HR Audit

HR AUDIT
An audit is a means by which an organization can measure where it currently stands and
determine what it has to accomplish to improve its human resources function. It involves
systematically reviewing all aspects of human resources, usually in a checklist fashion,
ensuring that government regulations and company policies are being adhered to. The key to
an audit is to remember it is a learning or discovery tool, not a test. There will always be room
for improvement in every organization.
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)
PURPOSE OF H.R. 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 organization's 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 organization's and the department's reputation in the
community.
To perform a "due diligence" review for shareholders or potential investors/owners.
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.
SCOPE OF HUMAN RESOURCE AUDIT
APPROACH TO H.R. AUDIT
AUDITING PROCESS: STEPS IN H.R. AUDIT
Auditing process varies from organizations to organizations
Generally involves following STEPS
STEP ONE: Briefing and Orientation:
Key Staff Members meet:
i. To discuss particular issues considered to be important.
ii. To chart out audit procedures, and
iii. 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:
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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:
I. What questions to be asked, are developed during scanning of information.
II. 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, and
d. Issues identified.
STEP SIX; Reporting:
1. The results of the audit are discussed with Managers and Staff Specialists, in several rounds.
2. Important issues are identified for inclusion in the formal Report.
Important HR Topic Areas
The questions to which answers should be obtained are:

1.What strategic contribution is being made by HR to the achievement of
business/corporate
objectives?
2.To what extent are there well-articulated and agreed HR strategies which are aligned to
the business strategy and which are integrated with one another?
3.What role does HR currently play? Is this role appropriate in the context of the
organization?
4.To what extent has the responsibility for HR issues been devolved to the management?
5.How well does HR reconcile the need for devolution with the need to ensure that
organizational, ethical and legal obligations and requirements are being mf consistently?
6.What evidence exists that HR is being innovative in a practical and business way,
based on an analysis of the business and people needs of the organizational and
benchmarking?
7.How well is HR performing by reference to quantitative measures such as added value
per employee, absenteeism and attrition?
8.How well is HR performing in terms of service delivery in fields such as recruitment,
training, reward management, health and safety, the management of equal opportunity
and diversity, advice on employment law and legal obligations, the provision of
employee assistance programmes and the maintenance and use of personnel
information systems?
9.To what extent does HR express proper concern for ethical considerations, the interests
of all stakeholders (employees as well as management), enhancing the quality of
working life and achieving a satisfactory work/life balance?
10.What ' contribution has HR made to the improvement of the employee relations
climate?
11.How well is HR regarded by its customers - management, line managers, employees
generally, employee representatives, as measured by formal assessments or opinion
surveys?
12.Is the HR function well-organized and properly staffed with qualified professionals who
are actively concerned with continuous professional development?
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PURPOSE-HR AUDIT
The purpose of the audit is to reveal the strengths and weaknesses in the human
resources system, and any issues needing resolution.
The audit works best when the focus is on analyzing and improving the HR function in
the
organization.
The audit itself is a diagnostic tool, not a prescriptive instrument. It will help you identify
what you are missing or need to improve, but it cant tell you what you need to do to
address these issues.
It is most useful when an organization is ready to act on the findings, and to evolve its
HR function to a level where its full potential to support the organizations mission and
objectives can be realized.
How are needed improvements identified?
Once information is gathered, the audit team reviews each major section and notes
disparities between paper (what we think or say we do) and practice (what we actually
do, as revealed by the answers to the audit questions).
It means, a systematic assessment of the strengths, limitations, and developmental needs of
HR management in the context of organizational performance
HR AUDIT - OBJECTIVES
To analyze and improve the HR functions in the organization.

To expose the strengths and weaknesses in the HR function, and any issues need
resolution.
To evaluate the efficiency and effectiveness of HR functions.
To ensure whether the HR function is on the right path to achieve and helping company
to achieve its goal / objectives or not.
HR AUDIT - Scope
Audit of all the HR function.

Audit of managerial compliance of personnel Policies, Procedures and Legal provisions.
Audit of corporate strategy regarding HR Planning, Staffing, IRs, Remuneration and other
HR activities.
Audit of the HR climate on employee motivation, morale and job satisfaction.
Auditors may adopt any of the five approaches for the purpose of evaluation:
Comparative approach
Outside authority approach
Statistical approach
Compliance approach
Management by objective approach.
In the comparative approach, the auditors identify another company as the model. The results
of their organization are compared with those of the model company.
In the outside authority approach, the auditors use standards set by an outside consultant as
benchmark for comparison of own results.
In the statistical approach, statistical measures of performance are developed based on the
companys existing information.
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In the compliance approach, auditors review past actions to determine if those activities
comply with legal requirements and company policies and procedures.
The MBO approach creates specific goals against which performance can be measured. Then
the audit team researches HR by MBO.
CHALLENGES FOR H.R. DEPARTMENT
EIGHT CHALLENGES IDENTIFIED BY DAVE ULRICH (1997)
Globalization
The H.R department will need to create models and processes for achieving global
activeness, effectiveness and competitiveness.
2. Managing the Value Chain for Business Competitiveness.
Innovation
Faster Decision Making
Price or Value Advantage
Effective linking with Suppliers
3. Growth of the organization
By increasing customer, acquisition and mergers.
4.
Building organizational capabilities

Reviewing existing capabilities
New capabilities
Aligning new capabilities with business strategies.
5. Managing Change
Adopting some new H.R. Practices

Learning some New Skills and Attitudes
Unlearning some existing skills and Attitudes.
6. Making Technology viable
Finding out ways and means to make technology successful.
7. Attracting and Retaining Intellectual Capital
Attracting Talented People.
Retaining them.
Utilizing them suitably.
8. Transforming the Organisation
Creating fundamental and lasting changes.
GENERAL AUDITING METHOD
Develop an understanding of the management system and procedures
Assess the strength and weaknesses of the management systems and procedures
Gather evidence and verify findings
Validate audit findings and exceptions
METHODS OF HR AUDIT
INDIVIDUAL INTERVIEW METHOD
4
GROUP INTERVIEW METHOD

WORKSHOP METHOD
QUESTIONNAIRE METHOD
OBSERVATION

HR Audit

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What are the purposes of conducting an HR audit?

What are the typical steps involved in conducting an HR audit?

HR AUDIT

NEED FOR H.R. AUDIT

The questions to which answers should be obtained are:

To analyze and improve the HR functions in the organization.

Audit of all the HR function.

Building organizational capabilities

Adopting some new H.R. Practices

GROUP INTERVIEW METHOD

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