(A Central University Established by an Act of Parliament 1989)

School of Management Studies Nagaland University

DC Court Junction Dimapur-797112 Nagaland

Human Resource Audit and Research

Group No. 01
Ahuto Swu, Dilip Sah, Nukchala Jamir, Rokov N. Zhasa Abstract

29 Feb.2012

The human resource processes are dynamic, and must continually be redirected and revitalised to remain responsive to the ever changing needs. HR audits, like financial audits, help in providing insights into possible causes for current and future problems. It is an evaluation of the policies, procedures and practices to determine the effectiveness of human resource management. This report highlights the different components of a Human Resource Audit and how they are to be addressed when implementing them in practice.
Introduction

Human Resource Audit is a systematic assessment of the strengths, limitations, and developmental needs of its existing human resources in the context of organizational performance (Flamholtz, 1987)
Need for HR audit:

The only constant is change -Anonymous It is a fact that the business landscape continuously undergoes changes. Such changes create new challenges for the organisation, compelling the top management to seek solutions to their problems, issues and challenges in HRD. Finding them is crucial for the organisation to face business competition and to achieve organizational goals. HR audit is sought out to be used as a comprehensive evaluation of current HR strategies, structure, systems, styles and skills in the context of the short and long-term business plans of the company. It attempts to find out the future HR needs of the company after assessing the current activities and inputs. Its purpose is to ensure that operating managers and HR specialists are following HR policies and procedures and maintaining an effective workforce. HR auditing is a necessity for an organisation that seeks to keep pace with evolutionary changes-internal and external. Benefits of HR Audit: Several Benefits associates with HR audit are listed below: 1. Identifies the contribution of HR department to the organisation 2. Improves the professional image of the HR department 3. Encourages greater responsibility and professionalism among members of the HR department 4. Clarifies the HR departments duties and responsibilities. 5. Stimulates uniformity of the HR policies and practices 6. Locates critical HR problems 7. Ensures timely compliance of legal requirements
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MGT 201 Human Resource Management 8. Reduces human resource cost through more effective HR procedure 9. Creates increased acceptance of needed change in the HR department. 10. Requires thorough review of HR departments information system
Purpose of HR audit:

1. To examine and pinpoint strength and weaknesses related to H.R. areas and Skills and Competencies to enable an organization to achieve its long-term and short-term goals. 2. To increase the effectiveness of the design and implementation of human resource policies, planning and programs. 3. To help human resource planners develop and update employment and program plans.
Scope of human resource audit

The scope of an audit extends beyond just the HR departments work. Its success depends on how well it performs and how well its programmes are carried out by others in the organisation. Audits logically begin with a review of HR departments work. It touches on virtually every topic on human resource management. Through the use of audits, the organisation can maintain consistency in its practices within the organisation and in outside locations. An audit also reviews how well managers comply with HR policies and procedures. If managers ignore personnel policies or violate rules and regulation, the audit should uncover these errors so that corrective action can be initiated. Besides assuring compliance, the audit can improve the HR departments image and contribution to the organisation. If the comments of line managers are acted upon, the HR department will be seen as more responsive to their needs. The audit should cover three areas: Identifying current procedure and practice Analysing cost and the effectiveness of time and resource allocation Reviewing clients satisfaction and expectation Approach to HR audit The audit process can be carried out internally or with the help of an external consultant(s). Where it is conducted internally, four points are extremely important: 1. Unless the scope of the audit is very limited, the audit should be conducted by a team and not an individual; 2. The team should represent a cross-section of the organisations staff, including the line personnel, middle and upper management, and those responsible for HR functions; 3. The team should be trained in survey techniques and data analysis; and 4. The organisation culture should be trust based and open; otherwise, the information given will be distorted and the whole diagnosis will become inaccurate An internal exercise should be undertaken by an individual from outside the function. While the person may already have detailed knowledge of the company, this needs to be balanced against the advantage of untainted objective review. Using external consultants has the following general advantages: 1. Independence and more objectivity 2. Experience in other organisations: potential comparisons
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MGT 201 Human Resource Management 3. Professional authority. Any audit needs to be tailored to the requirements of the organisation. It must also give value for money. Any report must clearly identify areas for improvement and propose how these can be achieved within given resource or budget constraints. Auditing process: Steps in HR audit Auditing process varies from organizations to organizations. Generally it involves following steps: STEP ONE: Briefing and Orientation: Key Staff Members meet: i. To discuss particular issues considered to be important. ii. To chart out audit procedures, and iii. To develop plans and program of audit. STEP TWO: Scanning material information: Scrutiny of all available information pertaining to personnel, personnel handbooks and manuals, guides, appraisal forms, computer capabilities and any other related information. STEP THREE: Surveying employees: i. Interview with key managers, functional executives, Top functionaries in the organisation and employees Representatives, if necessary. ii. The purpose is to pinpoint issues of concern, Present strengths, anticipated needs and managerial views on human resources. STEP FOUR: Conducting interviews: i. What questions to be asked, are developed during scanning of information. ii. It is better for H.R. Audit, if clarity about the key factors of H.R.M. selected for audit and the related questions that need to be examined. STEP FIVE: Synthesising: The data gathered is synthesized to present the i. Current Situation. ii. Priorities. iii. Staff pattern, and iv. Issues identified. STEP SIX; Reporting: i. The results of the audit are discussed with Managers and Staff Specialists, in several ii. rounds. iii. Important issues are identified for inclusion in the formal Report. HR audit Topics (areas) for interview, questionnaires and related aspects 1. Information Coverage Source Adequacy Gaps 2. Forecasting
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MGT 201 Human Resource Management Methodology Reliability Testability Budgeting Time orientation Technology perspective 3. Training and development Need assessment Selection criteria Levels covered and frequency Internal vs external training Quality consciousness Changing needs Climate for self-development 4. Performance appraisal Validity of appraisal process Fitness Benefits and/or Draw backs/problems Know-how of appraising Clear objectives Uniformity in process Underlying benchmarks Consistency in ratings Linkages with pay Feedback to employees Changing needs 5. Management succession planning Policy formulation Identifying key positions Availability of successors Matching future needs Responsibility for grooming and developing Handling non/poor performers 6. Compensation Appropriateness of policies Company philosophy Adequacy of rewards Nature of job descriptions Flexibility in job evaluation systems Control over costs Rationale of reward system Opportunities for improvement 7. Affirmative action Efficiency of action programmes Lessons for future 8. Special assignment (other HR. Functions) Clarity Comments Activities jurisdiction 9. Need inter-relationships
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MGT 201 Human Resource Management Uniqueness Distinctiveness Presence and awareness of about companys h. R. Policy Clarity on objectives of HR audit Future outlook on philosophy Capabilities on implementation 10. The staff function (the HR staff) Expectation from human resource staff Degree of satisfaction Adequacy Attitude and approach Capability and potential Suggestion for change Four methods of HR audit: For HR audit, either combination of methods or all the methods are used: 1. Individual interview method 2. Group interview method 3. Workshop method 4. 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 H.R. Audit. C. Getting sensitive information pertaining to working styles and culture. Union leaders, departmental heads, some strategic clients and informal leaders are also interviewed, individually. D. 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 H.R. Audit, facilitate collection of information about effectiveness of existing systems. Composition of group: 1. Ideally, the group should be of 4 to 8 persons. 2. Group should consists of same or similar level of employees from cross functional areas. 3. In case of large organisation, group interviews for each functional area can be conducted, separately. Relevant questions that are asked in individual and group interviews: a. What do you see as the future growth opportunities and business directions of the company? b. What skills and competencies does the company have which you are proud of? c. What skills and competencies do you need to run your business, or to perform your role, more effectively at present?
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MGT 201 Human Resource Management d. What are the strengths of your HRD function? e. What are the areas where your HRD function can do better? f. What is good about your HRD subsystems, such as: performance appraisal, career planning, job rotation, training, quality circles, induction training, recruitment policies, performance counseling, worker development programmes, and HRD departments? g. What is weak about them? What can be improved? h. What changes do you suggest to strengthen HRD in your company? i. 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: 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 H.R. Auditor compiles the views of all groups, makes own observation, conclusions and prepares a report. f. The H.R. Auditor announces the audit Results before submitting the report to top Management. 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: a. Detailed questionnaire is prepared by H.R. Auditor. 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 to the top management. Observation, analysis of secondary data, reports, manuals and other published literature observation: In addition to following the said methods, the HR Audit, needs to undertake following to assess the extent to which a congenial and supportive human welfare-oriented climate exists in the company:
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MGT 201 Human Resource Management 1. Visit workplace, plant, machinery room, canteen, toilets, training rooms, hostels, hospital, school, living colony, etc., as applicable. 2. Observations can be made through a checklist. Analysis of secondary data: This can provide an insight into the HRD assets and liabilities of the company. For example in the area of training, it may reveal as to whether employees are given training systematically or otherwise, the cost involved for training, the age group of employees attended training programmes, the purpose of training the employees etc.. Analysis of reports, records, manuals and other published literature: Study and analysis of said documents help in assessing the strengths and weakness of HRD. H.R.Audit methodology (Individual interview method how to interview and frame questions) HRD systems that should be given attention when taking interviews: Interview areas, dimensions and questions for assessing HRD systems possible interview areas, dimensions, issues and questions can be in the following HRD systems: CAREER SYSTEM: Manpower Planning and Recruitment. Potential Appraisals and Promotions, Career Planning and Development. WORK PLANNING: Role Analysis (goal setting), Contextual Analysis, Performance Appraisal. Performance Appraisal: 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. 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? DEVELOPMENT SYSTEM: Training and Learning, Performance Coaching/Counseling, 360-Degree performance feedback, Job Rotation/Mentoring, Staff (worker) Development. Training and Learning: Assess the expenditure on training level-wise, departmentwise 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. 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?
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MGT 201 Human Resource Management What are the other learning mechanisms being used for competency building? What are the new learning mechanisms that can be used? 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? SELF-RENEWAL SYSTEMS: Role efficacy, O.D., Action-Oriented Research. CULTURE SYSTEMS: HRD Climate, Values, Quality orientation, Reward and Recognition, Information, Communication, Empowerment.

Interviews begin with the CEO and top management Purpose: To know expectations of CEO. To explain scope and limitations of HRA. To get cooperation from staff. To know strategic long-term and short-term plan of the organisation. CEO should be interviewed, separately. Briefing session with CEO, covers: HRD audit and its methodology. Schedule of HR audit. Asking CEO of his/her expectations. Expectations, which cannot be met. If desired by CEO, briefing session of senior and top managers can be held in a group: Briefing will cover following questions What is HRD? What is HRD audit? What is required of the line managers in individual or group interviews? What have been the findings of group. HR auditor to tell during briefings to CEO and senior/ top management: HR audit is not a problem-solving exercise. It will not give feedback about invididuals, but about structure, competency levels, leadership, processes etc. It is comprehensive, but can be focused on one or more systems. Action on HRD audit rest with CEO. Formulation of questions for interview with CEO: Will be based on future plans of the company in the areas, the competency requirements and preparedness of HR. Diversification, New market, New businesses, New areas Scale of operations, Export, Any change or consolidation. Interview questionnaire: What do you see as the competency requirements for the future? What competency gap do you see in the existing staff?
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MGT 201 Human Resource Management What new competencies need to be developed in the staff and how do you propose to do that?

Interview with the HRD chief Objective: To understand the existing systems, structure, skills of staff, styles of top management and relationship with the HRD philosophy, problems etc. To understand HRD chiefs perceptions: 1. About top management and the support required from them. 2. About line managers, their competencies and involvement in HRD matters. 3. About unions and their involvement In HRD related issues. The competencies of HRD department and staff. To understand the internal customer framework of HR 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--vis checklist of HR audit Framing of interview questionnaire, based on said dimensions for interview with HRD chief: What are the objectives of your department? When and how was it set up? What are the significant milestones and contributions of the department? What are its current activities? What is the organisational structure? How are the strategies of HR and HR plans formulated? What is the role of the department in strategic planning? What are the main competencies of HRD staff? Which are the competencies they need to develop? What are the styles of Top and Senior level Managers? To what extent the styles are helpful in developing learning culture? What are the main blocks in developing learning culture? How are the line managers supporting their juniors in developing? What needs to be done to make them more supportive? What is the extent of support given by Top Management to HRD? Is there a separate budget for HRD? How the same is allocated and what is the support of Top Management? What is the HRD philosophy and values? What the core competencies of each department and of the organisation as a whole? What is relationship between Personnel and HRD Departments? Is there need for further strengthening Integrating or differentiating the functions or activities of the two? What the strengths and weakness in the following systems of your organisation: i. Performance Appraisal. ii. Counseling. iii. Training. iv. Career Planning and Development. v. Succession Planning for strategic roles.
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MGT 201 Human Resource Management vi. vii. viii. ix. x. xi. Job Rotation. OD and Team Building interventions. Research and System Development. Mentoring. Culture- Building Exercises. Quality improvement interventions.

Interviews with line managers: Objective: To understand their perceptions about their: a. HRD needs. b. Current status. c. Expectations. d. Competencies. e. Commitment to HRD. f. Etc.. Formulation of interview questionnaire, based on above dimensions: What are the HRD needs of your department and yourself? What kinD of help do you get from HRD Department for competency and commitment building? What the HRD System that you feel happy about? What are the HRD System that you have contributed and contributing in achieving business goals? What are the strengths of your HRD functions? What are the weak areas of HRD? What are your expectations from HRD? What are the training needs of your department? Are your training needs taken care of? What are your career growth? Are they taken care of? What do you see as future growth of the opportunities and business directions of the company? What the core competencies are skills and knowledge the company has? What skills and knowledge do you thing are required to run the business (or to perform better in your job)? What is good about your HRD sub-systems: Performance Appraisal? Training? Job Rotation? Career Planning and development? What should the HRD Department start doing or do more? What it should stop doing or do less. Interviews with workers and their representatives: Objective - to find out: Their current development needs vis--vis business goals of the company. Their motivational level. Culture prevailing in the organisation. Good and bad practices of the organisation. Formulating interview questionnaire, Based on above: How to you feel working in your organisation?
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MGT 201 Human Resource Management What are the strengths of your organisation? What are the areas that need improvement? What do you know about the business plans and opportunities for your company? What do you know about the competition your company is facing today or is likely to face in the future? What are some of the things your company should do to face the changing environment? What is being done to ensure that you all have the skills needed to meet the current needs or future challenges of the company? What motivates you here? What more do you think needs to be done to help you contribute better to the organisation? 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? What are the facilities available for you in the plant and colony. What do you think can be done to improve quality, save costs and make people feel happy to work for the company. What are your expectations from the HRD Department? What are you happy about? What are your suggestions for them to serve you better?

Group interviews Advantages: 1. Wider coverage of issues. 2. Larger involvement of employees. 3. Verification of data and significant points. 4. Assessment of impact of feelings related to any issue and problem or satisfiers and dissatisfiers. 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 A. Auditors to be introduced to the group by a representative from H.R. Department. B. 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. C. Auditors to consolidate the feedbacks. Formulation of questionnaire for group interviews: As per your view, what are the Strengths and Weaknesses in respect of the following components of HRD: Commitment of Top Management to HRD. Performance Review discussions.
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Recruitment of competent people. Separations. Retention of competent people. Quality Circles. Identification of fast-track-employees. Participative Management. Mentoring System. Shopfloor Committees. Training (In-house & outside). Delegation. Induction. Personnel Policies. Career Planning. HRD Department and Staff. Succession Planning. Communication. Job Rotation. HRD Culture. Performance Appraisal. Others.

Writing HR audit report OBJECTIVE: A. To highlight areas that needs improvement. B. To be acted upon. PURPOSE: To help the top management and and the hrd staff to recognise and retain the companys strengths. POINTS TO REMEMBER FOR WRITING REPORT: A. Simple languare should be used. B. It should be short and precise. C. Bullet form highlighting the strengths and weaknesses, should be used. Model outline: HR audit report Executive summary Chapter-1 Introduction Chapter-2 Current status of the hrd function; some facts. Chapter-3 General observations Chapter-4 Career systems Chapter-5 Work planning Chapter-6 Development system Chapter-7 Self-renewal system Chapter-8 HRD culture Chapter-9 HRD function Table and appendices 1. INTRODUCTION BRIEF DESCRIPTION ABOUT: Company locations, Products and services, Manpower, turn over, 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.)
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MGT 201 Human Resource Management 2. Current status of the HRD function 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. 3. General observations 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, General observations about competencies found. General observations about the competency promoting mechanisms, Commitment and motivational patterns, Commitment-and motivation-promoting mechanisms, Work culture and organisational culture, Culture-building mechanisms A brief about importance of the above 3 components followed by general strengths and weaknesses of the company relating to HR areas, covering the following, can be given: Impact of existing situation in the industry on HRD Culture of the organisation; Technological Innovations, Customers expectations, Leadership change or change of Management or anything affecting HR function. Any excellent or weak parts of the HRD function. The general strengths and weaknesses of the Company 4. Career systems Findings of the audit on the following should be included: Manpower planning and utilisation: Strengths, Weaknesses and Recommendations. Recruitment: Strengths, Weaknesses and Recommendations. Potential appraisal and fast track: Strengths, Weaknesses and Recommendations. Career planning and development: Strengths, Weaknesses and Recommendations. Successional planning: Strengths, Weaknesses and Recommendations. 5. Work planning Introduction (Concept of work planning and the component of systems) Contextual analysis: Strengths, Weaknesses and Recommendations.
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MGT 201 Human Resource Management Role clarity: Strengths, Weaknesses and Recommendations. Performance appraisal system: Strengths, Weaknesses and Recommendations.

6. DEVELOPMENT SYSTEM Introduction and components Induction training: Strengths, Weaknesses and Recommendations. Trainingand learning systems: Strengths, Weaknesses and Recommendations. Performance guidance and development: Strengths, Weaknesses and Recommendations. Worker development: Strengths, Weaknesses and Recommendations. Other mechanisms of development: Strengths, Weaknesses and Recommendations. 7. SELF-REENEWAL SYSTEM Introduction Role efficacy: Strengths, Weaknesses and Recommendations. Organisation development: Strengths, Weaknesses and Recommendations. Action oriented research: Strengths, Weaknesses and Recommendations. 8. HRD CULTURE Introduction HRD culture: Strengths, Weaknesses and Recommendations. Values: Strengths, Weaknesses and Recommendations. Quality orientation: Strengths, Weaknesses and Recommendations. Rewards and recognition: Strengths, Weaknesses and Recommendations. Information: Strengths, Weaknesses and Recommendations. Communication: Strengths, Weaknesses and Recommendations. Empowerment through participation, decentralisation, shopfloor committees, etc: Strengths, Weaknesses and Recommendations. 9. HRD function General observations Industrial relations and hr: Strengths, Weaknesses and Recommendations. Personnel policies and HRD: Strengths, Weaknesses and Recommendations. HRD fuction structure : Strengths, Weaknesses and Recommendations. HRD department- competencies: Strengths, Weaknesses and Recommendations. HRD strategies: Strengths, Weaknesses and Recommendations. HRD activities and priorities: Strengths, Weaknesses and Recommendations. Conclusion As human resource needs to be aligned to the business goals, HR audit should be aligned with the HR needs and strategies of the company. HR audit can become an important intervention to rejuvenate the whole organisation as it highlights critical issues in HR. Several factors are necessary for the success of the audit, the key ones being top management involvement, involvement of line managers, attitude of the HR department, and adequate training of employees.The HR audit attempts to highlight the current status, strengths, weaknesses, cost-effectiveness and other vital elements of HR structure.

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Reference:

Sarma, A.M., Personal and Human Resource Management, pg 391-398, Himalayan Publishers, 2009 Human Resource Audit Notes, http://www.citehr.com/16449-hr-audit-notes.html, Monday 20 February 2012 08:21 AM
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