HR Audit with checklist

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HR Audit with checklist

  1. 1. - HR Audit
  2. 2. Human Resource Audit Page 1 1. Introduction Human resource management emerged from traditional personnel Management in the 1980s. Traditional personnel management was viewed largely as involving the performance of basic staffing functions, often conducted without regard to other organizational activities and without alignment to organizational objectives. Human resource management as a profession evolvedas an extension of the traditional personnel role into a more effective organizational activity. Within the field of human resource management a human resource audit is one method of evaluating or assessing activities. The word audit comes from the Latin, ‘audire’ (to listen). Auditing has existed for centuries and can be traced to ancient Egypt, Babylon and Rome. The auditor’s role was to ‘listen’ to the records and the notion of an independent outsider ‘looking in’ is central to auditing (Higgins, H. N, 1997). It is not the function of an auditor to take the role of management; the audit role is one of examination and of critiquing management systems and procedures (Clardy 2004). In this study the term‘human resource audit’ describes the professional practice of auditing applied to human resources management activities. Human resource auditing is located both within and between each of the fields of human resource management and auditing. This case has two parent disciplines: auditing and human resource management. Auditing is described as an investigative and information processing activity, which evolved in response to the need for independently v erified stewardship reports (McBrayne, I 1990). Within the discipline of auditing a human resource audit is a functional or activity audit conducted within or across a range of defined auditing types. This paper focuses on the uses of HR auditing to evaluate the contribution of human resource management activities, as defined in the audit scope, to a corporation’s current and future objectives. It will demonstrate that a human resource management audit can identify areas whereadditional value can be obtained from a valued, well regardedhuman resource department.
  3. 3. Human Resource Audit Page 2 2. Human Resource Management Human Resource Management is the process of managing people in organizations in a structured and thorough manner. This covers the fields of staffing (hiring people), retention of people, pay and perks setting and management, performance management, change management and taking care of exitsfrom the company toround off the activities. TheSociety for Human Resource Management, describe human resource management as “the formal structure within an organization responsible for all the decisions, strategies, factors, principles, operations practices, functions, activities and methods related to the management of people” (SHRM 2007a). In relation to human resource management it is observedthat “every manager is a human resource manager” (Mark A. Huselid, 1998) and that human resource management involve “all management decisions” emphasizing those human resource activities can also be undertaken by line managers. They define human resource management as: The design of formal systems in an organization to ensure effective use of human talent to accomplish organizational goals. 2.1. Functionsof HRM human resource strategic planning, human resource planning, manpower panning, recruitment / selection , induction ,orientation ,training ,management development, compensation development, performance appraisals, performance management ,succession planning, safety management ,staff communication etc. 2.1.1. Human Resource Planning HRP is the process including forecasting, developing and controlling-by which a firm ensures that it has the right number of people and the right kind of people, at the right places at the right time, doing work for which they are economically most useful.
  4. 4. Human Resource Audit Page 3 2.1.2. Recruitmentand Selection Recruitment is theattraction of capable candidates toa vacancy,whilst selection concerns the assessment and identification of the suitability of such applicants from this pool. Recruitment and selection offer key opportunities for an organization to alter the type of staff it employs. 2.2.1.3.Compensation andBenefit Employee compensation refers to all forms of pay or rewards going to employees and arising from their employment, and it has two main components: direct financial payments (in the form of wages, salaries, incentives, commissions and bonuses) and indirect payments (in the form of financial benefits like employer-paid insurance and vacations). Benefits are forms of value, other than payment, that are provided to the employee in return for their contribution to the organization, that is, for doing their job. Prominent examples of benefits are insurance (medical, life, dental, disability, unemployment and worker's compensation), vacation pay, holiday pay, and maternity leave, contribution to retirement (pension pay), profit sharing, stock options, and bonuses. 2.1.4. Training and Development Training refersto the methods used togive new or present employees, the skills they need to perform their jobs. Provision of training to the management members as well as to employees, with the aim of enhancing their knowledge, skill, and ability in making them always competent and responsive in performing their duties, is considered to be one of the key strategies that enhance the Corporation’s efforts to achieve its objectives. 2.1.5. Employee/Labor-ManagementRelations Employee/Labor-Management Relations is a relationship that covers all aspects of employment relations between the employer and the employees in the context of organizational operations. It involves, regulation of conditions of service, collective
  5. 5. Human Resource Audit Page 4 bargaining, management of strikes, industrial democracy, employer-trade unions’ relations, and organization personnel policies etc. 2.1.6. Safety and Security Creating a safe, healthy and happy workplace will ensure that your employees feel homely and stay with your organization for a very long time. 3. Definition of HR auditing The word audit comes from the Latin verb audire tolisten; the auditor’s role was to ‘listen to the records’ (Higgins, H. N, 1997). Auditing has been defined as: the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be performed by a competent, independent person. (Clardy, A 2004). The Human Resources Audit is a process of examining policies, documentation, systems, and practices with respect to an organization’s HR function. The purpose of the audit is to reveal the strength and weaknesses in the human resources system, and all issues, which need resolution. The audit is focused on analyzing and improving HR function in the organization. The audit is a diagnostic tool, not a prescriptive instrument. It will help the managers to identify what is missing or need to improve in the organization, but it can’t tell what else is necessary to do to address these issues. It is most useful when an organization is ready to act on the findings, and to evolve its HR function to a level where it’s full potential to support the organization’s mission and objectives can be realized. A Human Resources Audit is a comprehensive method (or means) to review current human resources policies, procedures, documentation and systems to identify needs for improvement and enhancement of the HR function as well as to ensure compliance with ever-changing rules and regulations. An Audit involves systematically reviewing all aspects of human resources, usually in a checklist fashion (Phillips, 1996).
  6. 6. Human Resource Audit Page 5 An HR audit helps a company's senior management evaluate the efficiency of its human resources department and programs. Depending on the needs of the individual company, an HR audit evaluates the department's effects, services and its place in the achievement of company goals and objectives. It also assesses HR compliance with state and federal laws and determines any weaknesses in the human resources management program. Senior management can use the audit to make any necessary changes and evaluate its overall approach to the human resources function (Phillips, J, 1996). Encyclopedic Dictionary of Human Resource Management (Mark A. Huselid, 1998) human resource audit is defined as: ‘… a series of systematic, formal procedures designed to evaluate the efficiency and effectiveness of the firm's HR management system, compare its performance to relevant internal and external benchmarks, evaluate the appropriateness of this system for implementing the firm's strategic and operational objectives, and thereafter provide a framework for improving the way in which the firm manages people’. 3.1. Goals of the HR Audit The review process should provide answers to several important questions regarding the application of company’s policies. The audit’s goals are to determine whether company’s policies are being applied consistently, whether they are the norm for companies and branch location, and whether they are consistently communicated to all employees. The audit should also provide insight as to which individuals are responsible for the implementation and enforcement of policies. Finally, it should distinguish between policies that are applicable to non-union employees, and the terms and conditions of employment for employees who are represented by a labour organization. 3.2. Benefits of HR Audit Human resource audit also provides an opportunity to assess the financial advantages and disadvantages of human resource functions, benchmark the function, evaluate the effectiveness of the function, ensure compliance, establish standards, promote change
  7. 7. Human Resource Audit Page 6 and creativity, bring human resources closer to line managers, focus staff on critical human resources issues and to improve the quality, image and contributions of the human resource function (Walker, J. W, 1998). Several benefits that result from an HR audit are:  Identification of the contributions of the HR department to the organization,  Improvement of the professional image of the HR department,  Encouragement of greater responsibility and professionalism among members of the HR department  Clarification of the HR department’s duties and responsibilities,  Stimulation of uniformity of HR policies and practices,  Finding critical personnel problems,  Ensuring timely compliance with legal requirements,  Reduction of HR costs through more effective personnel procedures, 3.3. Approaches to Human Resource Audits There are five common approaches for the purpose of auditing of HR in any organization: 3.3.1. Comparative approach: In this approach, another division or company that has better practices or results is chosen as the model. The audit team audits and compares the audited firm’s results with the best practices of the model organization. This approach is commonly used to compare the results of specific activities or programs. The approach is often used with turnover, absence, salary data and staffing levels. It helps detect areas where improvement is needed. It also makes sense to compare where a procedure is being used for the first time.
  8. 8. Human Resource Audit Page 7 3.3.2. Externalaudit: In this approach, standards set by a consultant or taken from published research findings serve as the benchmark for the audit team. The consultant or research findings may help diagnose the cause of problems. 3.3.3. Statistical: This approach relies on performance measures drawn from the company’s existing information system. From existing records, the audit team generates statistical standards against which activities and programs are evaluated. With the mathematical standards as a base, the team may uncover errorswhile they arestill minor. Often this approach is supplemented with comparative data from external sources such as other firms, or industry association surveys. The information is usually expressed in ratios or formulas that are easy to compute and use. 3.3.4.Compliance approach:This approach reviews past practices, to determine if actions taken followed legal requirements and company policies and procedures. The audit team here often examines a sample of employment, compensation, discipline and employee appraisal forms. The purpose of the review is toensure that the field offices and the operating managers have complied with internal rules and legal regulations, such as minimum wages and equal employment opportunity laws. By sampling elements of the human resources information system, the audit team looks for deviations from laws and company policies and procedures. The teamcan then determine the degreeof compliance achieved. 3.3.5.Management by Objectives(MBO): In this management by objectives approach, managers and specialists set objectives in their areaof responsibility. Then they create specific goals against which this performance can be measured. The audit team researches actual performance and compares it with the previously set objectives. They can then evaluate the trends in this area.
  9. 9. Human Resource Audit Page 8 3.5. Who should conduct HR audit? The audit can be conducted by internal managers of the organization, as external HR/Management expert or by a Labor Law expert. Whoever is In-charge of audit must have excellent knowledge about HR policies and should be able tomaintain a check list to check the existing policies with its present requirements. An audit conducted by outside HR expert adds extra value to the whole process apart from giving an insight into the whole issue. Gaps between what are being practices and what is desirable can always only are identified in a better way by external HR expert. Being independent, his views are always considered to be better than internal person’s opinion.
  10. 10. Human Resource Audit Page 9 HR AUDIT QUESTIONNAIRE/CHECKLIST HR Audits help to determine effectiveness of an HR department and/or HR systems. They are a systematic, objective tool to assess regulatory or policy compliance in the workplace. For EIC (Ethiopian Insurance Corporation) Human Resource Staff Please puta tick() mark inside the box thatindicate yourlevelof agreementforeachquestion HR AUDIT question/CHECKLIST Strongly Agree Agree Neutral Disagree Strongly Disagree Human ResourcePlanning The organization have plans for ensuring its development I believe that HRM is a strategic tool for an organizations that helps for sustainable competitive advantage Restrict hiring, giving compensation, reducing working, early retirement are the strategy that this organization are going to be act in case of surpluses of employees exist The organization estimates the size and composition of future to ensure survival and growth for sustainable competition with others Job analysis provides information about jobs currently being done in organization Labor turnover, retirement, resignation, termination, death are the factors that decrease internal supply of organization, but in my company these all factors do not affect the human resource planning Recruitment and Selection There is a policy in place stating the organization philosophy on recruitment and selection The policy contain procedures to guide managers through the recruitment and selection process There is a formal process in place for identifying job vacancies Recruitment was done proactively from a planning mode as well as reactively to immediate replacement and new job openings Mobility of human resources and expansion of the company are the factors that necessitate for new vacancy(recruitment) HR department does perform all initial screening of candidates Exams and personality profiles are used in the selection process of the company Compensationand Benefit The compensation policy of the company contain procedures to guide managers on how to implement the compensation system Distribution of compensation among departments are reviewed by management for consistency and equity before awarding increases The organization have a policy clearly stating its position on employees compensation(salary) The organization compensation philosophy clearly communicated to all employees The organization have a clear policy regarding employee benefits Performance Managementand Evaluation Performance appraisaldo reflect an employee's positive behavior as well as results
  11. 11. Human Resource Audit Page 10 HR AUDIT QUESTION/CHECKLIST Strongly Agree Agree Neutral Disagree Strongly Disagree The company's performance appraisal include a written plan to improve employees knowledge and skills The company's performance evaluation establish clear objectives, expectations and performance measurement criteria linked to the specific job Employee who are better performers receive higher pay increase than poor performers Staff Socialization The HR department fulfill their responsibilities by guiding and giving a full information for the selected employees to socialize shortly with the environment The company has practiced and allocated budget for welcoming program for new selected employees Training and Development There is a policy that states the organization philosophy on employee training & development There is a process for assessing the organizations immediate training needs and individual development needs There is also a process to assess the organization's future training needs Job skills, knowledge and ability are considered in assessing training needs New technologies, processes, products, services, market changes and community needs are considered in assessing training needs All training programs and opportunities well communicated to employees The results of training programs are monitored and evaluated The organization has to give a sponsorship for employee to study in higher education Employee/Labor-ManagementRelations The organization has clearly state its philosophy on labor relations and implement guiding procedures for managers Top management is informed and supportive of labor management strategies and goals There is an atmosphere of management respect for union representation Company encourage employees to play a proactive role in improving the labor-management relationship The management has assess the employees motivation and job satisfaction towards employees benefit and company's productivity There is an atmosphere of management respect for union representation The management body understand the laws that govern collective bargaining Employees are given the opportunity to exchange information with superiors as well as assimilate information being transmitted from the top down There is a program that provides for management and employee participation in the discipline process
  12. 12. Human Resource Audit Page 11 HR AUDIT QUESTION/CHECKLIST Strongly Agree Agree Neutral Disagree Strongly Disagree Safetyand Security safety hazards reported to the appropriate personnel Workplace accidents, near-misses, injuries, and illnesses reported and investigated Measures are in place to prevent intruders from entering the grounds or buildings There is a reliable response system in place in the event an alarm is triggered Employees are encouraged to promptly report incidents, and suggest ways to reduce or eliminate risks Structures are readily accessible to disabled employees Recordkeeping and other documentation personnel files are current Personnel files are completed accurately and on time and currently held Documents regarding employees are kept for their required duration All appropriate labor posters are displayed in an easily visible place HRIS system are being used There is training of managers and employees about personnel files, and policies and procedures for accessing them? Employee Communication Company creates an environment of open communication between employees and management The corporate capture the creative insight of employees by soliciting their ideas for improvement? Company create environment to delegate decision making to the lowest level possible THANK YOU FOR YOUR TIME IN FILLING THIS QUESTIONNAIRE AND HELPING ME WITH YOUR VALUABLE INPUTS. M M

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