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The Essence of Management

HR AUDIT – A COMPLETE GUIDE


A small introduction to HRD

Human Resource Development (HRD) is the integrated


use of training, organizational development, and career
development efforts to improve individual, group, and
organizational effectiveness.

Also See: Social Audit


HR Audit

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.

Also See: Critical HR Factors


What is HR Audit?

HR Audit is a comprehensive evaluation of the entire


gamut of HR activities :-
1. HR Cost
2. HRD activities
3. Health, Env. & Safety
Legal Compliance
4. Quality
5. Compensation & Benefits
Why Conduct an HR Audit?
• Routine check-up (uncover any conditions
you may have and set up a treatment plan)
• Determine how best to align HR operations
with organizational goals
• Ensure compliance with federal and state
regulations

• Also See: Career Prospects in Accounting


and Finance
Purpose behind HR audits
• To make the HR function business-driven.
• Change of leadership.
• To take stock of things & to improve HRD for
expanding,diversifying, & entering into a fast growth phase
• For growth & diversification
• For promoting professionalism among employees & to switch
over to professional Management
• To find out the reasons for low productivity & improve HRD
strategies.
• Dissatisfaction with a particular component.
• To become employer of choice
How to Conduct HR Audit?
1. OPENING MEETING
2. COLLECTING AUDIT EVIDENCE
3. AUDIT FINDINGS
4. CLOSING MEETING
5. AUDIT REPORT
What does a full HR Audit comprise ?

Legal compliance
Compensation/Salary Administration
Employment/Recruiting
Orientation
Terminations
Training and Development
Employee Relations
Files/Record Maintenance/Technology
Policies and procedures (including employee
handbook)
What is HRD Audit?
• HRD Audit is a comprehensive evaluation of the
existing HRD
Structure,
Strategies,
Systems,
Styles,
Skills / Competencies &
Culture
and their appropriateness to achieve the short-term
and long-term goals of the organisation.
How ?...
• In HRD Audit the skills, styles, systems, strategies, structure is
studied and analysed using a variety of methodologies like
–interviews, (Individual and group, Top Management, Line
Managers, HRD Staff, Workmen and others)
–questionnaires,
–observations,
–available records,
–workshops etc.
• This evaluation helps align the HR processes with business
goals.
Role of HRD Audit in Business Improvements
• Improvements in HRD systems
• Increased focus on human resources and human
competencies
• Better recruitment policies and more professional staff
• More planning and more cost effective training
• Strengthening accountabilities through appraisal systems and
other mechanisms

• Also See: Smart Ways to Compensate Employees


HRD Score Card
• This model assumes that,
• Competent and committed employees are needed to
provide quality products & services at competitive
rates & ways that
enhance customer satisfaction

• Also See: A Career in Accounting


HRD systems maturity
• The HRD systems maturity assesses the extent to
which various HRD subsystems and tools are well
designed & are being implemented
1. The systems should be appropriate and relevant to
business goals
2. It should focus on current and future needs of the
corporation.
3. The HRD strategies and systems should flow from the
corporate strategies
4. The systems should be well designed and
should have a structural maturity.
5.They should be implemented well.
• The employees should be taking them seriously
implemented well
• The employees should be taking them seriously
and follow meticulously what has been
envisaged in each system.
• The overheads of implementation should be
low
6. The subsystems should be well integrated and
should have internal synergy.
7. They should be adequate and should take care
of the HRD requirements of the organisation
Subsystems that are assessed:
• Manpower planning and recruitment
• Performance Management Systems
• Feedback and Coaching Mechanisms
• Training
• Career development and Succession planning
• Job-rotation
• OD Interventions
• HR Information Systems
• Worker Development methods and systems
• Potential Appraisal and Development
Methodology of HRD Audit
• Examines long term and short term plans
and vision to assess Competency
Requirements
• Identifies broad Competency requirements
for future Business Goals
• Examines the existing HRD strategies,
systems and practices and assess their
appropriateness to have the required
competencies
Methodology of HRD Audit
• Examines the adequacies and inadequacies
of HRD structure, staff and their
competencies, line managers and their
attitudes, top management and their
support, unions and their role in
competence building for future
• Suggests mechanisms for improving all these
in the business context
Methodology Adopted
• Interviews
– Individual and group
– Top Management
– Line Managers
– HRD Staff
– Workmen and others
• Questionnaires
• Observation
• Analysis of records and secondary data
Methodology
• Workshops could be used
• Task forces and internal teams could also be
used
• External Auditors have a significant role
• Benchmarking of questionnaire data may be
of use
Reasons for HRD Audit
• For expanding, diversifying and entering into
a fast growth phase.
• For promoting more professionalism and
professional management.
• Bench-marking for improving HRD practices.
• Growth and diversification
• Dissatisfaction with any component
• Change of leadership
Role of HRD Audit in Business Improvements
• HRD audit is cost effective
• It can give many insights into a company's
affairs.
• It could get the top management to think in
terms of strategic and long term business
plans.
• Changes in the styles of top management
• Role clarity of HRD Department and the role
of line managers in HRD
Role of HRD Audit in Business Improvements
• Improvements in HRD systems
• Increased focus on human resources and human
competencies
• Better recruitment policies and more
professional staff
• More planning and more cost effective training
• Strengthening accountabilities through
appraisal systems and other mechanisms
• Streamlining of other management practices
• TQM Interventions
Organisations that Have done HRD Audit
• Aditya Birla Group has been doing it for the last
8 years
– Rajashree Cement, Vikram Cement, Hindalco,
Indo-Gulf Fertilisers, Gwalior Grasim, Harihar
Fibres etc.
• L&T, Crompton Greaves
• Gujarat Guardian
• Gujarat Gas
• Apollo Tyres
• Alexandria Carbon Black
Reference
• Kelli W. Vito, SPHR, CCP- KV Consulting
• Amith.P, Dept MBA, SJBIT
• Human Resource – Managementguru
• Training & Development – Managementguru
• Entrepreneurship – Managementguru