Digital Human Resource

Scorecard & Analytics

Praveen Kamath K
pkamath2001@yahoo.com
 Key Business Anchors

People resources

Technology
Monetary resources
resources
The Internal Assessment would be as follows
•Individual Presentation: 20 Marks:  Starting from 23 Jul : Schedule attached
•Written Assignment Case Study Submission: 20 Marks:  30 Aug 2021 : Individual Assessment (Theoretical / Industry
Practice based)
•Quiz: In the Classroom from 23 Jul onwards: 15 Marks : Individual Assessment 
•Class Solutions Workshop:  Every Session starting from today:  15 Marks: Individual Assessment 
•Case Study Solution: Application Based Individual Assignment: 15 Sep: 30 Marks 

Individual Presentation (20 Marks)

-PPT format for 5 – 6 Slides
-Topics will be shared in advance for the student’s to prepare
-Encourage participation and Q&A
-Industry Practices to be covered as part of the Presentation

Written Assignment (20 Marks)

Discuss Industry relevant examples of HR Audit and Scorecard practices exist in the current business context –
Submission date – 30 Aug 2021

Case Study Solution (30 Marks)

Employees performance is an outcome of strong score card and matrices aligned to business and its growth – Argue
with relevant examples from the Industry – Submission date – 15 Sep 2021

Rules
•2 – A4 Sheets (4 Pages)
•Give relevant industry data, examples and statistics
•Relevant case studies are also encouraged
•Original thinking and application of the knowledge is required

Class Workshop Group Exercise : Rules

•Daily 2 to 3 quizzes on the subject discussed
•Mostly theoretical / academic in nature
•Daily on relevant topic – Application of the learnings in group
•Group activity
Individual Presentations
Individual
Sl. No. Student ID Candidate's Name Topic for Presentation Presentation
Dates
1 DM20013 Doddi Laxman Kumar Balance Score Card & HR Score Cards 23-Jul
2 DM20021 Yeddula Naveena Application of Score Card in Recruitment and Selection 04-Aug
3 DM20023 Nikil Somaiah Application of Score Card in Training and Development 05-Aug
Anil Narasimhan
4 DM20036 20 HR Metrics and its Applications 11-Aug
Podduturi Shruthi
5 DM20037 Reddy HR Dashboards and its Industry Examples 13-Aug
6 DM20040 Subreetha Gopu Application of HR Metrics in an IT Company with Examples 17-Aug
7 DM20043 Tharun P HR Analytics and Business Insights 18-Aug
8 DM20049 Rakshitha Srinivas HR Scorecards for a Sales Function / Org 20-Aug
9 DM20008 Bhagyalakshmi

Rules
•PPT should be at least 4 slides – 20 mins for presentation
•Video / Audio / Interviews / Live Cases can be shown as part of the topic
•Give relevant industry data, examples and analytics
•Relevant case studies are also encouraged
•Original thinking and application of the knowledge is required
A Strategy Map Represents How the Organization Creates Value

Productivity Strategy Growth Strategy

Long-Term
Financial Shareholder Value
Perspective
Improve Cost Increase Asset Expand Revenue Enhance
Structure Utilization Opportunities Customer Value

Customer Value Proposition

Customer
Price Quality Availability Selection Functionality Service Partnership Brand
Perspective
Product / Service Attributes Relationship Image

Operational Management Customer Management Innovation Regulatory and Social

Processes Processes Processes Processes
Internal •Supply •Selection •Opportunity ID •Environment
Perspective •Production •Acquisition •R&D Portfolio •Safety and Health
•Distribution •Retention •Design/Develop •Employment
•Risk Management •Growth •Launch •Community

Human Capital
Learning and Information Capital
Growth
Perspective Organization Capital
Culture Leadership Alignment Teamwork

Source: Kaplan R. S. & Norton D. P.,2004 ,Strategy Maps: Converting intangible assets into tangible outcomes, HBR
 Strategies in Brief
Company Strategic Principle

Dell Be direct
eBay Focus on trading communities
General Electric Be number one or number two in every
industry in which we compete, or get out
Southwest Airlines Meet customers’ short-haul travel needs
at fares competitive with the cost of
automobile travel
Vanguard Unmatchable value for the investor-owner
Wal-Mart Low prices, every day
The Balanced Scorecard
Linking Corporate and HR Strategies
HR Function
The Basic Architecture of HR
Translating Strategy into
HR Policy and Practice

Basic Model of
How to Align
HR Strategy
and Actions
with Business
Strategy
 The HR
Scorecard
Approach
to
Formulating
HR Policies,
Activities, and
Strategies
HR Competencies
 In brief: to evaluate and improve
your HR practices in:
• Staffing
• Compensation and Benefits
• Performance Management
• Employee Development
• Employee Relations
• Safety
• Reporting and Recordkeeping
 Benefits

• Create an HR business plan

• Streamline HR work processes
• Monitor compliance with established
regulations and procedures
• Develop user-friendly HR systems
 How

• Interview key staff

• Review relevant documentation
• Help you complete a comprehensive
questionnaire
• Compile data a prepare and customized
written report
• Make specific recommendations to
improve the efficiency and performance
of your HR function
 Data

• What do the written policies and

procedures say?
• What do the HR managers say?
• What do the line managers say?
 Examples of data
• Hiring statistics (acceptance rate, hiring rate,
hiring projections)
• Turnover
• Compensation and benefits philosophy and
practice
• Exit interview summaries
• Employee complaints (discrimination, harassment,
safety, other)
• Promotion and advancement practices and trends
• Human Resources budget and expenditures
 Interviews
• Perceptions of the company and its goals
• Strengths and weaknesses of top management
• Employee perceptions of the company and top
management
• Relations with subordinates
• Support of career goals for self and employees
• Major Human Resources issues
• Which Human Resources functions work well
• Which Human Resources functions need
improvement
 Conduct the Regulatory Compliance
Audit
• Personnel files and record keeping (contain only
job related information)
• Pay equality
• Job descriptions (ADA compliance)
• Health and safety
• Equal opportunities and positive action
• Forms (applications, internal forms, etc.)
• Legal reporting
• Policies and procedures
 Recruitment
• How are candidates sourced?
• How are candidates selected?
• Are legal requirements met?
• Are the same processes used for all jobs,
all locations?
• Are processes followed consistently?
 Compensation and Benefits
• What are the different policy groups (e.g. management,
clerical, union)?
• How is base pay policy set?
• What grading/job evaluation systems are used?
• Are there up-to-date job descriptions?
• What variable pay practices are in place?
• How are pay increments decided?
• What is the benefits plan?
• Are the same processes used for all jobs, all locations?
• Are processes followed consistently?
 Workforce Review

• Are there any critical skills shortages?

• Are there any critical succession issues?
• Is there anything unusual in the distribution of
worker age, gender etc.?
• What workforce planning processes are used?
• What succession planning processes are used?
• Are the same processes used for all jobs, all
locations?
• Are processes followed consistently?
 Training and Development

•How much training is given?

•How is the training program managed?
•Are there any staff development
programs?
•Are the same processes used for all jobs,
all locations?
•Are processes followed consistently?
 Industrial Relations
•What unions exist and what jobs are
covered?
•What collective agreements are in place,
when do they expire?
•How many grievances are there per year?
•Are there any outstanding grievances?
 Legal
•Are processes in place to manage
compliance issues for all relevant
jurisdictions?
•Is there any outstanding litigation?
•Are the same processes used for all jobs,
all locations?
•Are processes followed consistently?
 HR Technology
•What technology is installed?
•How up-to-date is the technology?
•Is the data clean?
•Are there any important technology
projects in progress?
 Strategic HR
•Where does the most senior HR person
report in to?
•How much interest does top management
have in HR issues?
 Some Other Audit Techniques to
Consider
•Audit of corporate culture.
•Competency audit of HR staff.
•Metrics based audit using metrics such as
those proposed by the Saratoga Institute.
•Audit of customer satisfaction with HR.
Our Approach to ROI

Influences/ Return on
Inputs Impact Investment
(Cost in Dollars)
Variables ( Revenue & 
(Quality, Time, & Cost) Costs)
Traditional Approach to ROI

Return on
Inputs
(Cost in Dollars)
≤ Investment
( Revenue & Costs)

* When the units in A and B are expressed in dollars

The Problem with ROI…

• MATH --- It is difficult to solve an equation with

different units on each side of the equation… Thus
8th grade algebra was invented…
• OD Initiatives --- Often the money you invest
does not directly result in hard dollar savings, nor,
revenues… Rather the OD/HR initiative impacts or
influences some behavior, process, or structure;
which in turn can be correlated with a hard dollar
cost savings or revenue increase….
Basic Elements of Measurement
• Cost
• Time
• Quality
• Satisfaction (correlated with productivity)
• Performance v. Productivity
• Effects on business priority (i.e., revenue)
• TTP (Time-to-productivity)
Effects of Human Behavior on
Business
U.S. Companies Lose:
• ½ their investors in 1 year
• ½ their employees in 4 years
• ½ their customers in 5 years

A 5% swing in customer retention can

result in a 25% swing in earnings *

*Frederick Reichheld: The Loyalty Effect

Measuring Efforts
• HR Measurement
– Operational Efficiency of HR
– Human Capital Health
– Financial Valuation methods
• Cost based approaches
• Market-based approaches
• Income-based approaches

And of course… ROI

Challenges – Calculating ROI
Benefits/Expense (cost) = ROI
• Identifying Costs √
• Quantifying Costs √

• Identifying Benefits √
• Quantifying Benefits ….!!

Yet need to ensure that initiatives impact the

Bottom Line
Return on Investment on People
Processes
“Like other leaders, many HR executives hold
flawed and incomplete beliefs. They fall prey
to second-rate evidence, logic and advice
which produce suspect practices, and in the
end, damages performance and people”
Pfeffer and Sutton (2006)
Hard Facts, Dangerous Half-Truths and Total Nonsense
 The Value of Top Talent

1SD

Low Superior
Performers Performers
Good
Low Complexity Jobs 19%
Moderately Complex Jobs 32%
Highly Complex Jobs 48%
Sales 48-120%

Hunter, J.E., Schmidt, F.L. and Judiesch, M.K. (1990) Individual differences in output
variability as a function of job complexity. Journal of Applied Psychology, 75; 28-42
 The Risk of Workforce
Disengagement
The Danger of Non-Engagement
Poor performers who
frequently put in minimal
effort – the “disaffected” –
exhibit strong emotional and
rational non-commitment to
day-to-day work, the manager,
team and organisation.
A Risk and an Opportunity The Reward of Engagement
The “agnostics” exhibit only High performers with low
moderate commitment to their work, retention risk – the “true
teams and organisations. The believers” – exhibit very strong
“agnostics” are capable of moving emotional and rational
into either the “disaffected” or the commitment to their day-to-day
“true believers” categories; many in work, teams, managers and
fact already lean towards one of the organisations
other

“The Disaffected” “The Agnostics” “The True Believers”

20% 29% 27%

13% 11%

Leaning towards Leaning towards

Neutral
disengagement engagement

Source: Corporate Leadership Council Research (2004)

Barriers to using ‘hard data’ to measuring
HR / L&D activities
Less to do with any disinterest in measuring bottom line impact,
more to do with the difficulty of doing so…

Barrier Mean Score

Difficult to calculate ‘true’ financial ROI 4.98

Insufficient resources available 4.77
More useful / relevant criteria 4.41
Time consuming 4.19
Don’t believe possible to calculate ‘true’ ROI level 3.78
There is no requirement 3.23
 Indirect Lack of
measure of commercial
impact impact

ROI Vicious
Simple
measures of Circle HR manage
transactions
behaviour

Difficulty
measuring
ROI
How do you currently
measure the impact of
what you do in HR?
Kirkpatrick’s Model of Training
Evaluation
Level
Level4:4:
Organisational
Organisational
Performance
Performance

Level
Level3;3;
Behavioural
BehaviouralChange
Change

Level
Level2:2:
Learning
Learning

Level
Level1:1:
Reaction
Reaction

Kirkpatrick (1959)
‘’Hold HR accountable: do not accept measures of activity
- things like positions filled, training hours delivered and
appraisals completed on time. Require measures of
accomplishment that reflect business success: sales or
revenue, profits, productivity, customer retention and so
on’’
Kaufman (2006)
‘’How to Fix HR’’ Harvard Business Review
 Change the questions we ask….
Today’s Questions
• What does the employee
survey suggest we do?
• What works in our company?
• What does the business
need?
• How much does it cost?
• What other data do we have?
New Questions
• What do the employee
behaviours suggest we do?
• What works here?
• How does what our
business needs fit into the
overall system?
• What do patterns over
time tell us?
• What data do we need?
 ROI - Leadership Development
Examples
We specialise in those industries with the key traits of professional sports –
constant pressure•and
Working with
the need Royal Mail
to deliver top 90and
immediate senior managers
tangible results
• 18 month programme aimed at reducing bureaucracy
and managing transitions
• 25% improvement in management confidence to effect
change
• “Making Sainsbury’s Great Again” Leadership
programme for top 1000 business leaders
• Internal capability building of 50 accredited coaches
• Staff perceptions of the new leadership behaviours up
11% to 76%

• Development of Top 150 in CCE over 5 year period

• Aimed at improving organisational confidence
• 60% reduction in voluntary attrition and improved
engagement
ROI - Leadership Development
Examples
• Development of UK Dealerships Management teams
• Aimed at improving sales and after sales service ratings
• Difference in participating vs non-participating
dealerships

• 4x2 day workshop in High Performing Leaders

Programme
• Significant improvement in 180 leadership scores (pre vs
post)
• EES scores highest in participating businesses
 Recruiting Units/Metrics
• Recruiting
– Inputs:
• Recruiting costs
• Advertising costs
• Resume management
• Branding
– Organizational Influencers/ Impact Variables:
• Higher retention (lower attrition rates)
• Reduce turnover, etc.
– Return:
• Cost per hire per level
• Revenue per employee
 Selection
• Selection
– Inputs:
• Sourcing costs
• Hiring costs
• Person-job fit
• Time and productivity / Time of selectors
– Organizational Influencers/ Impact Variables:
• Orientation process
• Assimilation
• Management
– Return:
• PBT (profit before taxes) per employee
• Productivity: individual, team, and organizational levels
• Productivity over time
 Training
• Training
– Inputs:
• Needs assessments
• Cost of training and development per employee
• Cost of lost opportunities/ work
• Cost of lost sales (for sales staff training)
• Project management costs
– Organizational Influencers/ Impact Variables:
• Retention
• Technical competence
• Organizational commitment
– Return:
• PBT per employee with training vs. no training
• Productivity per employee
• Prevented cost of lost opportunities
• Prevented cost of future mistakes
 Coaching
• Coaching
– Inputs:
• Costs of assessments
• Costs to do coaching ($20,000 for 10 months)
• Time away from daily work
– Organizational Influencers/ Impact Variables:
• Financial impact/ benefit because of behavioral changes in the
coachee
• Improved business performance, communication, and leadership skills
• Motivation, employee morale, employee commitment
– Return:
• Cost of turnover
• Employee productivity
• Satisfaction and commitment of direct and non-direct reports
 Example:
• Attrition in 2004 was 15% at the Director Level and
above.
• Post-initiative attrition was 12% at Director Level and
above.
• Attrition at the Director Level and above costs the
company $650,000 at 15%.
• After the initiative, the attrition rate at the Director
Level and above was 3% less or $450,000 in net cost to
the company.
• Thus, the initiative has an ROI of $200,000 in net
savings on a $10,000 investment.
 Factors that Fortune 500
Companies are Measuring:
• Turnover costs
• Employee replacement costs
• Economic value of employee behaviors (absenteeism, smoking,
etc)
• Economic benefits of developing a superior selection test
• Economic benefits of various training levels
• Economic benefits of additional recruiting
• Economic benefits of increasing job satisfaction, organizational
commitment, or similar job attitudes
• Economic benefits of high, medium, and low performance on a
particular job
General List of Human Capital
Success Metrics
• Average change in performance-appraisal rating overtime
• Climate surveys
• Customer complaints/ praise
• Customer satisfaction/ loyalty
• Employee commitment survey scores
• Employee competency growth
• Employee development/ advancement opportunities
• Employee job involvement survey scores
• Employee satisfaction with advancement
• Employee turnover by performance level and by controllability
• Extent of cross-functional teamwork
• Extent of organizational learning
• Extent of understanding of the firm’s competitive strategy and operational
goals
 Discuss examples of
ROI work within your
organisations…..
 What will you do
differently next time?
 Conclusions
• Measurement of ROI needs to change from retrospective and
separate to proactive and integrated

• HR initiatives should be integrated into the business as a whole

with shared accountability for the results

• Measurement of ROI should be used as a feature of feedback

loop to ensure that HR initiatives continually and positively
impact the organisation
 Return on Investment:
Training and Development

ROI and Evaluation

 Objectives
• At the completion of this unit, students will be able
to:
– Discuss the importance of determining ROI in training
environments.
– Identify stakeholders and develop questions to
determine their views and needs.
– Write training goals and observable objectives based
on stakeholders’ needs.
 Objectives

– Describe the importance of the assessment of learning

for ROI.
– Recognize the differences between short-term and
long-term assessment.
– Identify items that belong on a training budget sheet
to determine ROI.
– Calculate expenses and ROI.
– Write a report on training that includes all relevant
data.
 Return on Investment

• Rooted in manufacturing.
• Advanced to banking, health care, non-profit,
public and education sectors.
• Part of quality and efficiency methodologies.
 ROI Is Used To:

– Quantify the effectiveness of training.

– Manage the training budget.
– Provide evidence to management and other
stakeholders.
– Build trust and respect for ourselves and our unit.
– Earn the ears of senior management.
– Identify areas for improvement.
– Provide data requested by senior management.
– Keep our jobs.
 Models

• Benefit/Cost Ratio

Program Benefits
BCR 
Program Costs

• ROI (%)

Benefit  Cost
ROI (%)  x100
Cost
Why is ROI important to you?
 Evaluation Levels

1. Reaction and Planned Action

2. Learning
3. Application and Implementation
4. Business Impact
5. Return on Investment
 Stakeholders

• Who are they?

– Anyone who pays for, participates in,
benefits from, or has decision-making
responsibility for HRD and training.
• What should they know?
– The need for training.
– The results from training.
– The costs of training.
 Needs Assessment and Task Analysis

• Needs assessment: identifies gaps between what is and

what should be in the organization.

• Task analysis: investigates the specific skill(s),

knowledge or attitudes and at which point there is a
breakdown in use or performance. If the analysis
uncovers a lack of knowledge, skills or attitude, then
training is required. If it reveals faulty equipment, poor
work conditions or lack of incentive, then another
solution is needed.
 Return on Investment:
Training and Development

Goals, Objectives, Assessment

 Goals

• Organizational Goals
These goals are typically targeted toward the
organizational level and include such things
as productivity, net income, inventory and
cash cycles, and customer satisfaction.
• Learning Goals
These goals typically focus on the individuals
in the organization and their performance,
knowledge and skills.
 Writing Objectives

Easy as A, B, C, D

Audience: Who?
Behavior: What do “they” do?
Condition: What is the setting and method
of evaluation?
Degree: Measurement to be met.
 Example Objective

At the completion of the course the learner

will be able to score 85% or better on a
written multiple choice 25 question test
Condition
Behavior
Audience
Degree
 Example Verbs

• Verbs to Use: • Verbs to Avoid

– Discuss – Understand
– Explain – Comprehend
– Demonstrate – Know
– Identify – Do
– List
– Perform
– Compare/Contrast
– Score (on an
assessment)
 Objectives in ROI

• Course objectives: What is it that the learners

will be able to do upon course completion?
• Application objectives: What goals do the
HRD/training practitioner have for the
application of the skills gained in training?
• Impact objectives: What effect will
accomplishing the application objectives have
on the organization?
 Example Objectives

• Course objective: Learners will

be able to make 15 entries in a
customer database in 15 minutes
with no more than 1 error.

Increasing Scope
• Application objective: Learners
will be able to reduce the data
entry error rate by 50 percent
over the next 6 months.

• Impact objective: Employee time

spent correcting database errors
is reduced by 25 percent from last
year’s rate.
 Learning Assessment

• Alignment between assessment and objective is

paramount.
– Easy to do with well-written objectives.
• Cognitive, psychomotor and affective domains are
assessed in different ways.
– Cognitive: written and oral tests; discussion;
compare/contrast exercises.
– Psychomotor: demonstration; performance.
– Affective: longitudinal observation and/or
discussion.
• Be sure to use the right type of assessment for each
objective of the learning event.
 Return on Investment:
Training and Development

Costs, Budgets, Accounting

 Costs, Budgets, Accounting

• Quantifying ROI means accounting for all the

costs of the program.
– Fixed costs: independent of the number of
participants.
– Variable costs: Dependent on the number of
participants.
• There are costs at every step – make sure to
account for them all.
 Output Measures

Outputs are product-driven and include data

that are not performance-based but rather
outcomes of changes in performance or
investment in equipment.

Examples include:
– Units built.
– Time it takes to build the units.
– Income from sale of units.
 Benefits and Soft Skills

• Change in:
– Attitude, work climate, leadership, teamwork.
• We desire these changes because they ultimately
effect productivity.
– Allow time for change in attitude or behavior,
then measure these changes and report
qualitatively.
– Allow time for change in productivity, then
measure for data and report quantitatively.
 Benefit/Cost Ratio Example

• Data entry clerks’ average wage: $9.50/hr.

• Five hours per week were spent correcting errors before training.
• 20 percent less time correcting errors saves one hour each week.
• 40 clerks.

BCR = .076 for one week. What about 13 weeks? 26 weeks?

9.50x40x1 hr
BCR   .076
$5,000
 Now with ROI%

• Data entry clerks’ average wage: $9.50/hr.

• 20 percent less time correcting errors saves one hour each week.
• 40 clerks.
• When clerks use their skills for 26 weeks, ROI% is almost 100%!!

380 x1  5000  4620

ROI (%)  x100  x100  92.4%
5000 5000

(380 x 26)  5000 4880

ROI (%)  x100  x100  97.6%
5000 5000
 Create a Data Collection Plan

• What?
• New information that needs to be recorded?
• Who?
• When?
• How?
 Additional Thoughts

• Access to learners after training:

– Do you have access to learners to follow up
on application and use of the knowledge and
skills developed during the training?
• Isolating training effects:
– Consider what else may have occurred at the
same time as the training that may have
made a difference.
 Trend Line Example

Trend Line
35

Y axis: 30
Number of
Customer Complaints 25

Projected Value 20
Before Training
15
Training Intervention
10

New Projected Value

After Training J F M A M J J A S O N D

X axis: Months
 Return on Investment:
Training and Development

Reporting Your Findings

 Review of ROI

– Justify the training budget.

– Quantify effectiveness of training.
– Provide evidence to management and other
stakeholders.
– Build trust and respect for ourselves and our
unit.
– Earn the ears of senior management.
– Identify areas for improvement.
– Respond to management directive.
– Keep our jobs.
 Stakeholders: Review

• Customer
• Employee
• Supervisor
• Subordinate
• President
• Board of Directors
• Stockholders
 Reporting

• Needs to be:
– Timely, targeted and unbiased.
• The purpose is to:
– Illustrate success.
– Secure approval.
– Gain acknowledgement/agreement on
solutions.
– Build credibility.
– Enhance marketing.
 Reporting
• Who needs to know?
• What do they need to know?
– How will you inform them?
• Presentation.
• Briefing paper.
• Detailed report.
• Letter.
• When and where?
• Who will present?
• Feedback?
 Items to Include in a Report

• Executive summary.
• Title of training.
– Goals and objectives.
– Who participated, when/where, length.
• Assessment and outcomes.
• Evaluation.
• Budget.
• Recommendations.
 Summary

• Know your audience:

– Who, existing and desired skills, knowledge
and attitude (audience analysis).
• Expectations of/from organization:
– Goals and objectives, stakeholders.
• Assessment and evaluation:
– Budget, data collection.
• Reporting.
 Finally

Take action on the data collected.

Use it to enhance your training and
therefore your organization.
The Costs and Benefits of
Human Resources
Human Resource Management Activities

• Human Resource Management Activities:

– Attraction
– Selection
– Retention
– Development
– Utilization
• In the past, these activities were evaluated
in behavioral and statistical terms.
 Behavioral Measures

• Measures of the reactions of various groups

of what individuals have learned or of how
their behaviors have changed on the job.
• These groups include:
– Top Management
– HR Specialists
– Applicants
– Trainees
 Statistical Measures

• Statistical Measures Include:

– Ratios
– Percentages
– Measures of Central Tendency and Variability
– Measures of Correlation
 Measuring Activities

• Today, because of rising costs, there is a

need to evaluate HR management
activities in economic terms.
• This requires gathering information from:
– Accounting
– Finance
– Economics
– Behavioral Science
 Relevancy of Economic
Measurements
These economic measurements are relevant to
HR programs because:

– They can help senior executives assess the extent

to which HR programs are consistent with and
contribute to the strategic direction of an
organization.
– They give visibility to the HR department.
Historical Cost Approach to Employee
Valuation

• Asset model of accounting

– Measures the organizations investment in
employees.
• Viewed most appropriate when used for
external reporting.
• Objective
 Disadvantages of Historical Cost
Approach
• This approach is based on the false assumption that
the dollar is stable.
• Deleting and writing off abortive expenditures
involve a great deal of subjectivity.
• Because the assets valued are not salable there is no
independent check of valuation.
• This approach measures only costs to the
organization. It ignores any measure of the value of
the employee to the organization.
 Alternatives to the Historical Cost
Approach
• Replacement Cost
• Present Value of Future Earnings
• Present Value to the Organization
 Replacement Costs

• Measures only the cost of replacing the

employee.
• Replacement Costs Include
– Recruitment
– Selection
– Compensation
– Training cost (income forgone during the training
period)
• Biased estimates-an inefficient firm may incur
greater cost.
 Present Value of Future Earnings

• The organization establishes what an employee’s

future contribution is worth to it today.
• The contribution can be measured by its cost or by
the wages the organization will pay the employee.
• Objective
– Census income returns
– Mortality tables
• This measure is limited because it assigns a value to
the average rather than any specific group or
individual.
 3 Faulty Assumptions Using PVFE

1. Subject to any profit expectancy built into the

discount rate applied (Worth = Future Cost), the
employing organization is indifferent as to whether
it retains the employee, because in either case it
comes out even.
2. Earnings exclude fringe costs, the organization is
better off without this resource.
3. The value of past recruitment and employee
development is zero in (1) or is negative assuming
(2).
 Value to the Organization

• Hekimian & Jones proposed that where an

organization had several divisions seeking the same
employee, the employee should be allocated to the
highest bidder, and the bid price should be
incorporated into that divisions investment base.
• This approach has merit, but the opportunities to
use it are rare.
 Value to the Organization Continued

• Hermanson proposed an alternative approach

involving establishing the net present value of
expected wage payments and applying to this a
weighted efficiency ratio.
• However, use of such broadly based statistics appears
to diminish the precision of the calculations in
general and incorporates unrelated risk factors into
the efficiency-ratio calculation.
• Also, human resources so valued would subsume all
other intangible assets of a goodwill nature.
 Limitations

• Dollar values cannot always be attached to the

information that is collected, which limits the
application of HRA.
• These approaches to HRA reflect only inputs and not
effectiveness.
• These approaches are human asset accounting
models that focus exclusively on investments in
people ignoring the output those resources produce.
 Extension of HRA
• Pyle suggested that HRA be extended to compute
returns on assets and returns on investments.
• This approach properly compares input and output
measures but still fails to distinguish between
individual and group effects that produce variability
in output.
• The Search Continues
 Costing Employee Behaviors
• The general idea of costing human resources is not
new.
• Standard cost accounting procedures are applied to
employee behavior
• To accomplish this, cost elements associated with
each behavior must be identified and their separate
& independent dollar values computed.
 2 Ways to Conceptualize Cost
• Outlay Costs vs Time Costs
– Outlay – materials used in training new employees
– Time – Supervisors’ time spent orienting new employees

• Distinguishes among fixed, variable, and

opportunity costs.
– Variable Cost- sales commission
– Fixed Cost- Salaries
– Opportunity Cost- reflects what the organization might have
earned had it put the resources in question to another use.
 Believe It or Not
All aspects of HRM can be measured and
quantified in the same manner as any
operational function.
 Intellectual Capital
What is it?
– Knowledge
– Information
– Intellectual Property
– Experience
 Microsoft
• Total Market Value
– $412 Billion
• Total Value of all Physical Assets
(buildings, equipment, and furniture)
– $24 Billion
• Where is the extra $388 Billion coming
from?
 Intellectual Capital vs
Physical & Financial Capital

5:1 & 16:1

 Soft Assets
• Intangible Assets
– Brand Names
– Intellectual Capital
– Patents
– Copyrights
– Expenditures for R&D
• The shift to a knowledge based economy has
created a whole new category of assets which
are not recognized in financial statements.
• Information is the essence of these soft assets.
 The Information Revolution
• Knowledge has become the fundamental
ingredient of what we make, do, buy, and sell.
• Managing Knowledge
– Finding & Growing Intellectual Capital
– Storing It
– Selling It
– Sharing It
• This new trend suggests a new way of strategic
thinking, rather than a technical approach
about “how to put people on the balance
sheet.”
 Valuing Intellectual Capital
• The first firm to attempt to account for
its IC was Skandia AFS in a supplement to
its 1994 annual report.
• Skandia developed a framework called
the Skandia Navigator.
 The Navigator
• Intellectual capital in a company can be found
in one or more of three places:
– Its people
– Its structures
– Its customers
• Intellectual capital comprises:
– Human capital
– Structural capital
– Customer capital
 Human Capital
The knowledge, skill, and capability of
individual employees to provide solutions
to problems that customers think are
important.
 Structural Capital
Consists of everything that remains when
the employees go home, including
databases, customer files, software
manuals, trademarks, and organizational
structures.
 Customer Capital
The value of an organization’s
relationships with the people with whom
it does business, including suppliers.
Three Principles for Measuring
Intellectual Capital

1. Keep it simple.
2. Measure what is strategically
important.
3. Measure activities that produce
intellectual wealth.
 Human Capital Measures
• Measures of Innovation
• Measures of Employee Attitudes
• Measures of Tenure, Turnover,
Experience, and Learning
• Customer Capital Measures
• Structural Capital Measures
124
 HR Audit

Administrative
Function

Strategic Compliance
Partner Partner
 Guidelines for HR Audit
1. Identification of areas of HR audit e.g. recruitment process,
job description, employee classification, leaves, personnel
records etc.

2. Goals of HR Audit:
•To make effective HR policies.
•To ensure compliance with all regulatory norms.
•To correct existing deficiencies or people related problems in
any department, section, or organisation as a whole.
•To correct the performance evaluation systems
•To make training and development functions more effective
and need based.
3. Focus on developing Good Business Practices:
•By meeting strategic goals, enhancing such goals and
dovetailing such goals with the overall strategies of the
organisation.
4. Focus on Legal Compliance.
5. Focus on Administration Issues: Maintaining personnel or
HR files, how they are kept, degree of confidentiality in
record keeping.
6. Auditing HR Functions.
7. Employee-relation Audits: questionnaires, exit interviews,
job satisfaction studies etc.
 Methods and techniques of HR Audit
• Attitudinal Survey.
• Data Interpretation.

Advantages of HR Audit
• To ensure effective utilization of HR.
• To comply with administrative regulations.
• To inculcates sense of confidence in management.
• To develop and sustain organisation reputation in the society.
• To perform a due diligence review for various stakeholders.
 Role of HR Auditor
• To get the current facts.
• To study the effectiveness of the present system by
answering the following questions:-

 Why was the practice introduced?

 What would be the result if the practice is discontinued?
 What could be the best possible alternative?
 Approaches to Human Resources Audit
The following approaches are adopted for purpose of evaluation: 

•Comparative approach

•Outside authority approach

•Statistical approach

•Compliance approach

•Management by objectives (MBO) approach

Comparative Approach
•In this, the auditors identify Competitor Company as the
model. The results of their organization are compared with
that Company/ industry.

Outside Authority Approach

•In this, the auditors use standards set by an outside
consultant as benchmark for comparison of own results.

Statistical Approach
•In this, Statistical measures are performance is developed
considering the company’s existing information.
Compliance Approach
•In this, auditors review past actions to calculate whether those
activities comply with legal requirements and industry policies
and procedures.

Management By Objectives Approach

•This approach creates specific goals, against which
performance can be measured, to arrive at final decision about
organization’s actual performance with the set objectives.
HR Audit Process
 Presentation Outline
I. The Nature of Auditing
II. Auditing and Investor Risk
III. Assurance Services
IV. Requirements for CPA Certification
 I. The Nature of Auditing

A. Auditing Defined
B. The Distinction Between Accounting and Auditing
C. Types of Audits
D. Types of Auditors
 A. Auditing Defined
Auditor

accumulates and
evaluates evidence

to ascertain correspondence between

the information
and established
criteria

and communicates results

to interested
users
 Quiz 1
Auditor

to ascertain correspondence between

and

and communicates results

B. The Distinction Between Accounting
and Auditing

Accounting is the recording, classifying, and

summarizing of economic events for the purpose
of providing financial information used in
decision making.

Auditing is determining whether recorded

information properly reflects the economic
events that occurred during the accounting
period.
 C. Types of Audits
Operational Audit
 Involves evaluation of any part of an organization’s operating
efficiency and effectiveness.
 Not limited to accounting areas.

Compliance Audit
Determine whether the auditee has complied with specific
procedures, rules, or regulations set by some higher authority.

Financial Statement Audit

 Determine whether overall financial statements are stated in
accordance with specified criteria.
 Generally accepted accounting principles are normally the
criteria, although other basis of accounting are at times used.
 D. Types of Auditors

 External or Independent Auditors – CPAs are the only group

permitted to provide financial statement audits. Such audits
are required of all publicly traded companies.
 General Accounting Office Auditor – works for the Comptroller
General who reports to and is solely responsible to Congress.
They audit various governmental bodies.
 Internal Revenue Agents – evaluate taxpayer compliance with
tax laws.
 Internal auditors – Auditors who are employees of the
companies they audit.
 Quiz 2

 External or Independent Auditors –

 General Accounting Office Auditor –

 Internal Revenue Agents –

 Internal auditors –
 II. Auditing and Investor Risk

A. The Cost of Debt

B. Causes of Information Risk
C. Ways of Reducing Information Risk
A. The Cost of Debt
Auditing has no effect on either the
risk-free rate or business risk, but it
can have a significant effect on
information risk!

When a bank makes a loan, it will charge a rate of

interest determined by primarily three factors:
 Risk-free rate – return on U.S. Treasury notes for the
term of the business loan.
 Business risk for the customer – risk associated with a
particular business that may result in it being unable
to repay a loan.
 Information risk – Improper business risk decisions
resulting from inaccurate information.
B. Causes of Information Risk
 Remoteness of information –
information provided by
others must be relied upon.
 Biases and motives of the
provider – can result from
honest optimism of
intentional misstatement.
 Voluminous data – the
amount of data grows with
Warning
Thin Ice!
the organization. Important
details can be lost.
 Complex exchange
transactions – business
transactions are becoming
increasingly complex.
 C. Ways of Reducing Information Risk

 User verifies information – normally impractical for

user to go to business and examine information.
 User shares information risk with management –
although users may bring suit against management
for supplying inaccurate information, it is often
difficult to collect on losses.
 Provide audited financial statements – most feasible
approach is to have an independent party check for
completeness, accuracy, and removal of bias.
 Quiz 3

 User verifies information –

 User shares information risk with management –

 Provide audited financial statements –

III. Assurance Services

A. Assurance Services
B. Attestation Services
C. Other Assurance
Services
D. Non-Assurance
Services
A. Assurance Services
 Decision makers seek assurance
regarding the reliability
information they use to make
decisions.
 Assurance services are valued
because the assurance provider is
perceived as an independent and
unbiased evaluator of
information.
 Assurance services can be
provided by CPAs and a variety of
other professionals.
 B. Attestation Services
Many other assurance services do not meet the criteria of
attestation services: a CPA who issues a report about the
reliability of an assertion that is the responsibility of another
party. There are four categories of attestation services.

ASSURANCE SERVICES

ATTESTATION SERVICES
• Audits of historical financial statements
• Effectiveness of internal control over financial reporting
• Review of historical financial statements
• Other attestation services
 Quiz 4
Many other assurance services do not meet the criteria of
attestation services: a CPA who issues a report about the
reliability of an assertion that is the responsibility of another
party. There are four categories of attestation services.

ASSURANCE SERVICES

ATTESTATION SERVICES
1.
2.
3.
4.
 B1. Audits of Historical Financial
Statements
 An audit of historical
Ben Johnson
financial statements is a form Certified Public Accountant
of attestation in which the
auditor issues a written
report expressing an opinion
about whether the financial
statements are in material
conformity with generally
accepted accounting
principles.
 Publicly traded companies in
the United States are
required to have audits under
the federal securities acts.
B2. Attestation on Internal Control
over Financial Reporting
 Section 404 of the Sarbanes-
Oxley Act requires public
companies to report
management’s assessment
of the effectiveness of
internal controls over
financial reporting.

 The Act further requires

auditors to attest to the
effectiveness of internal
control over financial
reporting.
B3. Review of Historical
Financial Statements
 Many nonpublic companies
want to provide assurance
on their financial
statements without
incurring the cost of an
audit.

 In comparison to an audit,
less evidence is necessary
to support the level of
assurance provided by a
review.
 B4. Other Attestation
Services
Other attestation
services are natural
extensions of financial
statement engagements:
 Debtor compliance with
loan agreement
provisions.
 Forecasted financial
statements.
 WebTrust and SysTrust
for Internet sites
 C. Other Assurance Services
ASSURANCE SERVICES
ATTESTATION
SERVICES OTHER
Audits ASSURANCE
Internal Controls SERVICES
Reviews
Other

Other assurance services differ from those involving

attestation in that:
 The CPA is not required to issue a written report.
 The assurance does not have to be about the reliability of
another party’s assertion about compliance with specified
criteria. (see examples in Table 1-2 on p. 12)
 D. Non-Assurance Services
CPAs also provide non-
assurance services
including:
 Accounting and
bookkeeping
 Taxes
 Management
consulting
 Quiz 5
•What is the Auditing?

•What is accounting?

•Why statutory Audit is required?

•What is NON CONFIRMANCE?

•How Audit helps to keep the Accounting clean?

•Risk & Compliance is part of Audit check. Argue

Organisations record the information about human capital
in following ways:-

1.Basic Information about human resource: Number of

employees, categories, grades, total value of human
resources, value per employee.

2.HR acquisition: number of employees acquired in the

year, cost of acquisition, levels for which they were
acquired, HR development, all information pertaining to
HRD activities of the organisation, HR maintenance, Cost
related to HR maintenance, HR separation, Cost related to
HR separation, attrition rate, details of benefits provided
to employee.
 Personnel/Human Resource Audit

It is a systematic evaluation of personnel policies, procedures and

practices. Basically it covers three things:
 Measurement and evaluation of personnel programmes,
policies and practices
 Identification of gap between objectives and results
 Determination of what should or should not be done in future.

Why personnel audit?

 Increasing size of the organisation and personnel in most
organisations
 Changing philosophy of management towards human resources
 Increasing strength and influence of trade unions
 Changing HR philosophy
 Increasing dependence of the organisation on the human
resources system and its effective functioning.
Personnel Records, Audit And Research
 Scope of HRD Audit
• The actual state.

• The congruence between the desired and the actual state.

• The alignment with the overall organizational strategy and

goals.

• The compliance with the rules and regulations.

• Auditing HR practices, auditing HR professionals, auditing

HR functions or department.
 Purpose
• The purpose of a Human Resources audit is to
assess the effectiveness of the Human Resources
function to ensure regulatory compliance.
• To look for potentially serious problems (time
bombs)
• To find areas needing improvement
• To document processes for use in merger,
reorganization or inspection
• To address compliance issues
 HRD Audit
• It examines and evaluates policies, procedures and
practices to determine the effectiveness of HRD function in
an organization.

• Human resource audits are potentially powerful tools in

promoting wiser, more equitable use of human resources
and more accurate human resource planning. It works on
the principle of “prevention is better then cure”.

• E-enabled HR audit system is not always required.

 HRD and National Planning
• At national level focus of HRD activities is to develop
employable human resource.
• By increasing literacy, developing graduates and
postgraduates, professionals and scientists etc.
• It encompasses health, housing, provision for drinking water,
hospital and medical facilities, social security and other
welfare measures.
• In India availability of employable people is relatively less.
• World bank has sanctioned an aid of Rs 1650 crores.
 HRD in Asian Countries
 Indonesia:
 Change in employment relationship and restructuring of
organisations is controlled by Government to deal with
surplus labour.
 Employment matters are highly regulated and organisation-
wide HRD activities are limited.

 Malaysia:
 Extreme recession.
 Lay-offs and terminations are restricting HRD activities.
 Philippines:
 Introduction of new technology is resulting in large scale
displacement of workers, skill-mismatch and redundancy.
 Widespread training and development programs in the
industries.

 Singapore:
 Established a Skill Development Fund to counter the changing
technology and train workers.

 Thailand:
 Limited HRD activities.
 Retraining of workers.
 Scope of HR audit

Personnel audit covers areas like personnel philosophy, policies, programs, practices
and personnel results.

The audit process

Various personnel policies, procedures and practices can be evaluated by posing
questions like:
 What are they(policies, procedures, practices)
 How are they established , communicated and understood
 Are they consistent with other policies/
 What are the controls that exist for ensuring their effective and uniform
application
 What measures exist to modify them?
Personnel audit can be carried out either by attitudinal survey or by interpreting
data. It can be undertaken at frequent intervals. It may be done either by internal
people or by external consultants. To be effective, personnel audit should focus
attention on rectifying things rather than fault-finding.
Personnel Records, Audit And Research
 Objectives of HRD Audit
• To determine the effectiveness of management programs.
• To analyze the factors involved in HRD and develop a
statement of findings with recommendations for correcting
deviation, if any, on the following issues:
a) The extent of deviation from HRD policies.
b) To what extent objectives are spelt out.
c) To what extent performance standards have been established
• To study the extent to which line managers have complied
with HRD policies.
• To study the current manpower inventory and identify
shortfall of excess.
 Importance of HRD Audit

• It helps to identify the changing training needs and development

of new training modules for effective utilization of manpower due
to technological changes.

• To keep pace with environmental changes, management

philosophy and practices at the organisation level like
participative management, employee empowerment, total
employee involvement.
 Introduction
• Resource can be defined as an object which can provide
expected future services.
• Human Resource Accounting (HRA) is the process of
identifying, measuring and communicating data about human
resources.
• In 1974, Flamhoitz defined HRA as: “ Accounting for people as
an organizational resource. It involves measuring the costs
incurred by business firms and other organisation to recruit,
select, hire, train and develop human assets. It also involves
measuring the economic value of people to the organisation.”
 Concept of HR Accounting
• Human Resource Accounting (HRA) is a new branch of
accounting.
• It is the measurement of the cost and value of
people to organizations.
• It involves measuring costs incurred by private firms
and public sectors to recruit, select, hire, train and
develop employees and judge their economic value to
the organization. 
 Objectives Of HRA
• Provide cost value information about acquiring, developing ,
allocating and maintaining HR.
• Enable management to effectively monitor the use of HR.
• Find whether human asset is appreciating or  depreciating
over a period of time.
• Assist in the development of effective
management practices. practices.
• To motivate individual persons in the organization to
increase their worth by training .
• HR by giving valuable information.
 Objectives of HR Accounting 
• To furnish cost value information for making proper and
effective management decisions about acquiring, allocating,
developing and maintaining human resources in order to
achieve cost effective organizational objectives.

• To monitor effectively the use of human resources by the

management.

• To have an analysis of the human assets i.e. whether such

assets are conserved, depleted or appreciated.
 Definition Of HRA
Human Resource Accounting is,

“ The process of identifying and measuring data about human

resource and identifying and measuring data about human
resource and communicating this information to interested
parties”
-- AMERICAN ACCOUNTING ASSOCIATION COMMITTEE
 Definition for human resources
accounting
• Human Resource Accounting is the
process of assigning, budgeting, and
reporting the cost of human resources
incurred in an organization, including
wages and salaries and training expenses.
 Contd….
• To aid in the development of management principles.
and proper decision making for the future by
classifying financial consequences of various
practices.

• In all, it facilitates valuation of human resources

recording the valuation in the books of account and
disclosure of the information in the financial
statement.

• It helps the organization in decision making process.

 HISTORICAL DEVELOPMENT OF  HRA 
According to Eric G Falmholtz  

•FIRST STAGE (1960-1966) 

  Beginning of academic interest in the area of HRA 

•SECOND STAGE (1966-1971)

The focus here was more on developing and validating
different models of HRA
THIRD STAGE (1971-1976) – 
•This period was marked by a widespread interest in the field
of HRA. R.G.Barry experiments contributed substantially
during this stage.

FOURTH STAGE (1976-1980) – 

•This was the period of decline in the area of HRA

FIFTH STAGE (1980 onwards ) –

•There was a sudden renewal of interest in the field of HRA
 Uses Of HRA
According to Grojer and Johansson-
•As a political tool, used to demonstrate mismanagement
of human resource.
•As a pedagogical instrument for analyzing and structuring .
•As a decision making aid to ensure that decision on HR are
more rational from the management point of view.
 Methods of HRA

 Historical cost method

 Replacement cost method
 Opportunity cost method
 Capitalization of salary method
 Economic valuation method
 Return on efforts employed method
 Adjusted discounted future wages method
 Reward valuation method
 Standard Cost Method
 Currant Purchasing Power Method
1) Historical cost method
This method developed
by Brummet, Flamholtz and Pyle.
According to this method, the
actual cost incurred on recruiting,
selecting, training, placing and
developing the human resources of
an enterprise are capitalized and
written off over the expected
useful life of human resources. The
procedure followed for human
resource asset is the same as that of
other physical asset.

181
2) Replacement cost method

This method was developed by Rensis Likert and Eric G.

Flamholtz. The cost of replacing employees is used as the
measure of company’s human resources. The human
resources of a company are to be valued on the assumptions
as to what it will cost the concern if existing human
resources are required to be replaced with other persons of
equivalent experience and talent.
3) Opportunity cost method
In order to overcome the limitations
of replacement cost method,
Hekimian and Jones suggested the
use of opportunity cost method
which determines the value of human
resource on the basis of an
employee’s value in alternative uses.
Accordingly the value of an employee
is based on his opportunity cost-the
rice other divisions are willing to pay
for the services of an employee
working in another division of an
organization.
4) Capitalization of salary method
The advocates of this method Baruch Lev
and Aba Schwartz have used the concept of
human resources in terms of economic
value in this model. According to them the
salaries payable to employees during their
stay with the organization may be used as a
replacement for the value of human
resources, in view of the close co-relation
between employees’ compensation and
their value to the organization. Thus the
value of human resources is the present
value of future earnings of homogeneous
group of employees.

184
5) Economic valuation method

Economic valuation method considers the present worth of the

employee’s future service expected to be derived during their
stay with the organization as the value of firm’s human resource.
Although there are some resemblances between earlier model
i.e., capitalization of salary method and this model, yet they
differ with each other. The economic valuation model
recommends the capitalization.
 6) Return on efforts employed method

This method measures the value of the firm’s human resources on

the basis of efforts made by the individual for the organizational
benefits. These efforts are evaluated in the light of the following
factors :

 Positions an employee holds;

 Degree of excellence employee achieves;
 Experience profile of the employee.
7) Adjusted discounted future wages method

Roger H. Hermanson developed this model wherein he

recommends measuring the value of human resources on the
basis of relative efficiency of an organization in the industry. This
model relates the value of human resources with the extra profit
the firm earns over and above the industry expectations. In fact,
this model attributes the difference in profitability rates between
firms of an industry to the varying efficiency of their human
resources.
8) Reward valuation method

As an improvement over the capitalization of

salary method Flamholtz developed a model commonly known as
Stochastic Rewards Valuation Method. The method seeks to
measure the value of human resources on the basis of an
employee’s value to an organization at various services states
(roles) that he is expected to occupy during the span of his
working life with the organization. The author has identified the
major variables which determine the value of an individual to a
firm.
9) Standard Cost Method

This method envisages establishment of a standard cost per

grade of employee, updated every year. Variances produced
should be analyzed and would form a useful basis for control.
Replacement costs can be used to develop standard costs of
recruitment, training and developing individuals, such standards
189
can be used to compare actual results with those planned.
10) Current Purchasing Power Method

Under it, instead of taking the replacement cost to capitalized,

the capitalized historic cost of investment in human resources is
converted into current purchasing power of money with help of
index numbers. Its great advantage is its simplicity even though
it might produce only approximate answers and approximately
correct data.
 Advantages of HRA
• Foresee the changes.
• Provides different methods of testing.
• Increase productivity.
• Brings high return.
• Helps individual employee to aspire.
• Provides scope for advancement.
• Throws light on the strength and weaknesses of the
existing workforce.
• Helps potential investor judge a company.
 LIMITATIONS OF HR ACCOUNTING 
• Not easy to value human asset.
• Results in dehumanizing human resource.
• No evidence. 
• HR is full of measurement problem.
• Employees and Unions may not like the ideas .
• Unrealistic.
• Lack of Empirical evidence.
 Personal Records, Audit & Research

INTRODUCTION
Records management is the planned control of records. It includes
decision making regarding the retention, transfer, microfilming and
destruction of records. Personnel records and reports enable
managers to obtain requisite information regarding the use of
human resources in various departments or divisions.

Personnel Records, Audit And Research

 Essentials of a good record and report
Record
1. Simple: Record-keeping must be simple. It should, at the 1. Conformity: Reports must conform
same time, meet the requirements of the organisation.
2. Accurate: Records should be error-free.
They must be built around facts as far as possible.
3. Economical: It should not cost a fortune
to maintain records. The cost of maintaining
records must not be high.
4. Useful: Records must provide information which could
be put to use. They must facilitate managerial decision
making. To this end they must be reviewed and kept
up-to-date.
time
Personnel Records, Audit And Research
Report
to organisational objectives.
2. Unbiased: Reports must be objective
and prepared without prejudice or bias.
3. Data based: Reports must be built
around facts. Theycmust not only
present facts but interpret them in a
meaningful manner.
4. Clarity and Simplicity: The report must
be clearly worded so that people could
use it easily. To make it simple, some
illustrative points could also be used.
5. Timely: Reports must be submitted
keeping the time limits in mind. They
very purpose of preparing a report
gets defeated once it exceeds the
limit.
 Records Management

The purposes of records management may be listed thus

 To keep an orderly account of progress

 To facilitate the preparation of the statement of the true conditions
 To enable the making of comparisons
 To facilitate the detection of errors and frauds
 To meet legal requirements
 To serve other miscellaneous purposes

Personnel Records, Audit And Research

 Types of Personnel Records

 job application and test scores

 job descriptions and job specifications
 interview results
 employment history
 medical reports
 attendance records
 payroll
 employee ratings
 training records
 leave records
 accident and sickness records
 grievances, disputes records
 contracts of employment
 records to be kept under various statutes
Personnel Records, Audit And Research
 Fundamental principles of record keeping

For effective records management, record keeping must

 Justification
 Verification
 Classification
 Availability of required information
 Reasonable cost

Personnel Records, Audit And Research

 Significance of Personnel Records

Personnel records and reports help management in obtaining the

requisite information regarding the use of human resources in
various departments or divisions.

Personnel Records, Audit And Research

 Significance of Personnel records

Personnel records play a significant role in performing various personnel functions

including audit and research. They are specially needed to:
i. supply the information required by the management and trade unions to
review the effectiveness of personnel policies and practices and develop
them.
ii. supply the information required by various agencies on the accidents,
employment position, strikes, absenteeism, turnover, etc.
iii. provide the information about manpower inventory for manpower
planning and succession planning.
iv. conduct research in personnel and industrial relations areas.
v. identify training and development needs.
vi. revise pay scales and benefits from time to time.

Personnel Records, Audit And Research

 Personnel Research

Personnel research implies systematic investigation into any

aspect of personnel or human resource management in a
systematic way. The major objectives of personnel research
include:
 Measure current conditions in human resource management
 Evaluate effects and results of current policies and practices
 Discover ways and means of strengthening the abilities and
attitudes of employees at a high level and on a continuing basis
 Provide an objective basis for revising current programmes
and activities

Personnel Records, Audit And Research

 Techniques to carry out personnel research

Personnel research can be undertaken through:

 Historical studies
 Case studies
 Survey method
 Statistical studies
 Mathematical models
 Simulation methods
 Action research methods
Personnel decisions can be improved through personnel research
because better information leads to better solutions Personnel
research can offer valuable insights for managers as they attempt
to increase employee productivity and satisfaction while reducing
absenteeism and turnover.
Personnel Records, Audit And Research