Human resource audits

Human Resource Audits

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Human Resource Audit?
A human resource audit evaluates the personnel
activities used in an organization. The audit may
include one division or entire company.

“ HR Audit is a systematic assessment / investigation
of strengths, weaknesses and developmental needs of
existing Human Resources in context of
organizational performance”

In short, the audit is an overall quality control check
on human resource activities in a division or
company and how those activities support the
organization’s strategy 2

Nature of Human Resource Audit
 Identifies the contribution of the personnel
departments to the organization
 Improves professional image of the personnel
department
 Encourages greater responsibility and
professionalism among employees
 Clarifies the employee’s duties and
responsibilities
 Finds critical personnel problems

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The Scope of Human Resource
Audits
 Audit of Corporate Strategy
Corporate Strategy concerns how the organization is going to gain competitive
advantage.
 Audit of the Human Resource Function
Audit touches on Human Resource Information System, Staffing and Develop-
ment, and Organization Control and Evaluation.
 Audit of Managerial Compliance
Reviews how well managers comply with human resource policies and
procedures.
 Audit of Employee Satisfaction
To learn how well employee needs are met.

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Audit of Corporate Strategy
 Human resource professionals do not set corporate
strategy, but they strongly determine its success.
 By assessing the firm’s internal strengths and
weaknesses and its external opportunities and
threats, senior management devises ways of
gaining an advantage, such as :
 stresses superior marketing channels,
 low-cost production, etc.
 Understanding the strategy has strong implications
for human resource planning, staffing,
compensation, employee relations, and other
human resource activities
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Audit of the Human Resource
Function
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; Fringe benefit package;
Employer-provided services

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2. Staffing and Development
 Recruiting : sources of recruits, availability of
recruits, employment applications
 Selection : selection ratios, selection procedures,
equal opportunity.
 Training and development : orientation program,
training objectives and procedures, learning rates
 Career development : internal placement, career
planning program, human resource development
efforts

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3. Organization Control and Evaluation
 Performance appraisals : standards and measures
of performance, performance appraisal techniques,
evaluation interview.

 Labor-Management Relations : Legal compliance,
management rights, dispute resolution problems.

 Human Resource Controls : employee
communications, discipline procedures, change
and development procedures,

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Tasks of Auditors
 Identify who is responsible for each activity.
 Determine the objectives sought by each activity.
 Review the policies and procedures used to
achieve these activities.
 Prepare a report commending proper objectives,
policies, and procedures.
 Develop an action plan to correct errors in each
activity.
 Follow up the action plan to see if it solved the
problems found through the audit.

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Audit of Managerial
Compliance
 Compliance with laws is especially
important. When safety, compensation, or
labor laws are violated, the government
holds the company responsible.
 If managers ignore policies or violate
employee relations laws, the audit should
uncover these errors so that corrective
action can be started.

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Audit of Employee
Satisfaction
 Employee satisfaction refers to an employee’s
general attitude toward his or her job.
 When employee needs are unmet, turnover,
absenteeism, and union activity are more likely.
To learn how well employee needs are met, the
audit team gathers data from workers.
 The team collects information about wages,
benefits, supervisory practices, career planning
assistance, and other dimensions of job

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How HR Audit is done?
 In HR Audit the skills, management styles,
systems, strategies, structure is studied and
analysed using a variety of methodologies like
– interviews, (Individual and group, Top Management, Line
Managers, HRD Staff, Workmen and others)
– questionnaires,
– observations,
– available records,
– workshops etc.

 This evaluation helps the organisation have a
clear understanding of the gaps and better align
the HR processes with business goals.

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Types of Questions to be asked

- Employee attitude about supervisors
- Employee attitude about their jobs
- Perceived effectiveness of human resource
department
- Employees’ perception about the changes required
for better functioning

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3. Historical analysis

Not all the issues of interest to human resource audit
are revealed through interviews or questionnaires.
Sometimes insight can be obtained by an analysis of
historical records, such as:
- Safety and health records
- Grievances records
- Compensation studies
- Turnover and absenteeism records
- Selection records
- Affirmative action plan records
- Training program records

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The audit report
 Findings of research are used to develop a picture
of the organization’s resource activities. For this
information to be useful, it is compiled into audit
report.
 The audit report is a comprehensive description of
human resource activities that includes both
commendations for effective practices and
recommendations for improving practices that are
less effective.
 Audit report often contain several sections. One
part is for line managers, another is for manager
of specific human resource function, and the final
part is for the human resource manager.
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Report for line managers
 How line managers handle their duties such
as:
 Interviewingapplicants
 Training employees
 Evaluating performance
 Motivating workers
 Satisfying employee needs
 Thereport also identifies people problems.
Violations of policies and employee
relations law are highlighted

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Report for the HR Specialist
 The specialists who handle employment
training, compensation, and other activities also
need feedback. Such feedbacks are :
1. Unqualified workers that need for training
2. Qualified workers that need for development
3. What others company are doing
4. Attitude operating managers toward personnel
policies
5. Workers pay dissatisfaction

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Report for HR Manager
 Itis contains all the information given to both
operating managers and staff specialists. In
addition, HR Mangers gets feedback about :
 Attitude operating managers and employees about
services given by HRD
 A review of HRD plans
 Human resource problems and their implication
 Recommendations for needed changes and
priorities for their implementation

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Approaches of HR Audit
1. Internal Approach : In this approach the
audit focuses on contribution of Hr Deptt
to the internal operations of the
organization. The cost benefits of HR
activities is measured in terms of
organizational productivity and overall
cost.

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2. External Approach : HR Audit focuses on
contribution of HR activities on the external
performance of organization. When the cost
of Hiring, training and compensation is
reduced, the organization gets an
opportunity to vary the cost of
goods/services provided.

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Approaches based on People behind
Audit
1. Self Directed Team Approach
2. Task Force Approach
3. Consultant / Third Party Approach

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Limitations of HR Audit
 Lack of Management Commitment
 Lack of clarity in HR Audit objectives
 Lack of communication between management and
employees about importance of HR Audit
 Not utilizing the feedback obtained from HR
Audit
 Regularity and continuity of HR Audits is difficult
to maintained
 Auditors’ lack of knowledge and training

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Human resource audits

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Human resource audits