Presentation on HR Audit

(Human Resource Management)

Presented by
Artim
Ashirdeep
Sahil Beetan

HR FOCUS ON ADDING VALUE

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.

NATURE & NEED FOR HR

EVALUATION

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.

Contd..

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 functions role in
accomplishment of firms goals.

EVALUATION FRAMEWORK

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

Contd..

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.

APPROACHES TO EVALUATION

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

Audit Approach

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

Practices of HR Audit

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

Contd..

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.

Benefits of HR Audit

It provides verifiable data on HRM function

It clarifies HRs 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.

Analytical Approach
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

Qualitative and Quantitative

Indices

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

HR Metrics
HR Metrics
1. ROI

2. Hiring Cost

How Calculated
Net Benefits
Cost of HR Intervention
Total Cost of Hiring
No. of Hires

Significance
HR value addition is
determined
How much the
company incurs on
recruitment

3. Rate of
Absenteeism

No. of days absent in a

Shows the absence
month
rate of employees
Avg. no. of employees during
the month*Number of
Working days

4. Turnover
Rate

Employees left during a year

Avg. 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 HR
Total 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

Productivity
Cost to Company
(CTC)

Shows how far an

employee is useful to
the organisation

Balanced Score Card

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

Financial Performance of an organization

It reflects a concern that the organizations 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
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.

Steps in Benchmarking
Identify HR practices to
benchmark
Establish a core team
Select the benchmarking
partners
Collect the data
Analyze and interpret the data
Prepare a report
Implement action plans

Benchmarking
partners
A
B
C

HR Dash Boards
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.

Benefits
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.

THANK YOU!