INFORMATION SYSTEMS,

ACCOUNTING & AUDITING

PRESENTED BY:CHANDAN CHOUDHARYTRAPTI AGGARWALVIKAS NEHA SHARMAPRATEEK SHARMA

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HRIS

HRIS can be defined as:• “HRIS can be briefly defined as integrated systems

used to gather, store and analyze information regarding an organization’s human resources.” (Hedrickson, 2003, p.381).

• HRIS “One which is used to acquire, store, manipulate, analyze, retrieve and distribute information about an organization’s human resources.” (Tannenbaum 1990)

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Who uses HRIS and how is it used?

• Reporting and compliance

• Payroll and compensation analysis

• Benefits administration

• Applicant tracking, skills inventory

HR Professional

• Performance management and appraisal

• Recruitment and resume processing

• Team and project management

• Training and skills testing

• Management development

Functional Managers

• Self-service benefit options

• Career planning• Training and

development

Individual Employees

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Benefits of HRIS

Benefits of HRIS

Increased Efficiency

More Transactions with Fewer Resources

Increased Effectiveness

More Accurate Information &

Simplification of Processes

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Traditional HRIS

• Monitor absences• Salary structures• Training information• Recruitment• Media response• Current information• Medical information• Global administration

Administrative Uses

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HRIS in Business Decision Making

• Budget control• Applicant tracking and

screening• Skills matching• Appraisals• Feedback• Manpower planning• Succession planning• Skills monitoring• Training needs analysis• Global analysis

Analytical Processes

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Application of HRIS

• Environmental scanning• Tracks quality and productivity

improvements

Strategic Management

• Tracks promotions, transfers, hiring and termination rates

• Maintains and prints EEOC data in the required form

• Prints applicant flow and utilization reports for affirmative action programs

Workforce Planning and Employment

• Outlines career path development• Tracks, education, skills and training

programs• Registers employees in courses• Evaluates employee performance

Human Resource

Development

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CONTINUED…

• Tracks salary survey information• Tracks retirement planning, tuition

reimbursement, COBRA & HIPAA info.• Facilitates benefit administration and

salary analysis across job classifications

Total Rewards

• Stores employee discipline records• Records union data & labor

distribution data• Maintains attitude survey results

Employee and Labor Relations

• Identifies accident and illness trends • Tracks safety records, insurance and

workers’ comp. claims• Monitors high-risk conditions and

accidents

Risk Management

SOME EXAMPLES OF HRIS

• Bamboo• Clearcompany HRM• SimpleHR• People-Trak HRMS• Skandia Navigator

The Skandia Navigator is an early model to analyze intangible assets, pioneered by Leif Edvinsson at Skandia.The architecture of the SN is built of 5 focus areas or perspectives, each capturing different areas of interest:• Financial focus• Customer focus• Human focus• Process focus• Renewal and development focus

SKANDIA NAVIGATOR MODEL

• Process of examination and evaluation of policies, procedures and practices to determine the effectiveness of personal management

• Covers three things 1. Measurement and evaluation of personnel programs,

policies and practices2. Identification of gaps between objectives and results3. Determination of what should and shouldn’t be done

in future

Human Resource Auditing

Objectives of HR Audit

To review the organizational

system, HR sub-systems, to find efficiency of the organisation in

atrracting & retaining human

resources

To find effectiveness of

various personnel policies and

practices

To know about the functioning of various units and implementation

of policies

To review and modify personnel

systems.

Need for HR audit• Increase the size of an organisation• Changing philosophy of management towards HR• Increase strength and influence of trade unions• Increase dependence of organization on the HR

system and its effective functioning

• Identifies the contribution of HR department• Improves the professional image of HR department• Encourages responsibility among members of HR

department• Classifies the HR department duties• Stimulates uniformity of personnel policies and

practices• Finds critical personnel problems• Ensures timely compliance with legal requirements.• Reduces human resource costs

Benefits of HR Audit

The HR audit usually covers three parameters, namely,1. the HR policies and practices, 2. the HR professionals and 3. the HR department.

Scope of HR Audit

With respect to each of these, the Audit tries to find out :

1. The actual state;2. The congruence between the desired/professed state and the actual state;3. The alignment with the overall organisational strategy and goals; and4. The compliance with the laws and regulations.

Auditing HR Practices

All HR departments provide several services that may be clustered into six key domains staffing, training and development, appraisal, rewards, oraganisation governance and communication.

Four types of assessments. 1. The HR strategies, the distribution of responsibility, the resource utilisation, and the competencies of the HR portfolio.2. The second type of assessment is that of customer value.3.Cost benefit or utility analyses of HR functions4. Research, involving HR experiments

Auditing HR Professionals

1. Developing a Model of Competencies 2. Collect data using the Model 3. Summarise data and give feedback to the HR professionals 4. Create action plans 5. Continuous Improvement

Auditing HR Function or Department

There are overall indicators of HR functions, such as ratio of total employees to HR professionalsthe performance of the department against the plan the ratio of expenditure on HR to total sales general costs and other such measures.

There is no uniform norm regarding how often the HR Audits should be conducted in an organisation. Generally, it differ in case of different organisations depending upon:

• the purpose of the Audit,• the periodicity of changes in the external business environment,• the frequency of changes in the strategies, policies, and personnel

within the organisation,• the rapidity of technological changes which are expected to impact

the psychology of people,• the speed of change in the legal, socio-economic and political

conditions.

THE FREQUENCY OF HR AUDIT

• 1. Comparative approach2. Outside authority approach3. Statistical approach4. Compliance approach5. Management by objectives (MBO) approach

Approaches to Human Resources Audit

• Comparative approachIn this, the auditors identify Competitor Company as the model. The results of their organization are compared with that Company/ industry.

• Outside authority approachIn this, the auditors use standards set by an outside consultant as benchmark for comparison of own results.

• Statistical approachIn this, Statistical measures are performance is developed considering the company’s existing information.

• Compliance approachIn this, auditors review past actions to calculate whether those activities comply with legal requirements and industry policies and procedures.

• Management by objectives (MBO) approachThis approach creates specific goals, against which performance can be measured, to arrive at final decision about organization’s actual performance with the set objectives.

Though this process may vary from organisation to organisation, it essentially follows the stages described below.

1) Briefing and orientation: This is a preparatory meeting of key staff members to:i) discuss particular issues considered to be significantii) chart out audit procedures, andiii) develop plans and program of audit.

2) Scanning material information: This involves scrutiny of all available records and documents pertaining to the personnel as well as personnel handbooks and manuals, material on recruitment, computer capabilities, and all such other information considered relevant.

AUDITING PROCESS

3) Surveying employees: Surveying employees involves interview with key managers, functional executives, top functionaries in the organizations, and even employees representatives. The purpose is to identify and enumerate issues of concern, present strengths, anticipated needs and managerial philosophies on human resources.

4) Conducting interviews: The key issue here is to list the pertinent and probing questions. The decision on these questions depends on the scope and purpose of the Audit as well as on the culture of the organisation. The skill of the interviewer lies in getting relevant and correct information without threatening the interviewees.

5) Synthesising: The data thus gathered is synthesized to present the current situation priorities staff pattern, and issues identified.

6) Reporting: Like planning meetings for briefing and orientation, the results of the audit are discussed within several rounds with the managers and staff specialists. Based on the findings and the discussion during the meetings, then a final report is prepared and presented formally to the Management. This report should include

1. the “state of the organisation” report,2. the assessment of effectiveness and efficiency of various areas covered by the Audit, 3. a legal compliance/ areas of concern report, and4. critical recommendations for improvement

There are several techniques that may be employed in conducting an HR Audit, especially in collecting data.

Interviews:Interview of key HR stakeholders can provide a valuable insight into the strengths and weaknesses of the HR practices, professionals and department, as perceived by the stakeholders. Interviews can be part of either an exploratory or descriptive mode of inquiry.

Questionnaires:In HR Audits, questionnaires may be used for generating data that serves as input to the HR Scorecard.Some of the commonly used questionnaires include the HRD Audit Questionnaire, a102 item Map your HRD Practice Profile (see La Piana Associates, Inc, 2002) the HRD Climate Survey, the Training Effectiveness Questionnaire, Performance planning to name a few.

COMMON RESEARCH TECHNIQUESIN HRA

HUMAN RESOURCE ACCOUNTING

DEFINITION:“Human Resource Accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties.” - American Accounting Society Committee on HRA

Human Resource Accounting is the process of assigning, budgeting, and reporting the cost of human resources incurred in an organization, including wages and salaries and training expenses.

OBJECTIVES OF HUMAN RESOURCE ACCOUNTING

• To furnish cost value information for making proper and effective management decisions about acquiring, allocating, developing and maintaining human resources in order to achieve cost effective organisational objectives.• To monitor effectively the use of human resources by the management.• To have an analysis of the human assets i.e. whether such assets are conserved, depleted or appreciated.• To aid in the development of management principles. and proper decision making for the future by classifying financial consequences of various practices.• In all, it facilitates valuation of human resources recording the valuation in the books of account and disclosure of the information in the financial statement.

ADVANTAGES OF HUMAN RESOURCE ACCOUNTING• It offsets uncertainty and change, as it enables the

organisation to have the right person for the right job at the right time and place.

• It provides scope for advancement and development of employees by effective training and development.

• It helps individual employee to aspire for promotion and better benefits.

• It aims to see that the human involvement in the organisation is not wasted and brings high returns to the organisation.

• It helps to take steps to improve employee contribution in the form of increased productivity.

•It provides different methods of testing to be used, interview techniques to be adopted in the selection process based on the level of skill, qualifications and experience of future human resources.

•It can foresee the change in value, aptitude and attitude of human resources and accordingly change the techniques of interpersonal management

COMPANIES PRACTICING HUMAN RESOURCE ACCOUNTING

The companies, who are presently reporting human assets valuation include: • Bharat Heavy Electrical Ltd (BHEL). • Steel Authority of India Ltd (SAIL). • Oil and Natural Gas Commissioning (ONGC). • Cement corporation of India (CCI).• Mineral and Metal trading Corporation of India.(MMTC). • Oil India Ltd • Project and Equipment corporation of India.(PEC). • Hindustan Zinc Limited (HZL)

• Southern Petrochemicals Industries Corporation Ltd (SPIC).

• Engineers India limited • Electrical India Ltd. • Infosys Technologies Ltd. • National Thermal Power Corporation Ltd (NTPC).

For Example:

• Oil and Natural Gas Corporation Limited (ONGC): This Company considers the rate of interest, at which the Government of India advances them loans, as the discount rate. It divides total employees into four categories as under (a) Managerial and Supervisory (b) Clerical (c) Skilled Workers (d) Unskilled Workers.

• Minerals and Metals Corporation of India (MMTC): MMTC started human resource valuation and reporting practice in the year 1982 by using a modified model of human resource valuation given by Lev and Schwartz under the head of “Human Asset Accounting”.

• Project and Equipment Corporation of India (PEC): PEC have been following the human resources accounting practice from the year 1980-81 and it report group wise and in total in terms of employees and also it reports human resources value group wise as well as in total.

HUMAN RESOURCE VALUATION APPROACHES

Some of the models to valuation of Human Resources are:STOCHASTIC REWARDS MODEL:• Stochastic Rewards Model was developed by Eric G. Flamholtz. • This model identified some major variables that are help to determine

the value of an individual to the organization. • He determined the movement of employees from one organization to

another as Stochastic Process. • Employee value is the product of individual conditional value and the

profit that the individual offers to the organization in his/her service life. • The conditional value comprises of productivity, transferability and

promotability, skills and activation levels are also the determinants of an individual’s conditional value.

Replacement Cost Model :

• According to this model the value of employee is estimated as the cost of replacement with a new employee of equivalent ability and efficiency.

• There are two costs, individual replacement cost and positional replacement cost in this model.

• Cost of recruiting, selecting, training and development and familiarization cost are account in individual replacement cost.

Opportunity Cost Model : • Opportunity cost is the maximum alternative earning that is earning

if the productive capacity or asset is put to some alternative use. • Quantifying HR value is difficult under this method. Because

alternative use of HR within the organization is restricted and at the same time the use may not be identifiable in the real industrial environment

LEV AND SCHWARTZ COMPENSATION MODEL:• This model developed in 1971 by Lev and Schwartz for valuing

human resources and is used by public sector like SAIL and BHEL. • It is based on future earnings of an employee till his retirement.• Lev & Schwartz also recommended the use of cost of capital of the

organizations for the purpose of discounting the future earnings of the employees to arrive at the present value.

Historical Cost Method:

•This method was developed by William C. Pyle and adopted in 1969 by R. G. Barry Corporation, a leisure footwear company in Columbus, Ohio, USA.

• Historical cost method calculates actual cost incurred on recruiting, selecting, hiring and training and development of human resource (HR) which is equal to the value of workforce.

• The economic value of HR increases overtime and they gain experience. However, according to this model, the capital cost of HR decreases through amortization.

SKANDIA’S NAVIGATOR:

• The Skandia Navigator is an early model to analyze intangible assets, pioneered by Leif Edvinsson at Skandia.

• The SN comprises a holistic view of performance and goal achievement with respect to intangibles.

• The architecture of the SN is built of 5 focus areas or perspectives, each capturing different areas of interest:- Financial focus- Customer focus- Human focus- Process focus- Renewal and development focus