Human Resource Audit (HRA)

• HRA is a systematic assessment of the strengths, limitations, and developmental needs of the existing human resources of an organization in the context of its (organizational) performance.

• It is a critical analysis of the existing human resource within the organization. It is a systematic review and assessment of human resource management philosophies, policies, systems and practices.

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• Need & purpose of HRA:• Felt concern by Top management,• External compulsions for HRA to be more

competitive and for survival,• Changing business factors & environments,• An urge on the part of HR professionals to

improve & advance existing policies, practices & systems. To keep the manpower dynamic, not to miss opportunities & cope up with the changes.

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• HRA is essential for effective HRP. All evaluated qualitative & quantitative information of manpower is made available for HRP through HRA.

• Scope of HRA may focus on a particular HR function ( like T & D, recruitment, appraisals etc ) OR focus on all HR functions. This is decided by the Management before initiating HRA. It is to collect all information on human resource policies, practices, systems, adequacy to meet changes etc.

HRA & Statutory Financial audit.

• Statutory financial audit & HRA: • The annual financial audit is mandatory as per

Companies Act. But, HRA is neither mandatory nor statutory.

• Financial audit is somewhat a fault-finding exercise, even though it produces good results. But, HRA is to assess the strengths, weaknesses, limitations & developmental needs of existing human resource, reviewing existing policies, practices, systems of human resource.

HR auditing process

• HRA is usually conducted by outside consultants to ensure greater objectivity & impartiality. It need not be routine.

• The steps in HRA are :• Briefing and orientation: This is preparatory

meeting of all employees to discuss issues involved, chart out audit procedures & develop plans and programmes of audit.

Steps in HRA

• Scanning material information : This involves scrutiny of all information of personnel, manuals, HRIS data, appraisals, compensation , computer capabilities to store & process data etc.

• Surveying employees: It involves interview with managers, Top management, all key employees to pinpoint out issues, present strengths, limitations, anticipated needs, management philosophies etc.

Steps in HRA

• Conducting interviews with questionnaires prepared in advance: The key factors in the questionnaire may focus on :

• Information : Coverage, source, adequacy, gaps etc

• Forecasting: Methodology, reliability, testability, budgeting, time orientation , technology perspective.

Steps in HRA

• Training & development: need assessment, selection criteria, level & frequency, internal vs external training, quality of training, evaluation of training, HRD climate, budget for training, benefits for employees after training etc.

• Management succession planning: Policy, and present system, Special assignment data etc

Steps in HRA

• Compensation policies, job study details, reward system, grievance procedures, industrial relations status etc.

• Affirmative action : Efficiency of action programmes, lessons for the future

• Need inter-relationships: Future outlook on HRM, Clarity on HRA etc

• The staff function & HRM department details.

Steps in HRA

• Synthesizing : This involves assessing current situation, priorities, staff pattern, issues identified etc.

• Identification of future needs, criteria for HR development, specific recommendations and an action plan (time-bound) for development.

• Reporting: This involves a number of planned meetings with all concerned to clarify issues and avoid communication gap. At the end, a formal report is submitted to the Top management for approval and action.