1 Human Resource Audits

2 Human Resource Audit? A human resource audit evaluates the personnel activities used in an organization. The audit may include one division or entire company. It gives feedback about : The function of operating managers. The human resource specialists. How well managers are meeting their human resource duties. In short, the audit is an overall quality control check on human resource activities in a division or company and how those activities support the organization’s strategy

3 Benefits of A Human Resource Audit Identifies the contribution of the personnel departments to the organization Improves professional image of the personnel department Encourages greater responsibility and professionalism among members of the personnel department Clarifies the personnel department’s duties and responsibilities Finds critical personnel problems

4 The Scope of Human Resource Audits Audit of Corporate Strategy Corporate Strategy concerns how the organization is going to gain competitive advantage. Audit of the Human Resource Function Audit touches on Human Resource Information System, Staffing and Development, and Organization Control and Evaluation. Audit of Managerial Compliance Reviews how well managers comply with human resource policies and procedures. Audit of Employee Satisfaction To learn how well employee needs are met.

5 Audit of Corporate Strategy Human resource professionals do not set corporate strategy, but they strongly determine its success. By assessing the firm’s internal strengths and weaknesses and its external opportunities and threats, senior management devises ways of gaining an advantage, such as : stresses superior marketing channels, low-cost production, etc. Understanding the strategy has strong implications for human resource planning, staffing, compensation, employee relations, and other human resource activities

6 Audit of the Human Resource Function Human Resource Information System Human Resource Plans : Supply and demand estimates; skill inventories; replacement charts and summaries Job Analysis Information : Job standards, Job descriptions, Job specifications Compensation Management : Wage, salary, and incentive levels; Fringe benefit package; Employer-provided services

7 2. Staffing and Development Recruiting : sources of recruits, availability of recruits, employment applications Selection : selection ratios, selection procedures, equal opportunity. Training and development : orientation program, training objectives and procedures, learning rates Career development : internal placement, career planning program, human resource development efforts

8 3. Organization Control and Evaluation Performance appraisals : standards and measures of performance, performance appraisal techniques, evaluation interview. Labor-Management Relations : Legal compliance, management rights, dispute resolution problems. Human Resource Controls : employee communications, discipline procedures, change and development procedures,

9 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 these activities. Prepare a report commending proper objectives, policies, and procedures. Develop an action plan to correct errors in each activity. Follow up the action plan to see if it solved the problems found through the audit.

10 Audit of Managerial Compliance Compliance with laws is especially important. When safety, compensation, or labor laws are violated, the government holds the company responsible. If managers ignore policies or violate employee relations laws, the audit should uncover these errors so that corrective action can be started.

11 Audit of Employee Satisfaction Employee satisfaction 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 audit team gathers data from workers. The team collects information about wages, benefits, supervisory practices, career planning assistance, and other dimensions of job

12 Research approaches to audits 1. Interviews with employees and managers are one source of information about human resource activity. Employees and managers comments help the audit team find that need improvement. Another useful source of information is the exit interview. Exit interview are conducted with departing employees to learn their views of the organization.

13 2. Questionnaires/surveys Because interviews are time-consuming, costly, and often to only few people, many human resource departments use questionnaires. Through questionnaire surveys, a more comprehensive picture of employee treatment can be developed. Questionnaire may also lead to more candid answers than face-to-face interviews. - employee attitude about supervisors - Employee attitude about their jobs - Perceived effectiveness of human resource department

14 3. Historical analysis Not all the issues of interest to human resource audit are revealed through interviews or questionnaires. Sometimes insight can be obtained by an analysis of historical records, such as: - Safety and health records - Grievances records - Compensation studies - Scrap rates - Turnover and absenteeism records - Selection records - Training program records

15 4. External information Outside comparisons give the audit team a perspective against which their firm’s activities can be judged. Through Department of Labor, industry association, professional association numerous statistics and report are compiled. These organizations regularly publishes information about future employment opportunities, employee turnover rates, work force projection, area wage and salary survey, work force demography, accident rates, and other data that can serve as benchmark for comparing internal information.

16 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 effective. 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.

17 Report for line managers How line managers handle their duties such as: Interviewing applicants Training employees Evaluating performance Motivating workers Satisfying employee needs The report also identifies people problems. Violations of policies and employee relations law are highlighted

18 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 policies 5. Workers pay dissatisfaction

19 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 HRD A review of HRD plans Human resource problems and their implication Recommendations for needed changes and priorities for their implementation