Answer 1.

Human Resource Valuation

Human resource valuation means the identification and measurement of the value of human
resources and then supplying this information to the interesting parties. It is sometimes also
defined as a method of assigning value to the employees on the basis of their future economic
services to the organization. The employees of value at the present worth of the services they are
expected to render during their stay in the organization or a particular period of time.

Importance of Human Resource Valuation

 HR valuation assures the customers the company that it has the requisite human capital
reserves to service their demand. The employees of the company also feel assured when they
come to know that they are counted as assets by the company and not expenses.
 It serves as a tool for improved performance appraisal and man power assessment. It also
helps the management in realizing the present value of its future commitment of providing
employee compensation.
 It helps the management in the employment like locating and effective utilization of human
resources. It also helps in deciding the transfers, promotion, training and retrenchment of
human resources.
 It assists in evaluating the expenditure incurred for imparting further education and training
in employees in terms of the benefits derived by the firm.
 It also helps the management in taking appropriate decision regarding the use of human
assets. Managers get valuable feedback regarding the effectiveness of their HR policies and
practices.

Human Resource Audit

Human Resource Audit is a systematic formal process, 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.

Importance of HR Audit

 HR audit is the key for recognizing HR deficiencies, they also aid in recognizing HR
successes. Furthermore, they help HR professionals standardize processes, identify risk areas,
and align HR practices with the overarching strategy and goals of the organization.
 An HR audit assesses the current activities and inputs available, and then determines the
future HR needs of the organization. When done properly, the audit will ultimately result in
 meaningful action items, including a suggested timeline and allocation of resources that will
improve the effectiveness and efficiency of the HR function.
 Employers should regularly audit the services that are provided to their employees, including
payroll, benefits administration, and conflict resolution. The quality of these services directly
affects employee satisfaction, which is the key in employee retention. Employee satisfaction
with these services typically leads to increased company morale and engagement. An audit of
these services should seek to ensure that they are meeting the needs of employees.
 Performing an HR audit is especially important because it mitigates the risk of being liable
for what are deemed “unfair employment practices”. Legal issues and conflicts can be
extremely costly, and HR audits are a proactive way to minimize the costs associated with
such compliance issues. The audit should assess the recruitment and selection process for
employees to ensure fairness. It should also assess the procedures for layoffs and
terminations, and the effectiveness of measures taken to maintain workplace safety.
 HR audits usually involve reviewing employee files to ensure that supervisors and managers
are continuously providing feedback and properly documenting it. An audit can help to
pinpoint lapses in leadership and management and identify opportunities for training or
performance management improvement.

The human resource valuation system cannot be considered to be a complete system of

accounting unless it is followed by an equally competent system of auditing. Application or use
of HR audit to ascertain whether or not the performance of the managers has been true and fair in
the overall interests of the organization they serve. In the absence of human resource valuation,
the management may not realize the negative effects of certain programmes aimed at improving
profits in the short run. Such programmes may result in decreased value of human assets due to a
fall in productivity levels, high labour turnover and low morale. Audit of human resources could
help in finding out the efficiency of every segment. Human resource audit could enable the
appraisal of the performance of various managers. The basic function and management of human
resources is also greatly facilitated. Hence human resource valuation and audit activity could be
helpful in improving the efficiency of human resources in the changing business scenario.
Answer 2.

HR audit interventions aim to enhance overall organizational performance by improving the

performance of individuals and groups within the organization. The meta-goal in these
interventions is to create what is being called a “learning organization”. It comprises the
procedures and processes that purposely seek to provide learning and development activities to
enhance the skills, knowledge and capabilities of people, teams and the organization so that there
is a change in action to achieve the desired outcome. It incorporates traditional views of training
and development but seeks to extend attention to learning throughout an organization as a
strategy to cope with change.

The HR audit in several organizations resulted in establishing several organizational systems and
processes such as potential and performance appraisal, career planning, training, mentoring.
Performance appraisal and job rotation are the two most frequently affected changes.

In a few companies it has resulted in the formulation of clear-cut policies including promotion
policy, communication policy, reward and recognition policy, etc. In others it seemed to have
drawn their attention to issues like developing trust, collaboration, teamwork, quality orientation
etc. In a few others it has resulted in more role clarity and direction to the employees in terms of
their work leading to higher level of role efficacy.

In one of the organizations, as the audit started with the issues of future strategies the top
management team could not identify the future plans. They indicated that the plans come from
the multinational Head Office and they have no freedom in influencing the same. The turnover
from Indian operations was negligible and therefore the parent office paid little attention to the
corporation. As a result the top management could not communicate the future of the
organization clearly to the employees. This resulted in morale and motivation issues though of
not a significant magnitude. The corporation has good practices and the employees were proud.

On the basis of the HRD Audit report, which indicated the difficulties in ensuring employee
commitment without an appreciation of the future plans of the company, the top management
team made it a point to negotiate and plan the future strategy and plans for the company.

In another company the HRD Audit indicated the need for developing locals as HRD Managers
and the need for reorienting the HRD systems to local culture. The company recruited an HRD
manager as a short-term basis who designed a number of HR systems and also trained the local
line managers in HRD. The systems designed were integrated into the TPM, ISO 9000 and such
other interventions.

The above consequences indicate that HRD Audit is cost effective and can give many insights
into a company’s performance improvements. While various methods like individual and group
interviews, workshop, questionnaires and observation can be used as tools the success of the
audit as an intervention depends on the efficiency of implementation in the post-audit phase.