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HR Audit SMU MU0013

HR Audit SMU MU0013

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Published by: R Abdullah Azad on Aug 27, 2013
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Master of Business Administration- MBA Semester 3Q1.Define Human Resource (HR) Audit. What is the need for HR Audit? What are the variousapproaches to HR Audit?
Many organisations now realise that their most important and expensive asset is their human resources. Theyrecognise the need to exercise better control over these assets so that they are able to make an optimum returnon their HR investment. ln this regard, HR audit is seen by the organisations as an invaluable tool to inculcatediscipline and accountability among the HR people. Audit is one of the important Management Control Devices
lt‟s a review and
verification of completed transactions to see whether they represent a true state of affairs of  business or not. Thus an HR audit refers to:
a. The measurement of effectiveness of HRM‟s missions, objectives,
strategies, policies, procedures, programme, activities and thereafter. b. The determination of what should or should not be done in the future.(Bhatia, 2009, HRM in Global Scenario)'A human resource audit is defined as an investigative, analytical and comparative process that attempts toreflect the effectiveness of the human
resource functions.”
Jack J. Phillips
„The human resource audit is defined as an investigation
into size, skill, structure, and all other issuessurrounding those currently employed by the
organisation and its future human resource needs.”
Need for HR audit
Human resource audit is a systematic assessment of the strengths, limitations, and developmental needs of itsexisting human resources in the context of organisational performance. (Flamholtz,1987). Human resourceaudits give an account of the skills, abilities and limitation of its employees. The audit of non-managers arecalled skills inventory while the audit of managers are called management inventories. Basically, the audit is an
inventory that catalogues each employee‟s skills and abilities
which enables the planners to have an
understanding of the organisation‟s
work force. (William B. Werther, Jr. and Keith Davies). Thus the need for HR audit is:
To make the HR function business-driven.
Determining change of leadership.
To take stock of things and improve HRD for expanding, diversifying andentering into a fast-growth phase.
For growth and diversification.
For promoting professionalism among employees and to switch over to professional management.
To find out the reasons for low productivity and develop HRD strategies to address that.
Dissatisfaction with a particular component. UNCLEAR 
To become employer of choice or revamping employer branding.
To ensure effective utilisation of human resources.
To review compliance with laws and regulations.
To instill a sense of confidence in the human resource department that it is well-managed and preparedto meet potential challenges and opportunities. '
To maintain or enhance the organisations reputation in a community
Approaches to Human Resource Audit by Walker Walker [1998] differentiates between two approaches relative to HR auditing, i.e., those centred on the
function‟s internal aspect, and those
centred on the external aspect.
Internal perspective:
From an internal perspective, as in any staff function, there is a trend of valuing itsactions as a result of the activities undertaken
and its costs incurred. The way of judging a department‟s
capability would be on its ability to supply certain services to the organiation at the lowest possible cost.
According to this approach, the operational measurements traditionally used are those which refer to quantity,quality and reliability, or cost and speed, therefore placing the focus on activities, costs, or productivity ratios.
External perspective:
From an external perspective, if it is understood that the ultimate appraisalof the
effectiveness of HR „is based on their impact on
the company‟s results, then the measurements should include
results obtained outside the function. Though HR audit is a recent concept, it has emerged as an invaluabletechnique for improving the efficiency of the HR management of an organisation. Due to the growth of theservice sector in the economy, the importance of human resources in organisations has increased enormously,and this has hastened the process of the introduction of HR audit. The role of the HR audit in these firms is tostreamline managerial control over HR activities. Based on the role and utility of the HR audit, two major approaches have been developed.
Internal Approach
External Approach
Internal Approach:
The HR audit focuses on examining the effectiveness of the contribution of the HR department to the internaloperations of the organisation. From this perspective, the emphasis of the HR audit is on the cost benetit of theHR activities measured in terms of organisational at the lowest cost, speed and reliability are some of thecriteria used in its activities. Quantity, quality, cost, speed and reliability are some of the criteria used inmeasuring the performance of the HR department in this method.
External Approach:
The emphasis of the HR audit is on measuring the contribution of the HR activities to the external performanceof the organisation. For instance, the organisation may obtain competitive advantage in the market through theefficiency of the HR department. When the HR department is able to reduce the cost of hiring, training andcompensation, it provides the organisation the opportunity to vary the prices of the goods or services to itsadvantage. Certainly, the ultimate benefit of efficiency of any operation can come only from outside theorganisation.
Common approaches to HR audit
There are five common approaches for the purpose of evaluation of HR in any organisation:
Comparative approach:
ln this approach, another division or company that has better practices or results ischosen as the model. The audit team audits
and compares the audited firm‟s results with the best practices of the
model organisation. This approach is commonly used to compare the results of specific activities or  programmes. This approach is often used to compare turnover, absence, salary data and staffing levels. lt helpsdetect areas where improvement is needed. lt also makes sense to compare where a procedure is being used for the first time. Outside authority: ln this approach, standards set by a consultant or taken from published researchfindings serve as the benchmark for the audit team. The consultant or research findings may help diagnose thecause of problems.
This approach relies on performance measures drawn from the
company‟s existing information
system. From existing records, the audit team generates statistical standards against which activities and programmes are evaluated. With the mathematical standards as a base, the team may uncover errors while theyare still minor. Often this approach is supplemented with comparative data from external sources such as other firms, or industry association surveys. The information is usually expressed in ratios or formulas that are easy tocompute and use.
Compliance approach:
This approach reviews past practices to determine if actions taken followed legalrequirements and company policies and procedures. The audit team here often examines a sample of employment, compensation, discipline and employee appraisal forms. The purpose of the review is to ensurethat the field officers and the operating managers have complied with internal rules and legal regulations, suchas minimum wages and equal employment opportunity laws. By sampling elements of the human resourcesinformation system, the audit team looks for deviations from laws and company policies and procedures. The'team can then determine the degree of compliance achieved. This concept of HR auditing is based on a legaloutlook. According to Antona [1993] the audit of performance or conformity consists of making an inventory of the social situation of the company, considering the labour law
norms and regularly verifying the company‟s
compliance with the applicable regulations. Thus, this concept is centred on the verification that the current
labour laws are being adhered to. The audit should verify if the company‟s
policies, practices, and documentsregarding employee hiring, retention, discipline, termination, and post-employment are both fair and legal[Higgins, 1997]. These practices and policies must prohibit discrimination by offering equal employmentopportunities; protect the employment seeker from being discriminated against on the basis of age; ensureminimum wages; and contain provisions regarding mental disabilities and reasonable accommodations for disabled workers.
Management By Objectives (MBO
): ln this „management by objectives‟
approach, managers and specialistsset objectives in their area of responsibility. Then they create specific goals against which this performance can be measured. The audit team researches actual performance and compares it with the previously set objectives. They can then evaluate the trends in this area.
Q2.Write a brief note on staffing. How does employee orientation programs help employees? What arethe characteristics of good employee orientation programs?
 Answer : Staffing is a term used in the sphere of employment. It has been applied to more than one aspect of theworking environment. Staffing has been defined as follows by Heneman and Judge in Staffing OrganisationStaffing is the process of acquiring, deploying, and retaining a workforce of sufficient quantity and quality tocreate positive impacts on the organizati
on‟s effectiveness.
Staffing is a term that refers to the management of employee schedules. It can be described as the process of acquiring, deploying, and retaining a workforce of sufficient quantity and quality to create positive impacts on the organisation's effectiveness. The ideal staffinglevel for an organisation depends on the amount of work to be done and the skills required for doing it. lf thenumber and quality of staff employed are greater than necessary for the workload, an organization may bedeemed to be overstaffed or if the number of staff is insufficient for the workload, an organisation is deemed to be under-staffed.
Effective human resource planning will determine the appropriate staffing level for anorganisation at any given point in time. Staffing includes various aspects to ensure the best practices in anorganisation.
Employee Orientation Programmes
Employee orientation programmes are given to new employees at a place of business or work. lt helpsemployees t
o speed up and learn the “ground
rules” of the company. This often reduces start
-up time, training,and other indirect costs associated with having new employees who are unfamiliar with the company culture.Orientation programmes are aimed at reducing the
“new employee stress” factor. J
The employee orientation programme offers the business its best chance in
shaping an employee‟s skills / work practices and imbibing its
corporate philosophy onto the mind of the new employee, because a new hire comeswith an open mind to learnand create a good impression. The programmes can last from several hours to several days. The process of new
employee orientation strengthens the new employee‟s
relationship with the organisation. lt fuels their enthusiasm and guides their steps into a long term positive relationship with the organisation. Effectiveorientation programmes - where new employees are introduced to the company's mission, vision and goals begin to feel they are a vital part of the team - are key to sparking early productivity and improving employeeretention. "ln today's labour market, new employees know they can quit and start somewhere else tomorrow,"says Mel Kleiman, author of Hire Tough, Manage Easy - How to Find and Hire the Best Hourly Employees.Done poorly, the new employee orientation will leave the new employees wondering why on earth they walkedthrough your door. "Orientation should
 be geared toward reinforcing new employees' 'buying decisions‟. The
focus must be on convincing them that they made the right choice when they signed on."Good employee orientation programmes;
Make a good first impression.
Make new employees feel welcome and valued as key players on the team.
Explain the mission/ purpose of the company and the job so that employees can see the big picture.
Assure them they will be carefully and patiently trained - not thrown in to
"sink or swim”.
Familiarise employees with rules, policies and procedures.
Help employees adapt to their new surroundings, as well as learn who all the players are and how theywork together.
Establish friendly relationships among co-workers and managers.

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