HUMAN RESOURCE MANAGMENT

November 20
Auditing the Human Resources Management Program: The Human resource units; Approaches to the Human Resources Audit; Indicators for Evaluating The Work Environment; Utilizing Audit Findings

2011

BS SEMESTER 8 SUBMITTED TO MS.HUMA UROOJ SUBMITTED BY SHEHER BANO ALI

INTRODUCTION Human Resource Audit is an addition to the various tools and concepts used for effective management of human resources. It has a vital role to perform particularly in the service industry where the human resources are a part and parcel of the product or service that is being consumed. Hence, in this Unit, we introduce you to the basic concepts of human resource audit and the issued related to it. DEFINITION 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. Ref: Principles of Accounting by Flamholtz, 1987. THE NEED AND PURPOSE OF FORMAL HUMAN RESOURCE AUDIT The purpose of a Human Resources audit is to assess the effectiveness of the Human Resources function and to ensure regulatory compliance. The audit can be conducted by anyone with sufficient Human Resources experience. Having experience working in more than one company is a plus, as it provides the auditor with a broader perspective. Human Resource Audits give an account of the skills, abilities and limitation of its employees. Basically, the audit is an inventory that catalogues each employee s skills and abilities which enables the planners to have a understanding of the organization s work force. 1. Skills Inventory The audit of non-managers are called skills inventory. 2. Management Inventories The audits of managers are called management inventories. 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: 1. Felt concern by top management. 2. Compulsions of the external forces necessitating a situational audit. 3. Business changing significantly influenced by international business decisions affecting human resource management. 4. An urge on the part of human resource management professionals towards advancement of the practices and systems. Ref: Werther, William B. & Davis, Keith, 1989 Human resources and Personnel Management HUMAN RESOURCE AUDIT PREMISE: The premise on which the human resource audit is based is that opportunities are being missed by staying with the current approaches. It considers the human resource process as dynamic and that it must continually be redirected and revitalized to be responsive to the ever changing needs. 1. It is a sort of feedback on the duties and working of the managers and other employees of the organization. 2. It is a sort of quality control of the human resource of an organization. 3. It gives a more professional image and helps in bringing out the problem not necessarily linked with the Human Resource division of an organization. 4. It helps clarify a department s role in an organization and brings about more uniformity in action. 5. It is the critical analysis of the existing human resource within the organization. 6. It is from the base of the current situation that the human resource audit is to take-off in order that the future must be planned. SCOPE OF AND APPROACH TO HUMAN RESOURCE AUDIT Every time a human resource audit is to be taken up, the scope is decided. The audit need not be exhaustive but may focus on a particular function of human resource management such as training and development, compensation,

performance appraisal, etc. Nevertheless, the objective and approach of HRA more or less remains the same, regardless of scope. In routine audits, auditors are engaged to verify the accuracy of financial information and the reasonableness of the accounting practices followed by an organization. Essentially, human resource audits are not routine, these are in fact, studies of unusual nature. The audit can be a onetime affair or an occurrence after a regular interval or an ongoing audit function for operating units within the organization. The following approaches are adopted for purpose of evaluation: y Comparative approach In this, the auditors identify Competitor Company as the model. The results of their organization are compared with that Company/ industry. y Outside authority approach In this, the auditors use standards set by an outside consultant as benchmark for comparison of own results. y Statistical approach In this, Statistical measures are performance is developed considering the company s existing information. y Compliance approach In this, auditors review past actions to calculate whether those activities comply with legal requirements and industry policies and procedures. y Management by objectives (MBO) approach This approach creates specific goals, against which performance can be measured, to arrive at final decision about organization s actual performance with the set objectives y Outside Consultants and HRA : Many firms prefer to have independent consultants conduct the audit in order to obtain greater objectivity and impartiality in reporting. Consultants who have wider experience and specialization in the particular field are asked for conducting HRA. AUDITING HUMAN RESOURCES It is the systematic assessment of your organization's HR service excellence. A good HR Audit should help you: 1. Identify the HR programs that are most important to achieving your organization's objectives. 2. Find out how well your HR department is delivering those programs. 3. Benchmark your HR work to ensure continuous improvement. 4. Promote change and creativity. 5. Focus the HR staff on important issues. 6. Bring HR closer to the line functions of the organization. OUTCOMES OF HUMAN RESOURCES AUDIT These are some of the outcomes that you can expect: 1. Cost-effectiveness of the recruitment and selection process 2. Competency level of employees in the performance of their job 3. Effectiveness of training and development programs 4. Employee commitment to assigned tasks 5. Ability to achieve defined performance targets 6. Rewards and incentive system that can motivate employees to perform better 7. Strategies to retain good employees UTILIZING AUDIT FINDINGS The Audit findings can help you to: 1. Identify and assess HR contribution to the organization 2. Create or improve your human resource business plan 3. Build up the professional image of HR 4. Ensure that the HR function achieves its objectives 5. Make uniform human resource policies, processes and practices 6. Clarify HR duties and responsibilities 7. Verify your organization's compliance with current regulations and procedures 8. Identify risks and areas where you can reduce cost

9. Facilitate mindset change among employees 10. Develop a user-friendly human resource information system that everybody can easily understand and implement. GUIDELINES FOR WRITING AN AUDIT RESPONSE: All audit clients are required to provide a written response to audit findings. The response represents management s plan for correcting or improving the finding situation. All responses are included in the final audit report that is distributed to senior management, the Board of Governors, and the external auditors. Writing an audit finding response can be relatively easy if the following guidelines are used: 1. Begin your response with one of the statements described in format for audit responses. 2. Respond directly to the finding and its recommendation(s). 3. Provide specific actions that management commits to take to correct the finding. 4. Make your response clear and concise. 5. Exclude information that is not pertinent to the finding or its corrective action plan. 6. Identify specific positions, if applicable, responsible for implementation. 7. Provide a specific and realistic timetable for implementation. KEY PERFORMANCE INDICATORS FOR EVALUATING THE WORK ENVIRONMENT KPI is a set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. KPIs vary between companies and industries depending on their priorities or performance criteria. The Human Resource Key Performance Indicators (KPI s) have been designed to provide information and analysis on key staffing-related themes for the Trust. The purpose of introducing Human Resource KPI s is: To provide a framework for monitoring and analyzing standard staff-related data within the Trust. To set benchmarks and measure performance against these, at both a local and Trust-wide level. To identify and analyze trends which will help us to plan targeted action. CONCLUSION OF THE AUDIT FINDINGS At the conclusion of the audit, it is important to engage in constant observation and continuous improvement of the company s policies, procedures and practices so that the organization never ceases to keep improving. This will ensure that the company achieves and retains its competitive advantage. On way to do this is to continuously monitor HR systems to ensure that they are up-to-date and to have follow-up mechanisms built into every one of them. One approach is to designate someone on staff (or an outside consultant) to monitor legal developments to ensure that HR policies and practices are kept current. Likewise, it is important to keep track of the audit findings/changes made, turnover, complaints filed, hotline issues, employee survey results, etc. to identify trends in the company s employmentrelated issues. Identifying problematic issues, growth areas or declining problem spots can help in the decision of where to allocate time, money and preventive training resources in the future.