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What is HRD?.
• HRD is any process or activity that, either initially or over the longer-term, has the potential
to develop adults work-based knowledge, expertise, productivity, & satisfaction, whether for
personal or group/team gains or for the benefit of an organisation, community nation or
ultimately the whole humanity
• Competence Building
• Commitment Building
• Culture Building
An HRD Audit is like an annual health check-up, it plays a vital role in instilling a sense of
confidence in the Management and the HR functions of an organisation.
• Structure,
• Strategies,
• Systems,
• Styles,
• Culture
and their appropriateness to achieve the short-term and long-term goals of the organisation.
• Strategies,
• Structure,
• Systems,
• Styles
Culture
HR Audit is a comprehensive
of HR activities :-
• HR Cost
• HRD activities
• Legal Compliance
• Quality
• Change of leadership.
• To take stock of things & to improve HRD for expanding, diversifying, & entering into a fast
growth phase.
• To find out the reasons for low productivity & improve HRD strategies.
• Competent and committed employees are needed to provide quality products & services at
competitive rates & ways that enhance customer satisfaction.
• Components to be audited
à The systems should be well designed and should have a structural maturity.
Å The subsystems should be well integrated and should have internal synergy.
Æ They should be adequate and should take care of the HRD requirements of the organisation.
Æ The following subsystems are assessed and depending upon the extent to which they meet
the requirements a score is assigned.
Æ Training
ç Job-rotation
ç OD Interventions
ç HR Information systems
ç HR Information Systems
This dimension indicates the extent to which HRD competencies are well developed in the
organisation.
HRD Staff…
• Do they spend adequate time trying to understand the requirements of all categories of
employees?
HRD Function
4 Adequacy of manpower
4 Are they the first to implement HRD systems? Do they implement them in an exemplary way?
A HRD Competency maturity core is assigned on the basis of the competency levels of all
categories.
• A* = All categories of employees have extremely high competence base in HRD (knowledge,
attitudes, values and skills) and the HRD department has a high internal efficiency and
satisfaction levels.
• B = The competence levels of every group is at an acceptable level and the internal
efficiency of the HRD department and the internal customer satisfaction are acceptable levels.
• D = The competencies of more than one group are below acceptable levels and/or the HRD
department is not internally efficient and does not meet the requirements of the minimum
internal customer satisfaction.
• This score indicates the extent to which HRD efforts (tools, processes, culture etc.) are driven
to achieve business goals.
• Business Excellence including profitability and other outcomes the organization is expected to
achieve;
• Quality orientation;
• The extent to which the leadership and managerial styles are empowering and competence
building is assessed by studying the leadership and supervisory styles.
• The extent to which the HRD culture and values are practised and stabilised in the
corporation are measured.
Conceptualises the organisation as passing through 5 maturity levels, one superior to the other &
describes process areas of each level.
Based on HRD - HRD strategies, structure, competencies, styles, & culture & takes into
consideration Quality concerns & OD
Does not believe that organisation could be classified into any stage or level, assumes that any
organisation could be assessed on a 10 – point maturity scale on any given dimension.
Good HRD is involved
• The HRD Scorecard is a measure of the HRD maturity level of an organization. The scorecard
is based on the following assumptions and takes into consideration the research based
understanding gained in the last few decades regarding HRD. The maturity level of HRD in
an organization is indicated by the following factors:
- HRD Systems Maturity
- HRD Competencies of the Employees including the HR Department
- HRD Culture of the Organization
- HRD Influence on the Business Goals or Business Linkages of HRD.
• - Competent and motivated employees are needed to provide quality products and services
at competitive rates and ways that enhance customer satisfaction.
• - HRD Systems Maturity Score: Competencies and commitment can be developed through
appropriate HRD mechanisms (tools and systems). In a HRD Mature organization there will be
well-developed HRD systems and HRD systems Maturity can be measured through HRD audit.
- HRD Competence Score: HRD Competencies of the HRD department and the line managers
play a significant role in implementing the systems and processes in ways that could ensure
employee satisfaction, competence building and customer satisfaction linkages. The
competencies of the staff and the other employees can be measured in terms of an index.
- The HRD Culture: values and processes created by the HRD tools, staff and their styles also
play a crucial role in building sustainable competencies in the organization. These need to be
measured and monitored. It is possible in some corporations (for example small corporations)
to have very little of HR systems and yet have a high level of HR competencies and HR culture.
In the traditional family owned organizations in those years where there were no systems
approaches there used to be good degree of HRD culture, which has resulted in effective
functioning and business.
- Business Linkage Score: Business linkages of HRD are very crucial component of HRD
effectiveness. HRD systems, competencies and the culture must be aligned with the business
goals of the corporation. The alignment could be ensured through the direct linkages with
customer satisfaction and employee motivation indices.
• Are the HRD systems aligned towards the above mentioned or other important business goals
of the corporation?
• Does the HRD staff reflect adequate understanding the commitment to the business goals of
the organisation?
• Are the HRD processes and culture drive employees and the corporation and interviews of the
auditor with the employees. Similar ratings are assigned for this dimensions.
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.
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:
Benefits of HR Audit:
• 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.
• Provides timely legal requirement.
• Sound Performance Appraisal Systems.
• Systematic job analysis.
• Smooth adoption of the changing mindset.
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)
Conclusion:
The auditors always prepare and submit an audit report to authority of the organization,
which may be clean or qualified. The clean report indicates the appreciative of the
department's function, but the latter one represents the gaps in performance and therefore
contains remarks and remedial measures. HR Audit is very much helpful to face the
challenges and to increase the potentiality of the HR personnel in the organization.
Or
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.
3 To instill a sense of confidence in the human resource department that it is well-managed and prepared to meet
potential challenges and opportunities.
An audit is a systematic process, which examines the important aspects of the function and its management, and
is a means to identify strengths, weaknesses and areas where rectification may be warranted. An audit is done on
sampling basis. And in sampling, not every instance or situation can be examined.
An HR audit can be used by an organization for multiple purposes. Some of the more common reasons are:
How an audit is conducted is very often determined by its intended use. For instance, the type of audit used to
ascertain HR practices may be significantly different from the type of audit used to support an initial public
offering. Although the areas examined may be similar, the process used and the depth of inquiry will vary from
the intended outcome.
The HR audit process is conducted in different phases. Each phase is designed to build upon the preceding phase
so that the organization will have a very strong overview of the health of the HR function, at the conclusion of
the audit. These phases include:
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.
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.
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.
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.
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.
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.
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.
Data gathering: Completion of a self-assessment questionnaire significantly expedites the audit process and
allows for better audit planning.
On-site access: The on-site portion of the audit is the most critical.
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.
* Address as many needs as possible using the organization's internal expertise and resources.
* 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.
Where a human resource associate comes and makes sure that your employee files are up to date