Human Resources Audit QB

7/30/2019 Human Resources Audit QB

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1) Human resources processHRP is done by the HRD manager. He is supported by the HRD department. He takes

following Steps in the process of Human Resource Planning HRP.

1. Review of Organisation's Objectives

The HRD Manager first studies the objectives of the organisation. Then he prepares a list of all the

activities (jobs) that are required to achieve the objectives. He also does Job's analysis.

2. Estimation of Manpower Requirements

The HRD manager then estimates the manpower requirement of the organisation. That is, he finds

out how many people (manager and employers) will be required to do all the jobs in the

organisation. Estimation of manpower requirements must be made in terms of quantity and quality.

3. Estimation of Manpower Supply

The HRD manager then estimates the manpower supply. That is, he finds out how many managers,

and employers are available in the organisation.

4. Comparison of ManpowerThe HRD manager then compares the manpower requirements and manpower supply.

5. In case of no difference

If there is no difference between the manpower requirements and the manpower supply, then the

HRD manager does not take any action. This is because manpower requirements are equal to the

manpower supply.

6. In case of difference

If there is a difference between the manpower requirements and the manpower supply the HRD

manager takes the following actions.

1. Manpower SurplusIf the manpower requirements are less then the manpower supply then there is a surplus.

During manpower surplus, the HRD manager takes the following actions :-

1. Termination i.e removal of staff.2. Lay-off.3. Voluntary retirement.

2. Manpower Shortage

If the manpower requirements are greater than the manpower supply then there is manpower

shortage.

During manpower shortage, the HRD manager takes the following actions :-

1. Promotions

2. Overtime3. Training to improve quality.4. Hire staff from outside, etc.5.

7. Motivation of Manpower

HRP also motivates the employers and managers by providing, financial and non-financial

incentives.

8. Monitoring Manpower Requirements

The HRD manager must continuously monitor the manpower requirements. This is because many

employees and managers leave the organisation by resignation, retirement, etc. and new work force

must take their place fill the manpower gap. This helps in uninterruptible functioning of the

organisation.


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2) Discuss the HR/Manpower/Workforce demand forecasting techniques in

detail.

Forecasting human resource demand is the process of estimating the futurehuman resource requirement of right quality and right number. As discussedearlier, potential human resource requirement is to be estimated keeping in view

the organisation's plans over a given period of time. Analysis of employmenttrends; replacement needs of employees due to death, resignations, retirementtermination; productivity of employees; growth and expansion of organisation;absenteeism and labour turnover are the relevant factors for human resourcedforecasting. Demand forecasting is affected by a number of external and internalfactors.

Job analysis and forecasting about the quality of potential human resourcefacilitates demand forecasting. So, existing job design must be thoroughlyevaluated taking into consideration the future capabilities of the presentemployees.

FACTORS AFFECTING HR DEMAND FORECASTING

Human Resource Demand Forecasting depends on several factors, some ofwhich are given below.

Employment trends; Replacement needs; Productivity; Absenteeism; and

Expansion and growth.

There are number of techniques of estimating/forecasting human resourcesdemand:

(a) Managerial Judgement(b) Work Study Technique(c) Ratio-trend Analysis (d) Econometric Models(e) Delphi Model(f) Other Techniques

(a) Managerial Judgement: Managerial judgement technique is very commontechnique of demand forecasting. This approach is applied by small as well aslarge scale organisations. This technique involves two types of approaches i.e.'bottom-up approach' and 'top-down approach'. Under the 'bottom-up approach',line mangers send their departmental requirement of human resources to topmanagement. Top management ultimately forecasts the human resourcerequirement for the overall organisation on the basis of proposals ofdepartmental heads. Under the Top-down approach', top management forecaststhe human resource requirement for the entire organisation and variousdepartments. This information is supplied to various departmental heads fortheir review and approval. However, a combination of both the approaches i.e.

'Participative Approach' should be applied for demand forecasting. Under thisapproach, top management and departmental heads meet and decide about the


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future human resource requirement. So, demand of human resources can beforecasted with unanimity under this approach.

(b) Work-Study Technique: This technique is also known as 'work-loadanalysis'. This technique is suitable where the estimated work-load is easilymeasureable. Under this method, estimated total production and activities for aspecific future period are predicted. This information is translated into number ofman-hours required to produce per units taking into consideration the capability

of the workforce. Past-experience of the management can help in translating thework-loads into number of man-hours required. Thus, demand of humanresources is forecasted on the basis of estimated total production andcontribution of each employee in producing each unit items. The followingexample gives clear idea about this technique.

Let us assume that the estimated production of an organisation is 3.00.000units. The standard man-hours required to produce each unit are 2 hours. Thepast experiences show that the work ability of each employee in man-hours is1500 hours per annum. The work-load and demand of human resources can becalculated as under:

Estimated total annual production = 300000 units Standard man-hours needed to produce each unit = 2 hrs Estimated man-hours needed to meet estimated annual production (i x ii)

= 600000 hrs Work ability/contribution per employee in terms of man-hour = 1500 units Estimated no. of workers needed (iii / iv) = 600000/1500 = 400 units

The above example clearly shows that 400 workers are needed for the year.Further, absenteeism rate, rate of labour turnover, resignations, deaths,

machine break-down, strikes, power-failure etc. should also be taken intoconsideration while estimating future demand of human resources/ manpower.

(c) Ratio-Trend Analysis:Demand for manpower/human resources is alsoestimated on the basis of ratio of production level and number of workersavailable. This ratio will be used to estimate demand of human resources. Thefollowing example will help in clearly understanding this technique.

Estimated production for next year = 1,40,000 unitsEstimated no. of workers needed(on the basis of ratio-trend of 1: 200) will be = 700

(d) Econometrics Models: These models are based on mathematical andstatistical techniques for estimating future demand. Under these modelsrelationship is established between the dependent variable to be predicted (e.g.manpower/human resources) and the independent variables (e.g., sales, totalproduction, work-load, etc.). Using these models, estimated demand of humanresources can be predicted.

(e) Delphi Technique: Delphi technique is also very important technique usedfor estimating demand of human resources. This technique takes into

consideration human resources requirements given by a group of experts i.e.mangers. The human resource experts collect the manpower needs, summarises


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the various responses and prepare a report. This process is continued until allexperts agree on estimated human resources requirement.

(f) Other Techniques:The other techniques of Human Resources demandforecasting are specified as under:

(a) Following the techniques of demand forecasting of human resourcesused by other similar organisations

(b) Organisation-cum-succession-charts(c) Estimation based on techniques of production(d) Estimates based on historical records(e) Statistical techniques e.g. co-relation and regression analysis.

Manpower demand forecasting

The development of strategies to match the supply of workers to the availabilityof jobs at organizational, regional, or national level. Manpower planning

involves reviewing current manpower resources, forecasting futurerequirements and availability, and taking steps to ensure that the supply of

people and skills meets demand. A more current term for manpower planning at organizational level is human

resource planning.

Demand Forecasting:-

It is the process of estimating the requirement of different kinds of personnel infuture

The basis of manpower forecasts should be the annual budget and long termcorporate plan translated into activity levels for each function an department

Techniques of Demand Forecasting

Managerial JudgmentWork Study TechniqueStatistical TechniquesDelphi Technique

Computer Analysis

Managerial Judgment:-

The most typical method for smaller company

In this method the managers simply sit down, think about their future workload and how many people they need

It adopt both the bottom-up' and top-down approach.

Work Study Technique:-


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It is technique can be used when it is possible to apply work measurementto know how long operations should take and the amount of labour

required.

It calculated in two type

Work-load Analysis:-In work load analysis the manpower expertneed to find out sales forecasts, work schedules and thus

determine the manpower required per unit of product. Work-force Analysis: -In work load analysis the manpower

expert need to find out sales forecasts, work schedules and thusdetermine the manpower required per unit of product.

Statistical Techniques:-

It is the technique of using high speed computers and new mathematical

techniques The main statistical tools are

Ratios and Trend analysis:- Ratios, which are calculated for thebasis of past data relating to number of employees

The data are collected in different levels

Future manpower requirement is calculated on the basis ofestablished ratios

The value depend upon accurate records and realistic estimate offuture activity levels and the effect of improved performance

Regression analysis:- The technique is used to estimate themanpower requirement of an organization's at a future point oftime

It used when dependent and independent variables arefunctionally related to each other

Delphi Technique:-

The objective of the Delphi technique is to predict future situations by

integrating the independent opinions of experts A major goal of the Delphi technique is to avoid direct confrontation of

experts, since some individuals may be unduly influenced by othersbecause of status differences, resulting in compromise of good ideas

Computer Analysis:-

MANPLAN was developed by General Electric" to overcome humanresource modeling problems (such as the overwhelming mathematical

complexity that can be brought into such planning efforts).

One final merit of MANPLAN is that running the computer model isrelatively inexpensive.


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This computer program needs for its forecast, asking such questions as:1. How many different product lines do you manufacture?

2. How many months does your forecast cover?

Once these questions are answered and fed into the computer, thecomputer can produce a forecast estimating average human resourcelevels required to meet product demand. MANPLAN also provides for

ranges of possible human resource needs for any period


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3)Discuss the HR supply forecasting techniques in detail.

Human Resource supply forecasting is the process of estimating availability ofhuman resource followed after demand for testing of human resource. Forforecasting supply of human resource we need to consider internal and externalsupply. Internal supply of human resource available by way of transfers,promotions, retired employees & recall of laid-off employees, etc. Source ofexternal supply of human resource is availability of labour force in the market andnew recruitment. External supply of human resource depends on some factorsmentioned below.

Supply and demand of jobs. Literacy rate of nation. rate of population industry and expected growth rate and levels Technological development. Compensation system based on education, experience, skill and age.

The most important techniques for forecasting of human resource supply areSuccession analysis and Markov analysis.


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6) Define/Describe HR audit. Is an HR scorecard an outcome or input for the HR audit

process? Justify your answer

Definition:

HR Audit means the systematic verification of job analysis and design, recruitment andselection, orientation and placement, training and development, performance appraisaland job evaluation, employee and executive remuneration, motivation and

morale, participative management, communication, welfare and social security, safetyand health, industrial relations, trade unionism, and disputes and their resolution. HRaudit is very much useful to achieve the organizational goal and also is a vital tool whichhelps to assess the effectiveness of HR functions of an organization.

Scope of Audit:

Generally, no one can measure the attitude of human being and also their problems arenot confined to the HR department alone. So it is very much broad in nature. It coversthe following HR areas:

Audit of all the HR function. Audit of managerial compliance of personnel policies, procedures and legal

provisions.

Audit of corporate strategy regarding HR planning, staffing, IRs, remunerationand other HR activities.

Audit of the HR climate on employee motivation, morale and job satisfaction.

Balanced Scorecard BasicsThe balanced scorecard is astrategic planning and management system that is used extensively

in business and industry, government, and nonprofit organizations worldwide to alignbusiness activities to the vision and strategy of the organization, improve internal andexternal communications, and monitor organization performance against strategic goals.It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton asa performance measurement framework that added strategic non-financial performancemeasures to traditional financial metrics to give managers and executives a more'balanced' view of organizational performance. While the phrase balanced scorecard wascoined in the early 1990s, the roots of the this type of approach are deep, and includethe pioneering work of General Electric on performance measurement reporting in the1950s and the work of French process engineers (who created theTableau de Bordliterally, a "dashboard" of performance measures) in the early part of the 20th century.

The balanced scorecard has evolved from its early use as a simple performance

measurement framework to a full strategic planning and management system. The newbalanced scorecard transforms an organizations strategic plan from an attractive butpassive document into the "marching orders" for the organization on a daily basis. Itprovides a framework that not only provides performance measurements, but helps

planners identify what should be done and measured. It enables executives to trulyexecute their strategies.

This new approach to strategic management was first detailed in a series of articles andbooks by Drs. Kaplan and Norton. Recognizing some of the weaknesses and vaguenessof previous management approaches, the balanced scorecard approach provides a clear

prescription as to what companies should measure in order to 'balance' the financialperspective. The balanced scorecard is a management system (not only a measurementsystem) that enables organizations to clarify their vision and strategy and translate them

into action. It provides feedback around both the internal business processes andexternal outcomes in order to continuously improve strategic performance and results.
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When fully deployed, the balanced scorecard transforms strategic planning from anacademic exercise into the nerve center of an enterprise.

Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measurestell the story of past events, an adequate story for industrial age companies for whichinvestments in long-term capabilities and customer relationships were not critical forsuccess. These financial measures are inadequate, however, for guiding and evaluating

the journey that information age companies must make to create future value throughinvestment in customers, suppliers, employees, processes, technology, and innovation."

Adapted from Robert S. Kaplan and David P. Norton, Using the Balanced Scorecard as a Strategic Management

System, Harvard Business Review (January-February 1996): 76.

PerspectivesThe balanced scorecard suggests that we view the organization from four perspectives,and to develop metrics, collect data and analyze it relative to each of these perspectives:

The Learning & Growth PerspectiveThis perspective includes employee training and corporate cultural attitudes related toboth individual and corporate self-improvement. In a knowledge-worker organization,people -- the only repository of knowledge -- are the main resource. In the current

climate of rapid technological change, it is becoming necessary for knowledge workers tobe in a continuous learning mode. Metrics can be put into place to guide managers infocusing training funds where they can help the most. In any case, learning and growthconstitute the essential foundation for success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes

things like mentors and tutors within the organization, as well as that ease ofcommunication among workers that allows them to readily get help on a problem whenit is needed. It also includes technological tools; what the Baldrige criteria call "highperformance work systems."

The Business Process Perspective

This perspective refers to internal business processes. Metrics based on this perspective


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allow the managers to know how well their business is running, and whether its products

and services conform to customer requirements (the mission). These metrics have to becarefully designed by those who know these processes most intimately; with our uniquemissions these are not something that can be developed by outside consultants.

The Customer PerspectiveRecent management philosophy has shown an increasing realization of the importance of

customer focus and customer satisfaction in any business. These are leading indicators:if customers are not satisfied, they will eventually find other suppliers that will meettheir needs. Poor performance from this perspective is thus a leading indicator of futuredecline, even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed in terms of kinds ofcustomers and the kinds of processes for which we are providing a product or service tothose customer groups.

The Financial PerspectiveKaplan and Norton do not disregard the traditional need for financial data. Timely and

accurate funding data will always be a priority, and managers will do whatever necessaryto provide it. In fact, often there is more than enough handling and processing offinancial data. With the implementation of a corporate database, it is hoped that more ofthe processing can be centralized and automated. But the point is that the current

emphasis on financials leads to the "unbalanced" situation with regard to otherperspectives. There is perhaps a need to include additional financial-related data, suchas risk assessment and cost-benefit data, in this category.

Strategy MappingStrategy maps are communication tools used to tell a story of how value is created for

the organization. They show a logical, step-by-step connection between strategicobjectives (shown as ovals on the map) in the form of a cause-and-effect chain.Generally speaking, improving performance in the objectives found in the Learning &

Growth perspective (the bottom row) enables the organization to improve its InternalProcess perspective Objectives (the next row up), which in turn enables the organizationto create desirable results in the Customer and Financial perspectives (the top tworows).

Balanced Scorecard SoftwareThe balanced scorecard is not a piece of software. Unfortunately, many people believe

that implementing software amounts to implementing a balanced scorecard. Once ascorecard has been developed and implemented, however, performance managementsoftware can be used to get the right performance information to the right people at theright time. Automation adds structure and discipline to implementing the Balanced

Scorecard system, helps transform disparate corporate data into information andknowledge, and helps communicate performance information. The Balanced ScorecardInstitute formally recommends the QuickScore Performance Information System

developed by Spider Strategiesand co-marketed by the Institute.


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10) The scope of hr audit

Every time the scope is to be decided. The scope of human resource audit is very

wide. It represents the encompassing approach. It assumes that the management of

human resources involves much more than the practice of recruiting, hiring, retaining

and firing employees. In other words, human resource audit is interested in all the

prograrnmes relating to employees regardless of where they originate. In this way,

the areas personnel audit includes are recruitment, selection, job analysis, training,

management development, promotions and transfers, labour relations, morale

development, employee benefits, wage and salary administration, collective

bargaining, industrial relations and communication. Further, the areas like leadership,

grievances, and performance appraisal and employee mobility are also included within

the scope of human resource audit.

For integration of personnel management with HRD functions, HRD audit now

encompasses all the areas like review and integration of corporate mission, goals,

policies and objectives, manpower planning, career planning and development, and

transfer policies, performance appraisal systems, training and development functions,

recruitment and selection, etc


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a. Use the HR audit as a blueprint or action plan for addressing HR needs.b. Address as many needs as possible using the organizations internal expertise and

resources.

c. Contract out those need areas where internal expertise and resources are notavailable or do not fit in the core competencies of the organization.

An HR audit is much like an annual health check. It can perform the same function for the

organization. An audit is a means by which an organization can measure where it currently stands

and determine what it has to accomplish to improve its HR functions. It involves systematically

reviewing all aspects of human resources, usually in a checklist fashion, ensuring that the

government regulations and company policies are being adhered to. The key to an audit is to

remember that it is a tool to discover and not to test. There will always be room for improvement in

every organization.


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12) METHODS OF HR AUDIT

There are four methods of conducting HR audit. For HR audit, either combination of

methods or all the methods are used.

1. Individual interview method2. Group interview method3. Workshop method4. Questionnaire method

I. Individual interview method: Top level management and senior managers areinterviewed, individually. It helps in following:

a. Knowing their thinking about future plans and opportunities available for thecompany.

b. Knowing about their expectations from the HR Audit.c. Getting sensitive information pertaining to working styles and culture.d. Union leaders, departmental heads, some strategic clients and informal leaders are

also interviewed, individually.

e. In case of small companies, manned by professionals, interviews can be extendedwith selected employees from different levels and functions.

The individual interview is conducted with:

1. CEO2. HRD Chief

3. Line Managers4. Workers and Their Representatives

II. Group Interview Method: Group interviews and discussions with the employeesand/or executives of large companies for HR Audit facilitate collection of information

about effectiveness of existing systems.

The Advantages of this method are:

Wider coverage of issues

Larger involvement of employees

Verification of data and significant points

Assessment of impact of feelings related to any issue and problem.

Guidelines for selecting samples for group interviews: Middle level managers: Minimum 10% and Maximum 100% group-wise ordepartment-wise. In any audit, 100 Managers individually or in groups should be

interviewed. Supervisors and Staff: 10% or 5-6 groups from different functions and workplacesmay be selected for audit. Workmen: To be interviewed in large groups. 5-10 groups are advisable.

Guidelines for interviews in groups: Auditors to be introduced to the group by a representative from HR Department.


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Auditors to brief about the HRD Audit and its purpose and usefulness to the company.Thereafter, questions relating to various systems can be either asked questions or

given a questionnaire to answer in about 30 Minutes and after collecting the

feedbacks, discussion for another about 30 minutes can be held to know the intensity

of the feelings. In either case, notes should be taken.

Auditors to consolidate the feedbacks.

III. Workshop method: In some cases of HR Audit, instead of Individual and GroupInterviews, Workshop Methods i.e. Large Scale Interactive Process (LSIP) is

conducted, as under:

a. 30 to 300 participants can be asked to gather in a room.b. They are divided in small groups.c. They are asked to work either around Systems, Subsystems or around

different dimensions of HRD and do SWOT Analysis.

d. All the groups thereafter give presentations.

e. The HR Auditor compiles the views of all groups, makes own observation,conclusions and prepares a report.

f. The HR Auditor announces the audit Results before submitting the report to

IV. Questionnaire Method: Feedback about various dimensions of HRD, including thecompetency base of HRD staff, the styles of line managers, the implementation of

various HRD systems, etc are obtained through a detailed questionnaire from

individuals or groups for HR Audit. This method helps in benchmarking. The process

is as follows:

a. Detailed questionnaire is prepared by HR Auditor.b. Individuals or groups are asked to assemble in a room or hall are explained the

objective and process of HR Audit. They are then given questionnaires.

c. They submit the questionnaire, duly filled in, to the HR Auditor.d. The HR Auditor compiles the feedbacks, makes observations, conclusions and

recommendations.

e. Audit Results are informed to the Participants before the report is submitted.

HR AUDIT QUESTIONNAIRE

With human resources audit becoming a mandatory annual undertaking in most

organizations, there is no denying the vital role that the HR audit questionnaire plays. The

HR audit is conducted for purposes of gauging the overall well-being of the human resource(workforce) in an organization.

Through data compiled from such audits, the HR department is then able to figure any

lapses or gaps that may exist in the workforce. The audit is also vital in comparing set

systems, policies and targets with implementation. In addition, the HR department is able to

determine if the organization is sufficiently staffed, whether the HR resources are maximally

utilized and whether the workforce complies with set industry laws.


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13)Limitations of HRD Audit:

Top mgmt can influence HR audit.

Failure of implementation of corrective action based on the feedback.

Victimize the HR deptt and remove some HR staff, due to negative audit feedback.

The audit works best when the focus is on analyzing and improving the HR function in the

organization - IF NOT IT IS A TOOTHLESS DOCUMENT.

The audit itself is a diagnostic tool, not a prescriptive instrument. It will help you identify whatyou are missing or need to improve, but it cant tell you what you need to do to address theseissues. It is most useful when an organization is ready to act on the findings, and to evolve itsHR function to a level where its full potential to support the organizations mission andobjectives can be realized.


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17) Why human resource audit undertaken

Companies need to periodically audit their human resources practices to check if they are still

adding value to the business. The audit can be performance related or a compliance one depending

on your business requirements. A human resources audit can be an effective first step towards

building better human resources practices for your organisation. A number of business

organisations, large and small, will benefit immensely from a comprehensive audit of their human

resources practices.The audit helps to eliminate many simple but common errors that employers, especially new

businesses, often make. It also serves to educate HR professionals on the latest trends and best

practices used by their peers. The HR audit can give those responsible for employee relations some

reassurance that legal risks have been managed and minimized, thus freeing them to focus on more

creative aspects of their jobs that can add value to the employer's bottom line. There are also other

benefits in undertaking an HR audit. Its results can be presented to investors for their review.

The final stage of the process is a comprehensive, personal presentation of the assessment showing

the organization's posture relative to its overall HR management. Normally the objective is to

provide senior management with a comprehensive and confidential assessment, along withassociated recommendations for corrective action that can serve as a roadmap for immediate, as

well as long-term, strategic human resources planning.

When carrying out the audit you need to know what to look at and what questions to ask. Then, you

need substantive knowledge of the applicable labour legislation so that you can evaluate whether

what you have found satisfies the laws that apply to your workplace. The audit should cover all

areas of human resources practices in the organisation from recruitment, compensation, training,

employee relations etc.

The areas that create the greatest risk are hiring, firing, remuneration, working conditions,

employee handbooks, and unfair labour practices. In order to assess the degree of exposure that a

company has, you must first be familiar with the legal requirements in each of these areas. For

example, in Zimbabwe HR practitioners would want to know whether their HR practices are in

compliance with the Labour Relations Act (LRA), Collective Bargaining Agreements (CBA) for

your sector and other workplace related pieces of legislation. The Human Resources professional

must also have at least a basic familiarity with the employer's obligations under those laws.

The next step in conducting an audit is to gather information on your operating environment and

procedures. Typically, you will be guided in this process by a checklist. The checklist will ask you

questions on your practices and policies in a number of areas. It might also ask for copies of your

existing employment policies and forms, and your employee handbook. This part of the process

may be tedious and time consuming, but it should not be difficult.After you have provided the information requested in the checklist, it will be time to analyze your

employment practices and policies to determine whether your company is in compliance with the

best practice. At the same time, a good audit will provide guidance to help you avoid common

mistakes that affect the smooth functioning of the organization

The net result of your HR audit should be some sort of a list of action items that need attention.

What you do next is key to whether the audit was done in good faith or not. It does not help to

undertake the audit and end there. You need to devise an action plan to address the areas of

concern.


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18) Discuss the HR audit introduction & initiation process.

Human Resources Audit

A Human Resources Audit is a comprehensive method (or means) to review current human

resources policies, procedures, documentation and systems to identify needs for improvement and

enhancement of the HR function as well as to ensure compliance with ever-changing rules andregulations. An Audit involves systematically reviewing all aspects of human resources, usually in

a checklist fashion.

Sections of review include:

1. Hiring and Orientation

2. Benefits

3. Compensation

4. Performance evaluation process

5. Termination process and exit interviews6. Job descriptions

7. Form review

8. Personnel file review

A periodic HR audit can qualify its effectiveness within an organization. HR audits may

accomplish a variety of objectives, such as ensuring legal compliance; helping maintain or improve

a competitive advantage; establishing efficient documentation and technology practices; and

identifying strengths and weaknesses in training, communications and other employment practices.

Objectives of the Human Resource Audit

To review the performance of the Human Resource Department and its relative

activities in order to assess the effectiveness on the implementation of the various

policies to realize the Organizational goals.

To identify the gaps, lapses, irregularities, short-comings, in the implementation of

the Policies, procedures, practices, directives, of the Human Resource Department and

to suggest remedial actions.

To know the factors which are detrimental to the non-implementation or wrong

implementation of the planned Programmes and activities. To suggest measures and corrective steps to rectify the mistakes, shortcomings if any,

for future guidance, and advise for effective performance of the work of the Human

Resource Department.

To evaluate the job chart of the Human Resource Managers, Executives,

Administrative Officers, Executive Officers, Recruitment Officers, whether they have

implemented the directives and guidelines for effective Management of the Human

resources in their respective Departments.


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The Basic Steps In An HR Audit

The general process of conducting an audit includes seven key steps, each of

which is discussed in greater detail below:

Step 1: Determine the scope and type of the audit

To uncover the needed information, it is important to determine exactly what areas should

be targeted for review. If the organization has never audited its HR function, or if there

have been recent significant organizational or legal changes, the audit team may want to

conduct a comprehensive review of all HR practice areas. On the other hand, if concerns

are limited to the adequacy of a specific process or policy, the audit focus should be

limited to a review of that particular area.

Step 2: Develop the audit questionnaire

An audit usually is conducted by using a questionnaire that asks for the evaluation of

specific practice areas. This document helps guide the audit team in scrutinizing all critical

areas of a companys HR practices. The audit also may include interviewing selected HR

employees and other department managers to learn whether certain policies and

procedures are understood, practiced and accepted.

Whether conducting a comprehensive audit or an audit of a specific practice, it is

important to invest sufficient time in developing a comprehensive document that elicitsinformation on all the subjects of the inquiry. A list of specific questions must be

developed to ensure that the questionnaire is complete.

Step 3: Collect the data

The next phase includes the actual process of reviewing specific areas to collect the data

about the company and its HR practices. Audit team members will use the audit

questionnaire as a roadmap to review the specific areas identified within the scope of the

audit.

Step 1

Determine the scope and type of audit.

Step 2Develop the audit questionnaire.

Step 3Collect the data.

Step 4Benchmark the findings.

Step5Provide feedback about the results.

Step 6Create action plans.

Step 7Foster a climate of continuous improvement.


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Step 4: Benchmark the findings

To fully assess the audit findings, they must be compared with HR benchmarks. This

comparison will offer insight into how the audit results compare against other similarly

sized firms, national standards and/or internal company data. Typical information that might

be internally benchmarked includes the companys ratio of total employees to HR

professionals, ratio of dollars spent on HR function relative to total sales, general and

administrative costs, cost per new employee hired, etc. National standard benchmarking

might include the number of days to fill a position, average cost of annual employee

benefits, absenteeism rates, etc. For additional information about benchmarking

Step 5: Provide feedback about the results

At the conclusion of the audit process, the audit team must summarize the data and provide

feedback to the companys HR professionals and senior management team in the form of

findings and recommendations. Findings typically are reduced to a written report with

recommendations prioritized based on the risk level assigned to each item (e.g., high,

medium and low). From this final analysis, a roadmap for action can be developed that will

help determine the order in which to address the issues raised. In addition to a formal report,it is critically important to discuss the results of the audit with employees in the HR

department, as well as the senior management team, so everyone is aware of necessary

changes and approvals can be obtained quickly.

Step 6: Create action plans

It is critical actually to do something with the information identified as a result of an audit.

The company must create action plans for implementing the changes suggested by the audit,

with the findings separated by order of importance: high, medium and low. It actually

increases legal risk to conduct an audit and then fail to act on the results.

Step 7: Foster a climate of continuous improvement

At the conclusion of the audit, it is important to engage in constant observation and

continuous improvement of the companys policies, procedures and practices so that the

organization never ceases to keep improving. This will ensure that the company achieves and

retains its competitive advantage. One way to do this is to continuously monitor HR systems

to ensure that they are up-to-date and to have follow-up mechanisms built into every one of

them.

One approach is to designate someone on staff (or an outside consultant) to monitor legal

developments to ensure that HR policies and practices are kept current. Likewise, it is

important to keep track of the audit findings/changes made, turnover, complaints filed,

hotline issues, employee survey results, etc. to identify trends in the companys employment -

related issues. Identifying problematic issues, growth areas or declining problem spots can

help in the decision of where to allocate time, money and preventive training resources in the

future.


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Benefits of Human Resource Audit

Several benefits associated with Human Resource audit are listed below. An audit reminds

member of HR department and others its contribution, creating a more professional image of the

department among manager and specialist. The audit helps clarify the departments role and leads

to greater uniformity, especially in the geographically scattered and decentralized HR function of

large organizations. Perhaps most important, it finds problems and ensures compliance with a

variety of laws and strategic plans in an organization.

Identifies the contribution of Human Resource department to the organization

Improves the professional image of the Human Resource department.

Encourages greater responsibility and professionalism among member of the Human

Resource department.

Clarifies the HR departments duties and responsibilities.

Stimulates uniformity of HR policies and practices.

Finds critical HR problems.

Ensures timely compliance with legal requirements. Reduces human resource cost through more effective Human Resource procedure.

Creates increased acceptance of needed change in the Human Resource department.

Requires thorough review of Human Resource departments information system.

Besides ensuring compliance, the audit can improve the departments image and contribution to

the company. Operating managers may have more respect for the department when an audit team

seeks their view. If the comments of manager are acted on, the department will be seen as being

more responsive to their needs. And since it is service department, these actions may improve its

contribution to organizational objectives.

Limitations of HRD Audit:

Top management can influence HR audit.

Failure of implementation of corrective action based on the feedback.

Victimize the HR department and remove some HR staff, due to negative audit feedback.

Documents

Human Resources Audit QB