Human Resource Audit

Human resource audits are an important means of analyzing HR policies and practices so as to avoiding legal and/or regulatory liability arising from it. HR audit includes systematic verification of each job and design, then identifying issues and finding solutions to problems before they become unmanageable. It include each and every department of an organization and suggests beat practices that can be followed. HR audit includes analysis of placement, training and development, performance appraisal, participatory management, job evaluation, trade unionism, employee recruitment and selection, safety and health, industrial relation and their disputes, orientation and executive remuneration, motivation and morale, communication, welfare and social security. The organizational goal can be achieve if HR audit is applied in a systematic way. Hence HR audit is an most important tool which helps to know the efficiency of HR functions within an organization.

The HR audit most vital purpose is to reveal the strengths and weaknesses of an organization with major focus on the human resources system, and provide assistance if any issues arises and needed resolution. Analyzing and improving the HR function in the organization considered to be the best outcome of HR audit. The HR audit process is not a prescriptive instrument rather it's a diagnostic tool, which helps in identifying the major component that are missing or need to provide improvement. HR audit helps in realizing company's goals and objective and lead to over all development of HR department and initiates utilization of full potential of HR functional.

Approaches of HR audit

The five major approaches of HR audit in any organization these are as follows-Comparative approach, Outside authority, Statistical Compliance approach and Management By Objectives(MBO).

Comparative approach-In this Competitor Company is identified as the model for analyzing by the auditors. The Model Company/ industry are used to compare the results with their own organization.
Outside authority approach-In this, outside consultant are being set as a benchmark standard by the auditors for comparing their own organization's results.
Statistical approach-Under this statistical method is applied to analyzed the growth, drawbacks and expectation of each job and department.
Compliance approach-In this, auditors focus on the application of legal requirement, industry policies and procedures. They even review the past actions so as to calculate whether those activities of HR functional complies with legal and industrial policies or not.
Management by objectives (MBO) approach-To achieve final decision about industry's actual performance with the set objectives MBO approach is applied. In this approach specific goals are presumed against which performance can be measured in any organization.

Scope of HR audit

Scope of HR audit is very much broad in nature. It should evaluate the personnel function, the use of its procedures by the managers and the impact of these activities on the employees. It covers the following HR areas--

Audit of HR function This involves audit of all HR activities. For each activity, auditor the objective of each activity must be determine, Analyze the performance and identify who is responsible for existing drawbacks, all performance is reviewed, gives direction to follow up the action plan so as to correct deviation..
Audit of managerial compliance-Audit of managerial compliance involves a wide range of analyses of all personnel policies, procedures and legal laws working in any organization. Further details of these information is analyse to access how effective they have been and provide corrective measures if faults arises.
Audit of HR climate-The HR climate is very important element within any organization, it has huge impact on employees motivation, morale, performance and hence affecting the overall turnover of that specified organization. The HR climate can be studied from the employees attitude, turnover and absenteeism.
Audit of corporate strategy- HR professionals do not assume corporate strategy rather they work on detrimental areas and attain success. Corporate strategy promotes competitive advantages within any organization. Top management regulates the usage of SWOT analysis and derives the methods of gaining advantage. HRM is always affected. When the company stresses advanced marketing channels, innovation, service or some other approach.

Benefits of HR audit

The team that is responsible for the audit should represent a cross-section of the organization’s staff, including line staff, middle and upper management and those responsible for HR functions. It provides the various benefits to the organization. These are-

Motivates the top management to act in terms of strategic and long-term business plans.
Clarifying the function and role of the HR department along with line managers in human resource development.
HRD audit identifies the strengths and weaknesses in the some of the management systems existing in the organization.
Promotes better recruitment policies along with more professional staff.
One of the major aims of human resource department is to promote learning organization. A learning culture induced in top managers of the company to exhibit a human resource department style of management.
The human resource department audit has been proved effective in many organizations concerning the effectiveness of their HR systems and after analyzing audit aims at designing and re-designing the HR systems.
More planning so as to promote more cost-effective training.
Increased focus on to promote human resources and human competencies.
HRD audit has discovered out to the linkages with many developmental program such as TQM which helped in growth of an organization.

HR audit process

The HR audit process is conducted in different phases. Each phase is designed to build upon the preceding phase so that the organization will have a very strong overview of the health of the HR function, at the conclusion of the audit. These phases include-

Pre-audit information-This phase includes the obtaining and reviewing of relevant HR handbooks, manuals, forms, reports and other information. A pre-audit information is provided to the client who compiles the necessary information for review conducted by auditors.

Pre-audit self-assessment-In order to maximize the time consumed during certain portions of the audit promotes a pre-audit self-assessment. This is sent to the client so that he can utilize it very well. It includes self-administered yes/no questionnaire which includes a number of questions about contemporary HR policies and practices within any organization. Once this self-administered questionnaire get completed by asking all details, auditors focuses to identify key areas involved during the HR audit.
On-site review-This phase includes an on-site visiting by auditors. Auditors emphasis on interviewing staff focusing the core areas of HR policies and practices within any organization. It promotes very in-depth HR audit checklist so as to facilitate solution to the existing problems.
Records review-During this on-site visit, a review is conducted separately on HR records and postings related information. Each employee personnel files are randomly checked including disciplinary actions, compensation, employee claims, grievances and other important HR associated details are being checked.
Audit report-All information collected is now proceeded to form an HR audit report. The audit report in this stage is now categorized into three well defined areas i.e. the areas that are urgent and important(UI), not so much urgent but need focus(NUI), and important opportunities needs(IO). Hence by this classifications managements are able to find area of major concern and can prioritize their steps.
The critical areas- The elaborated HR audit includes all major areas of HR management such as recruitment practices, relations, health, safety, training and development, compensation benefits, employee and union relation and others important factors like budget planning etc. Beside analyzing each area in very systematic way focus is paid on providing laws and better policies for over all HR manpower and functional development.
Preparation for an auditor engagement-It is advisable to provide terms in writing clarifying and agreeing on scope If external firm given the charge of conducting the audit. While using internal resource it is advised to appoint them on formal basis providing clarity on scope and initiate selection of persons whose conduct are non political or those who are not placed within top management. When internal persons are conducting auditing then these auditors must be well trained so as to provide required solution. Apart from this all auditors must have been provided with relevant information included in employee files and other confidential files and documents of the organization. Even auditors who once have signed the agreement for confidentiality must be provided unrestricted access to all records.
Gathering of data-In this phase all the gather information from self -assessment is determined and and process is focused towards preparing final audit reports.
On-site access-The on-site portion of the audit is the most critical as it focus on rechecking of collected data with practical facts and achievements and failure of any organization.
Presenting audit findings-Now this is last stage and the final audit has been presented. All critical and string areas have been brought to notice and now solution is provided for this specific situation for overall organization development. The major three solution are as follows-
- Action plan is prepared for fulfilling the requirement of HR department.
- With the help of internal expertise each and every area of major concerned is provided with best answers.
- Focuses on Contracting out certain function to external agents when internal expertise fails to act as needed.

Conclusion

An HR audit can be compared to an annual health check, It performs the same function for the organization. Hence HR audit is very much required for evaluating the real status of any organization. In HR audit all core areas of the organization is analysed and feedback is taken by the auditor both from files and on-site reviews, hence It initiates a systematically reviewing of all segments of human resources. Further HR audit focus on area of weakness and strength and provide solution to it. The key to an audit is that it discover and rediscover the potential areas within organization and promote its growth. Hence HR audit is part and parcel of every organization and its detrimental to arising complexities within any organization. The systematic application of HR audit promotes overall development of any organization.