ASSIGNMENT

ON

HUMAN RESOURCE
AUDIT
Submitted To:

Ms. N. Malathi
Faculty HRM,
DIAS

Submitted by:

Komal Kain
Roll no.-112
MBA-2A

DELHI INSTITUTE OF ADVANCE STUDIES, ROHINI,

NEW DELHI

HR/PERSONNEL AUDIT
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.
According to Seybold,
HR/Personnel Audit refers to an examination of policies, procedures and
practices to determines the effectiveness of personnel management.
Personnel/HR Audit covers basically 3 things:
1. Measurement and evaluation of personnel programmes, policies and practices;
2. Identification of gap between objectives and results; and
3. Determination of what should or what should not be done in future.
Objectives of HR Audit

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.
To find out the proper contribution of the HR department towards the organization.
Development of the professional image of the HR department of the organization.
To review the organizational system, human resources subsystem in order to find out the
efficiency of the organization in attracting and retaining human resources.
To find out the effectiveness of various personnel policies and practices.
To know how various units are functioning and how they have been able to implement
the personnel policies.
To review the personnel system in comparison with organizations and modify them to
meet the challenges of personnel management.

Need for Personnel/HR Audit

Increasing size of the organization and personnel in several organizations.

Changing philosophy of management towards human resources.
Increasing strength and influence of trade unions.
Changing human resources management philosophy and thereby personnel policies and
practices throughout the world.
Increasing dependence of the organization on the human resources system and its
effective functioning.
Changing managerial philosophy, which has come to regard employees participation and
identification as having a powerful influence on motivation of employees at work for the
success of the organization, has recognized the need for human resource audit.
As an organization grows the need for such an audit increases. A continuous feedback is
necessary to improve, for example, the performances of the personnel and this is possible
only by the way of human resource audit.
Expansion of unions of employees and of bilateral determination of employment policy
with frequent criticisms of managerial competence has made it necessary to conduct
human resource audit.
Rapidly raising wages and salaries, with higher labour costs and greater opportunities for
competitive advantage in the management in the management of people is another cause
which compels management to conduct human resource audit.
The changing mixture of skills with growing proportions of technical and professional
workers, who present more difficult managerial problems, has also made it essential for
the management to use human resource audit.

Benefits of HR Audit:
It provides the various benefits to the organization. These are:

It helps to find out the proper contribution of the HR department towards the
organization.
Development of the professional image of the HR department of the organization.

Reduce the HR cost.

Motivation of the HR personnel.

Find out the problems and solve them smoothly.

Sound Performance Appraisal Systems.

Systematic job analysis.

Smooth adoption of the changing mindset.

Identifies the contributions of the HR department.

Encourages greater responsibility and professionalization among members of HR

department.

Finds critical personnel problems.

Ensures timely compliances with legal requirements.

Stimulates the uniformity of personnel policies and practices.

Classifies the HR departments duties and responsibilities.

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 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.
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.
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 departments objectives and future
challenges.

Types of HR/Personnel Records

Job application and test scores

Job description and job specification

Interview results

Employment history

Medical reports

Attendance records

Payroll

Employee ratings

Training records

Leave records

Accident and sickness records

Grievances, disputes records

Contracts of employment

Records to be kept under various statutes.

Scope of Audit:
Generally, no one can measure the attitude of human being and also their problems are not
confined to the HR department alone. So it is very much broad in nature. It covers the following
HR areas:

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.

In order to conduct HR audit, HR manager requires considerable amount of data . To conduct

meaningful HR audit information on following human resource functions is necessary:
1) Procurement Function
a)
In inventory present and future needs for manpower
b)
Reliable performance standard
c)
Possible change affecting manpower
d)
Location and matching of required and available skills
e)
Valid measure for testing and selection

f)
Cost of requirement and replacement
2) Development Function
a) Valid measure of employee performance
b) Cost benefit calculation on training and development
c) Linkage between individual aspirations and organizational needs.
d) Career and succession planning.
3) Compensation Function
a) Linkage between wages and productivity
b) Impact of money on work motivation of employee
c) Employee cost in term of turnover
d) Effect of inflation and technology on wages label and productivity
e) Value of collective bargaining and fringe benefit programmes to the
organization.
4) Maintenance Function
a) Absenteeism, turnover, accidents, grievance disciplines, man-days lost and
other indicator of organizational health
b) Environmental standards for physical and mental health of the employees.
c) Causes and cost of employee separation
d) Incentives for voluntary separation, if necessary.
5) Integration Function
a) Communication and leadership climate in the company
b) Adoption to environmental change
c) Causes of changes in productivity level
d) Impact of change in technology and market.
The persons in charge of auditing should examine the effectiveness of the HR function by
raising the following issues:
o Identify who is responsible for each activity.
o Determine the objectives sought by each activity
o Review the policies and procedures used to achieve those objectives.
o Sample the records in the HR information system to learn if the policies and
procedures are being followed correctly.
o Prepare a report commending proper objectives, policies, and procedures.
o Develop an action plan to correct errors in objectives, policies and procedures
o Follow up on the action plan to see if it solved the problems found through the
audit.
Obviously, audits are time-consuming. As a result, small firms use ad hoc arrangements
that often limit the evaluation to selected areas. Very large organizations have audit teams
similar to those used to conduct financial audits. These teams are especially useful when
the department is decentralized into regional or field offices. Through the use of audits,
the organization maintains consistency in its practices even though there are several

offices in different locations. And the mere existence of corporate audit team encourages
compliance and self audits by the regional offices between visits.
HR/Personnel Audit--Areas and Levels
Major Areas

Planning: Forecasting &

Scheduling to meet
organization & needs.
Staffing & Development:
Defined requirements &
careers; sources,
requirement, selection,
training, promotions
Organizing: Maintaining
structures for coordinating,
communicating,
collaborating, etc.

Motivation &
Commitment: Individual &
group motivation, interest,
effort, contribution

Levels & Examples of Audit Data

Level I-Results
Level II-Programmes Level III-Policy
& Procedures
Personnel shortages Time bound or network Explicit statement
supplies, layoff, etc. cost/benefit budget, etc. to provide inclusive
personnel plans for
present & future.
Recruitment times
In house & out house
Let cream rise; noncosts; training times training programmes;
discrimination, etc.
cost, labour
guidance in careers,
turnover etc.
etc.
Feedback, reader
interest, extent of
formal,
organization,
reports, records,
etc.
Productivity,
performance norms
comparative costs,
etc.

Administration: Style of
leadership and supervision;
delegation, negotiation.

Suggestions,
Promotions,
grievances,
discipline, unionmanagement
cooperation.

Research & Innovation:

Experiments & theory
testing in all areas.

Changes,
experiments,
research reports,
publications.

Approaches to HR Audit:

Job definitions for

individuals,
departments, task
forces, house organs,
etc.
Job enlargement; wage
& salary
administration; morale
survey; exit interviews;
fringe benefits, etc.
Consultative
supervision; collective
bargaining, unionmanagement
committees, etc.

R&D approach in all

areas; suggestion plans,
etc.

Encourage
flexibility, reduce
resistance to
change, effective 3way
communication, etc.
Gain high personal
identification,
ensure wholeman
satisfactions.
Style adapted to
changing
expectations;
participative
involvement,
collective
bargaining, etc.
Test old & new
theory; encourage
creativity in
management.

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)

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.
Outside authority approach:-In this, the auditors use standards set by an outside
consultant as benchmark for comparison of own results.
Statistical approach:-In this, Statistical measures are performance is developed
considering the companys existing information.
Compliance approach:-In this, auditors review past actions to calculate whether
those activities comply with legal requirements and industry policies and
procedures.
Management by objectives (MBO) approach:-This approach creates specific
goals, against which performance can be measured, to arrive at final decision about
industrys actual performance with the set objectives.

AUDITING 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.

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 self-administered 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 clients 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 practiceswelfare, 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
organization. Auditors must be given unrestricted access to records, once they sign
agreement for confidentiality.

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 organization 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. Organizations 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 organizations 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 organization.
An HR audit is much like an annual health check. It can perform the same function for the
organization. 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 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 organization.

METHODS OF H.R. AUDIT

I. INDIVIDUAL INTERVIEW METHOD:
Top level management and senior managers are interviewed, individually. It helps in
following:

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

Knowing about their expectations from the HR Audit.

Getting sensitive information pertaining to working styles and culture.

Union leaders, departmental heads, some strategic clients and informal leaders are also
interviewed, individually.

In case of small companies, manned by professionals, interviews can be extended with

selected employees from different levels and functions.

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.
Composition Of Group:

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

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

In case of large organization, group interviews for each functional area can be
conducted, separately.

Relevant Questions That Are Asked In Individual And Group Interviews :

What do you see as the future growth opportunities and business directions of the
company?

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

What skills and competencies do you need to run your business, or to perform
your role, more effectively at present?

What are the strengths of your HRD function?

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

What is good about your HRD subsystems, such as:

o

Performance appraisal,

Career planning,

o Job rotation, training,

o Quality circles,
o Induction training,
o Recruitment policies,
o Performance counseling,

o Worker development programmes, and

o HRD departments?
What is weak about them? What can be improved?
What changes do you suggest to strengthen HRD in your company?
What do you think are the ways in which line managers can perform more
developmental roles?
III. WORKSHOP METHOD:
In some cases of H.R. Audit, instead of Individual and Group Interviews, Workshop
Methods i.e. Large Scale Interactive Process (LSIP) is conducted, as under:

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

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

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

LSIP WORKSHOP FOR HRD AUDIT ON PERFORMANCE APPRAISAL SYSTEM

RELEVANT QUESTIONS THAT HAVE BEEN ASKED IN ONE OF THE HR AUDIT
CONDUCTED BY Dr. T.V. RAO:

What are the three good things in your performance appraisal system?

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

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

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

What three objectives would you use to describe the promotion policies as
they exist in your company?

IV. QUESTIONNAIRE METHOD:

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

Detailed questionnaire is prepared by H.R. Auditor.

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.

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

The HR Auditor compiles the feedbacks, makes observations, conclusions

and recommendations.

Audit Results are informed to the Participants before the report is submitted
to the top management.

Audit Reports
The audit report is a comprehensive description of HR activities that includes both
commendations for effective practices and recommendations for improving practices
that are less effective. Recognition of both good and bad practices is more balanced
and encourages wider acceptance of the report. An audit report contains several
sections. One part is for line managers, another is for managers of specific HR
functions, and the final part is for the HR managers. For line managers, the report
summarizes their HR objectives, responsibilities and duties. Examples of duties
include interviewing applicants, training employees, evaluating performance,
motivating workers, and satisfying employee needs. The report also identifies
peoples problems. Violations of policies and employee relations laws are
highlighted. Poor management practices are revealed in the report along with the
recommendations.
The specialists who handle employment, training, compensation, and other activities
also need feedback. The audit report they receive isolates areas of good and poor
performance within their functions. For example, one audit team observed that many
jobs did not have qualified replacements. This information was given to the manager

of training and development along with the recommendation for more programs to
develop promising supervisors and managers. The report may also provide other
feedback such as attitudes of operating managers about the HR specialists efforts.
The HR managers report contains all the information given to both operating
mangers and staff specialists. In addition, the manager gets feedback about:
a) Attitudes of operating managers and employees about the departments
benefits and services.
b) A review of the departments objectives and plans to achieve them.
c) HR problems and their implications.
d) Recommendations for needed changes and the priority for their
implementation.
With the information contained in the audit report, the HR manager can take a broad
view of the function. Instead of solving problems in a random manner, the manager
can focus on those which have the greatest potential for improving the departments
contribution to the organization. Perhaps the most important, the audit serves as the
map for future efforts and a reference point for future audits. With knowledge of the
departments current performance, the manager can make long term plans to upgrade
crucial activities. These plans identify new goals for the department, which serve as
standards for future audit teams.
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 companys 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.

Content HR Audit Report:

Chapter 1 INTRODUCTION: This will include a brief description about:

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
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.)

of

samples,

and

Chapter 2 - CURRENT STATUS OF THE HRD FUNCTION: This will include details about
HRD functions:

Structure and staffing of HRD function,

HRD departments 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--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,
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,
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

Chapter10 - TABLE AND APPENDICES

Difference between Human Resource Audit and Human Resource Accounting:
1. The Human Resources (HR) Audit is a process of examining policies, procedures,
documentation, systems, and practices with respect to an organizations HR functions.
They define HR Accounting as the measurement and reporting of the cost and value of
people in organizational resources.
2. The purpose of the audit is to reveal the strengths and weaknesses in the organisations
human resources system, and any issues needing resolution while accounting furnishes
cost/value information for making management decisions about acquiring, allocating,
developing, and maintaining human resources in order to attain cost-effectiveness.
3. The audit works best when the focus is on analyzing and improving the HR function in
the organization while accounting allows management personnel to monitor effectively
the use of human resources;
4. The audit itself is a diagnostic tool, not a prescriptive instrument. It will helps to identify
what you are missing or need to improve, and it may even tell you what you need to do to
address these issues while accounting indicates whether the processes are adding value
or enhancing unnecessary costs.
5. HR Audit aims at identification of the contributions of the HR department to the
organization,. HRA aims at measuring the performance of the HR function .

HR AUDIT Inc.

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.

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 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 organizations 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 telephone
support for 12 months following the on-site visit to answer questions, provide recommendations
or simply serve as a sounding board.

Related Questions:1. Difference between Human resource Audit and Human Resource Accounting.
How do these help in giving strategic advantage to organizations.[HRM MayJune-2009 Q:-5]
2. What is human resource audit? Describe its objectives and significance.
3. Discuss the purpose and scope of HR audit.
4. State the benefits of HR audit
5. What are the contents of a HR audit? Give ur comments upon such a repost you
have read recently.
6. What is HR audit and HR audit report?[May-2010 Q:-1(f)]
7. Explain the issues and challenges involved in HR audit.
8. Discuss the role of HR audit in business promotion.
9. Discuss the applications of HR audit in business improvements.
10. What are the various phases included in HR audit process?
11. What is the role of HR manager in Preparing HR audit report?
12. Explain the different types of instruments involved in HR audit?
13. Explain how balanced score card is used in HR audit.
References:

Books:

William.B.Werther and Keith Davis, Human Resource Management and Personnel

Management, 5th edition, McGraw-hill, 1996.
K. Aswathappa, Human Resource Management and Personnel Management, 4 th edition,
McGraw-hill, 2006.
V.S.P. Rao, Human Resource Management, 2nd Edition

Websites:

http://www.humanresources.hrvinet.com/benefits-of-hr-audit/
http://www.slideshare.net/gajendrakhare/hr-audit-for-organisations-2127332

http://www.hrmnotes.com/hr-audit

http://www.citehr.com/16449-hr-audit-notes.html
www.hraudit.com