The document discusses the importance of conducting regular HR audits through the case study of Texaco. Texaco did not properly audit its divisions for compliance with equal employment laws and faced a racial discrimination lawsuit. The $176 million settlement was an expensive lesson for Texaco on the importance of auditing HR practices. Regular audits allow employers to proactively identify and address issues before they escalate into legal claims.

1. Submitted by :
Sravan Kumar
Sudhanshu Cyril
Swarupa Rani Sahu
Tamil Selven
Tejas Savani

2. Simple, yet comprehensive tool in analyzing and
improving efficiency
Where does HR audit result to?
• Adequacy
• Goals being met
• Value addition

3. Objectives
• Evaluate current efficiencies
• Baseline for future development
• Review the system
• Clarify desired practices of HR work and roles
• Standardize practices within the company
• Improve performance levels to key customers

4. Research
• Task of searching for and analyzing facts
related to the personnel problems(solved or
derived from laws).
• Investigation into any aspect of personnel
management in a systematic way.

5. Personnel Records and
Reports
Why These?
• Time-time feedback.
• Measures inadequacies and deficiencies in
personnel programmes.
What are these?
• Record: person
• Report: event
* These are to be supported by facts.

6. Significance of personnel
records
• Revise pay scales and benefits.
• Identify training and development needs.
• Supply information to management and trade
unions in developing and reviewing personnel
policies.
• SPOC for information required, generally
external agencies.
• Conduct research.

7. Scope of HR Audit
• Employee development
• Interim/contingent staffing
• Interviewing and hiring
• Organizational development
• Payroll management
• Problem or conflict resolution
• Stress management
• Substance abuse
• Team building
• Termination
• Workplace violence

8. Functions of HR audit
Basically two functions
• Facilitates the development of managing
processes
• Controls and evaluate the policies and
established processes

9. Approaches
• Internal perspective approach
• External perspective approach
• Legal perspective approach

10. Types of HR Audit
Compliance
Best Practices
Strategic
Function-Specific
and many more…..

11. Parameters
• Formation of personnel policy
• Planning and utilization
• Recruitment and selection
• Professional career development
• Adaptation and training
• Motivation and Stimulation
• Development of teamwork spirit

12. Levels of HR audit
• Strategic level
• Functional level
• Medium (management) level

13. Process of HR Audit
Appointment
of auditors
Coverage of
HRM audit
Specifications
of standards
Collection &
evaluation of
information
Preparation
of report

14. Frequency of HR audit
Audit
during
crisis
Regular
auditing

15. Audit Report
• Objective
– To highlight areas that needs improvement
– To be acted upon.
• Purpose
– to help the top management and the HRD staff to
recognize and retain the company’s strengths.

16. Elements of Audit Report
• Basic elements of Audit report
– Table of Contents
– Preface
– Synopsis
– Objectives, scope, methodology and technique
used
– In-depth analysis of data
– Evaluation discussion and analysis
– Appendix
– Bibliography

17. Benefits
• It helps to find out the proper contribution of the
HR department towards the organization.
• Development of the professional image of the HR
department of the organization.
• Reduce the HR cost.
• Motivation of the HR personnel.

18. Contd.
• Find out the problems and solve them smoothly.
• Provides timely legal requirement.
• Sound Performance Appraisal Systems.
• Systematic job analysis.
• Smooth adoption of the changing mind-set.

19. Issues in HR Audit
• Difficult to audit personnel policies and
practices
• Fault finding
• Whole process would become meaningless,
if timely actions are not taken
• Data Accuracy

20. Case Study: Texaco
• Texaco began as the Texas Fuel Company, founded in 1901 in Beaumont,
Texas. It was an independent company until it merged into Chevron
Corporation in 2001.
• For many years, Texaco was the only company selling gasoline under the
same brand name in all 50 states as well as Canada, making it the most truly
national brand among its competitors.
• Products:
— Gasoline
— Convenience store
Some Locations:
— Carwash
— Automobile repair shop

21. The Problem Within
• Texaco did not audit its divisions to ensure that they were complying
with equal employment opportunity obligations, but rather relied on
its divisions to police themselves.
• While Texaco had a written policy prohibiting discrimination, there
was no oversight of management to ensure that they were complying
with Federal employment laws. In a deposition, the Vice President
of Human Resources testified that he was unaware of any "periodic
or systemic" effort by Texaco to ensure that all business units of the
company were in compliance with federal employment laws.
• Blacks, Latinos and other oppressed nationalities working at Texaco
were constantly subjected to racism--both behind the scenes and in
an openly hostile atmosphere.

22. Violation of Federal
Employment Laws
• An oil-industry survey conducted by the Mobil Corporation using 1993 data
showed that Texaco had a below-average percentage of Black people in
every salary bracket over $50,000
• A 1996 audit of an important Texaco division by the Department of Labor
found that on a job-by-job basis, Blacks and other minority employees had
to wait far longer than whites for promotion and were far less likely to
receive evaluations that would help them in their careers
• In November 1996, The New York Times disclosed the existence of tape
recordings wherein executive employees responsible for responding to
discovery referred to minorities as, inter alia, "black jelly beans" that were
"glued to the bottom of the bag.“
• The same newspaper also obtained court records, as well as government
documents that disclosed that out of the 873 executives at Texaco who made
more than $106,000 a year, only 0.7 percent were Black

23. The Suit
• In 1994, six black employees of Texaco filed a racial discrimination
lawsuit against Texaco based upon their assertion that they didn't think
they had received the positions nor the pay to which they felt they were
entitled. For good measure their attorneys added the assertion that
Texaco had established a pattern of racial discrimination.
• In short order, with strong encouragement from the NAACP Legal
Defense Fund and from the Clinton EEOC, 1400 or so other black
employees joined the suit which the judge quickly certified as a "class"
for the lawsuit.

24. A Very Expensive Example
of the Importance of an
Audit by Texaco, Inc., approved by the Court on March 21, 1997
The settlement
contained the following major components:
– $115 million in cash to the 1400 - 1500 aggrieved minority
employees;
– Over $20 million in salary increases to the aggrieved minority
employees; and
– Approximately $35 million for "diversity / sensitivity training", a
new corporate requirement for employees; and
– The creation of an Equality and Fairness Task Force; an
independent committee selected by Texaco and the plaintiffs, with
court approval, which has the power to implement personnel
policies designed to rectify alleged discriminatory practices by
Texaco.

25. In the Aftermath
• Raising the number of African Americans on the payroll to 13 percent,
up from 9 percent, by 2000. In all, minorities would make up 29
percent of the company, up from 23 percent.
• Raising by more than 25 percent the number of managers who are black
or female. The number of black managers would increase to 6.6 percent
from 4 percent.
• Imposing new "behavior standards" for managers.
• Including women and minorities on every company Human Resource
Committee.
• Increasing purchases from minority- and female-owned businesses
from $135 million to about $200 million.

26. Conclusion
The importance of conducting periodic and systematic human
resources audits cannot be overemphasized. Through the audit
process, an employer is able to identify those aspects of its
human resources management that are in disarray, before the
problems become the subject of a claim or lawsuit. It also
allows the employer to take corrective action at its own pace,
on its own terms, without meddling by or interference from the
courts. Because of these benefits, any wise employer will
conduct systematic and periodic human resources audits, and
treat them just as seriously as financial audits.