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MAJOR PROJECT REPORT
ON
HR AUDIT ON IT SECTOR
Submitted in partial fulfillment of the requirement ofBachelors of Business Administration (BBA)
Guru Gobind Singh Indraprastha University, Delhi
Project Supervisor Submitted By:
Dr. Gauri Dhingra Taranjeet SinghProfessor Enrollment No. 02614201713
SESSION 2013 – 2016
JAGANNATH INTERNATIONAL MANAGEMENT SCHOOLVASANT KUNJ, NEW DELHI
GURU GOBIND SINGH INDRAPRASTHA UNIVERSITYNEW DELHI – 110075
CERTIFICATE
This is to certify that the project work titled “HR Audit on IT Sector” is a bonafide work
carried out by Mr. Taranjeet Singh, Enrollment No. 02614201713, under my guidance and
direction for the partial fulfillment of the requirement of Bachelors of Business Administration
(BBA).
Project Guide: Dr. Gauri Dhingra Signature(Professor)
UNDERTAKING
I hereby declare that this Project Report titled “HR Audit on IT Sector” submitted by me to
Jagannath International Management School, Vasant Kunj is a bonafide work undertaken by
me and has not been submitted to any other University or Institution for the award of any degree
diploma / certificate or published any time before.
Taranjeet Singh
ACKNOWLEDGMENT
This project is great source of learning, a good experience as it made me aware of professional
culture and conducts that exist in the academic industry.
Though at the onset of any ambitious project one always encounters certain difficulties in the
beginning, however, overcoming these difficulties, completing the project as well as making it a
success greatly depends on the encouragement, inspiration. For completion of this project
various people have put lot of efforts.
I would like to thank Dr. Gauri Dhingra (Professor) for giving me an opportunity to do Project
Work on “HR Audit on IT Sector” and guiding me throughout the completion of the project
report. I would like to express my gratitude towards the faculty of Jagannath International
Management School, for participating in the research by giving their opinions in the survey
carried out for this project report.
EXECUTIVE SUMMARY
This research is based on HR audit process in Indian IT sector. Like any audit, the Human
Resource Audit is also a systematic formal process in IT firms, which is designed to examine the
strategies, policies, procedures, documentation, structure, systems and practices with respect to
the organization’s human resource management. It systematically and scientifically assesses the
strengths, limitations, and developmental needs of the existing human resources from the larger
point of view of enhancing organisational performance. The human resource audit is based on
the premise that human resource processes are dynamic and must continually be redirected and
revitalized to remain responsive to the ever changing needs. Human Resource Audits are not
routine practices aimed at problem solving. Instead of directly solving problems, HR audits, like
financial audits, help in providing insights into possible causes for current and future problems.
The findings of these audits aid decision making in the organisation and are usually internal
documents that need not necessarily be shared with the public. Moreover, unlike Financial
Audits that are routine, regulated and standardised, Human Resource Audits are non-routine and
may be designed to cater to the unique needs of the organisation at a particular point in time.
These are in fact, studies of an unusual nature. The manner in which the Audit is conducted
could vary from self-directed surveys to interventions by outside consultants. Human resources
are the people in an organization, so a human resources audit is a look at those people and the
processes that put them in place to make sure the system is working efficiently. An HR audit also
goes beyond looking at the hiring process into areas like employee retention, budgeting, training,
employee compensation, management/employee relations and virtually any process or practice
within the company that affects its people.
A periodic Human Resource audit can qualify its effectiveness within an organization. Human
Resource 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.
CONTENTS
S. No. Title Page No.
1. Introduction
1.1 Introduction the Research Topic
1.2 Background of the Study
1.3 Industry Profile
1-46
1
17
33
2. Literature Review 47-57
3. Research Objective 58
4. Research Methodology 59-60
5. Data Analysis 61-71
6. Findings 72-74
7. Conclusion 75-76
8. Bibliography 77-78
9. Questionnaire 79-80
CHAPTER 1: INTRODUCTION
1.1 Introduction to the research topic
Human Resource Audit means the systematic verification of job analysis and design, recruitment
and selection, orientation and placement, training and development, performance appraisal and
job evaluation, employee and executive remuneration, motivation and morale, participative
management, communication, welfare and social security, safety and health, industrial relations,
trade unionism, and disputes and their resolution. HR audit is very much useful to achieve the
organizational goal and also is a vital tool which helps to assess the effectiveness of HR
functions of an IT organization. A complete Human Resources Checkup, including
administration, employee files, compliance, handbook, orientation, training, performance
management, and termination procedures. The intended outcomes include minimizing your
liability exposure and introduction or enhancement of human resource best practices. The
purpose of the HR Audit is to conduct a more in depth analysis of the HR function to identify
areas of strength and weakness and where improvements may be needed. Conducting an audit
involves a review of current practices, policies, and procedures, and may include benchmarking
against organizations of similar size and/or industry. Legislation affecting all aspects of Human
Resources is constantly evolving and the legal ramifications of noncompliance impact the HR
department, the organization, and its employees. An HR Audit can help to ensure legal
compliance while measuring the effectiveness of HR programs. There are many reasons why an
HR Audit should be conducted, and the results can be used for multiple purposes. At a minimum,
the results of an audit help you to determine what needs to be done, how these changes will
impact the bottom line of your organization, and how to prioritize problem areas in terms of
1
significance. When it comes to physical health, prevention of problems is far better than waiting
until a problem arises and trying to cure it. The same holds true for human resources auditing.
Preventing problems is much easier than trying to fix them after the fact. Good Human Resource
planning and auditing can help prevent those problems, and save companies money and
difficulties. Human Resource Accounting benefits the company ascertain how much Investment
it has made on its Employees and how much return it can expect from this Investment.
Nowadays Human Resource has taken the drivers seat and is giving a lot of benefits to the
organizations. In order to get the best out of the H.R. function, their should be a good alignment
between strategies, structures, systems and styles with the business goals both short term and
long term. H.R. Audit is an attempt to assess such an alignment. Thus H.R. Audit can be said as
an evaluator of the current structures, strategies, systems style and skills in context of the long as
well as the short term goals of the company. HR always keeps the business goals in focus.
1.1.1 Audit:
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 human resources function. It involves
systematically reviewing all aspects of human resources, usually in a checklist fashion, ensuring
that government regulations and company policies are followed. One should remember that an
audit is a learning and a discovery tool, not a test therefore there is always a room for
improvement in every organization.
Audit is a tool in the hands of the employer to (i) comply with its legal obligations in managing
its workforce and (ii) take any corrective actions that might be needed. It is easy to perform an
audit but although it does require time and effort.
2
1.1.2 HR Audit?
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 human resources function. It involves
systematically reviewing all aspects of human resources, usually in a checklist fashion, ensuring
that government regulations and company policies are being adhered to. The key to an audit is to
remember it is a learning or discovery tool, not a test. There will always be room for
improvement in every organization. The role of an HR Auditor can be compared to a doctor who
does not prescribe the same medicine for all his patients, he first diagnoses the ailment an then
suggest an appropriate cure in the same way an auditor has to first diagnose the opportunities and
problems, identify deficiency in strategy, structure staff and systems in HRD development
process in the organization and recommendations for improvement. The audit process id like an
operation where the strength and weaknesses of the organization are brought.
1.1.3 Need for an HR Audit:
• To insure the effective utilization of an organization’s human resources.
• To review compliance with a myriad of administrative regulations.
• To instill a sense of confidence in management and the human resources function that it is
well managed and prepared to meet potential challenges.
• To maintain or enhance the organization’s and the department’s reputation in the community.
• To perform a "due diligence" review for shareholders or potential investors/owners.
3
An HR audit provides a quick way to take stock of a company’s human resources and practices
with an eye toward improving them. While there are different ways to conduct an HR audit,
depending on the company’s goals, audits usually involve interviewing senior and mid-level
management, reviewing the company’s HR policies and forms, and sometimes even surveying
employees. Once the audit is completed, the findings are presented to management. What
happens after that depends on management. The company owns the findings and can choose
whether, when, and to what degree to act on them.
1.1. 4 HR Audit answers the following questions:
• How effective is your organization at maximizing the contribution of your human capital?
• Why is one or more of your organization’s strategic initiatives languishing?
• What steps can you take today, using existing internal resources, to improve your
organizations performance and ROI?
• Do you have an HR system that meets your company’s needs, both now and into the
foreseeable future?
• Are your employees satisfied with their compensation and benefits plan, training
opportunities, and work environment?
1.1.5 HR Audit entail
1) Legal compliance
2) Compensation/Salary Administration
4
3) Employment/Recruiting
4) Orientation
5) Terminations
6) Training and Development
7) Employee Relations
8) Communications
9) Files/Record Maintenance
10) Policies and procedures (including employee handbook)
11) Communications
1.1.6 Two main components of HR Audit are:
• a thorough compliance review and
• a strategic assessment of HR practices.
1.1.6.1 Compliance Review:
Has become a very hot issue for companies. State and Federal laws govern fair practices in the
areas of compensation, employment, harassment, workplace safety, termination, corrective
action, policies and procedures, benefits administration, records maintenance, and overtime for
wage and hourly employees. While the complex employment laws are constantly changing and
difficult to track, the penalties for non-compliance are stiff. Failure to comply with regulations
5
can result in costly fines, retroactive penalties, and in the most extreme cases, imprisonment for
employers. Therefore such kind of compliances is to be made.
1.1.6.2 Strategic assessment:
Determining how a company's HR practices can be strategically aligned with the goals of the
organization. Hiring the right employees and motivating them and providing key training and
development opportunities to them are of strategic importance. Through interviews with senior
management and outstanding employees, along with an analysis of current HR practices, an audit
will help companies identify how they can best leverage the value of their employees and
position their company for growth.
1.1.7 Elements of HR AUDIT:
1.1.7.1. Economic
Includes wages and benefits, labour productivity, job creation, expenditure on outsourcing,
expenditure on R&D, investments in training and other forms of human capital and other
financial information.
1.1.7.2. Environmental
Includes impacts of products, processes and services on air, water, land and human health.
1.1.7.3. Society
Includes work place health and safety, employee retention, labour rights, human rights, and
wages and working conditions.
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1.1.8 Why do most companies want HRD Audit
1.1.8.1 To make HR function business driven:
Audit is generally done to make HR systems and processes more relevant to business goals.
Meeting the ever changing environmental demands and opportunities the HR function also need
to change that is its goals, strategies, systems and processes.
1.1.8.2 To improve HR for expanding, diversifying and entering into a fast growth phase:
Many organizations in the past had recruited employees on low salaries rather than on their
competence which now in the present was a constraint for the growth and diversification
therefore now the companies wants to change their profile and also searching for new HR
practices therefore felt the need for HR Audit.
1.1.8.3 For promoting professionalism in employees and switching over to professional
management:
With the process of globalization the companies are now realizing the importance of skill
development and professionalism among employees this led to use of HR audit.
1.1.8.4 Multinationals wants to know the reason for lower labour productivity in India and
wanted to improve that:
Some MNC’s felt that in India the labour productivity is very poor as their is high designation
consciousness, low level team work, lack of trust in the management, low energy levels and
preference for paternalistic treatment thus these MNC’s felt the high need for HR Audit.
7
1.1.8.5 Dissatisfaction with particular subsystem:
In some companies the top level felt that there is dissatisfaction because of the training programs,
appraisal, and to improve communication they had to do a comprehensive examination of HR.
this requires help of HR Audit.
1.1.8.6 Change of leadership:
Some companies also use HR Audit because their top management personnel are leaving so they
want to reorient the entire HR department.
1.1.9 Role of HRD Audit in Business Improvement:
1.1.9.1 Top management thinks in terms of strategic and long term business plans :
HR Audit had made sharing of their plans across the organization possible which had led to
increas3ed involvement and commitment of employees and has initiated new system of annual
planning and sharing of business possible.
1.1.9.2 Change in the styles of the top management:
A successful HR company has a learning environment this can only be done by the changing
style of top management like empowering attitude, participative style, ability to convert and use
mistake take conflicts and problems as learning opportunities.
1.1.9.3. Role clarity of HR department and line managers:
HR Audit leads to better role clarity of HR department and other HR functions resulting in better
understanding of roles by the line managers.
8
1.1.9.4. Improvements in HR systems:
HR Audit has helped in measuring the effectiveness of their HR systems and in designing and
redesigning HR systems like performance appraisal, inducti0on training, job rotation, career
planning, promotion policies, mentoring communication etc.
1.1.9.5 Increased focus on HR and human competencies:
HR Audit focuses on acquiring of new knowledge, attitude and skills required by the employees
and competencies like technical, managerial, human and conceptual. It also focuses on role
clarity and accountability.
1.1.9.6 Better recruitment policies & professional staff:
HR audit gives direction for competency requirement of the employees at various levels thus
providing the base for recruitment policies & procedures.
1.1.9.7 More planning & cost effective training:
HRD audit calculates the investment made in trainee & returns thereof which draws the attention
of the top management towards cost benefit analysis. The process of identifying training needs &
utilization of training inputs & learning for organizational growth & development are assessed.
1.1.9.8 Strengthening accountability through appraisal system & other
mechanisms:
HRD audit gives inputs regarding the accountability of employees which can be assessed
through performance appraisal, work culture & other cultural dimensions.
9
1.1.9.10 Streamlining of other management practices:
HRD audit points out the strengths & weaknesses in the management systems existing in the
organization & also indicates the absence of systems which enhance both human productivity &
utilization of existing competency base. Some of the resultant activities are preparation of
manual for delegation of powers, clarification of roles & responsibilities, developing or
streamlining the manual of financial & accounting procedures & strengthening the information
system.
1.1.9.11 TQM interventions:
Quality improvements & establishing TQM systems require a high degree of employee
involvement. Due to improvement in training system, enhancement of the quality of groups work
and strengthening of the appraisal system improves the TQM.
1.1.9.12 Enhances ROI of HR function:
HRD Audit aligns the HR functions and business activities with business goals and also
enhances the value adding activities and processes and reduces non productive assets of HR
department.
1.1.10 Metodology of HRD Audit:{Applied in Combination}
• Individual interviews: The auditor interviews the top management and the senior managers
individually and captures their thinking about the future plans and opportunities available for
the company. Individual interviews are also important for getting sensitive information like
work styles and culture.
10
• Group interviews: In a big company it’s not easy to collect information by meeting
everybody individually therefore group discussions and group interviews are conducted of 4-
8 individuals of the same and similar levels.
• Workshops: In some cases individual and group interviews are substituted by large scale
interactive process workshops where large number of participants ranging from 30-300
gather in a room and are asked to do the HR Audit. These workers work in small groups
around the various subsystems or round different dimensions of HR, do SWOT analysis and
make a presentation.
• Questionaire method: Questionnaires should be prepared which should be filled
individually or in groups. These questionnaires should make an attempt to asses various
dimensions including the competency base of HRD staff, styles of line managers,
implementation of HRD systems etc.
• Obeservation: The auditor should visit the plant, the machinery room canteens, training
rooms, hostels, etc. This is done in order to study the living environment of the employees.
The observation can be done through making a checklist of questions.
• Analysis of reports, records, manuals and other published literature: Published
literature of the company like manuals, marked handouts, training calendar, and various
circulars should be analyzed this would in assessing strengths and weaknesses of HRD.
11
1.1.11 Preparation of HR Audit:
• Educate all those employees who are going to be involved in this about the HRD audit,
for this a small note ma be circulated.
• Decide for the right time of the audit. Generally an audit should be avoided at the time of
the crisis in the company or when some other audit is going on like the ISO 9000 audit.
• Request all the line managers to cooperate and get interviewed and provide time for
filling the questionnaire.
• Do not expect that HRD audit will solve any or all the problems as it is just an assessment
and problems do not get solved by assessment rather then can only be solved by action
done after direction is provided from assessment.
• Provide auditor with the required information and the secondary data which he shall use.
• Put two or three dedicated employees under the auditor to assist him in his work because
these employees are more aware of their company then the auditor.
• Mentally prepare all those employees who are to be interviewed to take out some time
from their work to give answer to the auditor in the form of an interview or to fill the
questionnaire. For this a small notice or a circular may be passed.
12
1.1.12 How to use HR Audit:
Following are some of the steps that any organization should undertake to use hr audit.
• The auditor should give a written report because presentations remains in mind only for few
days though he may give indications about the sensitive issues and need not write about them
in detail.
• The auditor should always involve the top management in this so as to get their attention to
the HR issues and other HR functions this enables possibility of future actions.
• Appoint a no. of task groups to follow up on the report and its recommendations.
• The total no. of members in the task force should be given and line managers should be
encouraged to be a part of it will give them an exposure and experience in HR areas vital for
success at the top level.
• Ask the HR department to study the report and prepare its own action plans, this will help to
align the HR function with business concerns.
• Communicate a summary of the report an intended follow up action sin the form of a circular
to all the employees the employees who have given their input and whose suggestions have
been entertained will feel good and will try to give more information in future
• After six months plan a review mechanism and do a micro audit after an year or two.
13
1.1.13 Ten step plan for auditing & improving your company's HR function:
1. Assess company's current and future HR needs and define the role of HR function
within your overall business plan.
2. Create cost effective hiring system.
3. Develop new employees' orientation and training programs.
4. Develop and manage employee relations/communications.
5. Establish and implement key personnel policies. Develop and publish Employee
Handbook
6. Educate and train your employees to follow your company's policies effectively.
7. Adopt legal and creative personnel forms.
8. Install and implement HRIS System.
9. Structure and negotiate cost effective benefit programs. Educate your employees on the
value of your benefit program
10. Create and manage effective safety and security programs.
1.1.14 Advantages of HR Audit
• A consensus is achieved: consensus is what you would expect to emerge from face-to-face
interactions between disagreeing people trying to reach a workable solution that is acceptable
to everyone. You don't reach a consensus with a simple numerical average of checkmarks.
14
• Ideal state defined by business objectives – The organization can compare its HR
performance with an "ideal" determined by its own business objectives, rather than by a
consultant or some other external viewpoint.
• Small subgroups – Most surveying techniques require that groups or subgroups have at
least 20 to 25 variables in them. 5 or 10 people may be studied. This permits the delineation
of viewpoints in and between small, but important decision-making.
• Large number of HR tasks and programs –. With no significant increase in respondent
time or effort, 40 to 50 or more different tasks or programs can be studied
• Complete control of manipulation – it protects the organization against errors in the
results due to intentional manipulation, inconsistent judgments, misunderstood
instructions or concepts
• Providing feedback – on the contribution of the HR function to the organization’s
strategic business objectives, assessing the quality of HR practices, policies and delivery.
1.1.15 Conclusion of HR Audit
HR Audit is a very important intervention as it highlights critical issues such as competency
requirements, motivational values, competency gaps in the HR staff, alignment of HR strategies
with the business goals.
Several factors are required for the success of the HRD audit the key ones being involvement of
the top management, involvement of line managers, attitude of HR department and training of
the employees. HR audit highlights the current status, strengths, weaknesses, cost effectiveness
and other variables of HR structure and aligning them with the business goals.
15
The effectiveness of the audit highly depends upon the competency of the auditor who is doing
the audit the other things required of him are he should have an expertise in HR systems, survey
research, OD skills, social science research skills, benchmarking skills, general management
concepts and ethical soundness. It is also a good idea train internal people.
The data thus collected and generated after the audit should be first communicated across the
organization in the form of circulars and then forming a task force and later on implementing it.
1.1.16 Limitations of HR Audit
Though the audit is rarely a failure but if there is no support of the top department then it can be
a failure because in such a case some employees would be supporting it while others would be
against it and this political game wont allow the auditor to find the real truth. Therefore
commitment from the top management is a must.
Sometimes the after the audit the CEO’s come to know that their company is above the average
in such a case they become reassured and forget about the audit and don’t do anything for further
improvement here again the audit proves to be of no good.
HRD audit focuses on groups, systems or units rather then on individuals though the auditor may
give informal feedback if any to the person concerned.
Sometimes an HRD audit may be used to get rid of some staff in the HRD department, but such a
decision has an adverse effect on the overall HRD of the company unless it is made carefully and
after adequate time and scope.
1.2 Background of the Study
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Today IT companies are going through a process characterized by profound change, sometimes
dramatically, fact which determines economic organizations to focus on the change, flexibility,
customer-focused strategies and constant innovation in order to ensure market competitiveness.
What is happening in the world of organizations is a true paradigm shift due to important
changes in attitude to work, values and behavior of individuals and groups that make up the
organization. Today successful organizations that have achieved high performance, emphasize
the human resource development through the development and implementation of strategies,
policies and practices of recruitment, selection, motivation and involvement in work, and
packages of training and development programs for their employees. As a long term strategy,
best practices and ways to improve the human resource management helps employees seen as
internal customers, to acquire knowledge, skills, resources, encourages creativity to become
more efficient, to improve performance and to be enthusiastic. An effective manager must
develop skills in human resources and focus on employees (subordinates) seen as internal
customers and on external customers. A good manager knows how to collect and retain the best
talent, given that its success depends on the success of the team. Both challenges, present and
those of the future, causes organizations to seek ways to increase current levels of performance
and productivity. Organizations, especially in the economic environment are facing the need for
extensive changes at the level of individuals (members) and the organization. To meet these
challenges, they need to ensure competitiveness in an increasingly dynamic market. Learning
must include the whole range of behaviours that rely on professional and personal skills, the
behavioural aspects including: values, attitudes, motivation, thoughts, beliefs, etc. Human
resource management is now an important support, even critical, to the success of organizational
change and learning initiatives
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1.2.1 Approaches to Human Resources Audit
The following approaches are adopted for purpose of evaluation:
1. Comparative approach
2. Outside authority approach
3. Statistical approach
4. Compliance approach
5. Management by objectives (MBO) approach
1.2.1.1 Comparative approach
In this, the auditors identify Competitor Company as the model. The results of their organization
are compared with that Company/ industry.
1.2.1.2 Outside authority approach
In this, the auditors use standards set by an outside consultant as benchmark for comparison of
own results.
1.2.1.3 Statistical approach
In this, Statistical measures are performance is developed considering the company’s existing
information.
1.2.1.4 Compliance approach
18
In this, auditors review past actions to calculate whether those activities comply with legal
requirements and industry policies and procedures.
1.2.1.5 Management by objectives (MBO) 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.
1.2.2 Purpose of HR Auditing
The purpose of the HR Audit is to conduct a more in depth analysis of the HR function to
identify areas of strength and weakness and where improvements may be needed. Conducting an
audit involves a review of current practices, policies, and procedures, and may include
benchmarking against organizations of similar size and/or industry. Areas that should be audited
include, but are not limited to:
• Legal compliance (EEO, AA, ADA, FMLA, IRCA, etc.)
• Record-keeping (personnel files, I-9s, applications, etc.)
• Compensation/pay equity
• Employee relations
• Performance appraisal systems
• Policies and procedures/employee handbook
• Terminations
19
• Health, safety and security (OSHA compliance, Drug-Free Workplace,
• AIDS in the workplace, etc.)
Legislation affecting all aspects of Human Resources is constantly evolving and the legal
ramifications of noncompliance impact the HR department, the organization, and its employees.
An HR Audit can help to ensure legal compliance while measuring the effectiveness of HR
programs. There are many reasons why an HR Audit should be conducted, and the results can be
used for multiple purposes. At a minimum, the results of an audit help you to determine what
needs to be done, how these changes will impact the bottom line of your organization, and how
to prioritize problem areas in terms of significance.
1.2.3 The Auditing Process
Auditing involves the regular and systematic examination of organizational practices and
accomplishments vis-a-vis organizational objectives, company policies, legal requirements,
and/or professional standards. Effective audits pinpoint the gaps between “what is” and “what
should be” or “what could be.” By removing or reducing the size of the gaps, an organization can
increase legal compliance, ensure conformance to established professional standards, and/or
contribute to the quality improvement process. In finance and accounting, auditing is routine.
Financial audits are regularly performed and their findings submitted to senior management and
the board of directors. The audit typically involves a review of an organization's financial
policies and practices against established accounting standards and recommended practices. The
annual reports of public organizations include a statement from an independent certified public
accounting firm verifying that the financial statements are truthful and comply with normally
20
accepted practices and standards. Stakeholders rely on the independent financial audit to oversee
the fiduciary role of management and the board of directors. Larger organizations rely on
internal auditors to review, on a continuous basis, the operational and financial performance of
the operating departments, divisions, and subsidiaries. In human resources, auditing is not
routine. There are no laws or regulations requiring employers to engage an independent auditor
to audit company policies and practices. However, because of the complexity of state and federal
labor laws and regulations, it is common for employers to rely on their attorneys to review their
human resources policies and practices. Larger and more established organizations, moreover,
have developed internal guidelines for self-appraisal or independent review.
1.2.4 A Question of `Ownership'
The very idea of an audit generates fear. In the typical scenario, an auditor, internal or external,
comes in at senior management's request to examine and look for discrepancies between
management practices and applicable policy or legal requirements. A formal written report to
senior management usually follows. If some major discrepancy is found, remedial action,
including the possible removal of the offending manager, is recommended. Here, auditors appear
to act as “agents” for senior management-the client-and, as a result, are responsible primarily for
performing “due diligence.” Their role is to satisfy their client's predefined needs, no more and
no less. The role of the target audience-functional or operating management-tends to be
somewhat passive. Fear of reprisal, real or imagined, that uncovered gaps will result in career
derailment or termination becomes a strong motivator for doing things to pass the audit, and to
impress upper management. The due diligence or compliance audit, then, is not used as an
organizational learning initiative; hence, its value as a tool for organization renewal is limited.
For an audit to lead to organizational learning and improvement, the target audience must be
21
heavily involved in the auditing activities, and concur with-in fact, own-the audit's goals and
objectives. Achievement of tangible operating benefits, moreover, must be made a concurrent
purpose. The foregoing suggests that there are two distinct, separate and overlapping auditing
requirements: (1) to meet management's fiduciary responsibilities, and (2) to stimulate and
facilitate continuous improvement. The former, externally sanctioned, addresses problem
prevention; the latter, internally sanctioned, focuses on continuous improvement
1.2.5 Success Criteria
Often, when launching an audit, the reasons for the audit are not well understood and its “success
criteria,” which help identify the factors that will be used to evaluate the audit's relative merits,
that is, its usefulness in improving individual and group performance, are not fully articulated.
Since an audit can have multiple goals, the purposes and associated success criteria must be
clearly defined and communicated up-front. Examples of specific purposes for an audit are:
• To examine an organization's compliance with established regulations and/or company
policies.
• To explore how to better serve the needs or satisfaction of the relevant users or
constituencies-management, employees, or the community.
• To streamline the work processes used to carry out functional work, such as recruiting,
compensation, training, benefits, etc.
• To establish an “early warning system” to spot problems or identify issues before they
become crises.
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• To measure continuous improvement by asking whether things have gotten better or worse as
a result of a functional initiative.
Essential elements to success are:
- Clear objectives, established up-front.
- Appropriate resources, that is, staff skills, budget, an tools and materials required to plan and
execute the audit.
1.2.6 Defining the Audit in IT sector
As can be seen from the purposes above, an audit can have a compliance bend or a continuous
improvement bend. Depending on the objective, the process and methodology for executing the
audit will be different. Compliance auditing involves the systematic comparison of human
resources practices against policy and/or legal requirements. The output of the audit is a list of
gaps between what is required and what is being done
HR Auditing: Matrix Illustrating Relationship of Substantive or Procedural Issue to Strategic or
Operational Focus
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Continuous improvement auditing in IT sector is the systematic process of identifying gaps in
functional or organizational performance between what is and what could be or what should be.
The output of the audit is a list of opportunities for increased effectiveness and efficiency.
Service quality auditing is a specific example of continuous improvement auditing. In this type
of audit, the focus is on the alignment of the human resources unit's response to internal
customer (management or employee) demands. Alignment is defined in terms of customer
satisfaction vis-a-vis the perceived importance the customer attaches to the target service.
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The matrix that follows illustrates the relationship of a substantive or procedural issue to a
strategic or operational focus of a human resources audit.
1.2.7 Design Considerations in IT sector
Compliance and service quality audits are relatively easy to design and implement because they
are comparative. Continuous improvement audits are more difficult to design and implement
because they attempt to measure organization performance. Designing a continuous
improvement audit, therefore, requires that certain precautions be taken:
The focus of the analysis should not be arbitrary. Rather, it should follow an underlying frame of
reference that is, in itself, appropriate to and derived from management practice and research.
1.2.8 Identifying the Client
Compliance audits typically are sanctioned by executive management as an extension of its
fiduciary role. Continuous improvement audits typically are initiated at the request of senior
human resources executives as a part of their productivity improvement goal. Compliance audits
usually are carried out by persons from outside the functional area. Continuous improvement
audits usually are performed by a combination of resources internal and external to the function.
These relationships are depicted in the following matrix.
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HR Auditing: Matrix Illustrating Possible Relationship of Audit Purpose to Client Need
1.2.9 The Auditing Process
After audit goals and success criteria have been defined, it is helpful to develop a checklist that
can be used to determine the presence or absence of certain practices, and to compare and
contrast practices with policy or legal requirements. For example:
• What policies should be audited? The selected policy should be stated, followed by an
indication of how one would verify that the policy is being carried out, and, ultimately, by
measurement of the degree to which compliance or lack thereof is taking place.
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• What practices should be audited? The selected practice should be stated, followed by what
the policy or law requires, and, ultimately, by measurement of the degree to which
compliance or lack thereof is taking place.
• What records should be reviewed? The selected record should be stated, followed by what
the record should contain, and, ultimately, by measurement of the degree to which
compliance or lack thereof is taking place.
• What trends should be tracked? The selected trend should be stated, followed by an “X-and-
Y”chart defining the measurement points, and ultimately, by analysis of the implications of
the historical data plotted on the chart (for example, cost per hire, cost per placement, pay
rates, headcount, benefit costs, tardiness and absenteeism, turnover, training expenditures,
etc.).
• What analysis will be done? Audits lead to tremendous insights in and understanding of how
an organization functions. However, reducing information obtained from an audit to
meaningful components can be overwhelming. Experience has shown that by following the
sequence suggested below, the auditor can navigate more quickly through the data and
compress the analytical process. As the auditor moves through the data reduction process,
analysis should become more complex and intuitive.
Description: Questions to be asked during the audit should be framed to solicit a written or oral
description; for example: What are the key objectives? What is the mission? Transcribing the
answers makes it possible to later engage in systematic verification through comparison with
27
existing written records and reports. Inconsistencies usually are the result of unequal access to
information.
Clarity: Once descriptive information has been collected, the next step is to probe for common
understanding. Often, discrepancies among individuals as to what something means is the result
of poor communication. Agreement: Individuals may be consistent and accurate in providing
requested information, but may not agree with it. Although not every one must agree with every
one else on every issue, in fundamental areas such as goals, performance expectations, roles,
direction, and strategy, the key principals must agree if the organization is to be successful. Lack
of clarity and inadequate information may be reasons for disagreement, but such disagreement is
easily resolved. It is far more difficult to try to resolve differences in philosophy, policy, and
style.
Fit: Individuals may be clear and agree on a course of action, but clarity and agreement are not
an indication that a particular action is the right one to take. The organization may not have the
resources to implement the action; managers may not know how to carry it out; and, most
important, the action may be undesirable from the user's or customer's perspective.
1.2.9.1 Planning Questions
The word “audit” comes from the Latin verb audire-to listen. Listening is used here in a broader
sense than just listening with our ears. It includes using our eyes, as well, when we search for
answers to important organizational or functional issues. Developing a systematic set of
questions to take the place of eyes and ears can be tedious. Avoiding significant omissions and
preventing duplication are key. The answers to the auditor's questions must lend themselves, to
the extent possible, to quantitative analysis. For example, the auditor may start with an open-
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ended question and immediately follow with some specific and quantifiable follow-up questions.
The respondent's answers, when plotted, should illustrate both strong and weak performance
points. In order to measure the net contribution of any one factor to output, it is useful to
determine what might or would happen to output if all other inputs remained the same.
1.2.9.2 Collecting Data
Collecting information can be laborious and time-consuming. Depending on the size of the target
audience, the available time, and the type of data to be collected, it may be necessary to use and
blend the strengths of a number of different data collection methods. Such methods include
interviews, questionnaires, a review of relevant records, observation, or a combination of these
methods. Sources from which HR data can be obtained for auditing purposes include: human
resources policies, the HR mission statement, employee handbooks, affirmative action plans,
employee surveys, absenteeism and turnover studies, cost per hire studies, employee lawsuits,
bulletin board notices, organization charts, published salary surveys, EEO compliance reports,
classification studies, operating budgets, and workers' compensation claims. Sources of data for a
more specific auditing purpose, say, staff performance, might include manager assessments, self-
assessments, and surveys and interviews.
1.2.9.3 Analyzing Audit Data
After data are collected, it is important to examine the information with an eye toward assessing
readiness for change and identifying possible reasons for resistance to change. Resistance,
whether based on real or perceived fears, will be a formidable block to action consideration and
action-taking, which result from analysis and application of audit results. The more information
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available as to what may trigger resistance, the better will be the quality of the recommendations
suggested to overcome it.
Readiness for change can be measured using “force field analysis”-what organization
development practitioners call the “unfreezing-refreezing” method. A force field analysis makes
HR incumbents examine the restraining forces (-) on one side and the positive forces (+) on the
other for any given status quo situation. Restraining forces are for maintaining the status quo;
examples are: inertia, threat to social status, job security, lack of motivation, lack of resources,
etc. Positive forces are for changing the equilibrium. Improved job satisfaction is one example of
a positive force; others are: “Management is asking for it.” “People want to do it.” “The law
requires it.” “Employees are asking for it.” Unless the balance of forces is altered, no change is
likely to occur. Not all the forces, restraining or positive, are of equal strength; some require
significant effort (that is, reduce, eliminate, or add), while others are relatively easy to change
(that is, add or increase). The balance of forces can be changed either by adding new positive
forces or eliminating one or more negative forces. Taking the latter action is recommended,
because it does not add tension to the status quo situation; its effect is to turn a negative into a
positive. Adding positive forces does add tension, and the minute management takes its eye off
the ball, the situation reverts back to the status quo
1.2.10 Audit Process
Evaluation by audit results is usually superficial because the interpretation of such indicators is
generally limited. High absence rates, for example, may result from a variety of causes. Turnover
may be low because unemployment is high. The audit probe should be much deeper –apprising
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programmes, policies, philosophy and theory. Policy on the depth of the audit must determine
which of the following level is desired.
a) Results including both accomplishment and problem regarded as effect of current
management.
b) Programmes including the detailed practices and procedure of which they are composed.
c) Policies both explicit and implicit.
d) Philosophy of management, its priorities in value, goals and objectives.
e) Theory or the assured relationship and plausible explanation they clarify and relate
philosophies, policies and continuing problems.
The audit process thus consist of identifying indexes, indicators, statistical ratio and gross
number in some cases ,and examining the variation in time frame in comparison with a similar
previous corresponding period. A summary statement is then prepared and sent to top
management for information and action. Subsequent research and practice have revealed that
conventional audit have a limited focus, are isolated from the totality of the organization and its
human resource, and look upon procedure only, or emphasize apparent results. Substantive issue
such as organization pattern, style of management, appropriate structure and manpower
implication or the centralized Vs decentralized system are not dealt with in depth. To what extent
do the above factors help develop the human resource potential, or assess the impact of
environment change, political and social, on the industrial relation system and consequently, how
effective is the current industrial relation strategy and practice. Finally, what modifications are
31
envisaged to cope with emerging pattern? These are the some of the wider issues which must be
dealt with as they will have an impact on effective management of human resources.
One possible approach to start the thinking process in relation to the HR function is to ask the
following question:-
a) What is the philosophy underlying the function?
b) What principles of management are being followed in carrying it out?
c) What policies have been established for this function?
d) What procedures have been established? Are they in line with the company philosophy,
policies and principle?
e) Are the procedure, policies management principle and philosophy of each function consistent
with those of other related functions?
Such an investigative process calls for imagination in piecing to gather data from company
record and discussion with employees, using questionnaires to conduct surveys, obtaining
comparative data from other organisations and finally, correlating on variable with another to
understand the interrelatedness and thus arriving at a broader and deeper understanding. If the
personnel manager is doing the audit he should adopt a fact finding, probing and problem-
solving approach–the role normally played by an external consultant to diagnose the state of an
organization’s health.
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1.3 Industry Profile
The Indian Information Technology sector can be classified into the following broad categories -
IT Services, Engineering Services, ITES-BPO Services and E Business. IT Services can further
be categorized into Information Services (IS) outsourcing, packaged software support and
installation, systems integration, processing services, hardware support and installation and IT
training and education. Engineering Services include Industrial Design, Mechanical Design,
Electronic System Design (including Chip/Board and Embedded Software Design), Design
Validation Testing, Industrialization and Prototyping. IT Enabled Services are services that use
telecom networks or the Internet. For example, Remote Maintenance, Back Office Operations,
Data Processing, Call Centers, Business Process Outsourcing, etc. IT sector is attracting
considerable interest not only as a vast market but also as potential production base by
international companies. Therefore India is considered as a pioneer in software development and
a favorite destination for IT-enabled services. Th e rapid growth in the sector is a consequence of
access to trained English - speaking professionals, cost competitiveness and quality tel e-
communications infrastructure. Companies operating from India are able to leverage the
advantage of the Indian time zone to offer 24 x 7 services to their global customers. Several
world leaders including General Electric, British Airways, American Express, and Citibank, have
outsourced call centre operations to India. E Business (electronic business) is carrying out
business on the Internet; it includes buying and selling, serving customers and collaborating with
business partners. The following are some of the strengths of the Indian IT sector:
• Highly skilled human resource;
• Low wage structure;
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• Quality of work;
• Initiatives taken by the Government (setting up Hi-Tech Parks and implementation of e
-governance projects);
• Many global players have set -up operations in India like Microsoft, Oracle, Adobe, etc.;
• Following Quality Standards such as ISO 9000, SEI CMM etc.;
• English -speaking professionals;
• Cost competitiveness;
• Quality telecommunications infrastructure.
The following are some of the weaknesses of the sector:
• Absence of practical knowledge;
• Dearth of suitable candidates;
• Less Research and Development;
• Contribution of IT sector to India’s GDP is still rather small;
• IT development concentrated in a few cities only.
1.3.1 Regulatory Regime and Laws relating to the IT sector:
Department of Information Technology (DIT):
This department which is under the Ministry of Communications and Information Technology is
responsible for the formulation, implementation and review of national policies in the field of
Information Technology including hardware and software, standardization of procedures,
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internet, e -commerce and information technology education and development of electronics.
Initiatives for development of Hardware/Software industry including knowledge- based
enterprises; measures for promoting IT exports and competitiveness of the industry are looked
after by the Electronics Export and Computer Software Promotion Council (ESC) and National
Informatics Centre (NIC) along with DIT. The Department of Information Technology
undertakes the following functions:
• Policy matters relating to Information Technology; Electronics; and Internet (all matters
other than licensing of Internet Service Provider).
• Promotion of Internet, IT and IT enabled services.
• Assistance to other departments in the promotion of E -Governance, E - Commerce, E-
Medicine, E -Infrastructure, etc.
• Promotion of Information Technology education and Information Technology -based
education.
• Matters relating to Cyber Laws, administration of the Information Technology Act. 2000 (21
of 2000) and other IT related laws.
• Matters relating to promotion and manufacturing of Semiconductor Devices in the country;
The Semiconductor Integrated Circuits Layout Design Act, 2000 (37 of 2000).
• Interaction in IT related matters with International agencies and bodies e.g. Internet for
Business Limited (IFB), Institute for Education in Information Society (IBI) and
International Code Council - on line (ICC).
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• Initiative on bridging the Digital Divide: Matters relating to Media Lab Asia.
• Promotion of Standardization, Testing and Quality in IT and standardization of procedure for
IT application and Tasks.
• Initiatives for development of Hardware / Software industry including knowledge-based
enterprises, measures for promoting IT exports and competitiveness of the industry.
1.3.2 The information technology sector can broadly classify into:
1. IT- Software – These companies help in developing and implementation of different software
for their clients worldwide. These software could be for documentation, security services,
banking softwares etc.
2. ITeS Business process outsourcings (BPO) – Major Corporations across the world outsource
their back-office operations to some companies. E.g. Employee payroll for a US company’s
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global workforce is maintained by an Indian BPO. Slowly the definition is expanding to Human
resources, accounting, logistics, legal processes etc.
3. IT- Hardware and peripherals - The stuff you can actually see and touch, and would likely
break if you threw it out a fifth-story window, is hardware. This would include laptops, desktops,
Storage devices, Networking devices, LCD, printers etc.
4. IT- Education This segment provides training for employment in the other segments. This
would include companies providing various certification courses, like Java, Oracle etc. These
companies also provide training for employees in corporate sector. Recently, some companies
have also expanded this service to cater to schools and colleges.
This sector has made significant contributions to India’s economic growth in terms of GDP
increase, foreign exchange earnings as well as employment generation. Its contribution to GDP
has increased tenfold in last decade, from 0.6% to 6% till 2009-10. The sector has helped India
transform from a rural and agriculture-based economy to a knowledge-based economy. Besides
this, the lives of people have been positively influenced by direct or indirect contribution of IT
sector to various parameters such as employment, standard of living, per-capita income etc.
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1.3.3 National Association of Software and Services Company (NASSCOM):
NASSCOM acts as an advisor, consultant and coordinating body for the IT-BPO industry in
India, and has played a key role in enabling the government in India to develop industry friendly
policies. NASSCOM was set up in 1988 to facilitate business and trade in software and services
and to encourage advancement of research in software technology. It is a not -for-profit
organization, registered under the Indian Societies Act, 1860. NASSCOM has been proactive in
pushing this cause for ensuring that the Indian Information Security environment benchmarks
with the best across the globe. As a part of its Trusted Sourcing initiative, NASSCOM is in the
process of setting up the Data Security Council of India (DSCI) as a Self Regulatory
Organization (SRO) to establish, popularize, monitor and enforce privacy and data protection
standards for India ’ s ITeS-BPO industry. DSCI shall function as an enabler to the IT and ITeS
industry to grow at a rapid pace by facilitating the adoption and enforcement of the prescribed
security standards and best practices.
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1.3.4 Information Technology Act:
The legal enactment which governs the process and dissemination of information digitally in
India is the Information Technology Act, 2000. The Act along with its Rules legalizes the
acceptance of electronic records and digital signatures providing a legal backbone to e
-commerce. The Indian Information Technology Act addresses the following issues:
• Legal Recognition of Electronic Documents;
• Legal Recognition of Digital Signatures;
• Offenses and Contraventions;
• Justice Dispensation System for Cyber-crimes.
1.3.5 Government Initiatives:
The Foreign Trade Policy permits import of all kinds of computers (except second hand
computers) in India without any licenses. In order to promote domestic investment, foreign direct
investment, transfer of technology / process know -how, technical collaboration, joint venture etc
in India and export IT software products and services from India to the global market, both
Government of India and State Governments in India have been offering a series of policy
packages including tax breaks, import duty concessions etc under various schemes which
include:
• Export Oriented Units (EOUs) Scheme: The purpose of the scheme was basically to boost
exports by creating additional production capacity.
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• Electronics Hardware Technology Parks (EHTPs): Electronics Hardware Technology
Park (EHTP) complexes can be set up by the Central Government, State Government, Public
or Private Sector Undertakings or any combination thereof, duly approved by the Inter-
Ministerial Standing Committee (IMSC) in the Ministry of Communication and Information
Technology (Department of Information Technology).
• Software Technology Parks (STPs): The Software Technology Parks of India (STPI ) have
been set up by the Ministry of Information Technology, Government of India and the
International Technology Park in a joint project by the State Government.
• Special Economic Zone (SEZ) Scheme: SEZs are being set up to enable hassle free
manufacturing and trading for export purposes. Sales from Domestic Tariff Area (DTA) to
SEZs are being treated as physical export. This entitles domestic suppliers to Drawback/
DEPB benefits, CST exemption and Service Tax exemption. Certain exemptions like Income
Tax exemption on export profits is available to SEZ Units for 5 years, 50% for next 2 years
and 50% of ploughed back profits for 3 years thereafter are available for units in these
designated areas/zones.
• Export Promotion Capital Goods (EPCG) Scheme: The EPCG Scheme allows import of
capital goods for pre-production, production and post- production (including CKD/SKD
thereof) at 5% customs duty subject to export obligations.
Units undertaking to export their entire production of goods and services may be set up under the
Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or
Software Technology Park (STP) Scheme. The Export Promotion Industrial Park, built near
40
International Technology Park, gives an exclusive 288 acres of area for export oriented business.
GE has its India Technology Center located at this park and employs hundreds of multi
disciplinary technology development activities. An industrial park, known as Electronic City was
set up in 1991 taking more than hund red electronic industries including Motorola, Infosys,
Siemens, ITI, and Wipro, in an area of around 330 acres. The IT Corridor project, conceptualized
by Singapore ’ s Jurong Town Corporation Private Ltd, was initiated by the Department of IT
and the Bangalore Development Authority in order to develop state of the art facilities for the
development of knowledge based industries.
1.3.6 Government initiatives for the ITes Sector:
The government of India has already set up a single-window facility for attracting foreign direct
investments in this sector. Recognizing the potential of this sector, the government has provided
many incentives including a tax holiday up to 2015 and competitive duty structures. In addition
to the central government incentives, respective state governments have also developed attractive
incentive packages to target investors. The government is also actively trying to reduce
international communication cost. The telecommunications ministry has already started phased
liberalization program. In order to support IT-related services, the government is providing some
special incentives and is also providing infrastructure support through organizations such as the
Software Technology Parks (STP). Financial institutions and venture capitalists in the country
are willing to provide funds at competitive rates for expansion in ITes businesses. All these
factors collectively create a number of opportunities in the IT sector.
1.3.7 Tax Incentives / Budget:
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• Excise duty being increased on packaged software from 8 per cent to 12 per cent, bringing it
at par with customized software attracting a service tax of 12 per cent.
• Customized software has been brought under the service tax net to bring it on par with the
packaged software and other IT services.
• Specified parts of set top boxes and specified raw materials for use in the IT/electronic
hardware industry to be exempted from customs duty.
• Allocation to the Department of Information Technology enhanced to Rs.1, 680 crore in
2015-16 from Rs.1, 500 crore in 2014-15; Two Schemes for establishing 100,000 broadband
internet -enabled Common Service Centres in rural areas and State Wide Area Networks
(SWAN) with Central assistance under implementation; new scheme for State Data Centres
also approved; Rs.75 crore provided for the common service centres; Rs.450 crore provided
for SWAN and Rs.275 crore for the State Data Centres.
1.3.8 Market Trends:
1.3.8.1 Information Technology:
The Information Technology (IT) sector in India is amongst the fastest growing in the country
and the world. It is expected that by the year 2014, IT software and services industry will
account for 7 per cent of India ’ s GDP an d 35 per cent of total exports. The Indian domestic IT
market grew by 29% in the financial year 2012-13 to report revenues of Rs 288, 810 crore. The
revenue of the information technology sector has grown from 1.2 per cent of the gross domestic
product (GDP) in FY 1998 to an estimated 5.5 per cent in FY 2014. The net value added by this
sector, to the economy, is estimated to be 3.3 to 3.9 per cent for FY 2014. The Indian IT-BPO
42
sector grew by 33 per cent in FY 2014 to reach US$ 64 billion in aggregate revenue (including
hardware). Of this, the software and services segment accounted for US$ 52 billion, growing by
28 per cent over FY 2014. Software and services exports (including exports of IT services, BPO,
engineering services and R&D and software products) reached US$ 40.4 billion, contributing
nearly 63 per cent to the overall IT-BPO revenue aggregate. IT-BPO exports (including hardware
exports) grew by 28 per cent from US$ 31.8 billion in FY 2013 to US$ 40.9 billion in FY 2015.
Domestic IT market (including hardware) reached US$ 23.1 billion in FY 2015 as against US$
16.2 billion in FY 2013, a growth of 43 per cent. Hardware remained the largest segment of the
domestic market with a growth rate of 44 per cent in FY 2015. Software and services spending
grew by over 41 per cent during the year. The Indian IT services market is estimated to remain
the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent.
1.3.8.2 IT enabled Services (ITeS):
The IT / ITeS industry's contribution to the country's gross domestic product (GDP) has grown
from 1.2 per cent in FY 1998 to an estimated 5.5 per cent in FY 2014. The net value-added by
this sector, to the economy, is estimated at 3.3-3.9 per cent for FY 2015. The Indian IT-ITeS
sector (including hardware) grew by 33 per cent in FY 2014 to reach US$ 64 billion in aggregate
revenue. Of this, the ITeS/BPO sector contributed US$ 12.5 billion as against US$ 9.5 billion in
FY 2013, an increase of 31 per cent. The Indian ITeS-BPO exports grew significantly from US$
8.4 billion in FY 2013 to US$ 10.9 billion in FY 2014 while the revenues of domestic BPO grew
to US$ 1.6 billion in FY 2015 from US$ 1.1 billion in FY 2014. The sector provided direct
employment to 700,000 in FY 2015 up from 553,000 in FY 2014.
1.3.8.3 Foreign Direct Investment (FDI) Policy:
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100% FDI is permitted in the Electronic hardware sector and the Software development sector
under the automatic approval route. Industrial Licensing has been virtually abolished in the
Electronics and Information Technology sector except for manufacturing electronic aerospace
and defence equipment.
1.3.8.4 Global IT players in India:
There are a large number of multi-national IT enterprises operating in India in sectors such as:
Integrated Chip Design, System Software, Communication Software, R&D Centres, Technology
Support Sector, Captive Support Sector, BPO Sector etc reaping the cost and quality advantages.
These multinationals include Siemens, Philips, Intel, Texas Instruments etc. (Chip Design);
Siemens, Motorola, Lucent Technologies, Sony, Nortel etc. (Communication Software);
Microsoft, Oracle, Sun Microsystems, HP, Compaq etc. (Systems Software); Google, Yahoo etc.
(R&D Centres); Axa Business Services, Swiss Shared Services, Siemens Shared Services etc.
(BPO Sector); Accenture, DELL, HSBC, GE Capital, Fidelity etc. (Captive Support Sector).
1.3.8.5 Localization of the IT industry:
The Indian state of Karnataka dominates other Indian states in terms of attractiveness as an IT
destination with the city of Bangalore being at the topmost. Bangalore offers good infrastructure,
with large floor space and great telecom facilities and is therefore the most preferred destinations
of all the big banners like HSBC, Dell, Microsoft, GE, Hewlett Packard, and several Indian multi
national firms like Infosys Technologies, Wipro, and Microland who have set up their offices in
the city. The state of Andhra Pradesh, backed by the emergence of the city of Hyderabad as a
major IT hub, ranks as the second IT hub of India. This is followed by the state of Tamil Nadu
and Maharashtra. The city of Chennai in Tamil Nadu is emerging as a global capital for business
44
process outsourcing (BPO) and is propelling Tamil Nadu to the number one position in IT
exports. The state is a pioneer in IT and software services, and has a 100 percent digital
exchange network thus having the potential to garner a major chunk of ITeS business.
Maharashtra is the second largest exporter of software with annual exports of Rs 18 000cr (20%
of India's software ex ports). The state has set up software parks in Pune, Mumbai, Navi
Mumbai, Aurangabad, Nagpur and Nasik. Globally branded firms have their presence in the state
of Gujarat. Nasscom (National Association of Software and Services Companies) has ranked the
city of Ahmedabad in Gujarat to be among the top five Indian destinations for business process
and knowledge process outsourcing. The state of West Bengal is beginning to be recognize d as
the fastest growing IT destination in the country with more than double the national average
growth rate. A number of IT majors are doing significant business in the city of Kolkata. West
Bengal aims to become one of the top three IT states by 2018, contributing 15-20 per cent of the
country's total IT revenue.
1.3.8.6 Growth of the Indian IT Sector:
The Indian information technology sector is one of the sunshine sectors of the Indian economy
showing rapid growth and promise. The Indian IT-BPO sector is estimated to reach a target of
US$ 60 billion in exports and US$ 73-75 billion in overall software and services revenues by
2018. India's information and communication technology market is estimated to grow 20.3 per
cent annually to reach US$ 24.3 billion b y 2018. The Indian IT and ITeS market is estimated to
grow at the rate of over 16 per cent to become a US$ 132 billion industry, significantly, the
domestic market alone is expected to become over US$ 50 billion, with a CAGR of about 18.4
per cent. Simultaneously, the IT and ITeS exports are estimated to more than doubl e to US$
78.62 billion by 2017. Leading international companies have identified custom application
45
development and maintenance as priority areas due to high offshoreable component. The d
emand for domestic BPOs has been largely driven by faster GDP growth and by sectors such as
telecom, banking, insurance, retail, healthcare, tourism and automobiles. ITES now offers
services such as Knowledge Process Outsourcing (KPO), Legal Process Outsourcing (LPO),
Games Process Outsourcing (GPO) etc. More and more sophisticated products are being
developed in India. The domestic BPO segment is growing annually at a rate of nearly 35 - 40
%.The revenues generated by the BPO's are almost $1.18 million and the domestic market is
expected to reach $10 billion by the end of the financial year 2013. If it continues to grow by the
current rate then by the end of the financial year 2013 then IT and IT enabled services will reach
nearly US$330 million. The electronics hardware is growing at over 30% and is expected to
grow rapidly in the coming years and is estimated to be US$62 billion by 2015. According to a
recent World Bank study, India is the preferred location for software vendors for its quality and
cost. India has strong UNIX base which provides opportunity for the development of products
for internet based applications. Further, India has global connectivity with international dialing
facility from over 13220 locations, Leased/switched high-speed data links from major centers
through STPs and VSNL for point -to -point communication are also available. Abundant
investment opportunities exist in the following thrust areas in India:
• Communication Infrastructure
• Optic Fiber Cable
• Gateways
• Satellite based Communication Wireless
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• Software Development
• IT-enables Services
• IT-enabled education
• Data Centers & Server Farms
Hence IT sector is attracting considerable interest not only as a vast market but also as potential
production base by international companies. And it is one of the fastest growing segments of the
Indian industry both in terms of production and exports.
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CHAPTER 2: LITERATURE REVIEW
Ilieş, Liviu (2014), this study attempts to identify ways to develop a model of analysis and
internal audit of human resources in order to identify best practices and measures to improve
human resource management, aiming their implementation in the Romanian textiles industry
companies. The study aimed at highlighting the most appropriate ways in which the company
management can improve the effectiveness and efficiency of using human resources, taking into
account the characteristics and peculiarities of planning, organization and operational human
resources activities and processes. In this respect, we characterize the Romanian textile industry,
thus the present study took into consideration the analysis of the following variables: "strategic
human resource management", "quality management", "human resource planning and "human
resources motivation". For this purpose, the study is based on a representative sample of 22
companies from IT industry in which has been distributed 200 questionnaires. In the second part
of the study we realized an experimental research based on a model of human resource internal
audit which aims to identify good practice and complex issues faced by the IT companies. Today
companies are going through a process characterized by profound change, sometimes
dramatically, fact which determines economic organizations to focus on the change, flexibility,
customer-focused strategies and constant innovation in order to ensure market competitiveness.
What is happening in the world of organizations is a true paradigm shift due to important
changes in attitude to work, values and behavior of individuals and groups that make up the
organization. Today successful organizations that have achieved high performance, emphasize
the human resource development through the development and implementation of strategies,
policies and practices of recruitment, selection, motivation and involvement in work, and
48
packages of training and development programs for their employees. As a long term strategy,
best practices and ways to improve the human resource management helps employees seen as
internal customers, to acquire knowledge, skills, resources, encourages creativity to become
more efficient, to improve performance and to be enthusiastic.
Gross, Barrie (2015), Most IT employers have gone to tremendous expense and effort to create
scores of human resources policies, practices, and procedures that comply with the law and are
consistent with their organization’s corporate culture. This can include, for example, employee
handbooks, administrative guides for managers, performance management systems and
guidebooks, succession planning systems, severance plans, and “behind the scenes” processes for
onboarding new hires, disciplining or terminating employees, promotion guidelines, and making
bonus determinations. Not all human resources policies, practices, and procedures are committed
to writing. But they are used nonetheless. Whether they are written or not, it is vitally important
that companies also have a process to ensure that everything stays up-to-date with legal and
compliance requirements, and actually works as intended. Conducting human resources audits is
one way to do that.
A human resources audit usually involves review of all HR policies, practices, and procedures,
whether or not they are formal. It includes reviewing documents, interviewing human resources
professionals from different areas of the organization, interviewing some managers at different
levels of the organization, and possibly interviewing in-house employment counsel.
The audit can be performed in-house. But it is worth considering whether to use an outside
consultant who has no personal stake in what is working and whether everything complies with
the law. An outside employment attorney can conduct the audit. And, if set up properly, the audit
49
can be subject to the attorney/client privilege so that its results will not be discoverable in a
lawsuit. Or outside counsel can retain the consultant on the company’s behalf.
An effective HR audit will culminate in a well-organized report. The report includes not only the
specific results of the audit, but also a list of recommended actions. And a truly effective list of
recommendations is ranked by risk. That way, an organization can see at first glance where its
largest or most expensive exposure is and can design reasonable response times to address the
issues raised.
HR audits of the proper scope can be expensive. And it is important that business units are
solicited for their support before embarking because when the audit is done, there may be
changes that will directly impact the units. But most importantly, a company (through its
executive management) should be committed to acting on the results of the audit, whether that
means retaining outside counsel to perform a detailed legal review of policies, putting together
project teams to create or update policies and procedures, designing training courses targeted to
minimize risk, or writing a series of employee communications to address some of the issues
discovered.
Yadav, Rajesh K., (2013), Prompt advancement in product / service and process technology,
many operations in the manufacturing and service industries in recent years require competitive
HR practices. So this research study stresses on HR planning and audit practices. HR planning is
all about good management; good strategic management; good business management and
particularly good people management. It is important that you put thought and careful planning
into your human resource practices. And the purpose of the HR Audit is to conduct a more in-
depth analysis of the HR function to identify areas of strength and weakness and where
50
improvements may be needed. Conducting an audit involves a review of current practices,
policies, and procedures, and may include benchmarking against organizations of similar size
and/or industry. This research aims to figure out the practices, employee perception and
measures adopted by HCL for Human resource planning and audit. Chi square test is applied at
(.05 or 5 %) significance level in this paper to check the authenticity of data given by the
respondents. Findings suggests that it is difficult to assess accurate HR planning and adopting
accurate audit practices because practices itself does not produce right or wrong answers, but it
produces a series of alternatives from which the right course of action can be chosen. The
success of a business is directly linked to the performance of those who work for that business.
Underachievement can be a result of workplace failures. Because hiring the wrong people or
failing to anticipate fluctuations in hiring needs can be costly, it is important that you put effort
into human resource planning. Planning for HR needs will help to ensure your employees have
the skills and competencies your business needs to succeed. It will better prepare you for staff
turnover, recruitment, and strategic hiring – and improve stress when you have emergency/last-
minute hiring needs. With effective human resource planning, HR audit implies critical
examination and evaluation of policies, programs and procedures in human resource
management. In essence, workforce or HR planning is about predicting future labor market
needs. It requires an understanding of the make-up of the current workforce, an investigation into
future service needs and an analysis of the type and size of workforce required to meet them. It is
becoming increasingly important for agencies as they adopt new ways of operating in order to
adapt to changes. The challenge will be to ensure that agencies can minimize the costs and grab
the opportunities that such changes brings - quicker career progression, effective recruitment,
and more flexible job design and workforce deployment. By identifying workforce capabilities
51
and by considering what will be needed in the future and planning systematically, managers can
limit the risks associated with unanticipated events
Jothilakshmi M, (2015), The people in an organization are the prime sources have to be
effectively allocated and engaged in various affairs of business. Many Indian companies are
handling innovative practices to motivate and retain their talented pool. It has to be assured by a
systematic procedure which is called HR audit that is deliberate and detailed analysis of HR
standards. This paper mainly emphasizes the HR practices of public and private companies and
their styles of handling their employees and their set of norms, rules of regulations towards
people. Organizations belong to private and public industries are differed based on their
capabilities and their freedom to operate. This study aims to audit the HR practices of one public
and private company. Instead of criticism auditing the HR practices of those is the main motive
of the study. BSNL a government owned company and Reliance communication have taken for
this study. Both companies are represented public and private respectively. Through this study,
we could easily and visibly understand the framework made by both sectors towards their
people. The difficulties and problems are common to them but in different extent. This paper is
not one to compare each, reveal and audit the public and private company’s strengths and
weaknesses towards their employees. In the current competitive business climate, the companies
in various industries are tries to enhance their competence level to survive in the market. To
achieve their goals they have to comply with the dynamic pressures such as technology changes
increased competition etc. The performance of an organization can be improved only through
improved employee performance. Recruitment, training, compensation, conflict management and
motivation all these are common functions of Human resource management. All these
52
functions/activities have to be reviewed and evaluated in order to ensure the efficient HR policies
and management system
“Annual/quarter/need basis evaluation of HR functions of on organization is referred as HR
Audit”. The scope of an HR audit can range from a simple review of workplace policies to an
extensive examination of practices, policies, procedures and measurements to determine how
close the alignment is between the organization’s strategic goals, direction and HR functions that
support the company’s strategy. HR audit May either evaluate the company’s operational HR
policies, practices and processes or review of current HR indicators
Laurdan Associates, (2015), Evolution is a process of change. Over the last 25 years we have
seen significant change in the HR auditing process, the value derived from HR auditing, and the
HR audit tools used. HR audits have evolved from a simple checklist of dos and don’ts or
periodic affirmative action plans to a comprehensive, sustainable process that: 1) is an integral
part of the organization’s internal controls, due diligence, and risk management; 2) is a
fundamental activity of strategic management; and 3) uses sophisticated auditing products and
consulting services. Increasingly HR audits are conducted of HR rather than by HR. This white
paper reviews the changes in HR audits, discusses the external and internal forces affecting the
process and use of HR audits, and provides information about the leading HR auditing process.
Numerous external forces and factors have had an impact on the demand for and scope of HR
audits. First, in the global economy, human capital is becoming the single most important
determinant of competitiveness, productivity, sustainability, and profitability. Increasingly, the
organization’s human capital is being recognized as the source of innovation and a driver of
business success. Thus to be effective in the global economy, HR audits must be diagnostic,
predictive, and action oriented. Second, a confluence of economic, political, and social factors,
53
including corporate scandals, the failure of the financial industry to adequately assess risks, and
increasing stockholder initiatives, have resulted in increased statutory and regulatory
requirements, a call for greater transparency, and increased internal and external audit activity.
HR audit reports are increasingly being used to report audit findings to wider audience. The
distribution of the report on auditing findings is no longer limited to senior management. As
noted above, an increasing number of third parties are expressing interest in the organization’s
human resources management. This list of external stakeholders includes not only investors,
major stockholders, and venture capitalists, but also governmental agencies, NGO’s, civil rights
groups, and plaintiff attorneys. Since HR audits findings include proprietary and confidential
information and in many cases produce discoverable information, the implications of non-
management stakeholders reviewing HR audit finding are significant and create a potentially
serious problem for organizations. As a result, organizations are spending more time considering
the format, content, and the impressions created by their HR audit reports.
Randy See, (2013), The Audit Committee and the Superintendent approved an audit of OSFI’s
Human Resources – Performance Management for inclusion in Audit and Consulting Services
audit plan. The HR division, who is the key guardian of the Performance Management (PM)
process, is responsible to provide guidance/support to OSFI management in managing and
overseeing the process to ensure its quality, fairness, transparency, and consistency. As stated in
the PM Guide, the Performance Management (PM) process is a continuous cycle that helps
managers and employees work together to establish work and performance goals as well as
monitor their progress towards achieving them, recognizing the need to identify corrective
action, where necessary. It is an opportunity for an employee to receive and provide feedback
regarding his/her actual performance and contributions relative to OSFI’s performance
54
expectations as set out in the employee’s Goal Commitment Document (GCD). At the same
time, it should offer the employee and his/her manager an opportunity to discuss and plan for the
employee’s career development. The PM process is a very significant contributor to OSFI’s
mandate due to the importance, complexity, and difficulty to acquire, develop, and maintain the
skills, experience, and knowledge required to conduct OSFI’s activities, resulting in people risk
being rated high on an inherent basis in many areas of OSFI. It supports OSFI’s mandate by
requiring management and staff to work in partnership to deliver solutions related to
performance and career development. The main document governing Performance Management
(PM) at OSFI is the Performance Management Guide (‘Guide’). We noted that there is lack of
clarity with regard to the force of this document (i.e. is it mandatory or not) and with regard to its
true nature (i.e. is it a policy or just a guide). The degree of complexity in the process and
ambiguity in this Guide, outdated related documentation, as well as a lack of awareness of the
Guide’s content, all have led to variation in staff interpretation and inconsistencies in its
application. Consequently, employee morale and the staff retention could be significantly
impacted if PM-specific risks are not effectively managed. The recent employee survey indicated
that while performance management scored the second lowest on percent favourable (out of 6
survey categories), the overall survey results were positive with 92% of respondents agreeing
they would “recommend OSFI to others as a good place to work. The PM process is a significant
contributor to OSFI’s mandate due to the importance, complexity, and difficulty to acquire,
develop, and maintain the skills, experience, and knowledge required to conduct OSFI’s
activities.
Ukil, Minhajul Islam, (2015), The human resource is the most important asset of an organization,
which helps in achieving competitive advantage. In order to response to the changing work
55
environment, human resource personnel must determine ways to justify their performance and
operational workload. Human resource audit supports an organization to review and critically
analyze the effective performance of employees and human resource functions. A human
resource audit is a methodical process that aims to investigate the underlying policies, strategies,
systems, techniques, documents, functions, and practices of an organization with respect to its
human resource management. The purpose of this study is to review the concept and essentials of
Human Resource Audit. The current study is a desk-research in type and constructed on the basis
of secondary data, attempts to review the existing literatures of human resource audit from
different viewpoint. The human resource audit has distinct application in a diverse area of an
organization such as human resource functions, managerial compliance, employee satisfaction,
corporate strategy and human resource climate. Organizations should conduct human resource
audit regularly setting and following a set of principles, where the auditors would enjoy full
freedom in entire audit process. The thorough and objective evaluation of a human resource audit
can generate information necessary to the successful improvement of the entire human resources
of an organization. Auditing of financial records and transactions is a pretty usual practice in
business. Organizations care much about the financial performance and give preference to the
financial programs that relate in generating money; and audit of those accounting or financial
concerns are well established in business. Limited companies are bound by law to conduct
formal financial audit. Although human resource is another vital resource input and, is evenly or
in some settings, more important than financial resources, and the effective management of
human resources support an organization to attain sustainable competitive advantage, the
programs concerning people are hardly given the same measure. The resources of an
organization consist of all assets and organizational practices, competencies and company
56
attributes, knowledge, information etc., through which the organization implements strategies
and improves its effectiveness and efficiency. The effectiveness of human resources of an
organization basically depends on HR audit that provides necessary input into the potential
future strategies, and appraises the existing policies, techniques and customs of human resource
with an aim to recommend means in which they can be better developed. Human resource audit
is a vital tool in attaining an understanding about the human resources of an organization. It
provides a justification of the skills, capabilities and performance of all the workers of an
organization
Martin, Chrys A., (2013), Lawsuits can result in rusty HR practices that are sometimes unknown
to even the most sophisticated HR leaders. Thus, HR must ensure its own house is in order to be
a useful business partner to others in the C-Suite. Whether you are new to a company or have
been the head of HR for years – you always need to ensure that your HR practices are top notch,
compliant with the rapidly changing laws, and with HR “best practices” as those evolve. In
addition, HR needs to assess its effectiveness as a business partner. How is HR’s customer
service performance? Is the recruiting process resulting in top talent? These critical areas are all
ripe for auditing
Audits are an important tool to help HR stay on the cutting edge. There are generally three forms
of audits that can be performed by the HR department: First, legal compliance, second, HR “best
practices,” and third, customer service and performance. No department likes having an outside
auditor evaluate their practices as mandated by another department or the CEO. Thus, HR can
and should, perform self-audits to critically evaluate its performance in the three audit areas. HR
should embrace the audit process striving for continuous improvement in its compliance with the
law, “best practices” and customer service. HR professionals must have a willingness to evaluate
57
themselves, acknowledge deficiencies, and most importantly, to make or influence the necessary
organizational changes to maintain their position as valued strategic business partners. Thus, an
audit without the prerequisite commitment to continuous improvement is useless. HR must be
ready to acknowledge and remedy any deficiencies discovered and embrace change. There are
many factors to evaluate in deciding the type and scope of an HR audit. Is the timing right or are
there other corporate or HR initiatives that take precedence? What is the extent of the resources
that will be required? Is there an organizational commitment for those resources at this time?
Consideration needs to be given to availability of HR staff and vendors, other departments’ staff,
the cost, and availability of documents. HR must evaluate these factors in conjunction with other
corporate leaders and obtain the required buy-in before launching an audit. This is especially true
for an outward focused performance audit. Few audits can be performed entirely within the HR
department. For example, even an audit of wage and hour practices involves delving into proper
classification issues which requires the assistance of the departments where those jobs are
located. A decision also must be made as to whether outside vendors’ practices will be included
in this audit. This could include providers of payroll, HRIS, benefits, EAP, insurance and other
HR consultants. If it is impractical to complete a full scope audit, select key functions to audit
one at a time. Establishing a clear scope of the audit is necessary before determining who will
perform the work.
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CHAPTER 3: RESEARCH OBJECTIVES
• To identify the HR audit process in Indian IT sector
• To measure the need and importance of HR audit in Indian IT sector
• To analyze the effectiveness of HR audit process in Indian IT sector
• To recommend the ways to improve the HR audit process in Indian IT sector
59
CHAPTER 4: RESEARCH METHODOLOGY
This research work will deeply analyze the HR audit process in Indian IT sector. For doing this
the researcher would collect both primary and secondary data.
Research Design: Descriptive study
Data source: Primary data and secondary data is used to accomplish all the objectives
Research Instruments: Questionnaire survey among employees of IT Sector
Sample Size: 60
Research Area: Delhi/NCR
Sampling Method: Random Sampling
Method of Data Collection
a) Primary Data: Primary data are those, which are collected afresh and for the first time
and this happen to be original in character.
b) Secondary Data: Secondary data are those data which have already been collected by
someone else and which have already been used as per required.
I propose to get the secondary data from:
a. Previous in house studies done on customer preference for soft drinks
b. News papers, journals and online references related to customer preference for soft drinks
60
Limitations
The main three limitations of this research are time, finance and access. The research is time
crucial due to the deadline placed on the submission of the final research findings. Therefore
starting from sampling till data collection everything needs to be done as quickly as possible thus
leaves researcher with limited amount of time. Access to Companies data may be an issue
because the researcher will not be able to reach customers due to limited time.
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CHAPTER 5: DATA ANALYSIS
Q1. From how many years you have been working in IT sector?
40% respondents replied that they have been working in their organization from 2 to less than 4
years but 30% respondents replied that they have been working in their organization from less
than 2 years.
62
Q2. Age
14% respondents were from 20-25 years age group however 25% respondents were from 31-35
years age group
63
Q3. Gender
89% respondents were male and rest were female
64
Q4. Job Level
25% respondents were from junior level however 24% respondents were from senior level
65
Q5. Auditing process in your company involves the regular and systematic examination
32% respondents were strongly agreed with the above statement however 12% respondents were
disagreed with the above statement
66
Q6. Auditing process in your company meets all the legal requirements
30% respondents were strongly agreed with the above statement however 14% respondents were
disagreed with the above statement
67
Q7. Auditing process of the company is able to reduce the gaps to ensure conformance
29% respondents were strongly agreed with the above statement however 11% respondents were
disagreed with the above statement
68
Q8. Your company always communicate the purposes and associated success criteria
before starting auditing
25% respondents were strongly agreed with the above statement however 16% respondents were
disagreed with the above statement
69
Q9. The company always use the standardized checklist when during HR audit process
26% respondents were strongly agreed with the above statement however 17% respondents were
disagreed with the above statement
70
Q10. The company has set the valid parameters to identify the degree to which compliance
or lack thereof is taking place
28% respondents were strongly agreed with the above statement however 19% respondents were
disagreed with the above statement
71
Q11. Auditing process implemented by the company has a high level of clarity
31% respondents were strongly agreed with the above statement however 15% respondents were
disagreed with the above statement
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CHAPTER 6: FINDINGS
In summary, the purpose of analysis is to sort through the areas of strength and opportunities for
improvement in order to take positive action steps to improve the effectiveness of the HR
function.
The ideal time to complete an audit is just prior to the annual planning process. With audit
information in hand, you can be poised to take advantage of your insights into setting next year's
goals. There are two aspects of setting goals: maintenance of current good practices and
development of improved practices.
Knowing the capacity and capability of the HR department and system is critical in developing a
realistic plan. Good practices need to become a part of the HR system and 'baked in', so that they
occur in a reliable, predictable fashion. Once a process or program has reached that level, then
future development can occur more effectively.
With little discretionary time available, it is prudent to review the analysis of step three and
decide which one or two areas will provide the greatest overall improvement for the HR
function, its customers and the organization. These need to be the areas that goals are established
for the next year.
This is the point in the audit process, where definitions are reviewed and modified to create a
new and improved vision of the HR system as you wish it to be. Doing this on an annual basis
allows practices to be improved and benefits share
73
At time passes, the Audit enriches itself through better definition development and higher levels
of performance expectations. It takes on a systems approach because it is comprehensive,
inclusive of all traditional HR practices, yet accommodating to the uniqueness of company
cultures and business initiatives. Finally, it moves HR professionals into an active state of
defining their direction, making sense of their choices, and contributing to the business in a more
definitive way.
In IT sector, human resource audit can also be categorized in three ways based on the individuals
accompanying with audit processes: the self-directed team approach, the task force approach and
the external consultant approach. The self-directed team approach refers to a team within the
organization, which audits different activities of HR. In task-force approach, a task force is
formed in combination of people from different departments with diverse expertise to undertake
HR audit activities and in external consultant approach, an organization hires external HR
specialists to conduct HR audit
In comparative approach, the auditors choose and use another department or company as the
model that has sound and better practices. Comparative method is typically used to contrast the
results of specific programs or activities. This method, also branded as ‘best practices’ approach,
is frequently used in respect with HR planning, compensation management, turnover and
absence. It supports in identifying the areas where improvement is required.
The HR audit approach in which the auditors apply earlier research findings or the standards set
by an outside consultant as a benchmark to conduct audit is defined as outside authority
approach.
74
Statistical approach of HR audit depends on statistical measures of performance that are drained
from the current information about the functions of an organization. For example, by following
absenteeism and turnover rate of an organization from one period to another, the auditors can
communicate and analyze the data to determine how well human resource or operating managers
control these matters. These data help auditors to appraise the performance
An audit must understandably communicate its findings, conclusions and their implications, and
suggestions for improvement to the respective stakeholders. After analyzing the data, a number
of gaps are revealed. In the audit report, the auditors constitute recommendations to close those
gaps so that it helps to improve the organizational goal. The audit report must be produced in a
certain format containing a set of elements
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CHAPTER 7: CONCLUSION
• Before conducting HR audit, IT organizations must plan and register a set of principles to
carry out the audit activities e.g. setting specific objectives and standards of HR audit,
budgeting and establishing realistic time frame for each audit activity. Apart from these,
IT organizations may consider the following issues in conducting human resource audit.
• HR audit should be conducted with respect to the future needs of an organization, and the
facts, feelings and perception of all stakeholders should be taken into consideration.
• Human resource audit can be carried out by the internal HR specialists of an organization
or external specialists with expertise in HRM, fundamental knowledge in law and
auditing and high credibility.
• Regardless of internal or external auditor, organizations need to check the background of
the auditor before assigning the audit tasks. The auditor should enjoy full independence
in conducting the audit activities. According to Appah independence in auditing refers to
hold an unbiased position in the performance of data collection, data analysis and results
discussion in the audit report. No external interfere should be made and any such
initiative may abolish the objectivity of the audit.
• Audit is considered highly confidential both from employee and employer viewpoint.
Therefore, the organization must govern confidentiality agreement with the auditor so
that he does not unveil any information to any third party.
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• The organization should also negotiate with the auditor in how the audit functions and
report will be communicated to the respective stakeholders.
• The HR auditor should categorize who is liable for each activity, define the objectives
required by each activity, analyse the policies and procedures used to attain these
objectives and prepare a comprehensive report.
• Organizations should accept the weaknesses revealed in findings, and initiate
constructive action plan to its improvement.
• Human resource department must come up with initiatives to diminish the areas requiring
corrective actions.
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• Gross, Barrie (2015), The Importance of Human Resources Audits in IT Companies.
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QUESTIONNAIRE
Q1. From how many years you have been working Telecom sector?
Less than 2 Years 2 to less than 4 Years
4 to less than 6 Years More than 6 Years
Q2. Age
20-25 26-30 31-35
36-40 41 or more
Q3. Gender
Male Female
Q4. Job Level
Junior Middle Senior
Q5. Auditing process in your company involves the regular and systematic examination
Strongly Agree Agree Neutral
Disagree Strongly Disagree
Q6. Auditing process in your company meets all the legal requirements
Strongly Agree Agree Neutral
Disagree Strongly Disagree
Q7. Auditing process of the company is able to reduce the gaps to ensure conformance
Strongly Agree Agree Neutral
Disagree Strongly Disagree
Q8. Your company always communicate the purposes and associated success criteria before
starting auditing
Strongly Agree Agree Neutral
Disagree Strongly Disagree
80
Q9. The company always use the standardized checklist when during HR audit process
Strongly Agree Agree Neutral
Disagree Strongly Disagree
Q10. The company has set the valid parameters to identify the degree to which compliance or
lack thereof is taking place
Strongly Agree Agree Neutral
Disagree Strongly Disagree
Q11. Auditing process implemented by the company has a high level of clarity
Strongly Agree Agree Neutral
Disagree Strongly Disagree
81