Presentation on HR Audit(Human Resource Management)

Presented byArtimAshirdeepSahil Beetan

HR professionals are in the midst of reinventing themselves-changing what they do for the companies that employ them. The single most important tool they have in their hand is the intellectual capital held within any corporation. In the past, the profession has focused on winning the hearts of employees but today their aim is to harness their minds.

The role changed with the advent of technological change. Expectations from HRM are soaring. HR professional is now expected to play roles of change agent, strategic partner, employee champion and transformationalist.

HR FOCUS ON ADDING VALUE

HRM evaluation refers to the procedures and processes that measure , evaluate and communicate the value added of HRM practices to the organization. HRM evaluation assumes significance because of the intensive emphasis on cost control, need for efficient allocation of resources and capability of human resources to provide a competitive advantage to the firm.

HRM evaluation has been advocated for a number of reasons such as:

Promotion of HR function, through demonstration of bottom line contributions through reduced turnover.

NATURE & NEED FOR HR EVALUATION

The demonstration of accountability in utilisation of resources.

Promotion of change by identifying strengths and weaknesses.

Introduction of Financial assessment as decision tool in human resource planning.

Highlighting key HR practices. Demonstrating the function’s role in

accomplishment of firm’s goals.

Contd..

This model emphasizes overall relationship among three major elements a)HRM policies and practices b)HR performance measures both at individual as well as group levels c) Organisational performance indicators.

HRM policies include employee hiring, training and development, performance review and compensation systems. This will impact employee performance at both individual as well as group levels.

Employee performance seeks to emphasise on such outcomes as turnover, accidents, grievances and absenteeism. These indicators provide for objective

EVALUATION FRAMEWORK

assessment of performance. HRM policies should result in behavioral outcomes such as employee loyalty, commitment, hardwork, motivation and morale.

Organisational performance indicators include cost, quality , profitability and return on investment. These outcomes are the result of HRM practices and can be used to evaluate HR function.

Contd..

The most prominent approaches to Human Resource evaluation are as:

Audit Approach Analytical Approach Qualitative and Quantitative Approach Balanced Score Card Dash Boards Bench Marking

APPROACHES TO EVALUATION

HRM audit is a process of evaluating the effectiveness of the HR function. The HRM audit possesses the following elements:

technical work in the form of a systematic gathering and analysis of data

an evaluation of the HR activities , policies and systems based on the evidence

a clearly defined objective of the process Action in response to audit findings

Audit Approach

Auditors may adopt any of the practices for evaluation a) comparative b) outside authority c) statistical d) compliance e)MBO

Comparative Approach: The auditors identify another company as the model and results of their organisation are compared with the model company.

Statistical Approach: Statistical measures of performance are developed based on the company’s existing information.

Compliance: Auditors review past actions to determine if those activities comply with legal requirements and company policies.

Practices of HR Audit

MBO Approach: It creates specific goals against which performance can be measured. Then the audit team researches actual performance and compares it with the objectives.

Outside Approach : Auditors use standards set by an outside consultant as benchmark for comparison of own results.

Contd..

It provides verifiable data on HRM function It clarifies HR’s functions and responsibilities It identifies critical HR problems. It helps align HR strategy with organizational

strategy It improves status of HR function It reduces HR cost It helps review and improve HRIS.

Benefits of HR Audit

Analytical approach relies on Cost-Benefit Analysis, also called Utility Analysis

Utility Analysis seeks to express evaluation in economic terms, which are most useful in decision making

HR activities that have been evaluated with utility analysis are:• Appraisal Systems• Employee Hiring• Training and Turnover

Analytical Approach

Various quantitative indices or metrics available to determine effectiveness of HRM are as following:◦ Cost of Turnover◦ Absenteeism Cost◦ Cost of Work-life programs◦ Cost per hire◦ Lead time to fill vacancies◦ HR expense factor◦ Training Cost

Qualitative and Quantitative Indices

HR Metrics How Calculated Significance

1. ROI Net Benefits Cost of HR Intervention

HR value addition is determined

2. Hiring Cost Total Cost of HiringNo. of Hires

How much the company incurs on recruitment

3. Rate of Absenteeism

No. of days absent in a month

Avg. no. of employees during the month*Number of

Working days

Shows the absence rate of employees

4. Turnover Rate

Employees left during a yearAvg. number of employees

Shows the rate of employee turnover in a year

HR Metrics

HR Metrics How Calculated Significance

5. HR Expense Factor

Cost of HRTotal Cost

Cost incurred on HR function

6. Lead Time to fill vacancies

Days Lapsed to fill vacancies

Number of Hires

Shows the lead time required to fill vacancies

7. Effectiveness of each employee

ProductivityCost to Company

(CTC)

Shows how far an employee is useful to the organisation

HR Metrics

Developed by Kaplan and Norton It helps evaluate HRM effectiveness Contains four dimensions:

◦ Financial Performance of an organization◦ Customer Service◦ Internal Business Processes◦ Capacity to learn and achieve growth

Balanced Score Card

Financial Performance of an organization• It reflects a concern that the organization’s activities

contribute to improving short-term and long-term financial performance

Customer Service• It measures such things as how customers view the

organization, as well as customer retention and satisfaction Business Process• Business Process Indicators focus on production and

operating statistics, such as order fulfillment or cost per order

Potential for Learning and Growth• This is the Final component to track Organization Growth

Benchmarking involves employees learning and adopting the so called “best practices” by comparing their HRM with those of others.

Beside evaluation it enables managers to learn from other firms and adopt effective HR strategies.

It tells what an organization needs to improve.

Benchmarking

Identify HR practices to benchmark

Select the benchmarking partners

Collect the data

Establish a core team

Implement action plans

Prepare a report

Analyze and interpret the data

Steps in Benchmarking

Benchmarking partners

ABC

HR dash boar is an appealing visual display of HR metrics.

Each firm has its own customized Dash Board to track and repot progress against set goals.

Information provided by it is at high level. Publishing the HR Dash Board revolves

around gathering, verifying, sorting, analyzing information for consumption of the top management.

HR Dash Boards

HR Dash Board serves as means of keeping finger in the pulse of the organization.

Information provided by it can be archived and referred to over a period of time to map trends and identify areas of improvement.

Benefits

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