Q1. Define Human Resource (HR) Audit.

Explain the need or HR

Audit. What are the benefits of HR Audit?
Definition of HR Audit
Need for HR Audit
Benefits of HR Audit
Answer:
Definition of HR Audit
Human resource audit is a systematic assessment of the strengths,
limitations, and developmental needs of its existing human resources in the
context of organisational performance. (Flamholtz,1987).
Human resource audits give an account of the skills, abilities and limitation
of its employees. The audit of non-managers are called skills inventory while
the audit of managers are called management inventories. Basically, the
audit is an inventory that catalogues each employees skills and abilities
which enables the planners to have an understanding of the organisations
work force. (William B. Werther, Jr. and Keith Davies).
Need for Human Resource Audit
To make the HR function business-driven.
Determining change of leadership.
To take stock of things and improve HRD for expanding, diversifying and
entering into a fast-growth phase.
For growth and diversification.
For promoting professionalism among employees and to switch over to
professional management.
To find out the reasons for low productivity and develop HRD strategies to
address that.
Dissatisfaction with a particular component. UNCLEAR
To become employer of choice or revamping employer branding.
To ensure effective utilisation of human resources.
To review compliance with laws and regulations.
To instill a sense of confidence in the human resource department that it
is well-managed and prepared to meet potential challenges and
opportunities.
To maintain or enhance the organisation's reputation in a community.
Benefits of Human Resource Audit
Human Resource or HR is an integral part of any company that covers an
array of functions such as recruitment, selection, compensation
management, payroll, benefits, training, development, etc. HR audit is a
broad term covering all the human resource functions. It covers the following
HR areas:

 Audit of all the HR functions.

Audit of managerial compliance of personnel policies, procedures and
legal provisions.
Audit of corporate strategy regarding HR planning, staffing, industrial
relations (IR), remuneration and other HR activities.
Audit of the HR climate on employee motivation, morale and job
satisfaction.
After our comprehensive assessment of your HR systems through HR audit,
areas for improvement can be identified and solutions can be implemented.
The best HR practices involve a legally defensible framework, training of
employees, and accurate marketplace data. Some immediate audit benefits
are as follows:
Create an HR business plan.
Streamline HR work processes.
Monitor compliance with established regulations and procedures.
Develop user-friendly HR systems. It provides various other benefits to the
organisation. These are:
It helps to find out the proper contribution of the HR department towards
the organisation.
It helps in development of the professional image of the HR department of
the organisation.
It reduces the HR cost by minimising the faults in various functions.
It motivates HR personnel towards better performance as they know that
they are being observed so they are more conscious.
It helps in identifying problems and solving them smoothly.
It provides timely legal requirements.
It provides sound performance appraisal systems.
It helps in systematic job analysis.
It helps in changing mindsets.
Now read the example given below to observe how a company derives
benefits from HR audit.
An engineering organisation with over 100 employees contacted Vital HR to
carry out an HR audit. They did not have a specific HR person. As it often
does, the role of HR fell on finance or the company secretary and advice
when needed was taken from a solicitor. This organisation had robust
contracts of employment in place and many HR policies and procedures. The
audit gave the client an opportunity to discuss key areas of concern within
the business and to establish if its current procedures were able to help
overcome them. Following the audit, only a few additions to the policies were
recommended. The outcome of this audit was that the client felt reassured

that it was legally compliant, they had the opportunity to discuss what if
situations with an HR professional, and hopefully, in case they had any major
issues they would know whom to turn to for advice.
Q2. Discuss the methods used in the HR Audit process.
Explain the methods used in the HR Audit process
Answer:
Explain the methods used in the HR Audit process:
A good starting point for the audit process is to take some time and reflect
on the HR functions which need to be audited. Simply listing them is a good
first step. For achieving organisational goals, it is very important to carry out
various HR functions smoothly. In this step of the audit process, we define
the various functions which need to be audited.

In this step, consider your areas of responsibility and traditional HR practices covered by the
functions you need to audit. While starting out, it is better to make more general statements and
improve from year to year in those areas that you choose to raise the level of performance. For
example, as an audit manager, you may decide to audit any of the following:
All human resource functions.
Any specific function such as the recruitment process of your company.
Any part of the specific function you have selected for audit such as generating
applicant pool function of the recruitment process.
The main purpose is to study and analyse each one of the specific areas of HR management. The
analysis should focus on the planned measures, the method of implementation, and the results
obtained. In order to carry this out, the areas that need to be audited must be identified. A list of
the indicators corresponding to the different areas of the HR function could contain some of the
following:
Description of the staff of the company
The complete staff can be described by:

 Hierarchic levels
Years of service
Qualification
Sex
Nationality
The number of permanent and temporary employees, interns and physically or mentally
challenged employees.
Indexes of personnel rotation and absenteeism.
Job analysis
The various indicators of job analysis are as follows:
The number of described posts
Occupants per post
Degree to which the job description cards have been updated
The degree of detail in the job description cards
The methods used to analyse and describe the jobs.
HR planning
HR planning, as you have studied in unit 7, is an important area of preplanning which includes
the methods employed to plan personnel needs, the measures adopted to cover future personnel
needs, and the temporary planning horizon.
Recruiting and personnel selection
Main indicators of this are as follows:
The number of days required to fill in a vacant post
The number of applications received by work place categories
The average amount of days between the reception of the application and
recruitment
The average cost of recruitment
Cost of selection per job post
The degree to which internal and external sources of recruitment are used
The average number of candidates that do not pass the selective tests
The study of the reliability and validity of the selection tests
Training and development
The training indicators are as follows:
The procedures followed
Frequency at which personnel training needs are analysed
The criteria followed in the training programmes
The evaluation criteria for the efficiency of the training programmes
The percentage of the HR budget allocated to training
The average number of hours of training per employee
The percentage of employees that participate in training programmes by
workplace categories.

Development of professional careers

These indicators focus on the vacancies covered internally.
These indicators include:
The percentage of employees promoted
The percentage of vacancies covered internally and externally and the average time per
employee it takes to receive a promotion.
Q3. What is HR Scorecard? Explain the reasons for implementing HR
Scorecard framework.
Meaning of HR Scorecard
Reasons for implementing HR Scorecard framework.
Answer:
Meaning of HR Scorecard: HR scorecard measures the HR function's
effectiveness and efficiency in producing employee behaviours needed to
achieve the company's strategic
goals. In order to achieve that you need to know:
What the company's strategy is.
Understand the causal links between HR activities, employee behaviours,
organisational outcomes, and the organisation's performance.
Have metrics to measure all the activities and results involved.
This mode of scorecard is based on the assumption that competent and
committed employees are needed to provide quality products and services at
competitive rates emphasising on the ways to enhance customer
satisfaction.

Understanding the Reason for Implementing the Human Resource

Scorecard
In this era of tough competition it is very important for firms to have more
effective HR management systems. It is a challenge for managers to make

HR a strategic asset. The HR scorecard is an instrument that enables them to

improve the HR function in the organisation. It helps to periodically assess
effectiveness of HR functions in a wide range of areas, from recruiting to
terminations, and including training and development, communications, and
legislative compliance. But implementing effective audit systems for human
resource is a difficult task and demands the existence of a unified framework
to guide the HR managers. Sometimes firms under-invest in their people and
at times invest in the wrong ways. Another difficulty faced by managers is
that they cannot prepare the projected cash flows for future productivity of
present inputs as in the case of financial assets, but at the same time they
are not willing to take the risk. So the best way is to prepare the Balanced
Scorecard with sound
measurement strategies which are able to link HR functions, activity and
investment with the overall business strategy. The HR scorecard framework
was specifically designed for the following reasons:
It reinforces the distinction between HR do-ables and
deliverables: A good audit system must clearly differentiate between the
deliverables that influence strategy implementation and do-ables that do
not. Policy implementation is not a deliverable until it has a positive effect on
the
HR architecture and creates the right employee behaviours that drive
strategy implementation. An appropriate HR measurement system will
encourage HR professionals to think both strategically as well as
operationally.
It helps in controlling cost control and value creation: It is the
responsibility of HR to minimise the cost of the firm but at the same time, HR
has to fulfill its strategic goal, which is to create value. The HR scorecard
helps HR professionals balance the two and find the optimal
solution. It allows HR professionals to drive out costs where appropriate, but
at the same time it helps to create value for the firm by retaining good
human resources.
It measures leading indicators: There are drivers and outcomes in the
HR value chain along with leading and lagging indicators in the overall
balanced performance measurement system. It is thus important to monitor
the alignment of the HR decisions and systems that drive the
HR deliverables. Assessing this alignment provides feedback on HRs
progress towards these deliverables and lays the foundation for effective HR
strategies.
It assesses HRs contribution to strategy implementation: The
cumulative effect of the HR scorecards deliverable measures provides the

answer to the question regarding HRs contribution to a firms performance.

All measures have a credible and strategic rationale. Managers can use these
measures as solutions to business problems.
It lets HR managers to manage their strategic responsibilities: The
scorecard motivates the HR managers to focus on exactly how their
decisions shape the successful implementation of the firms strategy. This is
due to the systemic nature of the scorecard that covers all the aspects.
Therefore it provides a clear framework.
It encourages flexibility and change: In this era of an ever-changing
business environment, standardised patterns do not work well. The changes
are required even in the HR policies with the change in business
environment. The basic nature of the scorecard with its causal emphasis and
feedback loops helps fight against measurement systems getting too
standardised. Every decision needs to be taken based on past and future
scenarios. One of the common problems of measurement systems is that
managers tend to get skilled to obtain the right numbers once they get used
to a particular measurement system. The HR scorecard provides the
flexibility and change because it focuses on the firms strategy
implementation, which constantly demands change.
Q4. What is meant by Competency mapping? Explain the various
competencies and the associated behavioral aspects.
Meaning of competency mapping
Explanation any seven competencies along with the behavioral
aspects
Answer:
Meaning of competency mapping :
Competency mapping forms an excellent tool for optimising the human
capital. HR auditors should make sure that they identify the key
competencies for an organisation or a particular position in an organisation,
and use it for job evaluation, recruitment, training and development,
performance management, succession planning, etc. They should ensure
that the organisation effectively communicates what it actually expects from
them.
The competency framework serves as the bedrock for all HR applications. As
a result of competency mapping, all the HR processes such as talent
induction, management development, appraisals and training yield much
better results.
Competency mapping involves identifying the competencies that will
be needed by people working in an organisation. The level of

competency needed by employees at each level must also be specified. This

depends on the type of job they do and the environment in which the
organization functions. Once this is identified, the remaining process
becomes easier. The next step will be to match the existing level of
competencies with what is actually required, and take measures to bridge
the gap.
Just like a round peg cant fit a square hole, a wrong employee cant fit in a
right organisation.
The future of an organisation lies with the people working there. The
organisation will have to find the right person who will fulfill its expectations
or will have to chisel and shape up the existing employee to fit its
expectations. The more efficient they become in facing the demands of the
environment, the more effective will be the organisation.
Now let us go through certain core competencies for professionals, the
behavioural aspects associated to each of them, and elements pertaining to
each of them.
Explanation any seven competencies along with the behavioral
aspects
1. Communication Skills: This does not necessarily refer to English
speaking skills. There are various factors leading to effective communication.

2. Interpersonal Relationship Building Ability: This deals with how well

a person is able to socialise and bond with others around him. The
behavioural aspects and elements related to interpersonal relationship
building ability

3. Negotiating Ability: The need for this skill arises when two or more
parties argue on a common issue and each party wants a conclusion that it
prefers. The behavioural aspects and elements related to negotiating ability

4. Critical Thinking Ability: The business environment is full of

uncertainties and surprises. One must have the ability to think and act under
unforeseen and critical situations. The behavioural aspects and elements
related to critical thinking ability

5. Data Management Ability: The documents and files possessed by a

company are of great importance. The information has to be managed
effectively. The behavioural aspects and elements related to data
management ability

6. Forecasting Ability: As already said, the business environment is highly

uncertain. One has to possess the ability to foresee future changes and
competitions. The behavioural aspects and elements related to forecasting
ability

7. Creativity: It is not only the quality of the product that plays a role in the
market. It is also how different our products are, compared to that of our
competitors, and how useful they are, which attract our customers. This
requires creativity. This will also bring about a huge difference in the way
regular day-to-day activities are carried out. The behavioural aspects
and elements related to creativity

Q5. Write a brief note on effectiveness of Human Resource

Development Audit as an intervention.
Effectiveness of Human Resource Development Audit as an
intervention.
Answer:
Effectiveness of Human Resource Development Audit as an
intervention:
In any firm, along with the optimal utilisation of other resources, human
resources should also be exploited to its maximum potential. Businesses
which utilise their human resources in an effective way have better chances
of success in the future. Sustainability and progress of business will depend
on new competencies, methods, strategies and value creating processes.
Every organisation has accepted that human resource is the most valuable
asset of an organisation though its value is not mentioned in the balance
sheet.
Lack of information regarding human capital was seen as a serious handicap
for decision making, both for the managers, investors (Srivastava 1979: 83)
and for the human resource development process itself. Some of the
controversies that have emerged as hindrances to the very concept of
human asset and to the process of human audit (Khandelwal 1979) is listed
below:
a) Since human beings cant be owned by others, it is wrong to use the term
asset without legal ownership. Again it cant be even said that the services
of an employee are owned by an employer during his employment in the
enterprise.
b) While it may be possible to conceive the resource of an employee or his
service, the potential dimension of an employee cannot be conceived or
predicted. Hence, it is difficult to assess or account the same in terms of any
tangible methods. At the most, human potential can be qualitatively valued.
c) To be valued as an asset, an item should be capable of being valued with a
reasonable degree of objectivity and it should be capable of substantiation at
the time of audit. Human beings do not meet with any of these requirements.
Hence, they cannot be shown as assets.
d) The term asset implies some realisable value once out of use. Human
resources have no realisable value. Rather, they actually involve expenditure
in terms of payment of retrenchment compensation, gratuity and other
terminal benefits at the time of retirement, while the employer does not
receive anything on the termination of the services or on the retirement of
an employee.

e) Calling human resources as assets is against human dignity as human

beings are much more than resources. The study was conducted to find out
the effectiveness of HRD audit as an Organisational Development (OD) tool,
and the issues for making it succeed in an organisation by exploring the
factors affecting it. It also explored the expectations of HR to make the
intervention a success. The various findings of the study are as follows:
Where HRD chief/top HR is committed to HRD, the effectiveness of HRD
was likely to be high in those organisations.
Organisations with positive management style were utilising HRD audit as
a tool for change and advancement in HRD.
There is a direct relation with regard to management styles and HRD
effectiveness.
The business units which have a good HRD development profile were likely
to utilise the HRD audit interventions to bring about HRD oriented changes.
Q6. Write short notes on the following:
(i) Concept of Audit for HR Planning
(ii)Concept of Audit for HR Climate
Answer:
(i) Concept of Audit for HR Planning :
HR planning refers to the ongoing process of systematic planning to achieve
optimum use of an organisation's most valuable asset - its human resources.
The objective of HR planning is to ensure the best fit between employees
and jobs, while avoiding manpower shortages or surpluses. The three key
elements of the HR planning process are forecasting labour demand,
analysing present labour supply, and balancing projected labor demand and
supply. HR planning is the process by which management ensures that it has
the right personnel who are capable of completing those tasks that help the
organisation to accomplish its goals. The audit of HR planning helps to verify
the following aspects of HR planning:
a) An organisations plans regarding expansion, diversification, technological
change, etc., should be backed by the availability of human resources. It
suggests modification in the plan when the expected manpower is not
available.
b) Uncertainty and change.
c) Advancement and development of employees through training,
development, etc.
d) The level to satisfy the individual needs of the employees for promotions,
transfers, salary enhancement, better benefits, etc.
e) System for anticipating the cost of salary, benefits and all the cost of
human resources thus facilitating the formulation of budgets in a society.

f) The need for redundancy and plans to check of human resources and to
change the techniques of management.
g) Planning for physical facilities, working conditions, the volume of fringe
benefits such as canteen, schools, hospitals, conveyance, child care centres,
quarters, company stores, etc.
h) Development of various sources of human resources to meet the
organisational needs. Audit of HR planning helps ensure that you have
reliable monitoring and planning systems in place, so that the implications
for strategic and cost planning can quickly and easily be assessed. Normally
auditing addresses
the following six areas:
1. How to develop and introduce an effective HR planning system.
2. How to estimate workforce requirements for the organisation.
3. Understanding and predicting the available labour supply.
4. How to analyse the supply and demand balance, and deal with a surplus
or a shortfall.
5. Handling the implications for recruitment, internal redeployment, pay and
rewards, training and development, and employee retention.
6. Monitoring organisational plans, i.e., how to develop a system that will
give you reliable early warnings of problems ahead.
The audit of HR planning helps to take steps to improve human resource
contributions in the form of increased productivity, sales, turnover, etc. It
facilitates the control of all functions, operations, contribution and cost of
human resources.
Now read the case 1 given at the end of the unit about the central bank,
which is facing challenges on the manpower front from various directions
such as retirement and skill upgradation. It covers the various areas of HR
planning audit. By reading this you will understand importance of verifying
the HR policies so as to minimise future problems.
(ii)Concept of Audit for HR Climate
HR climate has impact on motivation, morale and job satisfaction. Quality of
HR climate can be measured by examining:
1. Employee turnover: In a HR context, turnover or staff turnover or
labour turnover is the rate at which an employer gains and loses
employees. Simple ways to describe it are "how long employees tend to stay
in a given organisation or industry. Losing employees may include
factors such as deaths, transfers, retirements and resignations. High
turnover may be harmful to a company's productivity if skilled workers are
often leaving and the worker population contains a high percentage of novice
workers which can lead to increased cost. Reduced employee turnover is an
excellent measure of HR climate. Some areas that lead to employee turnover
are better hiring practices, orientation, working conditions, remuneration and
benefits, and advancement opportunities.

2. Absenteeism: It can be described as failure on part of an employee to

report for work. Unauthorised absence costs money and reflects
dissatisfaction with the organisation. Some of the ways the organization can
curtail absenteeism are avoidance of night shifts, enhancement of job
security and job satisfaction and friendly supervision.
3. Safety records: Organisations should keep records of accidents in the
workplace. Accidents cost money and life and also reflect prevailing
organisational climate. Frequent accidents also affect the goodwill of the
organisation. In order to avoid it, the management must have safety
plans in place. Moreover, the effectiveness of the safety plan should be
evaluated and measured at regular intervals.
4. Attitude surveys: They are the most important indicators of
organisational climate. Attitudes determine employees feeling towards the
organisation, supervisor, peers and activities.