A Tybms Project Report On HR Audit
Submitted To Prof. Arshi S. of BMS Dept
Group members: Danish Choudhari (40) (T.L) Jaffer Choudhari (41) Khatija Daudi (06) Mayuri Joshi (08)
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Acknowledgement We are greatly honoured and privileged to thank and acknowledge those people who have contributed directly or indirectly in making this project successfully. Firstly with gratitude, we would thank Our Principal Sir, Prof. A.E. Lakdawala for giving us the opportunity for making this project and extracting good knowledge from this project. We also thank Our Joint-Principal, Prof. Kamala A.; Vice-Principal Prof. Mallika and Our BMS Co-ordinator, Prof. Arshi in this context. With immense gratitude, we would like to thank Our Subject Co-ordinator, Prof. Arshi for guiding us throughout the project. We would also thank all the sources from whom we have collected the data and lastly our group members who have been supportive and co-operative throughout.
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Sr. No. 1 2 3 4 5 6 7 8 9 10 11
Contents Introduction Approaches To HR Audit Scope Of HR Audit Benefits of HR Audit HR Audit Process HR Audit Checklist Methods of HR Audit HR Audit Report HR Audit Inc. Vital HR Conclusion
Pg. No. 4 5 6 9 12 16 18 28 32 34 36 3
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Bibliography
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INTRODUCTION HRM includes different functions like HRP, job analysis and design, recruitment, selection, induction, performance appraisal, safety and health, welfare, industrial relations and many more. These functions are performed in furtherance of certain social, functional and personal objectives. At this stage several questions crop up, for example: • Does the organization do the HRP regularly in various categories? • Does job analysis exist for all positions in the organization? • Are all potential sources of recruitment identified and evaluated? • Is there a performance evaluation system that helps asses past and potential performance? • Is remuneration programme designed to motivate employees? • Does the HRM practice respond to individual employee needs and aspirations? • Does the organisation have high quality of work life? It is necessary to take a look at these questions. HR audit is highly useful for this purpose. The Human Resources (HR) Audit is a process of examining policies, procedures, documentation, systems, and practices with respect to an organization’s HR functions. The purpose of the audit is to reveal the strengths and weaknesses in the nonprofit’s 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 can’t 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 it’s full potential to support the organization’s mission and objectives can be realized.
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Definition: HR Audit means the systematic verification of job analysis and design, recruitment and selection, orientation and placement, training and development, performance appraisal and job evaluation, employee and executive remuneration, motivation and morale, participative management, communication, welfare and social security, safety and health, industrial relations, trade unionism, and disputes and their resolution. HR audit is very much useful to achieve the organizational goal and also is a vital tool which helps to assess the effectiveness of HR functions of an organization.
APPROACHES TO HR AUDIT There are five approaches for the purpose of evaluation of HR in any organization: Comparative approach • Outside authority • Statistical • Compliance approach and • Management By Objectives(MBO) 1. Comparative approach: In this, the auditors identify Competitor Company as the model. The results of their organization are compared with that of the Model Company/ industry. •
2. Outside authority approach: In this, the auditors use standards set by an outside consultant as benchmark for comparison of own results. 3. Statistical approach: In this, Statistical measures are performance is developed 5
considering the company’s existing information. 4. Compliance approach: In this, auditors review past actions to calculate whether those activities comply with legal requirements and industry policies and procedures. 5. Management by objectives (MBO) approach: This approach creates specific goals, against which performance can be measured, to arrive at final decision about industry’s actual performance with the set objectives.
Scope of audit Generally, no one can measure the attitude of human being. Hr audit must cover the activities of the department and extend beyond because employees’ problems are not confined to the HR department alone. So it is very much broad in nature. It should evaluate the personnel function, the use of its procedures by the managers and the impact of these activities on the employees. It covers the following HR areas: 1. Audit of all the HR function. 2. Audit of managerial compliance of personnel policies, procedures and legal provisions. 3. Audit of corporate strategy regarding HR planning, staffing, IRs, remuneration and other HR activities. 4. Audit of the HR climate on employee motivation, morale and job satisfaction. 1. Audit of HR function: This involves audit of all HR activities. For each activity, auditor must (i) determine the objective of each activity, (ii) identify who is responsible for its performance, (iii) review the performance, (iv) develop an action plan to correct deviation, if any (v) follow up the action plan. The following criteria would help measure effectiveness of HR function. Each statement has a four point rating scale varying from ‘very true to not true’. a. In your company, all issues are closely related to every other business process. b. The HR department is represented in strategy building sessions of top management. c. The performance of HR department and the organisation are linked. d. The HR function is given more importance than other functions e. The HR managers have sufficient powers to suggest strategic initiative to the top management. 6
f. The services of HR department are equally available to everyone. g. The HR department plans the company’s manpower need proactively. h. The HR department links appraisal and compensation to corporate objectives. i. The HR department meets individuals and organisation’s training needs. j. The HR department does not handle staff-welfare canteens, or payrolls management. k. HR department has knowledge of behavioral sciences and industrial psychology. l. The Hr department gets feedback on its performance from other employees. m. HR practices are audited, their costs computed and then effectiveness evaluated.
2. Audit of managerial compliance: This involves audit of managerial compliance of personnel policies, procedures and legal provisions. How well re these complied with should be uncovered by the audit so that corrective action can be taken. 3. Audit of HR climate: The Hr climate has an impact on employee motivation, morale and job satisfaction. The quality can be measured by examining employee turnover, absenteeism, safety records and attitude surveys.
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a. Employee turnover: It refers to the process of employees leaving an organization. Higher turnover involves high cost of recruitment, selection, training, etc. High turnover may also lead to disruption of production, problems in quality control, etc. Resignation, retirement, death and transfers are unavoidable labour turnover. The specific actions that will reduce employee turnover are better hiring practices, orientation and training, working condition, better remuneration and growth opportunities. b. Absenteeism: It refers to the failure on the part of the employees to report to work. In other words, unauthorized absence continues absenteeism. Absenteeism costs money to the organisation, besides reflecting employee dissatisfaction. Unavoidable absenteeism happens when employee or his family member is sick whereas avoidable occurs because of night shifts, indebtedness, lack of job security, unfriendly supervision, etc. Managers should take steps to remove the causes. They should make the work environment such that employees feel that it makes sense to work in the firm rather than sitting at home and wasting time. c. Accidents: Organization maintains records related to the accidents. Organisation must have a safety plan, implement it and evaluate its effectiveness. d. Attitude surveys: Attitude surveys are the most powerful indicators of the organizational climate. It determines an employee’s feelings towards the organisation, peer group, colleagues, supervisors, etc. The surveys may be conducted by face-to-face interviews but are usually conducted through questionnaires. 4. Audit of corporate strategy: Hr professionals do not set corporate strategy but they strongly determine its success. Corporate strategy helps the organization gain competitive advantage. By SWOT analysis, top management devises the ways of gaining and advantage. Whether the company stresses superior marketing channels, service, innovation, or some other approach, HRM is affected.
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Benefits of HR Audit The team that is responsible for the audit should represent a cross-section of the organization’s staff, including line staff, middle and upper management and those responsible for HR functions. It provides the various benefits to the organization. These are: 1. Getting the top management to think in terms of strategic and long-term business plans: It may sound ironical that the HRD audit should begin with such strategic plans, but in some cases, it has compelled the top management to think about such plans. While some companies started thinking about them, a few others started sharing these plans with a larger number of persons. Since the employees cannot participate in an HRD audit without some sharing of these plans, the audit has forced the top management to share their plans which has resulted in increased employee involvement. In a few cases a new system of annual planning and sharing of business plans with the management staff have been initiated to enable them plan their own activities and competency development programmes.
2. Clarifying the role of the HRD department and line managers in HRD: In almost all cases, the HRD audit has been found to draw the attention of employees at various levels to the important role of the HRD department in current as well as 9
the future. Enhanced role clarity of HRD department and HRD function and increased understanding of line managers about their HRD role have been the uniform results of HRD audit. The degree may vary from organization to organization depending on other factors.
3. Streamlining of other management practices: Most often HRD audit identifies the strengths and weaknesses in the some of the management systems existing in the organization. It also points out to the absence of systems that can enhance human productivity and utilization of the existing competency base; for example, the MIS, rules and procedures, etc. which may have an effect on the functioning of the employees. In a few cases an HRD audit has helped the management look at some of these sub-systems and work procedures. Preparation of a manual of delegation of powers, clarification of roles and responsibilities, developing or streamlining the manuals of financial and accounting procedures and systems, strengthening the information systems, and sharing of information are some of the resultant activities in this direction.
4. Better recruitment policies and more professional staff: An HRD audit points out to the competence base required. It sets the stage and gives direction for the competency requirements of employees at various levels and thus provides a base for recruitment policies and procedures. In some companies, it has resulted in strengthening the recruitment policies and procedures. As a result of HRD audit, new recruitment and retention strategies have been worked out.
5. Changes in the styles of top management: One of the objectives of HRD is to also create a learning organization. A learning culture can be created only if the top managers of the company exhibit an HRD style of management. Such a style requires an empowering attitude, participative style of management, and an ability to convert and use mistakes, conflicts and problems as learning opportunities. Some of the top-level managers in India have been found to block employee motivation and learning through coercive, autocratic and even paternalistic styles of management. In such cases the HRD audit has pointed out the difficulties in developing and preparing the employees for the future. This has helped to provide subtle feedback to the top management and to initiate a change process. 10
6. Improvements in HRD systems: The HRD audit has helped most of the organisations in taking stock of the effectiveness of their HRD systems and in designing or re-designing the HRD systems. The most frequently changed or renewed systems include performance appraisal, induction training, job-rotation, career planning and promotion policies, mentoring, communication, and training.
7. More planning and more cost-effective training: HRD audits have been found to raise questions about the returns on training. One of the aspects emphasized in the HRD audit is to calculate the investments made in training and ask questions about he returns. The process of identifying training needs and utilization of training inputs and learning for organisation growth and development are assessed. As direct investments are made in training, any cost-benefit analysis draws the attention of the top management and HRD managers to review the training function with relative ease. One organization strengthened its training function by introducing a new system of post-training follow-up and dissemination of knowledge to others through seminars and action plans. Many organisations have developed training policies and systematized their training function. Assessment of training needs has also become more scientific in these organisations.
8. Increased focus on human resources and human competencies: One of the results of an HRD audit is to focus on new knowledge, attitudes and skills required by the employees in the organization. Comments are made about the technical, managerial, human and conceptual competencies of the staff at various levels. This differentiation has been found to help organisations identify and focus sharply on the competency requirements and gaps. The audit establishes a system of role clarity and fixing of accountabilities. This can take place through separate role clarity exercises or through the development of an appropriate performance appraisal system. In any case the attention of the organization gets focused on developing the competency base of the organization. More sensitivity is developed to the missing aspects of competencies. For example, one organization has been found to neglect human relations competencies of their staff, resulting in a large number of human Problems leading to wastage of time. Some of these got streamlined and various HRD policies also got strengthened.
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9. Strengthening accountabilities through appraisal systems and other mechanisms: An HRD audit can give significant inputs about the existing state of the accountabilities of employees. This gets assessed through performance appraisals as well as through the work culture and other cultural dimensions. A number of organisations have introduced systems of performance planning, sharing of expectations and documenting the accountabilities of staff.
10. TQM interventions: Quality improvements and establishing TQM systems require a high degree of employee involvement. In a number of cases the HRD audit has pointed out to the linkages between TQM and other developmental programmes and helped in strengthening the same. Due to improvements in the training system, group work and appraisal systems, TQM programmes have also improved. In a few organisations the performance appraisals have been so changed as to integrate quality aspects and internal customer satisfaction dimensions into the appraisal system. Thus, an HRD audit leads to the strengthening of the quality systems. The HR manager is himself interested in knowing the effectiveness of HR department. It is not that the department is infallible. Errors do happen, procedures and practices become outdated. By auditing itself, the department finds the problems before they become serious. If done correctly, the audit process can build a strong rapport between department and operating managers, and it can reveal outdated assumptions that can be changed to meet department’s objectives and future challenges.
HR audit process The HR audit process is conducted in different phases. Each phase is designed to build upon the preceding phase so that the organisation will have a very strong overview of the health of the HR function, at the conclusion of the audit. These phases include: 1. Pre-Audit Information: This phase involves the acquiring and review of relevant HR manuals, handbooks, forms, reports and other information. A pre-audit information request is forwarded to the client who compiles the necessary information for review by auditors. 12
2. Pre-Audit Self-Assessment: In order to maximize the time spent during subsequent portions of the audit, a pre-audit self-assessment form, if sent to the client can be of use. The self-administered yes/no questionnaire asks a number of questions about current HR policies and practices. The completion of this selfadministered questionnaire allows auditors to identify key areas for focus during the HR audit. 3. On-site Review: This phase involves an on-site visit at the client’s facility interviewing staff regarding HR policies and practices. A very in-depth HR audit checklist is completed. 4. Records Review: During the on-site visit, a separate review is conducted of HR records and postings. Employee personnel files are randomly examined as well as compensation, employee claims, disciplinary actions, grievances and other relevant HR related information are checked. 5. Audit Report: The information gathered is used to develop an HR audit report. The audit report categorizes action needs into three separate areas. The areas that are urgent and important (UI), not urgent needs but important (NUI), not urgent but not important needs (NNI)), and important opportunities needs (IO). As a result of this scheme of classification, managements can prioritize their steps. 6. The critical areas: The comprehensive HR audit covers all areas of HR management like recruitment practices, training and development, compensation and benefits, employee and union relations, health, safety and security, miscellaneous HR policies and practices-welfare, strategic HR issues, manpower planning/budgeting. Besides classifying needs in each of the above areas, the HR audit also cites relevant laws, cases and research to support the recommendations. 7. Preparation for an audit Auditor engagement: If external firm carrying out the audit, it is preferable to set terms in writing defining and agreeing on scope .If using internal resource it is better to appoint them formally with clarity on scope and select persons who are non political or those who are not high on hierarchy. Also, if internal persons are auditing there must be training in auditing. Documents, manuals, handbooks, forms and reports auditor must have access to relevant information contained in employee files and other confidential documents of the organisation. Auditors must be given unrestricted access to records, once they sign agreement for confidentiality. 13
8. Data gathering: Completion of a self-assessment questionnaire significantly expedites the audit process and allows for better audit planning. 9. On-site access: The on-site portion of the audit is the most critical. 10.Using audit findings: How does an organisation use HR audit results? Since the HR audit results are classified, an important aspect is already taken care of. Critical needs should be the first ones to be addressed. Organisations generally have three options for dealing with audit results. a. Use the HR audit as a blueprint or action plan for addressing HR needs. b. Address as many needs as possible using the organisation’s internal expertise and resources. c. Contract out those need areas where internal expertise and resources are not available or do not fit in the core competencies of the organisation. An HR audit is much like an annual health check. It can perform the same function for the organisation. An audit is a means by which an organisation can measure where it currently stands and determine what it has to accomplish to improve its HR functions. It involves systematically reviewing all aspects of human resources, usually in a checklist fashion, ensuring that the government regulations and company policies are being adhered to. The key to an audit is to remember that it is a tool to discover and not to test. There will always be room for improvement in every organisation.
The Five Critical Components of the Hr Audit Process Recognized as setting the standard in HR auditing, the new edition of the ELLA®, the Employment-Labor Law Audit™, the leading HR auditing tool, incorporates the five critical components of an HR audit into the HR audit process. These five critical components, which should be addressed in every HR audit, are shown and discussed below in the HR Audit Model™. 1. Activities: The starting point of the HR auditing process is a review of the organization’s activities, that is, the tasks and actions that create or implement employment policies, practices, procedures, and programs. Activities include such 14
actions as the promulgation of an EEO policy statement and other employment policies, and the posting of required employment posters. The Activities component of HR audits is typically evaluated by using a “checklist approach,” that is, the item is checked off when it is completed. 2. Behaviors: Behaviors in this context are actions and conduct that affect either positively or negatively the implementation or effectiveness of the organization’s policies, practices, procedures, and programs, and demonstrate the organization’s commitment to stated goals and objectives. Examples of Behaviors include: the creation of a corporate culture that values and promotes equal employment opportunities, diversity, and compliance; the visible and unequivocal support by senior management for the organization’s diversity efforts; and the budgeting of sufficient resources to achieve EEO compliance and diversity goals. Behaviors are frequently assessed using qualitative measures, such as culture scan and employee satisfaction surveys. 3. Risk Assessment: Risk assessment is the identification of events or conditions that create new opportunities for the organization to achieve its business objectives. Risk assessment provides management with the information to make informed decision about the allocation of the organization’s human, physical, and financial capital and about effective ways to eliminate, mitigate, control, or transfer those risks. Human resource management and employment practices liability related risks include: employment law and regulation compliance failures; lost business opportunities due to the failure to attract, hire, and retain top talent; intangible asset losses due to turnover and the loss of top talent and key employees; ineffective staff development and succession planning; and lower profitability due to the inability to control labor costs. HR auditing activities include assessments of the external and internal factors that impact human resource management and employment practices – including: 1) the economy; 2) legal, regulatory, and litigation trends; and 3) demographic and structural changes in the workplace and work force. 4. Internal Controls: Internal controls are processes, tests, and assessments that help ensure compliance, manage risks, identify fraud, and help ensure the achievement of organizational goals. HR auditing activities include: 1) assessments of the effectiveness and efficiency of HR management processes, policies, practices, and procedures; 2) the reliability and accuracy of HR management reporting; and 3) the level of compliance with: laws and regulations; industry and professional standards; codes of conduct and ethics; organizational policies; and budgets.
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5. Outcomes: Outcomes are quantitative and qualitative measurements and metrics that measure and help assess the achievement of organizational goals and objectives. HR auditing activity includes the identification of metrics used by the organization to measure organizational and individual performance; the assessment of results by comparing actual results against projected results, budgets, internal and external standards; and a description of the activities, behaviors, internal controls that are needed to maintain or improve future results.
HR Audit Model™
HR audit checklist
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What is the Purpose of the Audit? • • • •
To look for potentially serious problems (land mines)? To find areas needing improvement? To document processes for use in merger or reorganization? To address compliance issues?
Sources of Data 1. What do the written policies and procedures say? 2. What do the HR managers say? 3. What do the line managers say? Basics • • •
How many employees are there in HR (and related departments e.g. training)? What is the org chart for the HR department? What is the HR budget?
Recruitment • • • • •
How are candidates sourced? How are candidates selected? Are legal requirements met? Are the same processes used for all jobs, all locations? Are processes followed consistently?
Compensation and Benefits •
What are the different policy groups (e.g. management, clerical, union)? 17
• • • • • • • •
How is base pay policy set? What grading/job evaluation systems are used? Are there up-to-date job descriptions? What variable pay practices are in place? How are pay increments decided? What is the benefits plan? Are the same processes used for all jobs, all locations? Are processes followed consistently?
Workforce Review • • • • • • •
Are there any critical skills shortages? Are there any critical succession issues? Is there anything unusual in the distribution of worker age, gender etc.? What workforce planning processes are used? What succession planning processes are used? Are the same processes used for all jobs, all locations? Are processes followed consistently?
Training and Development • • • • •
How much training is given? How is the training program managed? Are there any staff development programs? Are the same processes used for all jobs, all locations? Are processes followed consistently?
Industrial Relations • • • •
What unions exist and what jobs are covered? What collective agreements are in place, when do they expire? How many grievances are there per year? Are there any outstanding grievances?
Legal • • • •
Are processes in place to manage compliance issues for all relevant jurisdictions? Is there any outstanding litigation? Are the same processes used for all jobs, all locations? Are processes followed consistently? 18
HR Technology • • • •
What technology is installed? How up-to-date is the technology? Is the data clean? Are there any important technology projects in progress?
Strategic HR • •
Where does the most senior HR person report in to? How much interest does top management have in HR issues?
Some Other Audit Techniques to Consider • • • •
Audit of corporate culture. Competency audit of HR staff. Metrics based audit using metrics such as those proposed by the Saratoga Institute. Audit of customer satisfaction with HR.
METHODS OF HR AUDIT There are four methods of conducting HR audit. For HR audit, either combination of methods or all the methods are used. 1. 2. 3. 4.
Individual interview method Group interview method Workshop method Questionnaire method
I. Individual interview method: Top level management and senior managers are interviewed, individually. It helps in following: a. Knowing their thinking about future plans and opportunities available for the company. b. Knowing about their expectations from the HR Audit. c. Getting sensitive information pertaining to working styles and culture. d. Union leaders, departmental heads, some strategic clients and informal leaders are also interviewed, individually. e. In case of small companies, manned by professionals, interviews can be 19
extended with selected employees from different levels and functions.
The individual interview is conducted with: 1. CEO 2. HRD Chief 3. Line Managers 4. Workers and Their Representatives 1. Interview with the CEO: The purpose is: • To know expectations of CEO • To explain scope and limitations of HRA • To get co-operation from staff • To know strategic long-term and short-term plan of the organisation Interview Questionnaire: a. What is HRD? b. What is HRD audit? c. What is required of the line managers in individual or group interviews? What have been the findings of group? d. What do you see as the competency requirements for the future? e. What competency gap do you see in the existing staff? f. What new competencies need to be developed in the staff and how do you propose to do that? 2. Interview with the HRD chief: The objective is: 20
• To understand the existing systems, structure, skills of staff, styles of top management and relationship with the HRD philosophy, problems etc. • To understand HRD chief’s perceptions: About top management and the support required from them. About line managers, their competencies and involvement in HRD matters. About unions and their involvement in HRD related issues. • The competencies of HRD department and staff • To understand the internal customer framework of HRD department • To find out the time division and how time is spent by the department • To ascertain views on how various systems are working • To get a SWOT analysis of HRD systems • To prepare a list of documents vis-à-vis checklist of HR audit Interview questionnaire: a. What are the objectives of your department? b. When and how was it set up? c. What are the significant milestones and contributions of the department? d. What are its current activities? e. What is the organizational structure? f. How are the strategies of HR and HR plans formulated? What is the role of the department in strategic planning? g. What are the main competencies of HRD staff? Which are the competencies they need to develop? h. What are the styles of Top and Senior level Managers? To what extent the styles are helpful in developing learning culture? i. What are the main blocks in developing learning culture? j. How are the line managers supporting their juniors in developing? What needs to be done to make them more supportive? k. What is the extent of support given by Top Management to HRD? l. Is there a separate budget for HRD? How the same is allocated and what is the support of Top Management? m. What is the HRD philosophy and values? n. What the strengths and weakness in the following systems of your organisation: • Performance Appraisal. • Counseling • Training 21
• • • • • • •
Career Planning and Development Succession planning for strategic roles Job Rotation Research and System Development Mentoring Culture- Building Exercises Quality improvement interventions 3. Interviews with line managers:
The objective is to understand their perceptions about their: • HRD needs • Current status • Expectations • Competencies • Commitment to HRD Interview questionnaire: a. What are the HRD needs of your department and yourself? b. What kind of help do you get from HRD Department for competency and commitment building? c. What are the HRD System that you have contributed and contributing in achieving business goals? d. What are the strengths and weaknesses of your HRD functions? e. What are your expectations from HRD? f. What are the training needs of your department? Are your training needs taken care of? g. What are your career growths? Are they taken care of? h. What skills and knowledge do you thing is required to run the business (or to perform better in your job)? i. What is good about your HRD sub-systems: Performance Appraisal, Training, Job Rotation, Career Planning and development?
4. Interviews with workers and their representatives: The Objective is to find out: 22
• • • •
Their current development needs vis-à-vis business goals of the company Their motivational level Culture prevailing in the organisation Good and bad practices of the organisation
Interview questionnaire: a. How to you feel working in your organisation? b. What are the strengths of your organisation? What are the areas that need improvement? c. What do you know about the business plans and opportunities for your company? d. What is being done to ensure that you all have the skills needed to meet the current needs or future challenges of the company? e. What motivates you here? What more do you think needs to be done to help you contribute better to the organisation? f. What kind of training do you get here? Are you satisfied? What more do you think need to be done in the interest of the company? g. What are the facilities available for you in the plant and colony? h. What do you think can be done to improve quality, save costs and make people feel happy to work for the company? i. What are your expectations from the HRD Department? What are you happy about? What are your suggestions for them to serve you better?
II. Group Interview Method: Group interviews and discussions with the employees and/or executives of large companies for HR Audit facilitate collection of information about effectiveness of existing systems.
The Advantages of this method are: • Wider coverage of issues • Larger involvement of employees 23
• Verification of data and significant points • Assessment of impact of feelings related to any issue and problem. Guidelines for selecting samples for group interviews: • Middle level managers: Minimum 10% and Maximum 100% group-wise or department-wise. In any audit, 100 Managers individually or in groups should be interviewed. • Supervisors and Staff: 10% or 5-6 groups from different functions and workplaces may be selected for audit. • Workmen: To be interviewed in large groups. 5-10 groups are advisable. Guidelines for interviews in groups: • Auditors to be introduced to the group by a representative from HR Department. • Auditors to brief about the HRD Audit and its purpose and usefulness to the company. Thereafter, questions relating to various systems can be either asked questions or given a questionnaire to answer in about 30 Minutes and after collecting the feedbacks, discussion for another about 30 minutes can be held to know the intensity of the feelings. In either case, notes should be taken. • Auditors to consolidate the feedbacks. Interview questionnaire: As per your view, what are the Strengths and Weaknesses in respect of the following components of HRD? • Commitment of Top Management • Training (In-house & to HRD outside) • Performance Review discussions • Induction • Recruitment of competent people • Personnel Policies and Separations • Career Planning • Retention of competent people • HR Department and Staff • Quality Circles • Succession Planning • Identification of fast-track• Communication employees Job Rotation • Participative Management • HRD Culture • Mentoring System • Performance Appraisal Possible interview areas, dimensions, issues and questions can be in the following HRD systems: 24
• Career system: Manpower Planning and Recruitment. Potential Appraisals and Promotions, Career Planning and Development. • Work planning: Role Analysis (goal setting), Contextual Analysis and Performance Appraisal. • Development system: Training and Learning, Performance Coaching/Counseling, 360-Degree performance feedback, Job Rotation/Mentoring, Staff (worker) Development. • Self-renewal systems: Role efficacy, O.D., Action-Oriented Research. • Culture systems: HRD Climate, Values, Quality orientation, Reward and Recognition, Information, Communication, Empowerment. Examples of HRD system/sub-system: (Possible interview areas, dimensions, issues and questions) A. • • • • • • •
Performance Appraisal What is the existing system of performance appraisal? What re the components? What are the objectives? What is it currently being used for? How is it linked to other systems? What are the roles played by the system? Are the line managers taking it seriously? Are they trained for and are they constantly kept educated? • What are the strengths, Weaknesses and suggestions for improvement? What to observe: Study the pattern of ratings for leniency, rater wise trends and department-wise trends to ascertain the leniency and conservativeness in assessment. Study interdepartmental variations in ratings and rewards to ascertain the possible biases, etc. Investigate this, only if necessary. B. Training and Learning • What are the suggestions for improvement in the training? • What is the training budget? • Do line managers take the training seriously? • What is the process of sponsoring employees for training? • What is the other learning mechanisms being used for competency building? • What are the new learning mechanisms that can be used? 25
• What are the attitudes of the line managers and the top management for training? • What are the strengths and weaknesses of the training as it is being managed? What to observe: Assess the expenditure on training level-wise, department-wise and location-wise. Assess, if the training programmes sponsored are in line with the training needs stated in the appraisal formats. Analyse the training budget to assess, if the budgets are prepared appropriately and if the full expenditure is taken into consideration in the assessment.
III. Workshop method: In some cases of HR 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 HR Auditor compiles the views of all groups, makes own observation, conclusions and prepares a report. f. The HR Auditor announces the audit Results before submitting the report to
IV. 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 for HR Audit. This method helps in benchmarking. The process is as follows: a. Detailed questionnaire is prepared by HR Auditor. 26
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.
HR AUDIT QUESTIONNAIRE With human resources audit becoming a mandatory annual undertaking in most organizations, there is no denying the vital role that the HR audit questionnaire plays. The HR audit is conducted for purposes of gauging the overall well-being of the human resource (workforce) in an organization.
Through data compiled from such audits, the HR department is then able to figure any lapses or gaps that may exist in the workforce. The audit is also vital in comparing set systems, policies and targets with implementation. In addition, the HR department is able to determine if the organization is sufficiently staffed, whether the HR resources are maximally utilized and whether the workforce complies with set industry laws. Following is the example of audit questionnaire:
Employee Name______________ Date of Employment_______ Dept._________ 27
Q1. How were you recruited? a. b. c. d. e.
Through a series of interviews Through a panel interview Through a written interview A combination of written and direct interviews I was just called for the job without any interviews
Q2. Have you ever been involved in training and development activities since joining this organization? _________ If yes, state when__________ Did you find the training beneficial for purposes of enhancing your job performance? ____________ Q3. Do you fully comprehend your rights to compensation and organization benefits? ______ If yes, how did you learn about them? a. By reading the HR manual b. Hearing from my work colleagues Q4. Are you a member of any employee or trade union? _______ If not, why? ____________________________________ Q5. Do you have insurance cover? Q6. Do you understand fully this organization’s policy regarding security and personal safety? ________ Q7. For how long have you been working in the same position? ___________
HR audit report 28
The objectives of the audit report are: • To highlight areas that needs improvement. • To be acted upon. The purpose of preparing the audit report is to help the top management and the HRD staff to recognize and retain the company’s strengths. Following points are to be remembered for writing an audit report: • Simple language should be used. • It should be short and precise. • Bullet form highlighting the strengths and weaknesses should be used. An HR audit report should include contents as follows: (Model Outline)
Cha pter s 1 2 3 4 5 6 7 8 9 10
Contents
Pg. No.
Introduction Current Status of The HRD Function: Some Facts General Observations Career Systems Work Planning Development System Self-Renewal System HRD Culture HRD Function Table And Appendices
Chapter 1 – INTRODUCTION: This will include a brief description about: 29
• Company locations, products and services, manpower, turnover, and main concerns and top management. • Date and reason for undertaking the audit. • Methodology adopted for the study: details of samples, and audit methods used: Questionnaires administered, Number of individual interviews, Level-wise records and reports examined, Group interviews, etc. • HRD SYSTEMS (various sub-systems of HR audit; etc.) Chapter 2 - CURRENT STATUS OF THE HRD FUNCTION: This will include details about HRD functions: • Structure and staffing of HRD function, • HRD department’s thrust areas and objectives, • Highlights of existing HRD systems and sub-systems: Performance appraisal, Potential appraisal, Career planning, Mentoring, Training, Job rotation, Quality circles, etc. • Strengths and weaknesses of the HRD function. • HRD needs: an overview – broad highlights of the areas that need attention. Chapter 3 - GENERAL OBSERVATIONS: General observations will include: • Salient features of the company observed by the auditors’ vis-à-vis present competencies and future potential, encompassing following dimensions of HRD: Competence Building, Culture Building, Commitment Building. • Present and future business concerns – highlights • Competencies and competency requirements for future, • Commitment and motivational patterns, • Work culture and organizational culture, 30
• Culture-building mechanisms Chapter 4 - CAREER SYSTEMS: This chapter will include Findings of the audit on the following and Importance of the following including the Strengths, Weaknesses and Recommendations of each: • Manpower planning and utilization • Recruitment • Potential appraisal and fast track • Career planning and development • Succession planning Chapter 5 - WORK PLANNING: This chapter will include the Strengths, Weaknesses and Recommendations of each related to work planning system: • Introduction (Concept of work planning and the component of systems) • Contextual analysis • Role clarity • Performance appraisal system
Chapter 6 - DEVELOPMENT SYSTEM: This chapter will include the Strengths, Weaknesses and Recommendations of each related to development system: • Introduction and components • Induction training • Training and learning systems • Performance guidance and development • Worker development Chapter 7 - SELF-REENEWAL SYSTEM: This chapter will include the Strengths, 31
Weaknesses and Recommendations of each related to self renewal system: • Introduction • Role efficacy • Organisation development • Action oriented research
Chapter 8 - HRD CULTURE: This chapter will include the Strengths, Weaknesses and Recommendations of each related to HRD culture: • Introduction • HRD culture • Values • Quality orientation • Rewards and recognition • Information • Communication • Empowerment through participation, decentralization, shop floor committees Chapter 9 - HRD FUNCTION: This chapter will include the Strengths, Weaknesses and Recommendations of each related to HRD function: • General observations • Industrial relations and HR • Personnel policies and HRD • HRD function – structure • HRD department – competencies • HRD strategies • HRD activities and priorities 32
Introduction: HR Audit, Inc. has been providing human resources, management practices and organizational development services since 1998. While located near Milwaukee, Wisconsin, HR Audit, Inc. provides services to companies nationally, from Radisys Corp. near Portland, OR to Monster.com in Maynard, MA. Co-founder and managing director Jim Bastian has 18 years of senior management experience including serving as senior vice president and officer of a Fortune 50 company. He also served as a member of a post-acquisition assimilation team during an aggressive growth period involving over a dozen transactions. Holding an undergraduate degree in psychology/education and an MBA, Jim serves as company's senior auditor. He is a frequent speaker on managing change, conflict, and diversity and performance accountability. The audit staff has a minimum of 12 years of senior management experience, has conducted dozens of audits and has an advanced degree in a related field. Services: As the name implies, they specialize in providing comprehensive Human Resources and Management Practices Audits. They also help clients find solutions to Organizational Development Challenges like reducing administrative and employment related costs, post merger/acquisition assimilation, talent retention and succession planning, workforce diversity, regulatory compliance, conflict resolution and change management and we design, develop and deliver customized, interactive Management/Supervisor Training programs. Their confidential audit/assessment process includes interviews with senior managers, focus groups, attitudinal surveys, review of policies and procedures, internal records, employment data, resources, staffing and processes. Audit Areas: Strategic plan implementation, Training, Affirmative action, Regulatory compliance, Turnover data/retention, Compensation Policies, Performance appraisal process, Job descriptions , Employee handbook, The employment process, Change readiness, Communications and Administrative staffing levels. 33
Audit Training: HR Audit, Inc. trainers are uniquely qualified to help human resource department heads and internal auditors conduct more thorough, expedient and valuable human resource audits. While they often customize programs to meet specific client needs, training typically is designed around one of the following three options. OPTION ONE: consists of a 3 ½ hour training program at your site on how to conduct a human resources or organizational audit, efficiently, expediently, objectively and thoroughly. This training program includes a PowerPoint, handouts and templates needed for conducting internal audits. At the end of the session, participants will have a template to use for auditing human resource functions, instruction on sample selection, review and analysis processes, regulatory requirements and best practices that should be included, and other information necessary to conduct internal HR audits. Cases, examples, situational analysis and other activities are incorporated to ensure a “hands on” learning experience. Questions are always welcome thorough out. OPTION TWO: goes beyond the classroom and includes an audit of one of your locations, (typically your corporate site)conducted by your organization’s internal auditor(s) the HR Director and/or his/her designee(s) using an audit process template we provide and with an HR Audit, Inc. auditor on-site providing guidance, direction and coaching. This option typically takes 2 days on-site. At the conclusion of the second day, you will have gone through a full audit process, have the data, sample results, and all other information and materials needed to draft an audit report/summary and the experience of having completed an audit prior to “soloing”. OPTION THREE: consists of HR Audit, Inc. completing an audit of one location while representatives of your organization look on and participate as appropriate This process facilitates the collection of vital information that is often not available to internal auditors, frees participants to address work demands while learning and while the audit process continues and results in your receipt of a complete written audit report which is followed by a presentation and de-brief on your site with the HR Audit, Inc. auditor. HR Audit, Inc. will provide quotes upon request. All prices quoted are “not to exceed” figures and will include all costs. Options two and three also include unlimited 34
telephone support for 12 months following the on-site visit to answer questions, provide recommendations or simply serve as a sounding board.
VITAL HR Introduction: Founded in 2005 by Jo and Jon Darling, Vital HR set out to provide practical HR solutions to organisations requiring assistance with HR problems. Jo Darling: Jo has 17 years generalist HR experience at a senior level within a number of multinational organisations and SME’s. Her time spent at Peugeot, Marconi Communications and Jabil Circuit has developed a strong commercial understanding enabling her to develop and deliver HR strategies in line with business objectives. Jo uses her down to earth approach to offer a complete range of practical tailor made HR solutions. Judith Wardell: Judith has a strong commercial understanding and an extensive general HR background and has worked for Peugeot Talbot, Smith & Nephew and Colgate-Palmolive. She is qualified in the use of SHL personality profiles and the Strength Deployment Inventory and has gained a Post Graduate Certificate in Life Coaching. She is able to design and deliver lively and engaging training programmes to raise awareness and understanding of diversity issues and provide managers with the skills to recruit and retain a diverse workforce. Stephen Knight: Steve spent over 20 years in four business sectors beginning with production management in food manufacturing, with Bowyers, followed by various management training posts both at tactical and managerial levels with Bass and Peugeot. More recently he worked in an executive capacity handling strategic human resource issues for a rapidly expanding international distributor, RS Components. Steve is an accomplished coach and able facilitator, being as comfortable in the boardroom as the shop floor. He is qualified to use a wide range of psychometric and ability tests and has extensive experience in their practical application in both assessment and development situations. He has an Honors Degree, Diploma in Personnel Management and is CMCIPD. Bruce West: Bruce has over 20 years of experience in learning and development and 16 years of which have been involved in management 35
development programmes. He was a senior instructor with Outward Bound responsible for the design and development of progressive management development training initiatives. Prior to that, he was a technical skill training instructor with the RAF Mountain Rescue Services. He has worked with the European Youth Parliament, organizing and delivering team awareness events throughout Europe. Currently he is associated with the Welsh Assembly, where he assessed senior civil servants as part of a leadership development programme which he is now delivering. His current clients include Welsh Assembly Government, Barclay Bank, Unilever, Cleanaway, Styles ∓ Wood, E-On, DHL and Beresford’s Solicitors Services: 1. HR Audit: Vital HR offers a free no obligation HR Audit. Taking no more than an
hour this will identify any areas where you may be at risk, provide ideas to improve employee motivation or simply give you peace of mind that you are doing all you should be. 2. Employment Contracts and Handbooks: Vital HR will review all existing contracts
of employment, policies and procedures in line with current UK employment legislation. A user friendly Manager’s guide, in support of the handbook, to provide day to day support in handling HR issues has proven very useful with many clients. 3. HR Support: The basic level of support will always include the following: • Access to a team of HR professionals who will provide advice, guidance and support on all employment issues. This will be provided via telephone, e-mail or attendance at your premises, whatever is most appropriate to the situation. • Provision of all documentation, guidance notes, letters etc, in relation to the advice given to ensure that the risk of litigation or successful litigation is minimized on matters of discipline, grievance, appeals, sickness absence, maternity etc. 4. Recruitment: Vital HR can provide support with recruitment exercises in a number of ways including the following: • Preparation of job description/role profile and defining the best method to attract applicants. • Preparation and placing of any advertisements in the media. • Initial CV sifts against job description. • First interviews to shortlist candidates. • Supporting recruiting manager’s at interview • Psychometric aptitude and personality testing. 36
• Issue of employment contracts. • Take up references.
CONCLUSION
The Human Resources (HR) Audit is a process of examining policies, procedures, documentation, systems, and practices with respect to an organization’s HR functions. The purpose of the audit is to reveal the strengths and weaknesses in the nonprofit’s 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 can’t 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 it’s full potential to support the organization’s mission and objectives can be realized. Finding out what is insufficient and inadequate is the first step toward improvement. If deficiencies are identified, it is important to take steps to correct those deficiencies. Organizations should take that first step only when they are ready to act on the findings, and to make necessary improvements in their HR skills, processes, and systems. Improving the HR system takes some time. A workplan — with a timeline, accountability, and deliverables — should be created after the team reviews the completed audit and identifies areas where improvement is needed. Follow-up and review should be a regular management function, performed on an ongoing basis. A healthy HR function in an organization is as important as the physical and mental well being of a human body. Typically the basic reason why organizations prefer to conduct an HR audit is to get a clear judgment about the overall status of the organization and also to find out whether certain systems put in place are yielding any results. HR audit also helps companies to figure out any gaps or lapses and the reason for the same. Since every company plans certain systems and targets, an HR audit compares the plans to actual implementation. The concept of HR audit has emerged from the practice of yearly finance and accounting audit, which is mandatory for every company, to be done by external statutory auditors. This audit serves as an examination on a sample basis of practices and systems for identifying problems and ensuring that sound accounting principles are followed. Similarly, an HR audit serves as a means through which an organization can measure the health of its human resource function.
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Reference Books: Human Resource Management and Personnel Management – K Aswathappa 2nd Edition 1997 Tata McGraw-Hill Publishing Company Limited New Delhi
Websites: http://www.citehr.com/16449-hr-audit-notes.html www.strategiesforabetterway.com/documents/au dit.pdf www.hr.com/hr/.../human_resources.../hr_audit/q uick_hr_audit_checklist_eng.html www.explorehr.org/.../HR.../HR_Audit_Questionna ire.html www.cag.gov.in/html/reports/commercial/2006_9 /chapter_II.pdf www.mouthshut.com/review/readproduct.php? cid...r=1 38
www.hraudit.com www.vitalhr.com
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