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HRD Audit

Submitted to: Presented by:


Prof. Sanjay Kaushik Akash Arora
Dushyant Raj
Verma
Ishita Sood
Mohit Goyal
HRD & Audit
HRD- framework for helping employees develop
their personal and organizational skills,
knowledge, and abilities.
employee training
employee career development
performance management and development,
coaching

Audit- evaluation of a person, organization,


system, process, enterprise, project or product.
What is HRD Audit?
HRD Audit is a comprehensive evaluation of the
existing HRD
Structure,
Strategies,
Systems,
Styles,
Skills / Competencies
Culture
and their appropriateness to achieve the short-term
and long-term goals of the organization.
Objectives
To determine the effectiveness of management
programs
Develop a statement of findings with
recommendations for correcting deviations
To study the current manpower inventory
Bench-marking for improving HRD practices.
Why Do Most Companies Want HRD
Audit?
Change of Leadership
To make HR function business-driven
For growth & diversification
Audit approaches
HRD Audit requires the use of a number of
methods for HRD Audit. Following are the
methods

Individual interview
Analysis of records and Secondary data
Work shop
Questionnaire methods
Observation
Interview method
Top management and senior management
Working style and organisational culture
Goals and readiness to pursue them
Representative employees
Vision
Mission
Culture
SWOT
Questionnaire Method
Q must be reliable and valid
Provided to a representative sample
Questionnaire assess
Competency of HRD staff
Line managers style
Implementation of HRD systems
Observation method
Observation in the natural environment
Canteen
Training centers
Residential colony
Workplace
Analysis of records and Secondary data
Secondary data
Training programmes conducted
Frequency of the programmes
Duration of training
Evaluation of training
Manner of assessment of training needs
Workshop method
Large number of employees
Gathered into a single room
Divided into groups
SWOT Analysis conducted on different
dimensions of HRD by each group
Presentation by each group
Discussion and suggestions
HRD SCORE CARD
T. V. Rao introduced the
concept of HRD Score Card
in 1999.

It measures the maturity


level of an organisation.

It is based on a variety of
assumptions and considers
research based
understanding gained in
last few decades regarding
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HRD.
HRD Audit | Human Resource Management
The Maturity Level of an
Organisation is indicated by
following factors:
HR Competencies of the
HRD System Maturity employees including the HR
Department

HRD influence on the


HRD Culture of an
business goals or business
organisation
linkages of HRD.

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Name of the Organisation ABC

HRD HRD Business Overall HRD


HRD Culture
System Competenc Linkage Maturity
Grade
Maturity e Score Grade Rating

B* C B* B B*C B*B

Score: A* Highest Score & Highest Maturity Level


A Very high Maturity Level
B*, B, C*, C, D*, D and so on to
F Not at all present
U Ungraded

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The HRD systems maturity assesses the extent
to which various HRD subsystems and tools are
well designed & are being implemented

1. The systems should be appropriate and


relevant to business goals
2. It should focus on current and future needs of
the corporation.
3. The HRD strategies and systems should flow
from the corporate strategies

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The HRD systems maturity assesses the extent
to which various HRD subsystems and tools
are well designed & are being implemented

4. The systems should be well designed and


should have a structural maturity.
6. The subsystems should be well integrated
and should have internal synergy.
7. They should be adequate and should take
care of the HRD requirements of the
organisation

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ASSUMPTIONS

Competent and motivated employees are


needed to provide quality products and services
at competitive rates and ways that enhance
customer satisfaction.

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HRD System Maturity
Score
Competencies and Commitment can be
developed through appropriate HRD
mechanisms. In a HRD organisation there will be
well developed HRD systems.

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HRD Competence Score
HRD Competencies of the HRD department and
the line managers play a significant role in
implementing the systems and processes in ways
that could ensure employee satisfaction,
competence building and customer satisfaction
linkages. The competencies of the staff and the
other employees can be measured in terms of
an index.
HRD Culture
Stephen P. Robbins, (1986) stated that Organisational Culture is a
relatively uniform perception held of the organisation, it has
common characteristics, it is descriptive, it can distinguish one
organisation from another and it integrates individual, group and
organisation system variables

Values and processes created by the HRD tools, staff and


their styles also play a crucial role in building sustainable
competencies in the organization. These need to be
measured and monitored. It is possiblein some
corporations (for example small corporations) to have very
little of HR systems and yet have a high level of HR
competencies and HR culture. In the traditional family
owned organizations in those years where there were no
systems approaches there used to be good degree of HRD
HRD Audit | Human Resource Management
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culture, which has resulted in effective functioning and
HRD Business Linkage Score

Business linkages of HRD are very crucial component


of HRD effectiveness. HRD systems, competencies
and the culture must be aligned with the business
goals of the corporation. The alignment could be
ensured through the direct linkages with customer
satisfaction and employee motivation indices.

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HRD Business Linkage Score

Business linkages of HRD are very crucial component


of HRD effectiveness. HRD systems, competencies
and the culture must be aligned with the business
goals of the corporation. The alignment could be
ensured through the direct linkages with customer
satisfaction and employee motivation indices.

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ROLE OF HRD AUDIT IN BUSINESS
IMPROVEMENTS

Improvements in HRD systems


Increased focus on human resources and human
competencies
Better recruitment policies and more professional staff
More planning and more cost effective training
Strengthening accountabilities through appraisal
systems and other mechanisms

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ROLE OF HRD AUDIT IN BUSINESS
IMPROVEMENTS
It can get the top management to think in terms
of strategic and long-term business plans
Changes in the styles of the top management
Role clarity of the HRD department and the role
of line managers in HRD
Improvements in HRD systems
Increased focus on human resources and human
competencies
Better recruitment policies and more professional
staff
More planning and more cost-effective training
Streamlining of other management practices
The HR Audit Process: A Model
The general process of conducting an audit
includes seven key steps:

Determine the scope and type of audit.


Develop the audit questionnaire.
Collect the data.
Benchmark the findings.
Provide feedback about the results.
Create action plans.
Foster a climate of continuous improvement.
1. Determine the scope and type of
the audit
The audit team must determine exactly which areas
to target for review.
If the organization has never audited its HR
function, or if significant organizational or legal
changes have recently occurred, the audit team
may want to conduct a comprehensive review of all
HR practice areas.
On the other hand, if concerns are limited to the
adequacy of a specific process or policy, the audit
team can focus its review on that particular area.
Compliance, Best practices, Strategic or
Function-specific.
2. Develop the audit questionnaire

Whether conducting a comprehensive audit or


an audit of a specific practice, the audit team
should invest sufficient time in developing a
comprehensive document that elicits
information on all the subjects of the inquiry.

HR must develop a list of specific questions to


ensure that the questionnaire is complete.
3. Collect the data

This includes the actual process of reviewing


specific areas to collect the data about the
organization and its HR practices.

Audit team members will use the audit


questionnaire as a road map to review the
specific areas identified within the scope of the
audit.
4. Benchmark the findings
This comparison will offer insight into how the audit
results compare against other similarly sized firms,
national standards or internal organizational data.
Typical information that might be internally
benchmarked includes the organization's ratio of
total employees to HR professionals, ratio of dollars
spent on HR function relative to total sales, general
and administrative costs, and cost per new
employee hired.
National standard benchmarking might include the
number of days to fill a position, average cost of
annual employee benefits and absenteeism rates.
5. Provide feedback about the
results
At the conclusion of the audit process, the audit team
must summarize the data and provide feedback to the
organization's HR professionals and senior
management team in the form of findings and
recommendations.
Findings are typically reduced to a written report with
recommendations prioritized based on the risk level
assigned to each item (e.g., high, medium and low).
In addition to a formal report, the audit team should
discuss the results of the audit with employees in the
HR department, as well as with the senior management
team, so that everyone is aware of necessary changes
and that approvals can be obtained quickly.
6. Create action plans
It is critical that the organization actually
todosomething with the information identified
as a result of an audit.

The organization must create action plans for


implementing the changes suggested by the
audit, with the findings separated by order of
importance: high, medium and low.

Conducting an audit and then failing to act on


the results actually increases legal risk.
7. Foster a climate of continuous
improvement
HR leaders must engage in constant observation and
continuous improvement of the organization's policies,
procedures and practices so that the organization never
ceases to keep improving.
This will ensure that the company achieves and retains its
competitive advantage.
Continuously monitor HR systems to ensure that they are
up-to-date and to have follow-up mechanisms built.
One approach is to designate someone on staff (or an
outside consultant) to monitor legal developments to ensure
that HR policies and practices are kept current.
Identifying problematic issues, growth areas or declining
problem spots can help in the decision of where to allocate
time, money and preventive training resources in the future.
How should it be conducted?
The audit process consists of a series of questions
covering the eight primary components of the HR
function:
Roles, head count, and HR information systems
(HRIS)
Recruitment
Documentation
Training, development, and career management
Compensation and benefits
Performance measurement and evaluation
Termination and transition
Legal issues and personnel policies
Auditing HR Practices of Public and
Private Companies
Objective is to audit the HR system in BSNL and Reliance
Communication.
BSNL
BSNL faced many financial and people management problems.
KPMG, a global management consultant firm was appointed.
The following are few of the recommendations of the HR audit
process to the company. The company was advised to
Prepare man power planning and manuals.
Formulate a recruitment policy to give a definite direction to
the process of recruitment to its different cadres.
The Company should formulate a well-defined, fair and
transparent transfer policy based on the consultants
recommendations
Auditing HR Practices of Public and
Private Companies
Reliance Communication- It was found that:
The working culture of Reliance Communication is
difficult for the employees to adopt and they need
minimum 3 years to adopt themselves to the
organization culture. To avoid this problem,
orientation training to the freshers will be helpful.
Some issues related to the HR system such as
poor incentives causes low level of dissatisfaction
among employees which needs to be looked
upon.
Aditya Birla Group is focusing on critical
HR areas while auditing
For Aditya Birla Group, the focus is on institutionalizing and
embedding audit and review procedures within the job
HR audit processes begin with self assessment or review; it
then goes into more granular elements of process that
cover aspects ranging from design, technology sufficiency,
output and desired impact. The driving emphasis is on
adequacy of resources, capability and awareness.
Employee engagement is critical to a conglomerate that is
the size of ABG. And there is a comprehensive survey
called vibes that is conducted every alternate year to
capture the employee experience. The feedback received
by employees is discussed at local and management levels
and action plans drawn up in consultation with employees.
HRD AUDIT AS OD
INTERVENTION
The nature of interventions undertaken by the HRD departments
include:
Cultural change through new performance management systems
TQM based interventions (in most cases these are undertaken also
by a separate group of professionals)
Survey Feedback
Role clarity and Role negotiation exercises
Training
Career Planning and Succession exercise
Assessment Centres and promotion policies
Visioning and value clarification exercises
Performance coaching workshops
Team building interventions
The Academy of Human Resources Development has
come up with a concept of IOAC (Individual and
Organizational Assessment Centre) which is becoming
popular as an intervention by the HRD departments.

In this concept the HRD department establishes an


Assessment Centre with the purposes of assessing and
developing the competencies of Individuals as
Individuals. Individuals in relation to their current and
future Roles, Dyadic relationships, teams, Inter-team
collaboration and work and Organizational Climate and
Synergy.
Experiences from Some Organizations
A great deal of work has been done in India regarding the use
of HRD Audit as an OD intervention and is a unique feature of
Indian organizations. The author's experience in initiating OD
with the aid of HRD audit has shown the following results:
Performance appraisal and job rotation are the two most
frequently affected changes.
In a few companies it has resulted in the formulation of clear-
cut policies including promotion policy, communication policy,
reward and recognition policy, etc.
Drawn their attention to issues like developing trust,
collaboration, teamwork, quality orientation etc.
Resulted in more role clarity and direction to the employees in
terms of their work leading to higher level of role efficacy
Results of a Research Study :
Jomon (1997) conducted a research study to identify the factors
influencing the use of audit as a change tool. He studied four
organizations that have got them audited. They were studied about
three years after the first audit. He tried to assess the influence of
the following variables in the effective use of HRD Audit:

Management styles
Organizational characteristics
Profile of the HRD Department
Competency levels of HRD department
CEO commitment
HRD Chief's commitment
HRD system improvement
Findings of the Study by Jomon
(1998)
1. There is a direct relationship between the CEOs
commitment towards HRD and the effectiveness of the
HRD function.
2. An interesting revelation was that in all four
organizations, the CEO was rated higher than the HRD
Chief in commitment towards HRD. The reason for this
could be that many communications announcing new
ideas, the CEO signed practices & systems to be put into
effect. This also ensured a greater acceptability by the
members of the organization.
3. There is however a direct relationship between the
ratings of the HRD Chief in
commitment towards HRD and the effectiveness of the
HR function.
4. Management styles also show a high degree of
Contd
5. In terms of Organization characteristics:
a. Middle aged organization (Est. between 1970-1990) as
compared to old or young organizations.
b. Professionally run private organizations as compared to
family owned organizations or closely held MNCs.
c. Service companies as compared to their manufacturing
counterparts.
d. Organizations with a flat structure as compared to those
hierarchical in nature.
e. Medium sized organizations (with 20-40 Departments and
between 1000 to 2000 employees) as compared to that
very large or very small.
g. Organizations where management systems were in
the process
of being setup as compared to those with a well-
established management system.
h. Organizations with participative and proactive
unions
undertaking developmental activities had better HRD
Practices
for Workers.

Organizations with employee development budgets as


compared
to those with no such allocation.
Organisations that Have done HRD
Audit

Aditya Birla Group has been doing it for the last


8 years
Rajashree Cement, Vikram Cement, Hindalco, Indo-
Gulf Fertilisers, Gwalior Grasim, Harihar Fibres etc.
L&T, Crompton Greaves
Gujarat Guardian
Gujarat Gas
Apollo Tyres
Alexandria Carbon Black
Organisations that Have done HRD
Audit (contd.)
Godrej Soaps
GVFL
BPL
Tyco International
Gati Cargo Management Services
Wokhardt Hospitals
For detailed list visit
http://hrdaudit.org/detail.php?pageid=83
The State of HR Audit In India (Key
Findings)
8 out of 10 companies routinely go for HR Audit
96% of the companies do not have dedicated
resources for HR auditing, they are either done
by external auditing agencies or internal audit
teams
In 80% of the organizations HR audit is
conducted to check compliance with established
regulations and/or company policies.
Only 52% perform HR audit to have an early
warning system
References
Jothilakshmi M (2015) HR Audit: Auditing HR Practices of
Public and Private Companies. Arabian J Bus Manag Review
5: 148. doi:10.4172/2223-5833.1000148
Ukil, M. I. (2015). ESSENCE OF HUMAN RESOURCE AUDIT: AN
ANALYTICAL STUDY. Journal of Management and Science .
http://www.citehr.com/184468-suraj-asks.html
http://www.younghrmanager.com/the-importance-and-
benefits-of-human-resources-audits
https://www.peoplematters.in/article/strategic-hr/aditya-
birla-group-focusing-critical-hr-areas-while-auditing-13092
Human resource management- Seema Sanghi.
Human resource management- Aswathappa.
References
Strength Based HRD Audit as an OD Intervention
by TV Rao
https://www.peoplematters.in/video/strategic-hr/c
ompliance-excellence-state-hr-audits-india-13395
Jomon, M. G. (1998). The effectiveness of HRD
audit as an OD intervention. Unpublished note
prepared for TV Rao Learning Systems,
Ahmedabad, India.
http://mbastudymaterial4u.blogspot.in/2011/07/co
ncept-of-hrd-audit-process-of-hrd.html
http://www.whatishumanresource.com/Human-
Resource-Auditing-process

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