HR Audit, How to Conduct HR Audit, Human Resource Planning, MS-23

Explain the need and scope of HR audit. Assuming you are required to conduct an HR audit for your organization or any organization you are familiar with, discuss how you will conduct this. Briefly describe the organization you are referring to.

There are various reasons why companies want to undertake HRD audit, some of which have been
stated below:

1. To make the HR function business-driver:
HRD audit is undertaken by organizations to make HR systems and processes more relevant to business goals. Over a period of time business changes may have taken place for a variety of reasons including environmental changes. Organizational restricting, may have necessitated meeting the changing environmental demands and opportunities. Such changes should be accompanied by appropriate changes in the HRD function. Some companies go in the HRD audit to examine and make changes in the HRD function to accompany organizational changes. Some organizations that have undertaken business process re-engineering have conducted HRD audit to ensure that the HRD function is aligned with business goals and strategies.

2. To take stock of things and to improve HRD for expanding diversifying and entering into a fast growth phases.
Many good organizations in India, after liberalization, have entered a competitive phase. There are those organizations which saw a lot of opportunities both within the country and abroad. In light of these new opportunities some of these felt that they had not paid adequate attention to their human resource due to constraints of the past. They used to recruit employees at low salaries on the basis of contract rather than competence. As a result the organizations ended up having very heterogeneous categories of employees. Moreover organizations suddenly discovered that what was valued in the past— employees with average competence and high loyalty—had become a weakness in the present. In order to compete for the future they had to challenge their profiles. Thus companies felt need to take shock and see the direction in which they should move.

Some of the companies have borrowed many HRD practices form professionally managed companies but with out adequate preparation. They are not sure if they are going in the right direction.

3.  For promoting  professionalism among employees  and to switch  over to professional
While the world becoming a global village some companies started realizing the importance of skill
development and professionalism among the employees. In order to include professionalism they
wanted to take stock of their HRD and therefore undertook as HRD audit.

4. Multinationals want to know the reasons for lower labour productivity and for improving their HRD strategies in the Indian context.
Some multinationals who have been operating in the country found from their experience that though they pay low salaries in India as compared to other plants they have in their countries the labour productivity is poor. After a careful examination of number of good practices they had introduced they discovered that they had some unique problems with the Indian people. Some of these included high designation-conscious, low level of teamwork, tendencies to unionise lack of trust on the management, low energy level, and preference for a paternalistic treatment. Some of these companies relied heavily on their HRD departments to change the situation. Their experience were not as positive as they desired. Therefore they decided to undertake an HRD audit. They perceived HRD audit more as a renewal exercise.

5. For growth and diversification
A few organizations after their initial success and building core competencies in certain areas wanted to diversify and expand into new areas. They even undertook the initial steps using their existing staff to handle new projects. They were not every sure whether this was likely to work out. They also wanted the direction in which they should move. Therefore they decided to undertake HRD audit.

6. Dissatisfaction with a particular Component
A few organizations undertake HRD audit more as a necessary comprehensive review of their sub
systems of HRD. For example, in one company HRD audit was taken as a means to improve
communications. In another company appraisal was starting point but they decided that since appraisal
is linked to many HRD sub systems they should get a comprehensive examination of HRD done. A third
company used HRD audit though their main interest was development of a training plan. In all these
cases the influencing factor for initiating and using HRD audit has been some visionary either at the top
level or at the board level who has a more holistic view of the organization.

7. Change of leadership
Some organization undertook HRD audit as their HRD manager was leaving and they needed to recruit
new HRD manager and reorient the entire HRD department. Sometimes a change in the CEOs and
other top management members may also prompt HRD audit.
Thus there can be various reasons for initiating HRD audit.

The experiences of the companies discussed above indicate that HRD audit can give many insights into
a company's affairs. HRD audit is also cost effective. The auditors normally camp in the organization for
one to two weeks, make their observation and give their reporting in a month's time. They normally
make preliminary presentation at the end of their visit.

The auditors bring with them their experience of HRD with large number of companies and provide a
good degree of qualitative data. Thus, the retunes on such low-cost audit can be substantial.

The following are some of the favorable consequence of HRD audit that have been observed.

• it can get the top management to think in terms of strategic and long-term business plans. Ironically, it may seem that HRD audit should bring with such strategic plans, but in some cases it has propelled the top management to formulate such plans. Another aspect in this regard is that people cannot participate in HRD audit without some sharing of these plans. The audit therefore has forced the top management to share their plans across the organization resulting in increased involvement and commitment of employees. In a few cases a new system of annual planning and sharing of the business plans with management staff, to enable them to plan their own activities and competency development programmes have been initiated.

•     Change in the styles of the top management
Any successful HRD company has an excellent learning environment. Thus one of the objective of HRD is to create a learning organization. A learning culture can be created only if the managers of the company exhibit an HRD orientation ability to convert and use mistakes, conflicts and problems as learning opportunities and so on. Some top-level managers in India have been found to block the motivation and learning of employees through coercive, autocratic and even paternalistic styles of management. HRD audit highlights such detrimental styles of management thereby pointing out the difficulties in developing and preparing the employees for the future. This has helped in providing subtle feedback to the top management and initiating a change process.
•     Role clarity of HRD department and the role of line managers in HRD
In almost all cases the HRD audit has been found to draw the attention of employees at various levels to the important role of the HRD department: current as well as the future, better role clarity of the HRD department and the HRD function, resulting in increased understanding of line managers about their HRD role and the uniform results of HRD audit. While the degree may vary from organization to organization on various factors, this exercise has favorable impact on employee productivity.
•     Improvement in HRD systems
HRD audit has helped most organizations in measuring the effectiveness of their HRD systems, and in designing or redesigning HRD systems the most frequently changed or renewed system include performance appraisal induction training job rotation, career planning and promotion policies monitoring communication and training. A number of organizations have change or strengthened one or more of their HRD subsystem as a result of HRD audit.
•     Increased focus on human resources and human competencies
One of the results of HRD audit is to focus on new knowledge, attitudes and skills required by the employees. Comments are made about the technical, managerial, human and conceptual competencies of staff at various levels. This differentiation has been fund to help organizations in identifying and focusing sharply on the competency requirements and gaps. The audit establishes a system of role clarity and fixing of accountability. This may take place through separate role-clarity exercises or through the development of and appropriate performance appraisal systems. In any case, the attention of the organization gets focused on developing the competency base of the organization. More sensitives are developed towards missing aspects of competencies. For example one organization was found to neglect the human relations competencies of their staff which led to quite a few problems and wastage of time. With HRD audit many of these were streamlined. The virus HRD policies also got strengthened.
•     Better recruitment policies and more professional staff
HRD audit proposes the competence base required by the organization. It gives direction for competency requirements of employees at various level, thus providing a base for recruitment policies and procedures. As a results in some companies new recruitment and retention strategies have been worked out. In other companies the audit has led to strengthening recruitment policies and procedures.
•     More planning and more cost-effective training
HRD audit has been found to assist in assessing the returns on training. One of the aspects emphasized in the HRD audit is to calculate the investments made in training and ask questions about the returns. The process of identifying training needs and utilization of training and learning for organization growth development are assessed. As direct investment are made training any cost benefit analysis draws the attention of the management and HRD managers to review the training function with relative ease. For example, one organization has strengthened its training function by introducing a new system of post training follow up and dissemination of knowledge to others through new systems and action plans. Many organizations have developed training policies and systematized their training function. Training needs assessment also has become more scientific in these organizations.
•     Strengthening accountability through appraisal system and other mechanisms
HRD audit can give significant inputs about existing state of accountability of employees. This can be assessed through performance appraisal as well as through the work culture and other cultural dimensions. A number of organizations have introduced systems of performance planning, sharing, of exceptions and documenting the accountability of staff. HRD audit had led to the chaining of appraisal systems.
•     Streamlining of other management practices
Most often HRD audit points out the strengths and weaknesses in some of the management systems existing in the organization. It also indicates the absence of systems which enhance both human productivity and utilization of the existing competency base e.g. MIS, rules and procedures, etc, which may have an effect on the functioning of employees. In a few cases HRD audit has helped the management to look at some subsystems and work procedures. Preparation of a manual for delegation of powers, clarification of roles and responsibilities developing or strengthening the manuals of financial
and accounting procedures and systems, strengthening the information systems ad sharing of information are some of the resultantly activities.
•     TQM interventions
Quality improvements and establishing TQM systems  require a  high degree of involvement of
employees. In a number of cases HRD audit has pointed out to the linkages between TQM and other
quality programmes, and helped in strengthening the same.
Due to improvements in the training systems,  enhancement of the quality of group work and
strengthening of the appraisals system, TQM programmes also get improved. In a few organizations
performance  appraisal  have  been  changed to  integrate quality  aspects  and  internal  customer
satisfaction in to the appraisal systems. Thus HRD audit leads to the strengthening of quality systems.
•     It can enhance the ROI of the HR function
In addition to all the above points HRD audit aligns the HR function and activities with business goals. In
the process it eliminates non-value adding HR systems, activities and processes and enhances the
value-adding activities and processes. It reduces nonproductive assets of the HR department and
sharpens the focus of the HR function to get better results. The main contribution of HRD audit is to
focus on value adding HRD.