HR Audit Material

7/28/2019 HR Audit Material

1/27

Master of Business Administration- MBA Semester 3

MU0013HR Audit- 4 Credits

Q1. What are the main objectives of Human Resource

Planning?

Ensuring optimum use of human resource in the organization. Helping the organization to cope with the technological development &modernization. Ensuring higher Labour productivity. Ensuring career planning of every employee of the organization & making succession

programmers.

Assessing manpower needs for future &making plans for recruitments & selection. Assessing skill requirement in future. Determining training & development needs of the organization. Anticipating surplus or shortage of staff &avoiding unnecessary detention or dismissal. Controlling wages & salary casts

Q2. What are the trends in HR audit seen in Indian scenario?

An HR audit is like an annual health check. It plays a vital role in instilling a sense of

confidence in the management and the HR functions of an organization. The Human

Resources (HR) Audit is a process of examining policies, procedures, documentation,

systems, and practices with respect to an organizations HR functions. The purpose of the

audit is to reveal the strengths and weaknesses in the human resources system, and any issues

needing resolution. The audit works best when the focus is on analyzing and improving the

HR function in the organization. The audit itself is a diagnostic tool, not a prescriptive

instrument. It will help you identify what you are missing or need to improve, but it cant tell

you what you need to do to address these issues. It is most useful when an organization is

ready to act on the findings, and to evolve its HR function to a level where its full potential to

support the organizations mission and objectives can be realized.


2/27

The audit process consists of a series of questions covering the eight primary components of

the HR function:

1. Roles, head count, and HR information systems (HRIS)2. Recruitment3. Documentation4. Training, development, and career management5. Compensation and benefits6. Performance measurement and evaluation7. Termination and transition8. Legal issues and personnel policies9. Health / Welfare systems10.Employee Relations11.Safety12.Resourcing

Q5. What are the reasons for implementing the human resource scorecard?

In this era of tough competition it is very important for the firms to have more effective HR

management systems. It is a challenge for managers to make HR a strategic asset. The HR

scorecard is an instrument that enables them to improve the HR function in the organization.

It helps to periodically assess effectiveness of HR functions in a wide range of areas, from

recruiting to terminations, and including training and development, communications, and

legislative compliance. But implementing effective audit systems for human resource is a

difficult task and demands the existence of a unified framework to guide the HR managers.

Sometimes firms under-invest in their people and at times invest in the wrong ways. Another

difficulty is, managers cannot prepare the projected cash flows for considering the future

productivity of present inputs as in case of financial assets but at the same time they are not

willing to take the risk. So the best way is to prepare the Balanced Scorecard with sound


3/27

measurement strategies which are able to link HR functions, activity and investment with the

overall business strategy. The HR scorecard framework was specifically designed for

following reasons:

I t reinforces the distinction between HR doubles and deliverables:The good audit system

must clearly differentiate between the deliverables that influence strategy implementation and

do-ables that do not. Policy implementation is not a deliverable until it has a positive effect

on the HR architecture and creates the right employee behaviors that drive strategy

implementation. An appropriate HR measurement system will encourage HR professionals to

think both strategically as well as operationally.

I t helps in controll ing cost control and value creation:It is the responsibility of HR to

minimize the cost of the firm but at the same time, HR has to fulfill its strategic goal, which

is to create value. The HR scorecard helps HR professionals balance the two and find the

optimal solution. It allows HR professionals to drive out costs where appropriate, but at the

same time it helps to create value for the firm by retaining good human resources.

I t measur es leading indicators:There are drivers and outcomes in the HR value chain

along with leading and lagging indicators in the overall balanced performance measurement

system. It is thus important to monitor the alignment of the HR decisions and systems that

drive the HR deliverables. Assessing this alignment provides feedback on HRs progress

towards these deliverables and lays the foundation for effective HR strategies.

It assesses HRs contribution to strategy implementation: The cumulative effect of the HR

Scorecards deliverable measures provides the answer to the question regarding HRs

contribution to firm performance. All measures have a credible and strategic rationale.Managers can use these measures as solutions to business problems.

I t lets HR managers to manage their strategic responsibil it ies:The scorecard motivates

the HR managers to focus on exactly how their decisions affect the successful

implementation of the firms strategy. This is due to the systemic nature of the scorecard that

is it works on all the aspects. Therefore it provides a clear framework.


4/27

I t encourages fl exibil ity and change:In this era of ever changing business environment,

standardized patterns in any aspects do not work well. The changes are required even in the

HR policies with the change in business environment. The basic nature of the scorecard with

its causal emphasis and feedback loops helps fight against measurement systems getting too

standardized. Every decision needs to be taken based on the past and future scenarios. One of

the common problems of measurement systems is that managers tend to get skilled to obtain

the right numbers once they get used to a particular measurement system. The HR scorecard

provides the flexibility and change because it focuses on the firms strategy implementation,

which constantly demands change.

Q6. Elaborate on the need for Human Resource Audit.

HR audit is a systematic evaluation of the strengths, limitations, and developmental needs of

its existing HR function based on the organisational performance.

HR audit activities play a more important role than just solely collecting and presenting

evidence of compliance. The HR audit is an analysis of factors involved in the management

of human resource with a summary of the findings. It is then followed by the solutions to

correct the short comings. The advantage is that there are previously defined policies, goals

and standards and the audit must see that management abides by it.

Scope of HR audit

A complete HR audit will have many specific sub-questions/samples required for analysis.

The HR audit could include any or all of the following areas:

1. Regulatory compliances (legal issues).2. Communication and employee relations.3. Maintenance of files and records/technology.4. Policies and procedures (including employee handbook).5. Administration of salary.6. Recruitment of candidates.


5/27

7. Orientation.8. Terminations.

An organized plan is always important for a successful human resource audit. While auditing,

it is not necessary that all questions be asked to each employee. Instead, the individual must

himself be responsible enough and give relevant information on the concerned issues.

The HR audit can be used as an effective tool. The various aspects of HR audit are as

follows:

1. Staffing2. Compensation and benefits3. Performance management4. Employee development5. Employee relations6. Safety7. Reporting and record keeping

Benefits of HR audit

The HR audit is an analysis of all the factors involved in managing HRM with the findings,

suggestions to correct the shortcomings when compared with the standards of the company.

The major benefits are listed below:

1. Helps identify the gaps between the current state and the standard, thereby streamliningHR work processes.

2. Monitoring compliance with established regulations and procedures.3. Creating a business plan for human resource.4. Helping in finding out whether the HR department is contributing effectively to the

organization.


6/27

5. Helping in the development of the professional image of the HR department of theorganization.

6. Motivating the personnel of HR department.7. Finding out the problems and solving them smoothly.8. Appraisal systems providing sound performance reports.9. Systematically analyzing job.10.Creating a business plan for human resource.11.Monitoring compliance with established regulations and procedures.12.Developing user-friendly HR systems.

Q1. Explain the linkages between HR Audit and business functions.

The HR audit also examines the linkages between HRD and other systems like total quality

management, personnel policies, strategic planning etc.

Suggestions are made on the basis of evaluation on the future HRD strategies required by the

company, the structure the company needs to have for developing new competencies and the

systems that need to be strengthened, the styles and culture that has compatibility with HRD

processes in the company particularly the styles of the top management, etc.

Business linkages of Human Resource Development

It indicates the extent to which HRD efforts (tools, processes, culture etc.) are driven to

achieve business goals. The business goals include:

1. Business excellence including profitability and other outcomes the organization isexpected to achieve;

2. Internal operational efficiencies;3. Internal customer satisfaction;4. External customer satisfaction;5. Employee motivation and commitment;6. Cost effectiveness and cost consciousness among employees;


7/27

7. Quality orientation.

Role of HR Audit in Business Improvements

1. HRD audit is cost effective2. It can give many insights into a companys affairs.3. It could get the top management to think in terms of strategic and long term business

plans.

4. Changes in the styles of top management5. Role clarity of HRD Department and the role of line managers in HRD6. Improvements in HRD systems7. Increased focus on human resources and human competencies8. Better recruitment policies and more professional staff9. More planning and more cost effective training10.Strengthening accountabilities through appraisal systems and other mechanisms11.Streamlining of other management practices

Q3. Explain the audit of human resource function.

Audit of Human Resource

Function

Good starting point of audit

process is to take some time

and reflect on HR functions

which need to be audited.

Simply listing them is a good

first step. For achieving


8/27

organizational goals, it is very important to carry out various HR functions smoothly. In this

step of audit process, we define the various functions which need to be audited. Look at

Figure 8.2 for various human resource functions.

In this step consider your areas of responsibility and traditional HR practices covered by the

functions, you need to audit. In starting out, it is better to make more general statements and

improve from year to year in those areas that you choose to raise the level of performance.

For example as an audit manager, you may decide to audit any of following:

1. All human resource functions.2. Any specific function like recruitment process of your company.3. Any part of the specific function you have selected for audit like generating applicant

pool function of recruitment process,

A list of the indicators corresponding to the different areas of the HR function could contain

some of the following:

Description of the staff of the company

1.

The complete staff can be described by:2. Hierarchic levels3. Years of service4. Qualification5. Sex6.Nationality7. The number of permanent and temporary employees, interns and physically or

mentally challenged employees

8. Indexes of personnel rotation and absenteeismJob analysis

The various indicators of Job analysis are as follows:


9/27

1. The number of described posts2. Occupants per post3. Degree to which the job description cards have been updated4. The degree of detail in the job description cards5. The methods used to analyze and describe the jobs.

HR planning

HR planning, as you have studied in unit 7, is an important area of preplanning includes the

methods employed to plan personnel needs, the measures adopted to cover future personnel

needs, and the temporary planning horizon.

Recruiting and personnel selection

Main indicators of this are as follows:

1. The number of days required to a vacant post2. The number of applications received by work place categories3. The average amount of days between the reception of the application4.

The average cost of recruitment

5. cost of selection per job post6. The degree to which internal and external sources of recruitment are used7. The average number of candidates that do not pass the selective tests8. The study of the reliability and validity of the selection tests

Training and development

The training indicators are as follows:

1. the procedures followed2. frequency to which personnel training needs are analyzed3. the criteria followed in the training programs4. the evaluation criteria of the efficiency of the training programs


10/27

5. the percentage of the HR budget dedicated to training6. the average number of hours of training per employee7. The percentage of employees that participate in training programs by work place

categories.

Development of professional careers

These indicators focus on the vacancies covered internally.

These indicators include:

1. the percentage of people promoted per number of employees2. The percentage of vacancies covered internally and externally and the average time per

employee it takes to receive a promotion.

Q4. What are the components of human resource development audit?

Components of Human Resource

Development Audit

For understanding the HRD Audit as

conducted in different organizations, you

should know well the different components of

HRD Audit. Look at Figure 2.1 to identify the

components of HRD Audit.

Components of HRD Audit

The HRD audit is divided into three components:

1. Organization and Administration of Human Resource2. Information Management through Documentation


11/27

3. Computerized HRISOrganization and administration of human resource

In this you should consider following points:

1. The way in which the organizations HR office is organized2. The operating standards and internal controls followed in the business unit.3. The ways of administrating retention rights, including notices, matrix, use of

separation incentives, and outplacement practices.

4. The procedure of making HR staff up to date with the HR field.5. The techniques used for communicating with employees and appointing authorities in

department.

Information management through documentation

You must be aware that information is managed in the business unit through documentation

of various records of the employees and factors concerned to them. So following are some

important considerations in this:

1. The person with whom the personnel files currently held.2. The documents are held in personnel files.3. The ways to document following in your organization :

Hiring: Application, interviewing, and reference checks Compensation and benefits

Leave and overtime information Transitions Training Discipline Work history Work Assignments


12/27

Significant accomplishments Emergency contact information Performance evaluation and performance management Termination

4. The duration of holding the files.5. The place at which they are stored after employees leave.6. It should be seen that whether there is training of managers and employees about

personnel files.

7. The policies and procedures for accessing files.8. The person responsible for filling the requests for information when they are made to

your organization.

9. The content of employee, payroll, medical, and position files.10.The various internal controls to ensure accuracy of information and control access.11.The process for purging records.12.The way of maintaining employee timesheets.13.The place at which various notices are posted.14.The methods to ensure timely and accurate reporting of information to the top

management.

Computerized Human Resource Information System

1. In this you need to check the System requirements, features and capabilities. Considerthe following:

2. Whether HRIS system is being used in the organization or not.3. The type of HRIS system used.4. To judge that system is based on same platform as rest of the organization.5. The formal training program for employees and managers to access the HR

information through the system.

6. Whether the HRIS system is comprehensive or not.7. Are discreet pieces of information captured about employees and their jobs:


13/27

Personnel data Recruitment/selection data Training and development data Compensation data

Performance appraisal/promo ability data Benefit Plan data Health/safety/accident data

8. The ways of translating the information into usable forms.9. The data security issues.10.The individuals who are able to update and change information controlled to enhance

accuracy.

11.The hardware is used to operate the system.12.The local area networks that is fully compatible with the system.13.The estimated processing time to generate a standard 10-field employee roster listing,

including age, annual salary, and years of service, for 500 employee records.

Q5. Explain how audit of training is conducted.

Training is a subsystem of an organization. It ensures that randomness is reduced and

learning or behavioral change takes place in structured format. The main objective of training

and development division is to make sure the availability of a skilled and willing workforce

to an organization. It improves the productivity of employees and thereby increases the

performance of the organisation. Audit of Training suggests future improvements based on

past activities measurement. The training indicators are:

1. the procedures followed and the frequency with which personnel training needs areanalyzed;

2. the criteria followed to list the content of the training programs;3. the evaluation criteria of the efficacy of the training programs;4. The procedure by which training needs are analyzed


14/27

5. the percentage of the HR budget dedicated to training;6. The situation at which training is being conducted like Employee orientation, Skills &

technical training, Coaching and Counseling

7. the training conducted at the orientation of the employees8. the average number of hours of training per employee;9. The percentage of employees that participate in training programs by work place

categories.

Q6. Elaborate on the different aspects work place policies and practices

to be considered by the employers.

Many smaller companies do not like writing certain aspects of ways of conducting business.

For such companies, it is mere formality and they do not appreciate people -oriented

culture. Though it should be avoided because it is patently illegal because laws require that

companies should mention very clearly the policies about guaranteeing specific protections to

employees

Different aspects work place policies and practices:

Safeguarding employee information Auditing workplace behaviors that support legal compliance Safe work environment Employee performance management

Safeguarding employee information

Employees personal information should be safeguarded. Separate files should be maintained

for personal information as contrasted with employment related information.

Main objective behind it to ensure that while deciding the employees career with the

company his personal information should not be considered. For examplewhile deciding


15/27

whether to promote employee or not, instead of his personal information like his religion, his

work experience and capabilities should be considered.

The employment decision needs to be made on work/performance-related information, not

the personal information. Relevant materials in the work file include information on the

employees education, related work experience, and performance evaluations in other

positions within the company. An audit can clarify what information must be segregated and

the laws that govern employees access to and copying of their files. Other employee

information that must be safeguarded includes any materials that contain medical

information.

Employee performance management

An audit can review companys job descriptions for compliance (i.e., to determine whether

the descriptions list the essential functions of the job). Various legal issues can arise due to

performance related problems of employees. Audit will help in following improvements and

reviews:

1. A 90-day written standard performance evaluation form,2. An annual written standard performance evaluation form,3. A performance management/performance improvement plan,4. A description of the companys policy for both voluntary resignation and company-

initiated termination,

5. Wage and salary administration program,6. Bonus/stock option criteria.

Safe work environment

Audit practices may also help the companies to know about factors that contribute to a safe

work environment. A company may choose to develop an audit sheet tailored to a particular

issue, such as the companys zero-tolerance policy for harassment. Forexample, a company


16/27

may wish to review and evaluate its practices of dealing with inappropriate harassing

behavior in its workplace.

Auditing workplace behaviors that support legal compliance

A safe, dignified, and respectful work environment is not only mandated by the law, but also

increases motivation and productivity of the employees. An example of review of business

practices used to deal with allegations of harassment safe working environments should be

considered especially for the females in the offices so as to make them feel confident and

concentrate on work is shown as under:


17/27
http://train-srv.manipalu.com/wpress/wp-content/uploads/2010/11/clip-image00819.jpg


18/27

Q4. Explain the different types of competencies with examples.

Competency Mapping

Competency mapping forms an excellent tool for optimizing the human capital. HR auditors

should make sure that they identify the key competencies for an organization or a particular

position in an organization, and using it for job evaluation, recruitment, training and

development, performance management, succession planning, etc. the organization

effectively communicates what it actually expects from them.

The competency framework serves as the bedrock for all HR applications. As a result of

competency mapping, all the HR processes like talent induction, management development,

appraisals and training yield much better results.

Competency mapping involves identi fying the competencies that wi l l be needed by people

working in an organization. The level of competency needed by employees at each level

must also be specified. This depends on the type of job they do and the environment in which

the organization functions. Once this is identified, the remaining process becomes easier. The

next step will be to match the existing level of competencies with what is actually required,

and take measures to bridge the gap.

Can a round peg fit a square hole? So cant a wrong employee in a right organization.

The future of an organization lies with the people working there. The organization will have

to find a correct person who will fulfill its expectations or will have to chisel and shape up the

existing employee to fit its expectations. The more efficient they become in facing the

demands of the environment, the more effective will be the organization.

Now let us go through certain core competencies for the professionals, behavioural aspects

associated to each of t hem, and elements pertaining to each of them.

1. Communication Ski ll s:This does not necessarily refer to the English speaking skill. There

are various factors leading to effective communication. For details refer to Table 10.1.


19/27

Table 10.1: Communication skill as a core competency

2. I nterpersonal Relationship Buil ding Abili ty:This deals with how well a person is able to

socialize and make a close bond with others around him. The behavioural aspects and

elements related to interpersonal relationship building ability re discussed in Table 10.2

Table 10.2: Interpersonal Relationship Building Ability as a core competency


20/27

3. Negotiating Abil ity:The need for this skill arises when two or more parties argue on a

common issue and each party want a conclusion on it prefers. The behavioural aspects and

elements related to negotiating ability are discussed in Table 10.3.

Table 10.3: Negotiating Ability as a core competency

4. Critical Thinking Abili ty:The business environment is full of uncertainties and surprises.

One must have the ability to think and act under unforeseen and critical situations. The

behavioural aspects and elements related to critical thinking ability are discussed in Table

10.4.

Table 10.4: Critical Thinking Ability as a core competency
http://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image01422.jpghttp://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image01422.jpg


21/27

5. Data Management Abi li ty:The documents and files possessed by a company are of great

importance. The information has to be managed effectively. The behavioural aspects and

elements related to data management ability are discussed in Table 10.5.

Table 10.5: Data Management Ability as a core competency

6. Forecasting Abi li ty:As already said, the business environment is highly uncertain. One

has to possess the ability to foresee future changes and competitions. The behavioural aspectsand elements related to forecasting ability are discussed in Table 10.6.

Table 10.6: Forecasting Ability as a core competency
http://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image01819.jpghttp://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image01620.jpghttp://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image01819.jpghttp://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image01620.jpg


22/27

7. Creativity:It is not only the quality of the product that plays a role in the market. It is also

how different our products are compared to that of our competitors, which attracts our

customers. This requires creativity. This will also bring about a huge difference in the way

regular day-to-day activities are carried out. The behavioural aspects and elements related to

creativity are discussed in Table 10.7.

Table 10.7: Creativity as a core competency

8. Business Environment Understanding:Success is possible in business only if proper

understanding and analyses of the happenings of the business environment is made. The

behavioural aspects and elements related to business environment understanding are

discussed in Table 10.8.

Table 10.8: Business environment understanding as a core competency
http://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image02014.jpghttp://train-srv.manipalu.com/wpress/wp-content/uploads/2010/12/clip-image02014.jpg


23/27

9. Coordination/Partnership Skil l:Any business cannot survive if people were to work as

individuals. It requires people of one department to coordinate and work with people of other

department. Also people of the same department must be able to coordinate among

themselves and also with external environment. The behavioural aspects and elements related

to coordination/partnership skill are discussed in Table 10.9.

Table 10.9: Coordination/Partnership Skill as a core competency

10. I nstruction F ollowing Ability:However flat todays organizations have become; there

still exists a certain amount of hierarchy. Employees must be able to receive orders from their


24/27

superior and execute the instructions correctly. The behavioural aspects and elements related

to instruction following ability are discussed in Table 10.10.

Table 10.10: Instruction Following Ability as a core competency

11. Knowledge Updating:Any employee must be in a position to update his/her knowledge

with regard to the happenings of the outside world. This is absolutely necessary for servicing

in todays business environment. The behavioural aspects and elements related to knowledge

updating are discussed in Table 10.11.

Table 10.11: Knowledge Updating as a core competency


25/27

12. Presentation Ski ll :Employees in any organization will have to present their reports or

analyses to people within the organization and also the others outside. The behavioural

aspects and elements related to presentation skill are discussed in Table 10.12.

Table 10.12: Presentation skill as a core competency

13. Analyzing/Problem Solving Abil ity:When faced with unexpected situations, the

employee must be able to tackle it. In case any problem arises; the employee must be able to

solve it. The behavioural aspects and elements related to analyzing/ problem solving ability

are discussed in Table 10.13.

Table 10.13: Analyzing/ Problem solving ability as a core competency


26/27


27/27

each of the competency should have been duly adhered to and the behavioural aspects should

have been properly marked.

Documents

HR Audit Material