land details part 1
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Master of Business Administration- MBA Semester 3
MU0013 –HR Audit- 4 Credits
Q1. What are the main objectives of Human Resource
Planning?
Ensuring optimum use of human resource in the organization.
Helping the organization to cope with the technological development &modernization.
Ensuring higher Labour productivity.
Ensuring career planning of every employee of the organization & making succession
programmers.
Assessing manpower needs for future &making plans for recruitments & selection.
Assessing skill requirement in future.
Determining training & development needs of the organization.
Anticipating surplus or shortage of staff &avoiding unnecessary detention or dismissal.
Controlling wages & salary casts
Q2. What are the trends in HR audit seen in Indian scenario?
An HR audit is like an annual health check. It plays a vital role in instilling a sense of
confidence in the management and the HR functions of an organization. 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 human resources system, and any issues
needing resolution. The audit works best when the focus is on analyzing and improving the
HR function in the organization. The audit itself is a diagnostic tool, not a prescriptive
instrument. It will help you identify what you are missing or need to improve, but it can’t tell
you what you need 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 its full potential to
support the organization’s mission and objectives can be realized.
The audit process consists of a series of questions covering the eight primary components of
the HR function:
1. Roles, head count, and HR information systems (HRIS)
2. Recruitment
3. Documentation
4. Training, development, and career management
5. Compensation and benefits
6. Performance measurement and evaluation
7. Termination and transition
8. Legal issues and personnel policies
9. Health / Welfare systems
10.Employee Relations
11.Safety
12.Resourcing
Q5. What are the reasons for implementing the human resource scorecard?
In this era of tough competition it is very important for the firms to have more effective HR
management systems. It is a challenge for managers to make HR a strategic asset. The HR
scorecard is an instrument that enables them to improve the HR function in the organization.
It helps to periodically assess effectiveness of HR functions in a wide range of areas, from
recruiting to terminations, and including training and development, communications, and
legislative compliance. But implementing effective audit systems for human resource is a
difficult task and demands the existence of a unified framework to guide the HR managers.
Sometimes firms under-invest in their people and at times invest in the wrong ways. Another
difficulty is, managers cannot prepare the projected cash flows for considering the future
productivity of present inputs as in case of financial assets but at the same time they are not
willing to take the risk. So the best way is to prepare the Balanced Scorecard with sound
measurement strategies which are able to link HR functions, activity and investment with the
overall business strategy. The HR scorecard framework was specifically designed for
following reasons:
· It reinforces the distinction between HR doubles and deliverables: The good audit system
must clearly differentiate between the deliverables that influence strategy implementation and
do-ables that do not. Policy implementation is not a deliverable until it has a positive effect
on the HR architecture and creates the right employee behaviors that drive strategy
implementation. An appropriate HR measurement system will encourage HR professionals to
think both strategically as well as operationally.
· It helps in controlling cost control and value creation: It is the responsibility of HR to
minimize the cost of the firm but at the same time, HR has to fulfill its strategic goal, which
is to create value. The HR scorecard helps HR professionals balance the two and find the
optimal solution. It allows HR professionals to drive out costs where appropriate, but at the
same time it helps to create value for the firm by retaining good human resources.
· It measures leading indicators: There are drivers and outcomes in the HR value chain
along with leading and lagging indicators in the overall balanced performance measurement
system. It is thus important to monitor the alignment of the HR decisions and systems that
drive the HR deliverables. Assessing this alignment provides feedback on HR’s progress
towards these deliverables and lays the foundation for effective HR strategies.
· It assesses HR’s contribution to strategy implementation: The cumulative effect of the HR
Scorecard’s deliverable measures provides the answer to the question regarding HR’s
contribution to firm performance. All measures have a credible and strategic rationale.
Managers can use these measures as solutions to business problems.
· It lets HR managers to manage their strategic responsibilities: The scorecard motivates
the HR managers to focus on exactly how their decisions affect the successful
implementation of the firm’s strategy. This is due to the systemic nature of the scorecard that
is it works on all the aspects. Therefore it provides a clear framework.
· It encourages flexibility and change: In this era of ever changing business environment,
standardized patterns in any aspects do not work well. The changes are required even in the
HR policies with the change in business environment. The basic nature of the scorecard with
its causal emphasis and feedback loops helps fight against measurement systems getting too
standardized. Every decision needs to be taken based on the past and future scenarios. One of
the common problems of measurement systems is that managers tend to get skilled to obtain
the right numbers once they get used to a particular measurement system. The HR scorecard
provides the flexibility and change because it focuses on the firm’s strategy implementation,
which constantly demands change.
Q6. Elaborate on the need for Human Resource Audit.
HR audit is a systematic evaluation of the strengths, limitations, and developmental needs of
its existing HR function based on the organisational performance.
HR audit activities play a more important role than just solely collecting and presenting
evidence of compliance. The HR audit is an analysis of factors involved in the management
of human resource with a summary of the findings. It is then followed by the solutions to
correct the short comings. The advantage is that there are previously defined policies, goals
and standards and the audit must see that management abides by it.
Scope of HR audit
A complete HR audit will have many specific sub-questions/samples required for analysis.
The HR audit could include any or all of the following areas:
1. Regulatory compliances (legal issues).
2. Communication and employee relations.
3. Maintenance of files and records/technology.
4. Policies and procedures (including employee handbook).
5. Administration of salary.
6. Recruitment of candidates.
7. Orientation.
8. Terminations.
An organized plan is always important for a successful human resource audit. While auditing,
it is not necessary that all questions be asked to each employee. Instead, the individual must
himself be responsible enough and give relevant information on the concerned issues.
The HR audit can be used as an effective tool. The various aspects of HR audit are as
follows:
1. Staffing
2. Compensation and benefits
3. Performance management
4. Employee development
5. Employee relations
6. Safety
7. Reporting and record keeping
Benefits of HR audit
The HR audit is an analysis of all the factors involved in managing HRM with the findings,
suggestions to correct the shortcomings when compared with the standards of the company.
The major benefits are listed below:
1. Helps identify the gaps between the current state and the standard, thereby streamlining
HR work processes.
2. Monitoring compliance with established regulations and procedures.
3. Creating a business plan for human resource.
4. Helping in finding out whether the HR department is contributing effectively to the
organization.
5. Helping in the development of the professional image of the HR department of the
organization.
6. Motivating the personnel of HR department.
7. Finding out the problems and solving them smoothly.
8. Appraisal systems providing sound performance reports.
9. Systematically analyzing job.
10.Creating a business plan for human resource.
11.Monitoring compliance with established regulations and procedures.
12.Developing user-friendly HR systems.
Q1. Explain the linkages between HR Audit and business functions.
The HR audit also examines the linkages between HRD and other systems like total quality
management, personnel policies, strategic planning etc.
Suggestions are made on the basis of evaluation on the future HRD strategies required by the
company, the structure the company needs to have for developing new competencies and the
systems that need to be strengthened, the styles and culture that has compatibility with HRD
processes in the company particularly the styles of the top management, etc.
Business linkages of Human Resource Development
It indicates the extent to which HRD efforts (tools, processes, culture etc.) are driven to
achieve business goals. The business goals include:
1. Business excellence including profitability and other outcomes the organization is
expected to achieve;
2. Internal operational efficiencies;
3. Internal customer satisfaction;
4. External customer satisfaction;
5. Employee motivation and commitment;
6. Cost effectiveness and cost consciousness among employees;
7. Quality orientation.
Role of HR Audit in Business Improvements
1. HRD audit is cost effective
2. It can give many insights into a company’s affairs.
3. It could get the top management to think in terms of strategic and long term business
plans.
4. Changes in the styles of top management
5. Role clarity of HRD Department and the role of line managers in HRD
6. Improvements in HRD systems
7. Increased focus on human resources and human competencies
8. Better recruitment policies and more professional staff
9. More planning and more cost effective training
10.Strengthening accountabilities through appraisal systems and other mechanisms
11.Streamlining of other management practices
Q3. Explain the audit of human resource function.
Audit of Human Resource
Function
Good starting point of audit
process is to take some time
and reflect on HR functions
which need to be audited.
Simply listing them is a good
first step. For achieving
organizational goals, it is very important to carry out various HR functions smoothly. In this
step of audit process, we define the various functions which need to be audited. Look at
Figure 8.2 for various human resource functions.
In this step consider your areas of responsibility and traditional HR practices covered by the
functions, you need to audit. In starting out, it is better to make more general statements and
improve from year to year in those areas that you choose to raise the level of performance.
For example as an audit manager, you may decide to audit any of following:
1. All human resource functions.
2. Any specific function like recruitment process of your company.
3. Any part of the specific function you have selected for audit like generating applicant
pool function of recruitment process,
A list of the indicators corresponding to the different areas of the HR function could contain
some of the following:
Description of the staff of the company
1. The complete staff can be described by:
2. Hierarchic levels
3. Years of service
4. Qualification
5. Sex
6. Nationality
7. The number of permanent and temporary employees, interns and physically or
mentally challenged employees
8. Indexes of personnel rotation and absenteeism
Job analysis
The various indicators of Job analysis are as follows:
1. The number of described posts
2. Occupants per post
3. Degree to which the job description cards have been updated
4. The degree of detail in the job description cards
5. The methods used to analyze and describe the jobs.
HR planning
HR planning, as you have studied in unit 7, is an important area of preplanning includes the
methods employed to plan personnel needs, the measures adopted to cover future personnel
needs, and the temporary planning horizon.
Recruiting and personnel selection
Main indicators of this are as follows:
1. The number of days required to a vacant post
2. The number of applications received by work place categories
3. The average amount of days between the reception of the application
4. The average cost of recruitment
5. cost of selection per job post
6. The degree to which internal and external sources of recruitment are used
7. The average number of candidates that do not pass the selective tests
8. The study of the reliability and validity of the selection tests
Training and development
The training indicators are as follows:
1. the procedures followed
2. frequency to which personnel training needs are analyzed
3. the criteria followed in the training programs
4. the evaluation criteria of the efficiency of the training programs
5. the percentage of the HR budget dedicated to training
6. the average number of hours of training per employee
7. The percentage of employees that participate in training programs by work place
categories.
Development of professional careers
These indicators focus on the vacancies covered internally.
These indicators include:
1. the percentage of people promoted per number of employees
2. The percentage of vacancies covered internally and externally and the average time per
employee it takes to receive a promotion.
Q4. What are the components of human resource development audit?
Components of Human Resource
Development Audit
For understanding the HRD Audit as
conducted in different organizations, you
should know well the different components of
HRD Audit. Look at Figure 2.1 to identify the
components of HRD Audit.
Components of HRD Audit
The HRD audit is divided into three components:
1. Organization and Administration of Human Resource
2. Information Management through Documentation
3. Computerized HRIS
Organization and administration of human resource
In this you should consider following points:
1. The way in which the organization’s HR office is organized
2. The operating standards and internal controls followed in the business unit.
3. The ways of administrating retention rights, including notices, matrix, use of
separation incentives, and outplacement practices.
4. The procedure of making HR staff up to date with the HR field.
5. The techniques used for communicating with employees and appointing authorities in
department.
Information management through documentation
You must be aware that information is managed in the business unit through documentation
of various records of the employees and factors concerned to them. So following are some
important considerations in this:
1. The person with whom the personnel files currently held.
2. The documents are held in personnel files.
3. The ways to document following in your organization :
Hiring: Application, interviewing, and reference checks
Compensation and benefits
Leave and overtime information
Transitions
Training
Discipline
Work history
Work Assignments
Significant accomplishments
Emergency contact information
Performance evaluation and performance management
Termination
4. The duration of holding the files.
5. The place at which they are stored after employees leave.
6. It should be seen that whether there is training of managers and employees about
personnel files.
7. The policies and procedures for accessing files.
8. The person responsible for filling the requests for information when they are made to
your organization.
9. The content of employee, payroll, medical, and position files.
10.The various internal controls to ensure accuracy of information and control access.
11.The process for purging records.
12.The way of maintaining employee timesheets.
13.The place at which various notices are posted.
14.The methods to ensure timely and accurate reporting of information to the top
management.
Computerized Human Resource Information System
1. In this you need to check the System requirements, features and capabilities. Consider
the following:
2. Whether HRIS system is being used in the organization or not.
3. The type of HRIS system used.
4. To judge that system is based on same platform as rest of the organization.
5. The formal training program for employees and managers to access the HR
information through the system.
6. Whether the HRIS system is comprehensive or not.
7. Are discreet pieces of information captured about employees and their jobs:
Personnel data
Recruitment/selection data
Training and development data
Compensation data
Performance appraisal/promo ability data
Benefit Plan data
Health/safety/accident data
8. The ways of translating the information into usable forms.
9. The data security issues.
10.The individuals who are able to update and change information controlled to enhance
accuracy.
11.The hardware is used to operate the system.
12.The local area networks that is fully compatible with the system.
13.The estimated processing time to generate a standard 10-field employee roster listing,
including age, annual salary, and years of service, for 500 employee records.
Q5. Explain how audit of training is conducted.
Training is a subsystem of an organization. It ensures that randomness is reduced and
learning or behavioral change takes place in structured format. The main objective of training
and development division is to make sure the availability of a skilled and willing workforce
to an organization. It improves the productivity of employees and thereby increases the
performance of the organisation. Audit of Training suggests future improvements based on
past activities measurement. The training indicators are:
1. the procedures followed and the frequency with which personnel training needs are
analyzed;
2. the criteria followed to list the content of the training programs;
3. the evaluation criteria of the efficacy of the training programs;
4. The procedure by which training needs are analyzed
5. the percentage of the HR budget dedicated to training;
6. The situation at which training is being conducted like Employee orientation, Skills &
technical training, Coaching and Counseling
7. the training conducted at the orientation of the employees
8. the average number of hours of training per employee;
9. The percentage of employees that participate in training programs by work place
categories.
Q6. Elaborate on the different aspects work place policies and practices
to be considered by the employers.
Many smaller companies do not like writing certain aspects of ways of conducting business.
For such companies, it is mere formality and they do not appreciate “people-oriented
culture.” Though it should be avoided because it is patently illegal because laws require that
companies should mention very clearly the policies about guaranteeing specific protections to
employees
Different aspects work place policies and practices:
Safeguarding employee information
Auditing workplace behaviors that support legal compliance
Safe work environment
Employee performance management
Safeguarding employee information
Employees’ personal information should be safeguarded. Separate files should be maintained
for personal information as contrasted with employment related information.
Main objective behind it to ensure that while deciding the employee’s career with the
company his personal information should not be considered. For example while deciding
whether to promote employee or not, instead of his personal information like his religion, his
work experience and capabilities should be considered.
The employment decision needs to be made on work/performance-related information, not
the personal information. Relevant materials in the work file include information on the
employee’s education, related work experience, and performance evaluations in other
positions within the company. An audit can clarify what information must be segregated and
the laws that govern employees’ access to and copying of their files. Other employee
information that must be safeguarded includes any materials that contain medical
information.
Employee performance management
An audit can review company’s job descriptions for compliance (i.e., to determine whether
the descriptions list the essential functions of the job). Various legal issues can arise due to
performance related problems of employees. Audit will help in following improvements and
reviews:
1. A 90-day written standard performance evaluation form,
2. An annual written standard performance evaluation form,
3. A performance management/performance improvement plan,
4. A description of the company’s policy for both voluntary resignation and company-
initiated termination,
5. Wage and salary administration program,
6. Bonus/stock option criteria.
Safe work environment
Audit practices may also help the companies to know about factors that contribute to a safe
work environment. A company may choose to develop an audit sheet tailored to a particular
issue, such as the company’s zero-tolerance policy for harassment. For example, a company
may wish to review and evaluate its practices of dealing with inappropriate harassing
behavior in its workplace.
Auditing workplace behaviors that support legal compliance
A safe, dignified, and respectful work environment is not only mandated by the law, but also
increases motivation and productivity of the employees. An example of review of business
practices used to deal with allegations of harassment safe working environments should be
considered especially for the females in the offices so as to make them feel confident and
concentrate on work is shown as under:
Q4. Explain the different types of competencies with examples.
Competency Mapping
Competency mapping forms an excellent tool for optimizing the human capital. HR auditors
should make sure that they identify the key competencies for an organization or a particular
position in an organization, and using it for job evaluation, recruitment, training and
development, performance management, succession planning, etc. the organization
effectively communicates what it actually expects from them.
The competency framework serves as the bedrock for all HR applications. As a result of
competency mapping, all the HR processes like talent induction, management development,
appraisals and training yield much better results.
Competency mapping involves identifying the competencies that will be needed by people
working in an organization. The level of competency needed by employees at each level
must also be specified. This depends on the type of job they do and the environment in which
the organization functions. Once this is identified, the remaining process becomes easier. The
next step will be to match the existing level of competencies with what is actually required,
and take measures to bridge the gap.
“Can a round peg fit a square hole? So can’t a wrong employee in a right organization.”
The future of an organization lies with the people working there. The organization will have
to find a correct person who will fulfill its expectations or will have to chisel and shape up the
existing employee to fit its expectations. The more efficient they become in facing the
demands of the environment, the more effective will be the organization.
Now let us go through certain core competencies for the professionals, behavioural aspects
associated to each of t hem, and elements pertaining to each of them.
1. Communication Skills: This does not necessarily refer to the English speaking skill. There
are various factors leading to effective communication. For details refer to Table 10.1.
Table 10.1: Communication skill as a core competency
2. Interpersonal Relationship Building Ability: This deals with how well a person is able to
socialize and make a close bond with others around him. The behavioural aspects and
elements related to interpersonal relationship building ability re discussed in Table 10.2
Table 10.2: Interpersonal Relationship Building Ability as a core competency
3. Negotiating Ability: The need for this skill arises when two or more parties argue on a
common issue and each party want a conclusion on it prefers. The behavioural aspects and
elements related to negotiating ability are discussed in Table 10.3.
Table 10.3: Negotiating Ability as a core competency
4. Critical Thinking Ability: The business environment is full of uncertainties and surprises.
One must have the ability to think and act under unforeseen and critical situations. The
behavioural aspects and elements related to critical thinking ability are discussed in Table
10.4.
Table 10.4: Critical Thinking Ability as a core competency
5. Data Management Ability: The documents and files possessed by a company are of great
importance. The information has to be managed effectively. The behavioural aspects and
elements related to data management ability are discussed in Table 10.5.
Table 10.5: Data Management Ability as a core competency
6. Forecasting Ability: As already said, the business environment is highly uncertain. One
has to possess the ability to foresee future changes and competitions. The behavioural aspects
and elements related to forecasting ability are discussed in Table 10.6.
Table 10.6: Forecasting Ability as a core competency
7. Creativity: It is not only the quality of the product that plays a role in the market. It is also
how different our products are compared to that of our competitors, which attracts our
customers. This requires creativity. This will also bring about a huge difference in the way
regular day-to-day activities are carried out. The behavioural aspects and elements related to
creativity are discussed in Table 10.7.
Table 10.7: Creativity as a core competency
8. Business Environment Understanding: Success is possible in business only if proper
understanding and analyses of the happenings of the business environment is made. The
behavioural aspects and elements related to business environment understanding are
discussed in Table 10.8.
Table 10.8: Business environment understanding as a core competency
9. Coordination/Partnership Skill: Any business cannot survive if people were to work as
individuals. It requires people of one department to coordinate and work with people of other
department. Also people of the same department must be able to coordinate among
themselves and also with external environment. The behavioural aspects and elements related
to coordination/partnership skill are discussed in Table 10.9.
Table 10.9: Coordination/Partnership Skill as a core competency
10. Instruction Following Ability: However flat today’s organizations have become; there
still exists a certain amount of hierarchy. Employees must be able to receive orders from their
superior and execute the instructions correctly. The behavioural aspects and elements related
to instruction following ability are discussed in Table 10.10.
Table 10.10: Instruction Following Ability as a core competency
11. Knowledge Updating: Any employee must be in a position to update his/her knowledge
with regard to the happenings of the outside world. This is absolutely necessary for servicing
in today’s business environment. The behavioural aspects and elements related to knowledge
updating are discussed in Table 10.11.
Table 10.11: Knowledge Updating as a core competency
12. Presentation Skill: Employees in any organization will have to present their reports or
analyses to people within the organization and also the others outside. The behavioural
aspects and elements related to presentation skill are discussed in Table 10.12.
Table 10.12: Presentation skill as a core competency
13. Analyzing/Problem Solving Ability: When faced with unexpected situations, the
employee must be able to tackle it. In case any problem arises; the employee must be able to
solve it. The behavioural aspects and elements related to analyzing/ problem solving ability
are discussed in Table 10.13.
Table 10.13: Analyzing/ Problem solving ability as a core competency
14. Counseling Ability: When employees have some problem, naturally their performance in
the organization goes done. The problem could be in their personal life or in the organization.
Whatever be the case, the employees require a good counselor who can lend their support to
the employees with problems. The behavioural aspects and elements related to counseling
ability are discussed in Table 10.14.
Table 10.14: Counseling ability as a core competency
15. Other Competencies: Apart from these competencies, there are others that are specific to
the job done. The requirements of those competencies vary depending upon the time and
situation. Those skills are:
- Financial forecasting ability
- Customs handling ability
- Computer knowledge
- Customer handling ability, etc.
While preparing the report of HR audit, you must always analyse first if all the above
discussed core competencies have been taken an account of or not. The elements related to
each of the competency should have been duly adhered to and the behavioural aspects should
have been properly marked.