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HR/Industrial-Organizational Psychology Concepts- HR Audit

Human resources is a gradually expanding field and terms like HR Audit and Strategic HR are gaining credence and value in the real world. Apart from performance appraisal, there have been new developments in the field of recruitment, selection, training,motivation and leadership. New concepts are coming into play and terms such as 360 degree feedback and MBO( Management by Objectives) are gaining value in the current scenario.

Here is an explanation of the term HR Audit:

HR Audit: A Human Resources Audit is a comprehensive means of reviewing current human resources policies, procedures, documentation and systems to find out the  needs for improvement  and enhancement of the HR function as well as to ensure compliance with ever-changing rules and regulations. An Audit involves systematically reviewing all aspects of human resources, usually in a checklist fashion.

The HR Audit is a process of examining policies, procedures,documentation, systems and practices with respect to an organization’s functions. The purpose of the audit is to reveal the strengths and drawbacks in the human resource system and the audit works best when the focus is on analyzing and improving the HR function in the organization.

The HR audit can lead to the following:

– to assess current knowledge and skills needed from HR personnel

– evaluate and ascertain current effectiveness

– standardize practices across various sites or divisions of the company

– to clarify desired practices of HR work and roles within the organization.

– to improve current performance levels

The HR Audit tries to ascertain the actual state, gap between the actual and desired state and alignment with overall organizational strategy and goals.

HR audit involves alignment. It is comprehensive and proactive as well as futuristic. It facilitates feedback and control and enhances operational efficiency and compliance. It involves competency anaysis and linkages with other systems. It involves business goals and employs OD Intervention. HR Audit generates an HRD scorecard and documents management styles, HRD Culture and values and impact.

The following are the types of HR Audit:

  • Audit Against Irregularity
  • Appropriation Audit
  • Audit against Propriety
  • Efficiency cum performance Audit

The HR Audit involves the following process:

  1. Preliminary/dipstick study of the selected systems, processes and functions
  2. Development of HR Audit plan
  3. Streamline purpose of Audit
  4. Execution of HR Audit and review
  5. Preparing the review report

The purpose of HR Audit is to make the HR Function business driven, to improve work performance, reduce expenditure, improve HR systems and enhance ROI of the organization.

There are internal as well as external auditors. The HR audit team myst be representative of the organizational staff. External consultants are beneficial as such a person would be solely involved in focusing on the project whereas internal auditors may be involved in numerous other functions as well.

HR Audit can be done through interviews with the organizational staff and management, group discussions and workshops, Questionnaires and records and documents.

The goals of HR audit are to ensure motivation and effective utilization of human resources and ensure compliance.

According to Walker(1998) there are two approaches to HR audit- internal perspective and external perspective.

Common approaches to HR Audit include comparative approach, outside authority, compliance approach and statistical approach.HR Audit measures the extent to which values and cultures of the organization are practiced and followed. HR audit can measure competencies in terms of business knowledge, strategic thinking, functional excellence, leadership and change management, execution skills and personal credibility.

There is a management competency framework and a generic competency framework. HR Audit vastly improves competency. In the selection process, there are 3 kinds of audit: process audit, effectiveness audit and capability audit.

The following are the key areas in which HR audit is conducted:

Audit of HR system

Audit of competency mapping

Audit of human resource planning

Audit of recruitment, selection, induction and orientation

Audit of training development and performance management

Audit of compliance of labor laws

Audit of career planning and career development

Audit of HR scorecard

Audit of HR Alignment with Business Goals and Organizational culture.


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