“The things that get measured gets managed”
14. General Auditing Method
2. Challenges For H.R.
15. Methods Of Hr Audit
Department Eight Challenges 16. Research Approaches To Audits
3. Meaning & Purpose Of Hr
17. Hrm Auditing Process
4. Purposes Of Hrm Auditing
5. Objectives Of Hr Audit
6. Benefits Of HR Audit
7. Frequency Of HR Audit
8. The Principles Of Effective Hrm
9. Types Of HR Audits
10. The Scope Of Human Resource
11. Hrm Audit Measures
12. HR Standards
13. Task Auditor
• “How does a firm know if its human resource practices have an impact on
• “..most professional service firms and organizations complete an extensive
audit of their financial statements on an annual basis, but the programmes
involving “people”, such as recruiting, training or pay-for-performance are
seldom given the same scrutiny.”
• “..the starting point for enterprises wishing to manage their human capital
successfully and seeking a labour competitive advantage is activities of the
EIGHT CHALLENGES IDENTIFIED
BY DAVE ULRICH (1997)
The H.R department will need to create models and processes
for achieving global activeness, effectiveness and competitiveness.
Managing the Value Chain for Business Competitiveness
Faster Decision Making
Price or Value Advantage
Effective linking with Suppliers
Growth of the organization By increasing customer,
acquisition and mergers
Building organizational capabilities
Reviewing existing capabilities
Aligning new capabilities with business
• Adopting some
• Learning some
New Skills and
• Unlearning some
existing skills and
Making Technology viable
Finding out ways and
means to make technology
Attracting and Retaining Intellectual Capital
Attracting Talented People.
Utilizing them suitably.
Transforming the Organization
Creating fundamental and lasting changes.
MEANING OF HR AUDIT
The Human Resources (HR) Audit is a process of examining policies,
procedures, documentation, systems, and practices with respect to
an organization’s HR functions.
The purpose of the audit is to reveal the strengths and weaknesses in
the organization's human resources system and any issues needing
The audit works best when the focus is on analyzing and improving the
HR function in the organization.
PURPOSES OF HRM AUDITING
administrative (efficiency) and
• Compliance – legislative and
• Risk – people and related e.G. Ohs
OBJECTIVES OF HR AUDIT
Effectiveness of performance of HR Department
Implementation of HR policies, procedures;
To find out the reasons for low productivity and improve HRD Strategies;
Evaluation of the HR staffs & employee;
Modify and Review HR system & challenges
Questioning: To seek answers to : What happened ? Why did it happen?
Why did it not happen?
Benefits of HR Audit
• Identification of contributions of HR department
• Helps identify the gaps between the current state and the standard,
thereby streamlining HR work processes
• Encouragement of greater responsibility and professionalism among HR
• Clarification of HR duties and responsibilities
• Stimulation of uniformity of HR policies and practices
• Ensuring timely compliance with legal requirements
• Reduction of HR costs through more effective personnel procedures
• A thorough review of HR information systems.
Frequency of HR audit
• It is best to have a HR audit once in a year. The HR audit, if
conducted continuously and regularly, then it becomes a fairly
• The chances of drastic corrections become lower if it is conducted
regularly. Usually, the frequency of the audit being conducted
depends on the company.
• An ideal audit can be conducted for every 18 months but the
management must see to it that a well efficient audit is done on
THE PRINCIPLES OF EFFECTIVE HRM AUDITING
Need for independence;
Audit activities should be budgeted for properly;
Acknowledgement that there are many types of
Each type of an hr audit has its own purpose and
Establish timeframes for every phase/step of the
Training of auditors is a must;
Set standards for the hr audits;
Agree on reporting template;
Auditors should sign a confidentiality agreement; and
Auditors should agree beforehand on communication
Types of HR Audits
• Compliance: Focuses on how well the company is complying
with current federal, state and local laws and regulations.
• Best Practices: Helps the organization maintain or improve a
competitive advantage by comparing its practices with those of
companies identified as having exceptional HR practices.
• Strategic: Focuses on strengths and weaknesses of systems and
processes to determine whether they align with the HR
department’s and/or the company’s strategic plan.
• Function-Specific: Focuses on a specific area in the HR function
(e.g., payroll, performance management, records retention, etc.)
The Scope of Human
• Audit of Corporate Strategy
The organization is going to gain competitive advantage.
• Audit of the Human Resource Function
Human Resource Information System, Staffing and Development, and Organization
Control and Evaluation.
• Audit of Managerial Compliance
Human resource policies and procedures.
• Audit of Employee Satisfaction
To learn how well employee needs are met.
Audit of the Human Resource Function
1. Human Resource Information System
- Human Resource Plans : Supply and demand estimates; skill
inventories; replacement charts and summaries
- Job Analysis Information : Job standards, Job descriptions,
- Compensation Management : Wage, salary, and incentive
levels; Fringe benefit package; Employer-provided services
2. Staffing and Development
• Recruiting : sources, availability,
• Selection : selection ratios, selection
procedures, equal opportunity.
• Training and development :
orientation program, training
objectives and procedures, learning
• Career development : internal
placement, career planning program,
human resource development efforts
3. Organization Control and
• Performance appraisals : standards
and measures of performance,
performance appraisal techniques,
• Labor-Management Relations :
Legal compliance, management
rights, dispute resolution problems.
• Human Resource Controls :
employee communications, discipline
procedures, change and development
Audit of Managerial Compliance
• Compliance with laws is especially important.
When safety, compensation, or labor laws are
violated, the government holds the company
• If managers ignore policies or violate
employee relations laws, the audit should
uncover these errors so that corrective action
can be started.
Audit of Employee Satisfaction
• It refers to an employee’s general
attitude toward his or her job.
• When employee needs are unmet,
turnover, absenteeism, and union
activity are more likely. To learn
how well employee needs are met.
• The team collects information about
wages, benefits, supervisory
practices, career planning assistance,
and other dimensions of job.
HRM AUDIT MEASURES
• HR PLANNING
• RESOURCING – RECRUITMENT
EFFICIENCY AND EFFECTIVENESS
• COMPENSATION AND BENEFITS
• EMPLOYEE COUNSELING AND
• LOST TIME COSTS
• EMPLOYEE TURNOVER RATES
• TRAINING AND DEVELOPMENT
COSTS E.G. ROI
• ORGANIZATIONAL DEVELOPMENT
AND CHANGE MANAGEMENT
Tasks of Auditors
• Identify who is responsible
for each activity.
• Determine the objectives
sought by each activity.
• Review the policies and
procedures used to achieve
• Prepare a report
objectives, policies, and
• Develop an action plan to
correct errors in each
• Follow up the action plan to
see if it solved the problems
found through the audit.
GENERAL AUDITING METHOD
Develop an understanding of the
management system and
Assess the strength and
weaknesses of the management
systems and procedures
Gather evidence and verify
Validate audit findings and
METHODS OF HR AUDIT
INDIVIDUAL INTERVIEW METHOD
GROUP INTERVIEW METHOD
ANALYSIS OF SECONDARY DATA
ANALYSIS OF REPORTS, RECORDS, MANUALS AND
OTHER PUBLISHED LITERATURE
INDIVIDUAL INTERVIEW METHOD
• Top level management and
senior managers are
interviewed, individually. It helps
Knowing their thinking about
future plans and opportunities
available for the company
Knowing about their
expectations from the HR audit
Getting sensitive information
pertaining to working styles and
GROUP INTERVIEW METHOD
Group interviews and discussions with the
employees and executives of large companies for HR
audit, facilitate collection of information about
effectiveness of existing systems.
Relevant Questions that are
asked in Individual And Group
What do you see as the future growth
opportunities and business directions of the
What skills and competencies does the
company have which you are proud of?
What skills and competencies do you need to
run your business, or to perform your role,
more effectively at present?
What are the strengths of your HRD function?
What are the areas where your HRD function
can do better?
What is good about your HRD subsystems,
such as: performance appraisal , career
planning, job rotation, training, quality circles,
induction training, recruitment policies,
performance counseling, worker development
programmes, and HRD departments?
What is weak about them? What can be
What changes do you suggest to strengthen
HRD in your company?
What do you think are the ways in which line
managers can perform more developmental
Workshop Methods also known as Large Scale Interactive Process (LSIP) is
conducted in some cases of audit.
• Feed back about various dimensions of HRD, including
the competency base of HRD staff, the styles of line
managers, the implementation of various HRD
systems, etc are obtained through a detailed
questionnaire from individuals or groups for HR audit.
• This method helps in benchmarking.
• The auditors should physically visit
• To assess the extent to which a
congenial and supportive human
welfare oriented climate exists in
• This is essential because
employees are not likely to give
their best if they do not live in
• The observations can be
conducted using a check list of
ANALYSIS OF SECONDARY DATA
Analysis of secondary data can give an insight into the HRD assets and
liabilities of the company.
Analysis of age profiles of the employees, analysis of the training
attended, analysis of the minutes of the meetings held etc., help in
determining the assets and liabilities.
ANALYSIS OF REPORTS,RECORDS, MANUALS
AND OTHER PUBLISHED LITERATURE
Published literature of the
company including annual
reports, marked hand-outs,
training calendar personnel
manual, and various circulars
issued from time to time are also
likely to help immensely in
assessing the strengths and
weaknesses of HRD.
HRM AUDITING PROCESS
• PHASE 1: FOUNDATIONAL/INITIATION
• PHASE 2: ASSESSMENT
• PHASE 3: CONCLUDING AND REPORTING
OVERVIEW OF THE GENERIC HRM AUDITING PROCESS
DESIGN AND DEVELOP HR POLICIES, PROCEDURES AND PRACTICES FOR YOUR
ASSESS CURRENT HR POLICIES, PROCEDURES AND PRACTICES AGAINST SET
ANALYSE THE RESULTS FROM EVIDENCE; AND
TAKE ACTION: TO CLOSE GAPS, MAKE RECOMMENDATIONS/ SET IMPROVEMENT
PHASE 1: FOUNDATIONAL/INITIATION
AUDIT SET-UP ACTIONS
AUDIT PLANNING ACTIONS
Determine the purpose and objectives of the audit
Determine the scope of the audit
Determine the organizational components to be audited
Determine the auditing tool to be used
Determine costs and resources needed to perform the audit
Determine audit team governance
PHASE 2: ASSESSMENT
• GENERAL COMMENTS
• IDENTIFY KEY ORGANIZATIONAL
• DEVELOPING A CHECKLIST
REFER TO THE ATTACHED ANNEXURE: HUMAN
RESOURCES BEST PRACTICE AUDIT AND NEEDS
• FORMULATING AUDITING METHODOLOGY AND
PHASE 3: CONCLUDING AND REPORTING
QUANTIFY YOUR RESULTS - START WITH
INCLUDE AN EXECUTIVE SUMMARY
IDENTIFY AND PRIORITIZE SOLUTIONS TO
PROBLEMS IDENTIFY. WHERE POSSIBLE,
FRAME YOUR SOLUTIONS FROM A
BOTTOM LINE PERSPECTIVE, I.E.,
CALCULATE THE BENEFITS AND COSTS OF
EVALUATE AND DISCUSS THE
ORGANIZATIONAL, FINANCIAL AND
EMPLOYEE RELATIONS IMPACT OF ACTION
DEVELOP A HR IMPROVEMENT PLAN
The audit report
Findings of research are used to developed
a picture of the organization’s resource
activities. For this information to be useful,
it is compiled into audit report.
The audit report is a comprehensive
description of human resource activities
that includes both commendations for
effective practices and recommendations
for improving practices that are less
Audit report often contain several sections.
One part is for line managers, another is
for manager of specific human resource
function, and the final part is for the
human resource manager.
Report for line managers
How line managers handle their duties such as:
Satisfying employee needs
The report also identifies people problems. Violations
of policies and employee relations law are highlighted
Report for the HR Specialist
The specialists who handle employment training,
compensation, and other activities also need feedback.
Such feedbacks are :
1. Unqualified workers that need for training
2. Qualified workers that need for development
3. What others company are doing
4. Attitude operating managers toward personnel
5. Workers pay dissatisfaction
Report for HR Manager
• It is contains all the information
given to both operating managers
and staff specialists. In addition,
HR Mangers gets feedback about :
• Attitude operating managers and
employees about services given by
• A review of HRD plans
• Human resource problems and
• Recommendations for needed
changes and priorities for their
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