Human Resource Audit

The word audit comes from the Latin verb audire , which means, to listen. Listening implies an
attempt to know the state of the affairs as they exist and as they are expected/ promised to exist.
Auditing as a formal process is rooted in this feature of listening. Consequently, it is a diagnostic tool
to gauge not only the current status of things but also the gaps between the current status and the
desired status in the area that is being audited.

Auditing has been a routine exercise in the area of finance, especially because it is a statutory
obligation. However, in case of Human Resource, there is no legal binding to adopt auditing. Some of
the companies nevertheless prefer to have Human Resource audits.

Like any audit, the Human Resource Audit is also a systematic formal process, which is designed to
examine the strategies, policies, procedures, documentation, structure, systems and practices with
respect to the organizations human resource management. It systematically and scientifically
assesses the strengths, limitations, and developmental needs of the existing human resources from
the larger point of view of enhancing organisational performance.

The human resource audit is based on the premise that human resource processes are dynamic and
must continually be redirected and revitalized to remain responsive to the ever changing needs.
Human Resource Audits are not routine practices aimed at problem solving. Instead of directly solving
problems, HR audits, like financial audits, help in providing insights into possible causes for current
and future problems.

The findings of these audits aid decision making in the organisation and are usually internal
documents that need not necessarily be shared with the public. Moreover, unlike Financial Audits that
are routine, regulated and standardised, Human Resource Audits are non-routine and may be
designed to cater to the unique needs of the organisation at a particular point in time. These are in
fact, studies of an unusual nature. The manner in which the Audit is conducted could vary from self-
directed surveys to interventions by outside consultants.
An HR 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.


HUMAN RESOURCE (HR) AUDIT
Human resources are the people in an organization, so a human resources audit is a look at those
people and the processes that put them in place to make sure the system is working efficiently. An
HR audit also goes beyond looking at the hiring process into areas like employee retention,
budgeting, training, employee compensation, management/employee relations and virtually any
process or practice within the company that affects its people.

A periodic Human Resource audit can qualify its effectiveness within an organization. Human
Resource audits may accomplish a variety of objectives, such as ensuring legal compliance; helping
maintain or improve a competitive advantage; establishing efficient documentation and technology
practices; and identifying strengths and weaknesses in training, communications and other
employment practices.


Human Resource auditing is something that many companies do annually, just as they audit their
financial information. This gives them an accounting of their workforce and the efficiency with which
the organization as an entity deals with its people, from recruiting to firing. Human Resource auditing
can be likened to a person going to the doctor for a general check-up to stay well. The process allows
a company to get a general idea of where it stands so it can better correct any potential problems and
plan for the future.

When it comes to physical health, prevention of problems is far better than waiting until a problem
arises and trying to cure it. The same holds true for human resources auditing. Preventing problems is
much easier than trying to fix them after the fact. Good Human Resource planning and auditing can
help prevent those problems, and save companies money and difficulties.

Human Resource Accounting benefits the company ascertain how much Investment it
has made on its Employees and how much return it can expect from this Investment.

Definition:

Human Resource Audit means the systematic verification of job analysis and design,
recruitment and selection, orientation and placement, training and development,
performance appraisal and job evaluation, employee and executive remuneration,
motivation and morale, participative management, communication, welfare and social
security, safety and health, industrial relations, trade unionism, and disputes and their
resolution. HR audit is very much useful to achieve the organizational goal and also is a
vital tool which helps to assess the effectiveness of HR functions of an organization.

A complete Human Resources Checkup, including administration, employee files,
compliance, handbook, orientation, training, performance management, and termination
procedures. The intended outcomes include minimizing your liability exposure and
introduction or enhancement of human resource best practices.

What is Human Resource Auditing?

The American Accounting Associations Committee on Human Resource Accounting (1973) has
defined Human Resource Accounting as
the process of identifying and measuring data about human resources and communicating this
information to interested parties.

HRA, thus, not only involves measurement of all the costs/ investments associated with the
recruitment, placement, training and develop ent of employees, but also the quantification of the
economic value of the people in an organisation.

Flamholtz (1971) too has offered a similar definition for HRA. They define HRA as the measurement
and reporting of the cost and value of people in organizational resources.

Who should conduct the audit?
The team that is responsible for the audit should represent a cross-section of the organizations staff,
including line staff, middle and upper management, and those responsible for HR functions.

Need and Purpose of Human Resource Auditing

The commonly understood audits are the established and regular accounting audits carried out in
accordance with specific statutory regulations. However, in the case of human resource audits, there
is no legal obligation, but enlightened managements have voluntarily accepted its usefulness
depending upon the circumstances. The following circumstances may be cited as examples:
felt concern by top management,
compulsions of the external forces necessitating a situational audit,
business changing significantly influenced by international business decisions affecting
human resource management, and
an urge on the part of human resource management professionals towards advancement of
the practices and systems.

It is necessary to take a look at these and other questions. Human Resource audit is highly useful for
the purpose
Does the organisation regularly forecast the supply of and demand for employees in various
categories?
Do job analyses exist for all positions in the organisation?
Are all potential sources of recruitment identified and evaluated?
Are measurable selection criteria developed and used while filling up jobs?
Do effective training and development programmes exist?
Is there a performance evaluation system that helps assess past and potential performance?
Is the remuneration programme designed to motivate employees?
Is the plant unionised?
Does a grievance procedure exist?
Does the organisation have high quality of work life?
Does the HRM practice contribute to organisational effectiveness?
Does the management underestimate the capacity of HRM to contribute to organizational
effectiveness?
Approaches to Human Resources Audit
The following approaches are adopted for purpose of evaluation:

1. Comparative approach
2. Outside authority approach
3. Statistical approach
4. Compliance approach
5. Management by objectives (MBO) approach

Comparative approach
In this, the auditors identify Competitor Company as the model. The results of their organization are
compared with that 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 organizations actual performance with the set objectives.


Sample Human Resource Audit question
1. How effective is the selection process in ensuring that people are placed in appropriate
positions? Explain.
2. How effective is the appraisal process in accurately assessing performance? Explain.
3. How effective are rewards (financial and non-financial) in driving performance? Explain.
4. How effective are the training, development, and career planning activities in driving
performance? Explain.
5. How effective is the appraisal process in differentiating performance levels for justifying
reward allocation decisions? Explain.
6. How effective is the appraisal process in identifying developmental needs of individuals to
guide training, development, and career planning? Explain.
7. How effective are the training, development, and career planning activities in preparing
people for selection and placement into new positions in the organization? Explain.
8. Overall, how effectively are the five components integrated and mutually supportive? Explain.
Organization and Structure
Is there an organizational chart?
Does the chart include both employees names and position titles?
Does the chart show reporting relationships?
Is the chart updated as changes occur?
As the needs of the organization change, does its structure change?
HR Department Organization
Is the department sufficiently staffed for the industry and the size of organization?
Is the budget in line with other organizations of similar size and industry?
Has the company been involved in any employment lawsuits?
If there have been suits, what were the outcomes?
Is there a job description for each position in the department?
To what position does the top HR position report?
Does the HR Department have a mission statement?
Is the HR mission statement consistent with the vision and mission of the organization?
Functions of the Human Resource Department
1. For what functions is the HR Department responsible?
Payroll Recruitment Safety
Benefits Training Strategic planning
Salary administration Labor relations Others
2. Should the HR Department be responsible for all of the functions listed above?
3. Should the HR Department be responsible for functions that are not listed above?



Power distance index (PDI): "Power distance is the extent to which the less powerful
members of organizations and institutions (like the family) accept and expect that power is
distributed unequally." Cultures that endorse low power distance expect and accept power
relations that are more consultative or democratic.
Individualism (IDV) vs. collectivism: "The degree to which individuals are integrated into
groups". In individualistic societies, the stress is put on personal achievements and individual
rights. People are expected to stand up for themselves and their immediate family, and to
choose their own affiliations. In contrast, in collectivist societies, individuals act
predominantly as members of a lifelong and cohesive group or organization (note: "The word
collectivism in this sense has no political meaning: it refers to the group, not to the state").
People have large extended families, which are used as a protection in exchange for
unquestioningloyalty.
Uncertainty avoidance index (UAI): "a society's tolerance for uncertainty and ambiguity". It
reflects the extent to which members of a society attempt to cope with anxiety by minimizing
uncertainty. People in cultures with high uncertainty avoidance tend to be more emotional.
They try to minimize the occurrence of unknown and unusual circumstances and to proceed
with careful changes step by step planning and by implementing rules, laws and regulations.
In contrast, low uncertainty avoidance cultures accept and feel comfortable in unstructured
situations or changeable environments and try to have as few rules as possible. People in
these cultures tend to be more pragmatic, they are more tolerant of change.
Masculinity (MAS), vs. femininity: "The distribution of emotional roles between the genders".
Masculine cultures' values are competitiveness, assertiveness,materialism, ambition and
power, whereas feminine cultures place more value on relationships and quality of life. In
masculine cultures, the differences between gender roles are more dramatic and less fluid
than in feminine cultures where men and women have the same values emphasizing
modesty and caring. As a result of the taboo on sexuality in many cultures, particularly
masculine ones, and because of the obvious gender generalizations implied by Hofstede's
terminology, this dimension is often renamed by users of Hofstede's work, e.g. to Quantity of
Life vs. Quality of Life.
Long-term orientation (LTO), vs. short term orientation: First called "Confucian dynamism",
it describes societies' time horizon. Long-term oriented societies attach more importance to
the future. They foster pragmatic values oriented towards rewards, including persistence,
saving and capacity for adaptation. In short term oriented societies, values promoted are
related to the past and the present, including steadiness, respect for tradition, preservation of
one's face,reciprocation and fulfilling social obligations.
Indulgence versus restraint (IVR): The extent to which members of a society try to control
their desires and impulses. Whereas indulgent societies have a tendency to allow relatively
free gratification of basic and natural human desires related to enjoying life and having fun,
restrained societies have a conviction that such gratification needs to be curbed and
regulated by strict norms.

Minnesota Multiphasic Personality Inventory

The Minnesota Multiphasic Personality Inventory (MMPI) is the most widely used and
researched standardizedpsychometric test of
adult personality and psychopathology.
[1]
Psychologists and other mental health professionals
use various versions of the MMPI to develop treatment plans; assist with differential diagnosis;
help answer legal questions (forensic psychology); screen job candidates during the personnel
selection process; or as part of a therapeutic assessment procedure.
[2]

The original MMPI, first published by the University of Minnesota Press in 1943, was replaced by
an updated version, the MMPI-2, in 1989. A version for adolescents, the MMPI-A, was published
in 1992. An alternative version of the test, the MMPI-2 Restructured Form (MMPI-2-RF),
published in 2008, retains some aspects of the traditional MMPI assessment strategy, but adopts
a different theoretical approach to personality test development.

J ob Characteristics Inventory (J CI)

About the Inventory
The Job Characteristics Inventory (JCI) measures individuals on how they feel about the: (1)
experienced meaningfulness of their work, (2) experienced responsibility for outcomes, and (3)
knowledge of the actual results of their work.
Positive scores on these three dimensions result in employees having high internal motivation, high
quality work performance, high satisfaction with their work, and reduced absenteeism and job
turnover. The JCI is a highly valid and reliable 15-item, self-report instrument that measures an
individual on five dimensions:
skill variety the extent to which a job requires a variety of employee competencies to carry it
out
task identity the extent to which a job requires an employee to complete a whole piece of
work (from start to finish)
task significance the extent to which an employee sees his or her work as meaningful
autonomy the extent to which the employee has empowerment and discretion in carrying
out his or her tasks
feedback the extent to which one receives clear information about the effectiveness of
performance
The instrument also includes a "Motivating Potential Score (MPS) component, which indicates
whether or not an employee is strongly motivated to perform his or her particular job. The MPS model
proposes that a job must have meaningfulness, "responsibility, and feedback. Without these three
components there is: (1) a lack of job enrichment, (2) the job is incomplete, and (3) it does not
strongly motivate an employee.
Benefits of the J CI
There are several strengths of the JCI, but one of the major strengths of this instrument is found in its
ability to measure employee motivation by calculating the Motivating Potential Score of JCI
respondents. More highly motivated employees generally tend to:
perform better
have greater levels of job satisfaction
also tend to exhibit less absenteeism and job turnover

Job Diagnostic Survey
The Job Diagnostic Survey (JDS)
[1]
is a psychological method for job analysis, based on the
'Job Characteristics Model "by Hackman and Oldham
[2]
is based. With him is essentially the
motivation potential, which is primarily from the work task as well as the other properties of
a work system produces, are determined and expressed as a point value. It is assumed
thatmotivation arises from the work task and personal characteristics as well as colleagues and
supervisors act on the motivation as potential moderators.
Representation of the JDS [ Edit ]
The JDS is
1. a diagnostic tool , which allows problem areas in job design to detect the interaction and
the potential for motivation,
2. which targeted improvements can be initiated and the
3. an evaluation and quality control measures for work structuring can be performed
[3]
.
The following questions should be answered:
1. Are there any observable problems with staff and work results?
2. Can the work organization to be responsible for the observed problems?
3. What aspects of work organization need the most noticeable changes?
4. How ready are the employees to participate in a work structure?
Basics [ Edit ]
Necessary conditions for the successful structuring work are theoretical ideas about what
effective motivational processes are stimulated by certain features of the work situation and the
mechanisms through which conveys, then these processes in the experience and behavior of
the working person found precipitation. The question of the possible effects of characteristics of
the work situation and the work task on the experience and behavior of employees in work
organizations is a central theme of work and organizational psychology . Developed by Hackman
and Oldham "Job Characteristics Model" provides a framework for motivation psychologically
motivated work design. Originally JDS was intended to subject the "Job Characteristics Model"
an empirical validation. In addition, the JDS can be used for diagnosis of motivational excitation
content of a work situation and - on this basis - the success of work structuring rate.
The Job Characteristics Model [ Edit ]
The starting point is the notion of "intrinsic motivation". Underlying this is the notion that people
do their work not caused by constraints or other external (extrinsic) incentives, but because of
incentives, which are mediated by the execution of the work itself. Hackman and Oldham
establish an intrinsic motivation to work on three essential conditions: First, the worker must be
a knowledge of the results of their work have to judge an obtained result work in accordance with
their own or other standards. Second, the person must be as responsible experience for the
results of the work, and finally they must work as a significant estimate and valuable.
This experience, according to the model states are influenced by the following five attributes (key
dimensions):
1. Diversity of requirements ("skill variety")
2. Comprehensiveness of the task (task identity - "task identity")
3. Importance of the task ("task significance")
4. Autonomy ("Autonomy")
5. Feedback ("Feedback from the job").
These in turn affect the dependent model variables intrinsic work motivation ("internal work
motivation"), satisfaction with development opportunities ("growth satisfaction"), General Job
Satisfaction ("general job satisfaction") and performance of high quality ("work effectiviness")
[4]
.
In addition, the differences in the subjective be the inclusion of moderating
variables perception of the characteristics of the work situation considered by different people:
the development need of context satisfaction and the skill level of the individual.
The JDS-arc [ Edit ]
Technically, the JDS is a questionnaire filled in just over 45 minutes and a spreadsheet can be
easily evaluated. The information is all collected from the perspective of the working person and
reflect the work situation and activity exclusively from the point of view of incumbents resist. The
advantage of this "subjective" job analysis is seen in the fact that, ultimately, not objective
conditions vorfindbare a work situation experience and worth are moderately effective, but rather
constitutes the purposeful action with the situation, the individual reality.
The result is a point value , the height of the potential motivation describes (MPS). The
questionnaire contains, in addition to the open questions of "department" and "Status", 81 scaled
items, of which 60 relate to variables of the Job Characteristics Model (image). Specifically, these
are:
First core features (core dimensions) of the job ("Job Characteristics")
[5]

Request change ("skill variety") (AW - 3 Items)
Task identity ("task identity") (AI - 3 Items)
Task importance ("task significance") (AB - 3 Items)
Autonomy ("Autonomy") (AU - 3 Items)
Factual feedback ("Feedback from the job itself") (SR - 3 Items)
Personal feedback ("Feedback from agents") (PR - 3 Items)
Collaboration with colleagues ("dealing with others") (ZK - 3 Items)
Second crucial mental stages ("Experienced Psychological States")
Experienced meaningfulness of work ("Experienced meaningfulness of the work") (ESA - 4
Items)
Experienced responsibility for work ("Experienced responsibility for the work") (EVA - 6
Items)
Knowledge of the results of the work activities ("Knowledge of the results") (KEA - 4 Items)
Third criterion variables ("Affective Outcomes")
General job satisfaction (general satisfaction) (AAZ - 5 Items)
Intrinsic work motivation (internal work motivation) (IAM - 6 Items)
Satisfaction with opportunities for personal development (growth satisfaction) (ZPE - 4 Items)
4th Moderator variables
Satisfaction ("Context satisfactions") with
Job security ("Satisfaction with job security") (ZAS - 2 Items)
Benefits ("Satisfaction with compensation - pay") (UWL - 2 Items) - also known as "pay"
and "payment" translated
Social climate ("Satisfaction with co-workers") (ZSK - 3 Items)
Superiors ("Satisfaction with supervision") (ZV - 3 Items)
5 needs for personal development ("Individual Growth needs strength") (BPE)
In this section, first preference for certain work situations are queried (11 questions). Further
work situations are compared with the relevant characteristics in the model in the pair
comparison and should be assessed. This is also the finding of the work orientation . By varying
scales and directions about the consistency of responses is also tested with.
The JDS is workplace-based pure. It is not suitable in order to aptitude testing .
From the items of the core dimensions is a central result, the potential motivation (MPS) is
calculated with: .
More items serve to identify additional individual statements.