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HUMAN RESOURCE AUDIT Course: MBA SEM 2 Subject: Human Resource Management Unit: 4

Mba ii hrm u-4.7 hr audit

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HUMAN RESOURCE AUDIT

Course: MBA SEM 2

Subject: Human Resource Management

Unit: 4

INTRODUCTION

• Resource can be defined as an object which can provide expected future services.

• Human Resource Accounting (HRA) is the process of identifying, measuring and communicating data about human resources.

• In 1974, Flamhoitz defined HRA as: “ Accounting for people as an organizational resource. It involves measuring the costs incurred by business firms and other organisation to recruit, select, hire, train and develop human assets. It also involves measuring the economic value of people to the organisation.”

Organisations record the information about human capital in following ways:-

1. Basic Information about human resource: Number of employees, categories, grades, total value of human resources, value per employee.

2. HR acquisition: number of employees acquired in the year, cost of acquisition, levels for which they were acquired, HR development, all information pertaining to HRD activities of the organisation, HR maintenance, Cost related to HR maintenance, HR separation, Cost related to HR separation, attrition rate, details of benefits provided to employee.

HRD AUDIT

• It examines and evaluates policies, procedures and

practices to determine the effectiveness of HRD function

in an organization.

• Human resource audits are potentially powerful tools in

promoting wiser, more equitable use of human resources

and more accurate human resource planning. It works on

the principle of “prevention is better then cure”.

• E-enabled HR audit system is not always required.

GUIDELINES FOR HR AUDIT1. Identification of areas of HR audit e.g. recruitment process, job description, employee classification, leaves, personnel records etc.

2. Goals of HR Audit:• To make effective HR policies.• To ensure compliance with all regulatory norms.• To correct existing deficiencies or people related problems in

any department, section, or organisation as a whole.• To correct the performance evaluation systems• To make training and development functions more effective

and need based.

3. Focus on developing Good Business Practices: By meeting strategic goals, enhancing such goals and

dovetailing such goals with the overall strategies of the organisation.

4. Focus on Legal Compliance.

5. Focus on Administration Issues: Maintaining personnel or HR files, how they are kept, degree of confidentiality in record keeping.

6. Auditing HR Functions.

7. Employee-relation Audits: questionnaires, exit interviews, job satisfaction studies etc.

OBJECTIVES OF HRD AUDIT

To determine the effectiveness of management programs. To analyze the factors involved in HRD and develop a statement

of findings with recommendations for correcting deviation, if any, on the following issues:

a) The extent of deviation from HRD policies.

b) To what extent objectives are spelt out.

c) To what extent performance standards have been established

• To study the extent to which line managers have complied

with HRD policies.

• To study the current manpower inventory and identify shortfall

of excess.

SCOPE OF HRD AUDIT

• The actual state.

• The congruence between the desired and the actual state.

• The alignment with the overall organizational strategy and

goals.

• The compliance with the rules and regulations.

• Auditing HR practices, auditing HR professionals, auditing HR

functions or department.

IMPORTANCE OF HRD AUDIT

• It helps to identify the changing training needs and

development of new training modules for effective utilization

of manpower due to technological changes.

• To keep pace with environmental changes, management

philosophy and practices at the organisation level like

participative management, employee empowerment, total

employee involvement.

METHODS AND TECHNIQUES OF HR AUDIT

• Attitudinal Survey.

• Data Interpretation.

Advantages of HRD Audit• To ensure effective utilization of HR.• To comply with administrative regulations.• To inculcates sense of confidence in management.• To develop and sustain organisation reputation in

the society.• To perform a due diligence review for various

stakeholders.

ROLE OF HRD AUDITOR

• To get the current facts.

• To study the effectiveness of the present system by answering the

following questions:-

Why was the practice introduced?

What would be the result if the practice is discontinued?

What could be the best possible alternative?

HRD AND NATIONAL PLANNING

• At national level focus of HRD activities is to develop employable human resource.

• By increasing literacy, developing graduates and postgraduates, professionals and scientists etc.

• It encompasses health, housing, provision for drinking water, hospital and medical facilities, social security and other welfare measures.

• In India availability of employable people is relatively less. • World bank has sanctioned an aid of Rs 1650 crores.

HRD IN ASIAN COUNTRIES

Indonesia: Change in employment relationship and restructuring of

organisations is controlled by Government to deal with surplus labour.

Employment matters are highly regulated and organisation-wide HRD activities are limited.

Malaysia: Extreme recession. Lay-offs and terminations are restricting HRD activities.

Philippines: Introduction of new technology is resulting in large scale

displacement of workers, skill-mismatch and redundancy. Widespread training and development programs in the

industries. Singapore: Established a Skill Development Fund to counter the

changing technology and train workers. Thailand: Limited HRD activities. Retraining of workers.

APPROACHES TO HUMAN RESOURCES AUDIT

The following approaches are adopted for purpose of evaluation: 

• Comparative approach• Outside authority approach• Statistical approach• Compliance approach• Management by objectives (MBO) approach

• Comparative Approach In this, the auditors identify Competitor Company as the

model. The results of their organization are compared with that Company/ industry.

• Outside Authority Approach In this, the auditors use standards set by an outside

consultant as benchmark for comparison of own results.

• Statistical Approach In this, Statistical measures are performance is developed

considering the company’s existing information.

• Compliance Approach In this, auditors review past actions to calculate whether those

activities comply with legal requirements and industry policies and procedures.

• Management By Objectives Approach This approach creates specific goals, against which performance

can be measured, to arrive at final decision about organization’s actual performance with the set objectives.

HR AUDIT PROCESS

Step 1 & 2

• Pre-Audit Information• Pre-Audit Self Assesment

Step 3 & 4

• On Site Review• Records Review

Step 5

• Audit Report

Bibliography

• http://www.whatishumanresource.com• http://www.mbaofficial.com• Human Resource and Personnel

Management- K. Aswathappa, Tata McGraw Hill