HR Audit, Records, Research, HRIS
HR Audit, Records, Research, Human Resource Information System
Human Resources Audit: It is a systematic formal process to review or examine the current human resources policies, procedures, documentation and systems to identify needs for improvement and enhancement of the HR function as well as to assess compliance with ever-changing rules and regulations.
The American Accounting Association’s Committee on Human Resource Accounting (1973) has defined Human Resource Accounting as “the process of identifying and measuring data about human resources and communicating this information to interested parties”.
An HR audit also goes beyond looking at the hiring process into areas like employee retention, budgeting, training, employee compensation, employee relations and virtually any process or practice within the company that affects its people. 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.
It involves a systematic analysis and evaluation of the efficiency and effectiveness of the HRM function and its contribution to the achievement of the organisations strategic business objectives.
It is an activity used to evaluate HR practices and performance. It investigates about HR functions.
A Human Resources Audit is a comprehensive method (or means) to review current human resources policies, procedures, documentation and systems to
identify needs for improvement and enhancement of the HR function as well as to ensure compliance with ever-changing rules and regulations and establish the best practices. An Audit involves systematically reviewing all aspects of human resources, usually in a checklist fashion.
The purpose of an HR Audit is to recognize strengths and identify any needs for improvement in the human resources function. A properly executed audit will reveal problem areas and provide recommendations and suggestions for the remedy of these problems. Some of the reasons to conduct such a review include:
Ensuring the effective utilization of the organization’s human resources
Reviewing compliance concerns with a myriad of administrative regulations
Instilling a sense of confidence in management and the human resources function
Maintaining or enhancing the organization’s and the department’s reputation in the community
Performing “due diligence” review for shareholders or potential investors/owners
Establishing a baseline for future improvement for the function
Other purposes of a HR audit
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.
To increase the effectiveness of the design and implementation of human resource policies, planning and programs. To help human resource planners develop and update employment and program plans.
To insure the effective utilization of an organizations 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 organizations and the departments reputation in the community.
To perform a “due diligence” review for shareholders or potential investors/owners.
Steps in HR Auditing Process
Step 1: Briefing and orientation: Key staff members meet:
To discuss particular issues considered being important
To chart out audit procedures
To develop plans and program of audit
Step 2: 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 3: Surveying Employees:
Interview with the key managers, functional executives, top functionaries in the organisation and the employees’ representatives if necessary.
The purpose is to pinpoint issues of concern, present strengths, anticipated needs and managerial views on human resources.
Step 4: Conducting Interviews:
What questions to be asked are developed during scanning of information?
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 5: Synthesizing:
The data gathered is synthesized to show the current situation, priorities, staff pattern and issues Identified.
Step 6: Reporting:
The results of the audit are discussed with the managers and staff specialists in several rounds. Important issues are identified for inclusion in the formal report.
Audit of Human Resource Function
Areas/ Topics for covered for HR Audit in each HR function Information :Coverage, source, adequacy and gaps
Forecasting: Methodology, reliability, testability, budgeting, time orientation, technology perspective
Training and development: Need assessment, selection criteria, levels covered and frequency, internal vs external training, quality consciousness, changing needs and climate for self-development
Performance Appraisal : Validity of appraisal process, benefits and/or draw backs/problems, know-how of appraising, uniformity in process, underlying benchmarks, consistency in ratings, linkages with pay, feedback to employees
Succession Planning:Policy formulation, identifying key positions, availability of successors, matching future needs, responsibility for grooming and developing and handling non/poor performers
Compensation: Appropriateness of policies, company philosophy, adequacy of rewards, nature of job descriptions, flexibility in job evaluation systems, control over costs, rationale of reward system and opportunities for improvement
Methods of HR Audit
Individual interview method:
Top level management and senior managers are interviewed, individually.
Union leaders, departmental heads, some strategic clients and informal leaders are also interviewed, individually.
It helps in following:
1. knowing their thinking about future plans and opportunities available for the company.
2. knowing about their expectations from the HR audit.
3. getting sensitive information pertaining to working styles and culture.
Group interview method
Group interviews and discussions with the employees and/or executives of the company. It facilitates collection of information about effectiveness of existing systems. Ideally group of 4 to 8 employees should consist of same or similar hierarchy from cross functional areas.
Workshop method
30 to 300 participants can be asked to gather in a room and divided in small groups. They are asked to work either around systems, subsystems or around
different dimensions of HRD and do SWOT analysis. All the groups thereafter give presentations.
The HR auditor compiles the views of all groups, makes own observation, conclusions and prepares a report. The HR auditor announces the audit results before submitting the report to top management.
Questionnaire method:
Feedback 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.
Audit of Employee Satisfaction
An Audit of Employee Satisfaction can be done by employee opinion survey which can provide valuable insights to strengthen the organization in the areas where employees feel there are opportunities to improve.
The various areas which are audited for employee satisfaction are as follows:
Overall Job Satisfaction
Satisfaction with the Work
Pay & Benefits Satisfaction
Promotions/Career Advancement
Supervisory Consideration
Internal Communication
Personnel Policies
Concern for Employees
Physical Working Conditions
Job Stress
Ethical Issues in HRM
Hiring without any discrimination: Selection on any employee should not be based on any one single competency, gender, religion, caste.
Appraisal without any biases: Role of HR should never be compromised over the line manager’s decision on appraising any employees.
Equal remuneration between genders: Compensation and benefits rendered to employees should be based on a criteria which is applicable to all
Managing disciplinary issues: The HR should lay down his/her independent decision rationally before finalizing any disciplinary proceedings.
Solving industrial disputes: The HR should never come under any pressure from the union or the management in terms of solving any industrial disputes.
Justified suspensions and terminations: Integrity should be placed above any other justifications in case of employee separations.
Fair promotions and transfer: : Critical decision making regarding internal mobility should be based on core facts and justified rational
Maintaining data privacy of employees: Data integrity is in the hands of HR since they have an access to most confidential data regarding all employees of an organisation