AUDITIAUDITING HR FUNCTIONS

INTRODUCTION

•      Personnel records and reports provide information regarding the use of human resources in an objective way. However, in most cases this is not sufficient. A critical evaluation of manpower programs might be required to find out the areas where improvements are needed and to set things in order. In place of informal impressions gathered and summarized through records and reports, a systematic and analytical search is made to find out the effectiveness of personnel management.

•      According to Seybold, personnel audit refers to an examination and evaluation of policies, procedures and practices to determine the effectiveness of personnel management.  Personnel audit covers basically three things:

•      1. Measurement and evaluation of personnel programs, policies and practices;

•      2. Identification of gap between objectives and results; and

•      3. Determination of what should or what should not be done in future.

OBJECTIVES

•          The objectives of personnel audit are:

•      i. To review the organizational system, human resources subsystem in order to find ,out the efficiency of the organization in attracting and retaining human resources.

•      ii. To find out the effectiveness of various personnel policies and practices.

•      iii. To know how various units are functioning and how they have been able to implement the personnel policies, and to meet the challenges of personnel management.

•      iv. To review the personnel system in comparison with organisations and modify them

TYPES OF PERSONNEL RECORDS

•      Personnel records include the following:

•      i. Job application and test scores

•      ii. Job descriptions and job specifications

•      iii. Interview results

•      iv. Employment history

•      v. Medical reports

•      vi. Attendance records

•      vii. Payroll

•      viii. Employee ratings

•      ix. Training records

•      x. Leave records

•      xi. Accident and sickness records

•      xii. Grievances, disputes records

•      xiii. Contracts of employment

•      xiv. Records to be kept under various statutes

BENEFITS

•      The benefits of a human resource management audit may be summarized thus:

•      i. Identifies the contributions of the HR department.

•      ii. Improves the professional image of HR department.

•      iii. Encourages greater responsibility and professionalization among members of HR Department.

•      iv. Classifies the HR departments’ duties and responsibilities.

•      v. Stimulates uniformity of personnel policies and practices.

•      vi. Finds critical personnel problems.

•      vii. Ensures timely compliance with legal requirements.

•      viii. Reduces human resource costs.

SCOPE OF PERSONNEL AUDIT

•      The scope of personnel audit is very wide. It covers areas like personnel philosophy, policies, programs, practices and personnel results. The major areas of personnel audit include programming, forecasting and scheduling to meet organization and personnel needs.

•      The areas of recruitment, selection, careers, promotions, training and development also come within the scope of personnel audit. Further, the areas of leadership, welfare, grievances, performance appraisal, employee mobility, industrial relations are also included within the scope of personnel audit. The areas and levels of personnel audit are fairly exhaustive

HR AUDIT PROCESS

•      The personnel audit should probe much deeper, evaluating personnel policies, programs, philosophy, practices and concepts comparing with standards and with those of the personnel records of the said organization and other organisations. The level and the depth of the investigation should be decided in advance. The process of personnel audit, usually carried out through an attitudinal survey or by interpreting data, includes:

•      i. Identifying indices, indicators, statistical ratios and gross numbers in some cases.

•      ii. Examining the variations in time-frame in comparison with a similar previous corresponding period.

•      iii. Comparing the variations of different departments during different periods.

•      iv. Examining the variations of different periods and comparing them with similar units and industries in the same region.

•      v. Drawing trend lines, frequency distributions and calculating statistical correlations.

•      vi. Preparing and submitting a detailed report to the top management and to the managers at appropriate levels for information and necessary action.

•      Various personnel policies, procedures and practices can be evaluated by asking various Auditing HR Functions questions of the following type:

•      Various personnel policies, procedures and practices can be evaluated by asking various Auditing HR Functions questions of the following type:

•      1. What are they? (i.e., policies, procedures/ practices).

•      2. How are they established?

•      3. How are they communicated to various managers and employers concerned?

•      4. How are they understood by individual employers, supervisors and managers at various levels?

•      5. Are they consistent with the managements’ organizational philosophy and human resource management philosophy?

•      6. Are they consistent with the existing trends towards human resource management and research?

•      7. What are the controls that exist for ensuring their effective and uniform application?

•      8. What measures exist to modify them to meet the organizational requirements?

FREQUENCY OF AUDIT

•      Generally top management thinks of personnel audit only when serious crisis occurs like strikes, increase in the number and/or magnitude of grievances or conflicts, etc. This type of audit is just like post-mortem of the situation. But a regular program of auditing helps the management to find out some significant trends. The probability of some serious incidents hitting the organization could he visualized and some remedial steps could be initiated.

•      This ensures smooth running of an organization in addition to controlling stressful situations, crises and conflicts.

•      The management has to, therefore, arrange for regular annual audit of almost all the personnel policies and practices. Certain indicators like absenteeism and employees’ grievances should be audited at the end of every month/quarter depending upon the magnitude of the issues.

Types of Audit

•              Personnel audit may be done either by internal people or by external people. Internal audit is done by the employees in the personnel department. This kind of audit is called internal audit.

•      The audit may be conducted by external specialists or consultants in personnel management. This type of audit is called external audit.

Audit report

•              The audit has to examine the various personnel reports, personnel policies and practices. Then the auditor has to record his observations, findings, prepare a report compiling all these findings and advance useful recommendations for the improvement of personnel management practices. The auditor submits a written report of his findings, conclusions and recommendations. The most common elements of the report are given below:

•      i. Table of contents

•      ii. Preface

•      iii. Statement of the objectives, methodology, scope and techniques used.

•      iv. A synopsis containing the summary and conclusions of the audit that has been carried out.

•      v. A clear and in-depth analysis of the data and information, furnished area-wise or department-wise.

•      vi. Evaluation, discussions and analysis. This part covers findings and suggestions offered by the auditor.

•      vii. Appendix – this includes supporting data and information which is not necessary in the main part of the report.

•      viii. Bibliography – important books and journals which are necessary for future reading are also included at the end.

PROBLEMS IN HR AUDIT

•                      The rules, systems and regulations for financial audit are well developed. But it is very difficult to audit personnel policies and practices. Personnel audit involves comparison with past ratios, rates of turnover, expenditure etc., with those of other departments and organizations.

•      The organization by itself cannot be taken as standard for comparison and a decision arrived at. Hence, it is difficult to conduct the personnel audit. There may be a tendency to turn the survey into a fault-finding process. Every employee may then try to pass the buck. The audit may create more troubles than solutions.

•      The audit has to be done carefully. It must evaluate things in an objective way, find out what has gone wrong and suggest improvements. The emphasis must be on rectifying things rather than fault finding.

FUTURE OF HRM FUNCTION

•      Even in the most archaic factories of today, ‘job’ has evolved to mean work that’s more than just cutting or grinding a piece of metal. It means being able to operate more than one machine, self-maintain quality, read statistical charts and graphs and troubleshoot machine problems. The white-collar job has been transformed no less. The employee of a modern corporation no longer pushes paper from in-box to out-box. Instead, he must coordinate with all the constituents of the corporation (like suppliers, customers, and even other employees), communicate, analyze and make vital decisions—typically in that order.

•      Tomorrow, the order will change. Sophisticated infotech systems will automatically take care of the coordination and communication bit. It will even crunch mountains of discrete sets of information to throw up intelligent patterns.

•      The biggest challenge to the employee at Future Inc. would lie in the way he chooses to use that information. In other words, the worker @ futureinc.com would be a knowledge worker; in varying degrees, he or she would need to seek ways of constantly adding value to the task at hand. Employees would need to look at jobs as entrepreneurial assignments, and employers should treat them accordingly.

TO SUM UP

•      The major areas of personnel audit include programming, forecasting and scheduling to meet organization and personnel needs. The personnel audit should probe much deeper, evaluating personnel policies, programs, philosophy, practices and concepts comparing with standards and with those of the personnel records of the said organization and other organisations. Generally top management thinks of personnel audit only when serious crisis occurs like strikes, increase in the number and/or magnitude of grievance or conflicts, etc.

•      This type of audit is just like post-mortem of the situation. But a regular program of auditing helps the management to find out some significant trends. The white-collar job has been transformed no less. The employee of a modern corporation no longer pushes paper from in-box to out-box. Instead, he must coordinate with all the constituents of the corporation (like suppliers, customers, and even other employees), communicate, analyze and make vital decisions—typically in that order.