HUMAN RESOURCE AUDIT

DEFINITION:
Human Resource Audit is a systematic assessment of the strengths,
limitations, and developmental needs of its existing human resources in the
context of organizational performance – (Flamholtz, 1987)

NEED FOR H.R. AUDIT:

Top Management saw solutions to their problems, issues and challenges in
HRD to face business competition and to achieve organizational goals.

PURPOSE OF H.R. AUDIT:

1. To examine and pinpoint strength and weaknesses related to H.R.

areas and Skills and Competencies to enable an organization to achieve
its long-term and short-term goals.

2. To increase the effectiveness of the design and implementation of

human resource policies, planning and programs.

3. To help human resource planners develop and update employment

and program plans.

SCOPE OF HUMAN RESOURCE AUDIT:

Whenever the H.R. Audit it taken up, the scope is decided. Audit need not be
exhaustive, but should be focused on particular function of H.R.M. such as
Training and Development, Performance Appraisal, Compensation, etc...
However, the objective and approach of H.R. Audit, more or less, remains the
same, regardless of scope.

APPROACH TO H.R. AUDIT

1. Self – directed surveys.

2. Task Forces within the organization.

3. Out side Consultants.

AUDITING PROCESS:

Auditing process varies from organizations to organizations. Generally involves

following STEPS:
STEP ONE: Briefing and Orientation:

a. To discuss particular issues considered to be important.

b. To chart out audit procedures.

c. To develop plans and program of audit.

STEP TWO: Scanning material information:

Scrutiny of all available information pertaining to personnel, personnel

handbooks and manuals, guides, appraisal forms, computer capabilities and
any other related information.

STEP THREE: Surveying employees:

a. Interview with key managers, functional executives, Top functionaries in

the organization and employees Representatives, if necessary.

b. The purpose is to pinpoint issues of concern, Present strengths,

anticipated needs and managerial views on human resources.

STEP FOUR: Conducting interviews:

a. What questions to be asked, are developed during scanning of

information.

b. It is better for H.R. Audit, if clarity about the key factors of H.R.M. selected
for audit and the related questions that need to be examined.

STEP FIVE: Synthesizing:

The data gathered is synthesized to present the

a. Current Situation.

b. Priorities.

c. Staff pattern.
 d. Issues identified.

STEP SIX: Reporting:

a. The results of the audit are discussed with

Managers and Staff Specialists, in several
rounds.

b. Important issues are identified for

inclusion in the formal Report.

H.R. AUDIT TOPICS FOR QUESTIONNAIRES AND RELATED ASPECTS

1. INFORMATION

• Coverage

• Source

• Adequacy

• Gaps

2. FORECASTING
• Methodology

• Reliability

• Testability

• Budgeting

• Time orientation

• Technology perspective

3. TRAINING AND DEVELOPMENT

• Need assessment

• Selection criteria

• Levels covered and frequency

• Internal VS external training

• Quality consciousness

• Changing needs

• Climate for self-development

4. PERFORMANCE APPRAISAL

• Validity of appraisal process

• Fitness

• Benefits and problems

• Know-how of appraising

• Clear objectives

• Uniformity in process

• Consistency in ratings

• Feedback to employees

• Changing needs
5. MANAGEMENT SUCCESSION PLANNING

• Policy formulation

• Identifying key position

• Availability of successors

• Matching future needs

• Responsibility for grooming and development

6. COMPENSATION

• Appropriateness of policies

• Company philosophy

• Adequacy of rewards

• Nature of job descriptions

• Flexibility in job evaluation system

• Control over cost

• Opportunities for improvement

7. AFFIRMTIVE ACTION

• Efficiency of action programmes

• Lessons for future

8. THE STAFF FUNCTION (THE H.R. STAFF)

• Expectation from human resource staff

• Degree of satisfaction

• Adequacy

• Attitude and approach

• Capability and potential

• Suggestion for change

 METHODS OF H.R. AUDIT

Four different methods are given as

 1 INDIVIDUAL INTERVIEW METHOD

2 GROUP INTERVIEW METHOD

3 WORKSHOP METHOD

4 QUESTIONNAIRE METHOD

FOR H.R. AUDIT, EITHER COMBINATION OF METHODS OR ALL THE METHODS ARE
USED.

1. INDIVIDUAL INTERVIEW METHOD:

Top level management and senior managers are interviewed, individually. It

helps in following:

 Knowing their thinking about future plans and opportunities available for
the company.

 Knowing about their expectations from the H.R. Audit.

 Getting sensitive information pertaining to working styles and culture.

Union leaders, departmental heads, some strategic clients and informal

leaders are also interviewed, individually. In case of small companies,
manned by professionals, interviews can be extended with selected
employees from different levels and functions.

2. GROUP INTERVIEW METHOD:

Group interviews and discussions with the employees and/or executives of

large companies for H.R. Audit; facilitate collection of information about
effectiveness of existing systems.

COMPOSITION OF GROUP:

A. Ideally, the group should be of 4 to 8 persons.

B. Group should consist of same or similar level of employees from cross

functional areas.

C. In case of large organisation, group interviews for each functional area

can be conducted, separately.

RELAVANT QUESTIONS THAT ARE ASKED IN INDIVIDUAL AND GROUP

INTERVIEWS:
 a. What do you see as the future growth opportunities and business
directions of the company?

b. What skills and competencies does the company have which you are
proud of?

c. What skills and competencies do you need to run your business, or to

perform your role, more effectively at present?

d. What are the strengths of your HRD function?

e. What are the areas where your HRD function can do better?

f. What is good about your HRD subsystems, such as:

• Performance appraisal

• Career planning

• Job rotation

• Induction training

• Recruitment policies

• Workers development programmes

g. What is weak about them? What can be improved?

h. What changes do you suggest to strengthen HRD in your company?

i. What do you think are the ways in which line managers can perform
more developmental roles?

3. WORKSHOP METHOD:

In some cases of H.R. Audit, instead of Individual and Group Interviews,

Workshop Methods i.e. Large Scale Interactive Process (LSIP) is conducted, as
under:

a. 30 to 300 participants can be asked to gather in a room.

b. They are divided in small groups.

c. They are asked to work either around Systems, Subsystems or around

different dimensions of HRD and do SWOT Analysis.

d. All the groups thereafter give presentations.

 e. The H.R. Auditor compiles the views of all groups, makes own
observation, conclusions and prepares a report.

f. The H.R. Auditor announces the audit Results before submitting the
report to top Management.

RELEVANT QUESTIONS:

i. What are the three good things in your performance appraisal

system?

ii. What is the one thing you would like to change in your performance
appraisal system?

iii. How would you critically evaluate the job rotation in your company?

iv. What are the strengths and weaknesses of your training policies
and practices?

v. What three objectives would you use to describe the promotion

policies as they exist in your company?

4. QUESTIONNAIRE METHOD:

Feed back about various dimensions of HRD, including the competency base
of HRD staff, the styles of line managers, the implementation of various HRD
systems, etc are obtained through a detailed questionnaire from individuals
or groups for H.R. Audit. This method helps in benchmarking.

The process is as follows: The process is as follows:

a. Detailed questionnaire is prepared by H.R. Auditor.

b. Individuals or groups are asked to assemble in a room or hall are

explained the objective and process of HR Audit. They are then given
questionnaires.

c. They submit the questionnaire, duly filled in, to the HR Auditor.

d. The HR Auditor compiles the feedbacks, makes observations,

conclusions and recommendations.

e. Audit Results are informed to the Participants before the report is

submitted to the top management.

OBSERVATION:
In addition to following the said methods, the HR Audit, needs to
undertake following to assess the extent to which a congenial and
supportive human welfare-oriented climate exists in the company:

(i) Visit workplace, plant, machinery room, canteen, toilets, training

rooms, hostels, hospital, school, living colony, etc., as applicable.

(ii) Observations can be made through a checklist.

ANALYSIS OF SECONDARY DATA:

This can provide an insight into the HRD assets and liabilities of the
company. For example in the are of training, it may reveal as to
whether employees are given training systematically or otherwise, the
cost involved for training, the age group of employees attended
training programmes, the purpose of training the employees etc..