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HR Audit

1. Define Human Resource (HR) Audit. Explain the need for HR Audit. What are the
benefits of HR Audit?
A: It is mechanism to review the current HR policies, practices and systems to ensure that they fulfill the
rules and regulations. The audit also helps in identifying the areas of improvement in the HR function.
Nowadays, the audit is done regularly in the organizations.
The HR audit covers various functions of HR like Recruitment, Compensation & Benefits, Performance
evaluation, Termination Process and exit interviews etc.
Advantages: A properly conducted audit helps in the following
1. To recognize strengths
2. To reveal problem areas
3. Confirms compliance with latest regulations
4. Ensures effective HR policies
5. Builds confidence in HR function
Need for HR Audit:
A HRD audit is a comprehensive evaluation of the current human resource development strategies,
structure, systems, styles and skills in the context of the short and long-term business plans of a company.
Conducting HR audits is an integral part of an HR professionals role in any company. Not only will an
HR audit help a company ensure its in compliance and conformance with the law, but it will help HR
professionals standardize processes, identify risk areas, and tie HR goals to strategic business goals. There
are various types of audits designed to accomplish a variety of objectives.
1. To increase the size of the organization and personnel in several organisations.
2. To change the philosophy of management towards HR
3. To increase the strength and influence of trade unions
4. To change HR management philosophy and thereby personnel policies and practices throughout the
world, and
5. To increase the dependence of the organization on the HR system and its effective functioning.
Benefits of HR Audit:
Several benefits associated with Human Resource audit are listed below. An audit reminds member of HR
department and others its contribution, creating a more professional image of the department among manager
and specialist. The audit helps clarify the departments role and leads to greater uniformity, especially in the

geographically scattered and decentralized HR function of large organisations. Perhaps most important, it finds
problems and ensures compliance with a variety of laws and strategic plans in an organization.

It identifies the contributions of the HR department.

It improves the professional image of HR department.

It encourages greater responsibility and professionalism amongst members of HR department.

It classifies the HR department's duties and responsibilities.

It stimulates uniformity of personnel policies and practice.

It identifies critical personnel problems.

It ensures timely compliance with legal requirements.

It reduces human resource costs.

2. Discuss the methods used in the HR Audit process.

A: Though the process would vary from organization to organization, generally it involves the
following steps:
1) Briefing and orientation:
This is a preparatory meeting of key staff members to:

discuss particular issues considered to be significant,

chart out audit procedures, and
develop plans and programme of audit.

2) Scanning material information:

This involves scrutiny of all available information pertaining to the personnel, personnel
handbooks and manuals, guides, appraisal forms, material on recruitment, computer capabilities
and all such other information considered material.
3) Surveying employees:
Surveying employees involves interview with key managers, functional executives, top
functionaries in the organisation, and even employees representatives, if necessary. The purpose
is to pinpoint issues of concern, present strengths, anticipated needs and managerial philosophies
on human resources.
4) Conducting interviews:

What questions to ask? The direction which audit must follow is based on issues developed
through the scanning of information gathered for the purpose. However, the audit efforts will get
impetus if clarity is obtained as to the key factors of human resource management selected for
audit and the related questions that need to be examined.

The following model depicts the various key factors on which information needs during human
resource audit need to be focused. It is developed from the interview guide used in an electronics
company. It covers a wide range of topics of profound interest relating to human resource
management practices in the organisation.
5) Synthesizing:
The data thus gathered is synthesized to present the

current situation


staff pattern, and

issues identified.

Similarly, future needs are identified and appropriate criteria developed for spotlighting the
human resource priorities and specific recommendations made.
6) Reporting:
Just as the planning meetings of briefing and orientation, the results of the audit are discussed
within several rounds with the managers and staff specialists. In the process, the issues that get
crystallized are brought to the notice of the management in a formal report. Follow-ups are
necessary after an audit to see if the action plan used to solve problems found this the audit
worked Or not.
In conclusion, human resource audit is an important approach to human resource planning. It is
practical because if correctly conducted, it should increase the effectiveness of the design and
implementation of human resource policies, planning and programmes. A periodic and
systematic audit helps human resource planners develop and update employment and programme
3. What is HR Scorecard? Explain the reasons for implementing HR Scorecard framework.
A: An HR scorecard is a visual representation of key measures of human resource department
achievements, productivity and other factors important to the organization. Factors measured
include costs, hiring, turnover, training, performance management and alignment with corporate
goals. Many companies are using Balance Scorecard metrics to evaluate performance of their HR
department by key performance factors.

Cost per Hire

By evaluating this factor you will be able to see how costly the recruiting process is. This process
starts from posting job offer to the moment when a new person is officially employed in the
company. Logically, the shorter this process is, the least expensive is cost per hire.
Turnover Cost
These are the costs connected to termination, new hire and learning. In other words, these are
expenses related to integrating an innovative person into the company.
Turnover Rate
This value represents the condition in your company related to leaving and hiring new
employees. Many people would agree that it is not good to change personnel too often.
Time to Fill
Basically, this is the time needed to fill a vacant position in the company. Of course, this time
depends on how well HR managers are working with recruiters, publicity and people in general.
The shorter this time, the better performance of your HR department.
Length of Employment
This indicator is very easy to understand. It is likely to calculate an average value. For instance,
in average an employee works 5 years for your company. Of course, everything depends on the
place. If you are changing couriers or secretaries, this is not a big trouble. But if chief managers
work for your company less than a year, this is definitely not good.
Training and Development
Even if you hire the best specialist you need to integrate him into your company and guide. Of
course, you bear costs, related to preparation. If you manage to cut this cost without injure
quality of training, then your HR department is doing a great job.
Salaries, compensation, bonuses
It is very important to know that you are not overpaying and allocating recourses wisely. This
also concerns HR department of any company. With Balanced Scorecard you will be able to see
how efficiently company's funds are being used in HR branch.
Cost Effectiveness
It all comes to cost efficiency after all. All above-mentioned factors influence performance of HR
department which has one goal minimize costs and boost presentation.
4. What is meant by Competency mapping? Explain the various competencies and the
associated behavioral aspects.
A: Competency Mapping is a process to identify key competencies for an organization and/or a
job and incorporating those competencies throughout the various processes (i.e. job evaluation,
training, recruitment) of the organization. A competency is defined as a behavior (i.e.
communication, leadership) rather than a skill or ability.

The steps involved in competency mapping are presented below:

1. Conduct a job analysis by asking incumbents to complete a position information
questionnaire(PIQ). This can be provided for incumbents to complete, or used as a basis
for conducting one-on-one interviews using the PIQ as a guide.
2. Using the results of the job analysis, a competency based job description is developed.
3. With a competency based job description, mapping the competencies can be done. The
competencies of the respective job description become factors for assessment on the
performance evaluation.
4. Taking the competency mapping one step further, one can use the results of ones
evaluation to identify in what competencies individuals need additional development or
training. Different competencies involves the following:
Organizational competencies: The mission, vision, values, culture and core competencies of
the organization that sets the tone and/or context in which the work of the organization is carried
out (e.g. customer-driven, risk taking and cutting edge).
Core competencies: Capabilities and/or technical expertise unique to an organization, i.e. core
competencies differentiate an organization from its competition (e.g. the technologies,
methodologies, strategies or processes of the organization that create competitive advantage in
the marketplace). An organizational core competency is an organizations strategic strength.
Technical competencies: Depending on the position, both technical and performance
capabilities should be weighed carefully as employment decisions are made.
Behavioral competencies: Individual performance competencies are more specific than
organizational competencies and capabilities. As such, it is important that they be defined in a
measurable behavioral context in order to validate applicability and the degree of expertise (e.g.
development of talent)
Functional competencies: Functional competencies are job-specific competencies that drive
proven high-performance, quality results for a given position. They are often technical or
operational in nature.
Management competencies: Management competencies identify the specific attributes and
capabilities that illustrate an individuals management potential. Unlike leadership
characteristics, management characteristics can be learned and developed with the proper
training and resources. Competencies in this category should demonstrate pertinent behaviors for
effective management to be effective.
Initiative and Creativity

Plans work and carries out tasks without detailed instructions; makes constructive suggestions;
prepares for problems or opportunities in advance; undertakes additional responsibilities;
responds to situations as they arise with minimal supervision; creates novel solutions to
problems; evaluates new technology as potential solutions to existing problems.
Makes sound decisions; bases decisions on fact rather than emotion; analyzes problems
skillfully; uses logic to reach solutions.5.
5. Write a brief note on effectiveness of Human Resource Development Audit as an
A: In any firm, along with the optimal utilisation of other resources, human resources should
also be exploited to its maximum potential. Businesses which utilize their human resources in an
effective way have better chances of success in the future. Sustainability and progress of business
will depend on new competencies, methods, strategies and value creating processes. Every
organisation has accepted that human resource is the most valuable asset of an organisation
though its value is not mentioned in the balance sheet. Lack of information regarding human
capital was seen as a serious handicap for decision making, both for the managers, investors
(Srivastava 1979: 83) and for the human resource development process itself. Perhaps India is
the first country to formally establish a totally dedicated HRD (Human Resources development)
Department separated from the Personnel Department. This was designed in the year 1974 when
the term HRD itself was not very popular in the USA. Two consultants from the Indian Institute
of Management , Ahmadabad after reviewing the effectiveness of the performance appraisal
system and training in Larsen & Toubro recommended an Integrated HR System to be
established and the department dealing with development issues be separated out from the
personnel department and be called the HRD. The nature of interventions undertaken by the
HRD departments include:
Cultural change through new performance management systems
TQM based interventions (in most cases these are undertaken also by a separate group of
professionals) Survey Feedback
Role clarity and Role negotiation exercises
Career Planning and Succession exercise
Assessment Centers and promotion policies Visioning and value clarification exercises
Performance coaching workshops Team building interventions The Academy of Human
Resources Development has come up with a concept of IOAC (Individual and Organizational
Assessment Center) which is becoming popular as an intervention by the HRD departments. In
this concept the HRD department establishes an Assessment Center with the purposes of

assessing and developing the competencies of Individuals as Individuals. Individuals in relation

to their current and future Roles, Dyadic relationships, teams, Inter team collaboration and work
and Organizational Climate and Synergy.
6. Write short notes on the following:
(i) Audit for HR Planning
(ii) Audit for HR Climate
A: Audit for HR Planning:
Human Resource 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. A complete Human Resources Checkup, including
administration, employee files, compliance, handbook, orientation, training, performance
management, and termination procedures. The intended outcomes include minimizing your
liability exposure and introduction or enhancement of human resource best practices.
The commonly understood audits are the established and regular accounting audits carried out in
accordance with specific statutory regulations. However, in the case of human resource audits,
there is no legal obligation, but enlightened managements have voluntarily accepted its
usefulness depending upon the circumstances. The following circumstances may be cited as
1. felt concern by top management,
2. compulsions of the external forces necessitating a situational audit,
3. business changing significantly influenced by international business decisions affecting human
resource management, and
4. an urge on the part of human resource management professionals towards advancement of the
practices and systems.
Audit for 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
Employee turnover: It refers to the process of employee leaving an organisation. Higher
turnover involves high cost of recruitment, selection, training etc.
Absenteeism: It refers to the failure on the part of the employees to report to work. In other
words, unauthorized absence continues absenteeism.
Accidents: Organisation maintains records related to the accidents. Organisation must have
safety plan, implement it and evaluate its effectiveness.
Attitude surveys: Attitude surveys are the most powerful indicators of the organisational
Audit of corporate strategy: HR professional dont set corporate strategy but they strongly
determines its success.