Human Resource Audit

Human Resource Audit or HR audit is a systematic survey and analysis of different HRD functions with a summarized statement of findings and recommendations for correction of deficiencies. It examines and evaluates policies, procedures and practices to determine the effectiveness of HRD function in an organization. HRD audit ensures that sound and cost-effective policies are implemented.

Human resource audit refers to the checking of the performance of the enterprise in its management of human resources. Human resource audit reveals how the management is doing in getting things done through the efforts of its people. It undertakes a systematic research of the effectiveness of the human resource programmes. It evaluates personnel activities of an organization. It acts as an overall quality control, check on human resource function. During the  conduct of audit if any deficiency is discovered, steps are taken to remove it. It reviews the effectiveness of management relating to the:

  1. Measurement of the effectiveness of human resource programmes and activities, and
  2. The determination of what should or should not be done in the future as a result of such measurement.

Seybord G. in his work “Studies in Personnel Policies” says “Human resource auditing refers to an examination and evaluation of policies, procedures and practices to determine the effectiveness of human resource management. It helps the personnel department to determine what should be done and what should not be done in future”.

Extending the general meaning of auditing to the field of human resource management, human resource auditing may be defined as the analysis and evaluation of personnel policies, procedures and practices to determine the effectiveness of personnel/human resource management in an organization. In other words, human resource audit is a periodic review to measure the effectiveness of personnel management and to determine the steps required for more effective utilization of human resources.

Objectives of HR Audit

The important objectives of human resource audit are as follows:

1. To review the whole organizational system of human resource practices, i.e., acquiring, developing, allocating and utilizing human resources in the organization.
2. To analyze the factors involved in HRD and develop a statement of findings with recommendations for correcting deviations, if any, on the following issues:

  • The extent of deviation from HRD policies
  • To what extent objectives are spelt-out
  • To what extent performance standards have been established

3. To seek explanations and information and answers to all such above questions as: What happened? Why did it happen?
4. To evaluate the effectiveness of various personnel policies and practices.
5. To evaluate the extent of implementation of policies by line managers and the operational problems faced by them in implementing HRD policies.
6. Evaluating the personnel staff and employees.
5. Knowing how the various units are functioning and how they have been able to meet the policies and guidelines, which were agreed upon.
6. To study the current manpower inventory and identify shortfall or excess, if any.
7. To modify the existing human resource practices to meet the challenges of personnel/human resource management.
8. To assist the rest of the organization by identifying the gap between objectives and results.
9. To formulate plans for correcting deviations if any.

Scope of HR Audit

Every time the scope is to be decided. The scope of human resource audit is very wide. It represents the encompassing approach. It assumes that the management of human resources involves much more than the practice of recruiting, hiring, retaining and firing employees. In other words, human resource audit is interested in all the programmes relating to employees regardless of where they originate. In this way, the areas personnel audit includes are recruitment, selection, job analysis, training, management development, promotions and transfers, labor relations, morale development, employee benefits, wage and salary administration, collective bargaining, industrial relations and communication. Further, the areas like leadership, grievances, and performance appraisal and employee mobility are also included within the scope of human resource audit.

For integration of personnel management with HRD functions, HRD audit now encompasses all the areas like review and integration of corporate mission, goals, policies and objectives, manpower planning, career planning and development, and transfer policies, performance appraisal systems, training and development functions, recruitment and selection, etc.

Importance of HR Audit

To keep pace with the changing environment, the importance of periodic HRD audit has increased in recent years. The past economic restructuring programme of the Government of India, as discussed earlier, prompted the need for restructuring of the organization, which, inter alia, calls for restructuring of production, manpower, strategies, management practices and philosophies, etc. All such possible reasons for periodic HRD audit can be enumerated as follows:

Technological changes, inter alia, are calling for renewal of knowledge and skills of existing manpower. Training function, therefore, has assumed importance. Periodic HRD audit can help to identify the changing training needs and development of new training modules for effective utilization of manpower.

To keep pace with the environmental changes, management philosophy and practices at the organizational level also need to be changed, like participative management (through quality circles and value engineering team), employee empowerment, total employee, involvement, etc. Need for all these can be understood only when we periodically undertake HRD audit.

Similarly, changing role of trade unions (which are now more Proactive), Government (which is now more liberal), emergence of new working class (who are more enlightened), emergence of international quality system requirements (which call for scientific documentation of different corporate functions and infuse attitudinal changes), changing expectations of customers (which call for more customer orientation), new statutory requirements (pollution control), etc., are now influencing HRD functions at the corporate level, the effectiveness of which can only be understood by conducting periodic HR audit.

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