Auditing the HR function

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Human Resource Audits Human Resource Audits
Dr Sorab Sadri and Prof. Jayashree Sadri

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Human Resource Audit?Human Resource Audit?
A human resource audit evaluates the personnel
activities used in an organization. The audit may
include one division or entire company. It gives
feedback about :
1.The function of operating managers.
2.The human resource specialists.
3.How well managers are meeting their human
resource duties.
In short, the audit is an overall quality control check
on human resource activities in a division or
company and how those activities support the
organization’s strategy

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Benefits of A Human Resource Benefits of A Human Resource
AuditAudit
Identifies the contribution of the personnel
departments to the organization
Improves professional image of the personnel
department
Encourages greater responsibility and
professionalism among members of the personnel
department
Clarifies the personnel department’s duties and
responsibilities
Finds critical personnel problems

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The Scope of Human Resource The Scope of Human Resource
AuditsAudits
Audit of Corporate Strategy
Corporate Strategy concerns how the organization is going to gain competitive
advantage.
Audit of the Human Resource Function
Audit touches on Human Resource Information System, Staffing and Develop-
ment, and Organization Control and Evaluation.
Audit of Managerial Compliance
Reviews how well managers comply with human resource policies and
procedures.
Audit of Employee Satisfaction
To learn how well employee needs are met.

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Audit of Corporate StrategyAudit of Corporate Strategy
Human resource professionals do not set corporate
strategy, but they strongly determine its success.
By assessing the firm’s internal strengths and
weaknesses and its external opportunities and
threats, senior management devises ways of
gaining an advantage, such as :
stresses superior marketing channels,
low-cost production, etc.
Understanding the strategy has strong implications
for human resource planning, staffing,
compensation, employee relations, and other
human resource activities

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Audit of the Human Resource Audit of the Human Resource
FunctionFunction
1. Human Resource Information System
- Human Resource Plans : Supply and demand
estimates; skill inventories; replacement charts
and summaries
- Job Analysis Information : Job standards, Job
descriptions, Job specifications
- Compensation Management : Wage, salary, and
incentive levels; Fringe benefit package;
Employer-provided services

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2. Staffing and Development2. Staffing and Development
Recruiting : sources of recruits, availability of
recruits, employment applications
Selection : selection ratios, selection procedures,
equal opportunity.
Training and development : orientation program,
training objectives and procedures, learning rates
Career development : internal placement, career
planning program, human resource development
efforts

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3. Organization Control and Evaluation3. Organization Control and Evaluation
Performance appraisals : standards and measures
of performance, performance appraisal techniques,
evaluation interview.
Labor-Management Relations : Legal compliance,
management rights, dispute resolution problems.
Human Resource Controls : employee
communications, discipline procedures, change
and development procedures,

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Tasks of AuditorsTasks of Auditors
Identify who is responsible for each activity.
Determine the objectives sought by each activity.
Review the policies and procedures used to
achieve these activities.
Prepare a report commending proper objectives,
policies, and procedures.
Develop an action plan to correct errors in each
activity.
Follow up the action plan to see if it solved the
problems found through the audit.

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Audit of Managerial Audit of Managerial
ComplianceCompliance
Compliance with laws is especially
important. When safety, compensation, or
labor laws are violated, the government
holds the company responsible.
If managers ignore policies or violate
employee relations laws, the audit should
uncover these errors so that corrective
action can be started.

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Audit of Employee Audit of Employee
SatisfactionSatisfaction
Employee satisfaction refers to an employee’s
general attitude toward his or her job.
When employee needs are unmet, turnover,
absenteeism, and union activity are more likely.
To learn how well employee needs are met, the
audit team gathers data from workers.
The team collects information about wages,
benefits, supervisory practices, career planning
assistance, and other dimensions of job

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Research approaches to Research approaches to
auditsaudits
1. Interviews with employees and managers
are one source of information about human
resource activity. Employees and managers
comments help the audit team find that need
improvement.
Another useful source of information is the
exit interview. Exit interview are conducted
with departing employees to learn their
views of the organization.

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2. Questionnaires/surveys 2. Questionnaires/surveys
Because interviews are time-consuming, costly,
and often to only few people, many human
resource departments use questionnaires. Through
questionnaire surveys, a more comprehensive
picture of employee treatment can be developed.
Questionnaire may also lead to more candid
answers than face-to-face interviews.
-employee attitude about supervisors
-Employee attitude about their jobs
-Perceived effectiveness of human resource
department

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3. Historical analysis3. Historical analysis
Not all the issues of interest to human resource audit
are revealed through interviews or questionnaires.
Sometimes insight can be obtained by an analysis of
historical records, such as:
-Safety and health records
-Grievances records
-Compensation studies
-Scrap rates
-Turnover and absenteeism records
-Selection records
-Affirmative action plan records
-Training program records

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4. External information4. External information
Outside comparisons give the audit team a
perspective against which their firm’s activities
can be judged.
Through Department of Labor, industry association,
professional association numerous statistics and
report are compiled.
These organizations regularly publishes information
about future employment opportunities, employee
turnover rates, work force projection, area wage
and salary survey, work force demography,
accident rates, and other data that can serve as
benchmark for comparing internal information.

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The audit reportThe audit report
Findings of research are used to developed a
picture of the organization’s resource activities.
For this information to be useful, it is compiled
into audit report.
The audit report is a comprehensive description of
human resource activities that includes both
commendations for effective practices and
recommendations for improving practices that are
less effective.
Audit report often contain several sections. One
part is for line managers, another is for manager
of specific human resource function, and the final
part is for the human resource manager.

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Report for line managersReport for line managers
How line managers handle their duties such
as:
Interviewing applicants
Training employees
Evaluating performance
Motivating workers
Satisfying employee needs
The report also identifies people problems.
Violations of policies and employee
relations law are highlighted

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Report for the HR SpecialistReport for the HR Specialist
The specialists who handle employment
training, compensation, and other activities also
need feedback. Such feedbacks are :
1.Unqualified workers that need for training
2.Qualified workers that need for development
3.What others company are doing
4.Attitude operating managers toward personnel
policies
5.Workers pay dissatisfaction

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Report for HR ManagerReport for HR Manager
It is contains all the information given to both
operating managers and staff specialists. In
addition, HR Mangers gets feedback about :
Attitude operating managers and employees about
services given by HRD
A review of HRD plans
Human resource problems and their implication
Recommendations for needed changes and
priorities for their implementation