1. Human Resource Audit

7/29/2019 1. Human Resource Audit

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An examination of the human resource policies,

practices, and systems of a firm (or division) to

eliminate deficiencies and improve ways to achievegoals.


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A human resource audit evaluates the personnel

activities used in an organization. The audit mayinclude one division or entire company. It givesfeedback about :

1. The function of operating managers.2. The human resource specialists.3. How well managers are meeting their human

resource duties.

In short, the audit is an overall quality controlcheck on human resource activities in a division orcompany and how those activities support theorganizations strategy.


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Helps align HR goals

Finds better ways for

HR to contribute

Ensures timely

compliance

Reduces humanresource costs

Provides specific,

verifiable data

Stimulates uniformity

Discloses how wellmanagers are doing

Uncovers critical

problems & solutions

Reviews and improvesinformation system

Enhances

professional image


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Identifies the contribution of the personneldepartment to the organization

Improves professional image of the personneldepartment

Encourages greater responsibility andprofessionalism among members of thepersonnel department

Clarifies the personnel departments duties andresponsibilities

Finds critical personnel problems


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Legal implications

People costs are significant

Departments activities help shapeproductivity and quality of work life

Critical resource is human resources

Growing complexity of human resource work


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Managerial

Compliance

Employee Satisfaction

Managers must comply with HR

policies, procedures and legal

requirements

Human resource departmentsshould attempt to meet employee

objectives where feasible

Alignment withCorporate Strategy

HR strategy must be consistent

with corporate strategy and

continually examined


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Audit of Corporate Strategy

Corporate Strategy concerns how the organizationis going to gain competitive advantage.

Audit of the Human Resource FunctionAudit touches on Human Resource InformationSystem, Staffing and Development, andOrganization Control and Evaluation.

Audit of Managerial Compliance

Reviews how well managers comply with humanresource policies and procedures.

Audit of Employee SatisfactionTo learn how well employee needs are met.


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Human resource professionals do not set corporate

strategy, but they strongly determine its success.

By assessing the firms internal strengths andweaknesses and its external opportunities andthreats, senior management devises ways of

gaining an advantage, such as :- stresses superior marketing channels,- low-cost production, etc.

Understanding the strategy has strong implicationsfor human resource planning, staffing,compensation, employee relations, and otherhuman resource activities


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1. Human Resource Information System- Human Resource Plans : Supply and

demand estimates; skill inventories;

replacement charts and summaries- Job Analysis Information : Job standards,

Job descriptions, Job specifications

- Compensation Management : Wage,salary, and incentive levels; Fringebenefit package; Employer-providedservices


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Recruiting : sources of recruits, availability ofrecruits, employment applications

Selection : selection ratios, selectionprocedures, equal opportunity.

Training and development : orientationprogram, training objectives and procedures,learning rates

Career development : internal placement,career planning program, human resourcedevelopment efforts


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Performance appraisals : standards andmeasures of performance, performanceappraisal techniques, evaluationinterview.

Labor-Management Relations : Legalcompliance, management rights, disputeresolution problems.

Human Resource Controls : employeecommunications, discipline procedures,change and development procedures,


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Compliance with laws is especiallyimportant. When safety, compensation,or labor laws are violated, thegovernment holds the company

responsible.

If managers ignore policies or violateemployee relations laws, the audit shoulduncover these errors so that correctiveaction can be started.


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Employee satisfaction refers to anemployees general attitude toward his orher job.

When employee needs are unmet, turnover,absenteeism, and union activity are more

likely. To learn how well employee needs aremet, the audit team gathers data fromworkers.

The team collects information about wages,

benefits, supervisory practices, careerplanning assistance, and other dimensionsof job


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Identify who is responsible for each activity.

Determine the objectives sought by eachactivity.

Review the policies and procedures used toachieve these activities.

Prepare a report commending properobjectives, policies, and procedures.

Develop an action plan to correct errors in

each activity.

Follow up the action plan to see if it solved theproblems found through the audit.


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Compliance

Management-by-objectives

Reviews past practices

Creates specific objectives to assess performancedimensions

Comparative Simplest form of research

Uses another division or company as a model or

may use benchmarks as indices

Reviews documentation to ensure managers are

complying with policies and laws

Balanced scorecard looks at multiple

perspectives


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1. Interviews with employees and managersare one source of information abouthuman resource activity. Employees andmanagers comments help the audit team

find areas that need improvement.

Another useful source of information isthe exit interview. Exit interview areconducted with departing employees tolearn their views of the organization.


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Because interviews are time-consuming,

costly, and often to only few people, manyhuman resource departments usequestionnaires. Through questionnairesurveys, a more comprehensive picture of

employee treatment can be developed.

Questionnaire may also lead to more candidanswers than face-to-face interviews.

- Employee attitude about supervisors- Employee attitude about their jobs- Perceived effectiveness of human resource

department


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Not all the issues of interest to human resource

audit are revealed through interviews orquestionnaires. Sometimes insight can be obtainedby an analysis of historical records, such as:

- Safety and health records

- Grievances records- Compensation studies

- Scrap rates

- Turnover and absenteeism records

- Selection records- Affirmative action plan records

- Training program records


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Outside comparisons give the audit team a

perspective against which their firms activitiescan be judged.

Through Department of Labor, industryassociation, professional association numerous

statistics and report are compiled.

These organizations regularly publishesinformation about future employmentopportunities, employee turnover rates, work

force projection, area wage and salary survey,work force demography, accident rates, and otherdata that can serve as benchmark for comparinginternal information.


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Findings of research are used to developed a

picture of the organizations resource activities.For this information to be useful, it is compiledinto audit report.

The audit report is a comprehensive description of

human resource activities that includes bothcommendations for effective practices andrecommendations for improving practices that areless effective.

Audit report often contain several sections. Onepart is for line managers, another is for managerof specific human resource function, and the finalpart is for the human resource manager.


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How line managers handle their duties

such as: Interviewing applicants Training employees Evaluating performance Motivating workers Satisfying employee needs

The report also identifies people problems.Violations of policies and employeerelations law are highlighted


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The specialists who handle employmenttraining, compensation, and other activitiesalso need feedback. Such feedbacks are :

1. Unqualified workers that need for training2. Qualified workers that need for

development3. What others company are doing4. Attitude operating managers toward

personnel policies5. Workers pay dissatisfaction


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It is contains all the information given toboth operating managers and staffspecialists.

In addition, HR Managers gets feedback about

: Attitude operating managers and employeesabout services given by HRD

A review of HRD plans Human resource problems and their

implication Recommendations for needed changes andpriorities for their implementation


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Audits are necessary, but they are backwardlooking

Human resource departments require aproactive approach and a future orientation


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HR audit though is a useful tool for the

organisational improvement but if the timelyactions are not initiated for solving the problemsfound during the audit process, then whole processis rendered meaningless.

Though finding out what is inadequate is the firststep toward improvement but at the same time ifthe deficiencies are identified, it is important totake steps to correct those deficiencies.

Organizations should take that first step only whenthey are ready to act on the findings, and to makenecessary improvements in their HR skills,

processes, and systems. Otherwise it will lead to


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Another important issue is that audit results arebased on data collected by different level ofemployees. So accuracy of results is based onthe accuracy of data collected.

Moreover, in some cases even if data is correct,its accuracy depends on the team analyzing theaudit data.

Communication of results should be done inthe appropriate manner to the HR personnel. Ifthe results are not communicated properly,then the whole process proves to bemeaningless

Documents

1. Human Resource Audit