HRD audit means the methodical authentication of job analysis and design, recruitment and selection, direction and placement, training performance appraisal and job evaluation of the HR of the organization.

HRD audit is useful to achieve the organizational goal and also is a vital tool which helps to assess the effectiveness of HR functions of an organization and helps company remain competitive.

Learn about:-

1. Introduction to HRD Audit 2. Meaning and Definition of HRD Audit 3. Characteristics 4. Objectives 5. Pre-Requisites 6. Designing and Using HRD Audit

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7. Writing HRD Audit Report 8. Role of HRD Audit in Business Improvements 9. Role of the HRD Department in HRD Audit 10. Benefits.

HRD Audit: Meaning, Characteristics, Objective, Role, Pre-Requisites, Benefits and Other Details

HRD Audit – Introduction

HR audit is a functional audit. It consists of diagnosing, analyzing, evaluating and assessing future lines of action within the framework of HRM. HRD auditing is a basic tool for the management of a company. Its objective is not only the control and quantifying of results, but also the adoption of a wider perspective that will aid in designing future lines of action in the HRD field.

Thus, HR auditing must perform two basic functions, 1st; it must be a MIS, whose feedback provides information about the situation in order to facilitate the development of managing processes or the development of HRD. On the other hand, it must be a way of controlling and evaluating the policies that are being applied, as well the established process.

HRD audit helps in organisational strategy, achieving goals and also to benchmark various performance data, to ensure continuous development of any organisation systematic. HR audit helps in developing good business practices and among others, private best direction to an organisation to achieve its strategic goals, optimising costs and return on investment (ROI) in all HR initiatives (especially on training and development).

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For monitoring periodically through systematic HR audit is essential for every organisation.

HR audit helps in many other key areas as below:

1. Legal Compliance:

HR is bound by various laws. Non-compliance not only sparks strained employer-employee relations, even can drag an organisation to a court of law. Systematic HR audit can ensure such compliance and benefit an organisation to concentrate more on other strategic issues

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2. HR Audit and Record Keeping:

HR record keeping is either electronically or through paper documents are, very important. Improper records can give rise to legal complications and organisations may face structures in terms of fines and law suits. Systematic HR audit can prevent this duly identifying deficiency in HR record-keeping and suggest better way of record maintenance.

3. Employee-Relations Audit:

Such audits encompass study of various aspects of employee relations through structured surveys to map employees’ perceived level of motivation / morale / job satisfaction etc. Through HR audit, getting an insight on employees thinking on various policies and programmes is possible. Such programmes or schemes some incentives, benefit plan etc.

HR audits can also be conducted in areas like compensations and benefit plan, pension plan, diversify issues, training and development functions etc. HR audit ensures that sound and cost effective policies are implemented.

HRD Audit – Meaning and Definition

HRD audit means the methodical authentication of job analysis and design, recruitment and selection, direction and placement, training performance appraisal and job evaluation of the HR of the organization. HRD audit is useful to achieve the organizational goal and also is a vital tool which helps to assess the effectiveness of HR functions of an organization and helps company remain competitive.

The scope of HRD audit is large encompassing all the HR function namely managerial compliance of personnel policies, procedures and legal provisions, HRD planning and staffing and audit of the HRD climate on employee motivation, morale and job satisfaction.

It provides various benefits to the organization by finding out the contribution of the HRD initiatives towards the organization. It also helps in development of the professionalism of employees. It helps reduce the developmental cost by providing a cost benefit analysis of the HRD activities. HR audit is helpful in facing the challenges of performance appraisal and increasing the potentiality of personnel in the organization.

HRD can be defined as a process of people to acquire competencies. In an organizational context HRD is a process by which the employees of an organization are helped in a continuous and planned way to acquire or sharpen capabilities required to perform various functions associated with their present or expected future roles and develop their general capabilities as individuals and discover and exploit their innate potential for their own and organizational development purpose.

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HRD Audit helps the employees acquire new competencies through a process of performance planning, feedback, training, periodic review of performance, assessment of the developmental needs, and creation of development opportunities through training, job rotation, responsibility definition and other mechanisms. HRD audit is a Comprehensive Evaluation of Human Resource Development practices in an organization and their appropriateness to achieve the short and long term business goals of the organization.

There are various methods of HRD audit as it examines the adequacies and inadequacies of HRD structure, staff and their competencies, line managers and their attitudes, top management and their support, unions and their role in competence building for future. HRD audit suggests mechanisms for improving all these in the business context.

HRD Audit – Salient Features of HRD Audit: Comprehensive, Linkages and Business-Driven

Rao (2007) defines the notion, thought, and salient features of HRD audit:

1. HRD audit is comprehensive,

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2. It examines linkages with other systems, and

3. It is business-driven.

1. Comprehensive:

An audit team must consider the business plan and its corporate strategies from the very beginning. The HRD auditor needs to take into account where the company intends to be after a definite period of time. The top level management needs to discuss these issues with the auditor. The auditor needs to examine the objective evidences such as long-term documents as well.

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Thereafter, the auditor needs to assess the skill base required to perform the new roles and the current skill base of HRD staff in the company in relation to various roles and role requirements.

Following this, an auditor should verify the effectiveness of the existing HRD mechanisms in developing people and ensure that human competencies are available in adequate levels in the company. An HRD audit examines linkages with other systems. The HRD structure existing in the company should be adequate enough to manage the company’s HRD functions. Top management and senior managerial styles of managing people need to promote a learning culture.

The managerial styles should facilitate the creation of a learning environment. Auditors need to examine this difficult task.

2. Linkages with Other Systems:

There is a linkage between HR and other functions such as production management, maintenance management, total quality management, personnel policies, strategic planning, etc., in any organization. An audit examines these linkages between HRD and other systems. On the basis of evaluation, HRD auditors suggest future HRD strategies required by the company.

The suggestions further include – (a) the structure the company needs to have for developing new competencies, (b) the systems that need to be strengthened, (c) the ideal managerial styles and work culture conducive and compatible with HRD processes in the company. The managerial styles of the top management should also be emphasized.

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3. Business-Driven:

HRD audit is business-driven and primarily focuses on fulfilling the objectives. Along with meeting objectives, HRD audit evaluates HRD strategy, structure, system, staff, skills and styles, and their appropriateness.

HRD audit is not a problem-solving exercise. HRD audit does not always provide solutions to organization-specific problems involving industrial relations, discipline, performance, etc. However, it throws some insights into the sources of the problem. It never gives feedback about any specific individu­als.

However, it gives feedback about the HRD department, the structure of the HRD departments, competency levels of the personnel manning, leadership styles, processes practiced, interrelationships of HRD system with systems, influence of the HRD on the other systems, etc.

HRD audit is one of the five systems used to measure the effectiveness of HR practices, the other systems being – (a) benchmarking, (b) HR accounting, (c) HR information system, and (d) HR researches.

HRD Audit – 5 Main Objectives of HRD Audit

(i) To determine the effectiveness of management programmes which facilitate management to develop allocate and monitor human resources.

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(ii) To analyse the factors and recommend for correcting deviation’s viz. the extent of bank deviation from HRD policies / intent of objectives spelt out / achievement of performance standards

(iii) To seek explanations and information and answers questions like what happened / why happened.

(iv) To the extent, to which like managers have complied with HRD policies

(v) To study the current manpower inventory and identify shortfalls or excesses

HRD Audit – Pre-Requisites

(i) Legal Compliance

(ii) Employment / recruitment

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(iii) Terminations

(iv) Employee Relations

(v) Record Maintenance / Technology Up-gradation

(vi) Compensation / Salary

(vii) Orientation

(viii) Training and Development

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(ix) Communications

(x) Policies and Procedures

An HRD Audit provides quick way to take stock of a company’s Human Resources and Practices with an eye towards. Improving them the advantage of HRD audits is that they bring a level of expertise to bear on issues. Once the audit is complete the findings are presented to management.

In HRD audit, the aspects of HRD practices covered are:

(i) Recruitment and employment

(ii) New employee orientation

(iii) Employee manual

(iv) HR policies and procedures

(v) Employee surveys

(vi) Exit interviews

(vii) Employee files and record keeping

(viii) Legal compliance

HRD Audit – Designing and Using HRD Audit (With Measures)

HRD audit starts with an understanding of the future business plans and corporate strategies. While HRD audit can be done even in organizations that lack well formulated future plans and strategies, it is most effective as a tool when the Organization already has long-term plans. The HRD audit starts with efforts to answer the question, where does the company want to be ten years’ time from now, three years from now and one year from Now?

The answer to this question needs to be provided by the top-level management. On the basis of the answers to these questions the auditors finalize the subsequent audit strategies and methodology. The consultants make an attempt to identify the nature of the core competencies the Organization needs to develop in order to achieve its long-term plans. The auditors also need to identify skills required to be developed by the company at various levels and with respect to various functions. Listing all these core competencies and skills for the future is the starting point of HRD audit.

The HRD audit normally attempts to assess the existing skills and the competency gaps in order to achieve the long-term business goals and short term results of the company. What is the current skill base of HRD staff in the company in relation to various roles and role Requirements is assessed through an examination of the qualifications of HRD staff, job descriptions, training programs attended etc. Apart from this the auditors attempt to identify various HRD sub-systems that are available to ensure the availability, utilization and development of skills and other competencies in the company.

In the next stage, an attempt is made by the auditors to examine whether the current HRD structure can handle the imperative and future HRD needs of the company. This examination helps assess the existing skill base of the HRD Staff of the company, their professional preparation, their attitudes, their values, their developmental needs, the line Managers perceptions regarding them, etc.

An attempt is made to examine the leadership styles, human relations’ skills, etc., of senior managers. The extent to examining their styles in order to facilitate the creation of a learning environment is accessed. HRD Audit starts with finding out details of the future plans of the organizations and uses it as a base for outlining the competency requirements of the organization in future.

The current competencies, structures, HRD systems are assessed in terms of their capability to prepare the organization for the future. Suggestions are made to improve the climate of the Organization. HRD plays an increasingly important role in the achievement of future goals. HRD audit is cost effective and can give many insights into a company’s affairs. It makes the top management to think in terms of strategic and long term business plans.

The HRD Scorecard is a measure of the HRD maturity level of an organization. The scorecard is based on the following assumptions and takes into consideration the research based understanding gained in the last few decades regarding HRD.

The maturity level of HRD in an organization is indicated by the following factors:

1. HRD Systems Maturity.

2. HRD Competencies of the Employees including the HR Department.

3. HRD Culture of the Organization.

4. HRD Influence on the Business Goals or Business Linkages of HRD.

This model is based on the assumption that competent and motivated employees are needed to provide quality products and services at competitive rates and ways that enhance customer satisfaction. It further emphasises that competencies and commitment can be developed through appropriate HRD.

The following scores effectively measure the HRD:

1. HRD Systems Maturity Score:

In a HRD Mature organization there will be well-developed HRD systems and HRD systems Maturity can be measured through HRD audit.

2. HRD Competence Score:

Competencies of the HRD department and the line managers play a significant role in implementing the systems and processes in ways that could ensure employee satisfaction, competence building and customer satisfaction linkages.

3. The HRD Culture:

Values and processes created by the HRD tools, staff and their styles also play a crucial role in building sustainable competencies in the organization. These need to be measured and monitored. It is possible in some corporations to have very little of HR systems and yet have a high level of HR competencies and HR culture.

4. HRD-Business Linkage Score:

Business linkages of HRD are very crucial component of HRD effectiveness. HRD systems, competencies and the culture must be aligned with the business goals of the corporation. The alignment could be ensured through the direct linkages with customer satisfaction and employee motivation indices.

The HRD system should focus on the above dimensions. Questions like are the HRD systems aligned towards the important business goals of the corporation, and does the HRD staff reflect adequate understanding the commitment to the business goals of the organisation and are the HRD processes and culture suitable for achievement of goals need to be answered.

HRD Audit – Types of Reports (With Role of HRD Auditor)

The HRD audit takeaway is a report that the auditors prepare and submit authority of the organization.

The reports are primarily of two types:

a. Clean Report – The clean report is one which indicates the appreciative aspects of the departments function.

b. Qualified Report is the one which brings forth the gaps in performance and therefore contains remarks and remedial measures.

HRD Audit inputs are given with the objective to make the organization a world-class organization. The audit recognizes the company’s efforts in human resource utilization and helps the organization perform well. Because of competitive environment and the changing business scenario the competency requirements of the organizations are likely to be changed in the future. The audit reveals the facts and helps in creating systems that are performance driven culture and are ready to take the challenges for the future.

Role of HRD Auditor:

HRD auditor has to:

i. Improve HRD system.

ii. Recommend effective recruitment practice.

iii. Ensure effective implementation of training programmes.

iv. Suggest ways to smoother industrial relations.

v. Give suggestions for conflict resolution.

vi. Strengthen accountability through appraisal system.

vii. Make recommendation to modify the style of leadership and remove the blocks in free flow of communication.

viii. Share his insight on developing the competencies of HR.

ix. Gives clarity on the role of HR department.

HRD Audit – Role of HRD Audit in Business Improvements (With Benefits)

HRD audit gives many insights into a company’s affairs. It is time-consuming, but cost-effective. The auditors come together for a period ranging from three days to two weeks, stay at the organization, and give a report generally within a fortnight or a month’s time. The auditors generally offer a prelimi­nary presentation on the last day of the audit.

The benefits of HRD audit are diverse and manifold. Apart from improving the organization’s practices, it creates a more professional image of the department among managers. In addition, it helps to project an elevated image of an organization to its stakeholders.

HRD-audit is cost effective and can give many insights into company’s affairs.

HRD audit leads to benefits viz.:

(i) Involvement of Top Management:

Since the employees cannot participate in HRD audit, the auditors have to force the management to share their plans, which has increased employee involvement.

(ii) Role Clarity of HRD and Line Managers:

Enhanced role clarity of the HR Department and HR functions and increased understanding of line managers, about their role have been uniform result of audit

(iii) Human Productivity and Strengths and Weaknesses:

Identifies the strengths and weaknesses in management system. It also points out the absence of system that can enhance human productivity e.g. MIS, rules and procedures etc. Preparation of a manual for the delegation of powers, roles and responsibilities, sharing of information, are some of the replant activities.

(iv) Increase in Professionalism:

As a result of HR audit, new recruitment and retention strategies have been worked out for the talented-employees

(v) Create a Learning Organisation:

A learning culture style requires empowering attitude, participative style of management and ability to convert mistakes, conflicts and problems.

(vi) Improvements in HR Systems:

HR audit helps in redesigning the HR system. The most frequently changed or renewed systems include performance appraisal training, job rotation, career planning and promotion policies.

(vii) Cost Effective Training:

In HR process the Identification of training needs and utilisation of training of inputs and learning for organisational growth and development, are assessed. As direct investments are made in training, any cost benefit analysis draws the attention of the top management and HR managers to the training & function with relative ease,

(viii) Increased Focus on Competencies:

One of the results of HR audit is to focus on knowledge, attitudes and skills required by the employees in the organisation. The audit establishes a system of role clarity and fixing of accountabilities. More sensitivity is developed to the missing aspects of competencies.

(ix) Strengthening Employee Accountability:

HR audit gives the existing state of the accountability of employees. This gets assessed through performance-appraisal as well as through work culture

(x) TQM Interventions:

Quality improvements and establishing TQM systems, require a high degree of employee involvement. Due improvements in the training system, TQM programmes have also improved.

HRD Audit – Role of the HRD Department in HRD Audit (With Useful Tips)

The HRD department has the most crucial role to play in HRD audit. First of all, it requires a lot of courage to get the HRD audit initiated. Any HRD audit is likely to point out the weak areas of the HRD function. Due to a limited understanding of the role of line managers, top management and a number of other factors in the success of HRD, most line managers and sometimes even the top management is likely to put total responsi­bility for the weak areas on the HRD department.

It is not quite uncom­mon to find the successful practice of HRD systems attributed to line managers and the top management, and the unsuccessful ones to the HRD department. It needs a good deal of maturity on the part of the HRD manager and the top management to appreciate the role of all employees in HRD. Everyone should eventually own the HRD function and the line managers should take a higher level of responsibility for the development of their own staff.

The HR department should be a facilita­tor. However until the time the maturity level of an organisation reaches this stage, the HR department has the tough task of building the HR competencies of the staff and, at the same time, has to be prepared to face criticism. The HRD department can use HRD audit as a step to build the desired awareness among line managers.

The following are some useful tips for the HRD department to use HRD audit effectively:

(a) Do not become defensive. Do not take criticism of the weak areas in the HRD function negatively you may have initiated the audit and therefore, you should have the confidence and courage to accept the weaknesses and plan improvements.

Weaknesses re­flect the status of the HR function which, in turn, is determined by the competencies of the staff, the treatment the function is getting in the corporation and also how it was treated in the past, past incumbents, competency gaps in line managers as well as the HR staff, developments or research or knowledge base in the area itself, top management support, role of unions and many other factors. You cannot ensure everything to be perfect. At the same time you need to ensure that the HR function plays a sig­nificant role in giving the right direction to the company.

(b) Use the audit to – (i) point out to the top management about their role in HRD and the support required from them; (ii) educate the line managers about their role in HRD; and (iii) educate the unions about the opportunities they have to develop their employees and the company.

(c) Create mechanisms to discuss the report and improve the func­tion. The audit provides a great opportunity to improve the effec­tiveness of the HRD function in the company. It also provides a good opportunity to develop the staff internally, to streamline the HRD budget, enhance HRD competencies, rationalize the HRD structure and participate in business strategies and decisions.

(d) Build your own competencies and learn to play a more signifi­cant role in making your corporation competitive and world class.

HRD Audit – Top 8 Benefits of HRD Audit

HRD audit is a complete appraisal of the active HRD structure, strategies, systems, styles, skills and culture and their aptness to achieve the short-term and long-term goals of the organisation. HRD audit begins with a comprehension of the future business plans and corporate strategies.

HRD audit can be done in organizations having well formulated future plans and strategies and it proves to be the most effective tool when the organization already has long term plans at hand. HRD audit endeavors to find the future HRD needs of the company after reviewing the current HRD activities and inputs available. HRD audit is cost-effective and can give many insights into a company’s dealings.

HRD audit has several benefits as outlined by some of the most effective HRD consultants like T V Rao:

Benefit # 1. Establishing Strategic Plans:

HRD audit begins with strategic plans which then roll down to the lower levels. This enables the employees to plan their own activities and eventually their competency development program.

Benefit # 2. Describing the Role of the HRD Department and Line Managers in HRD:

HRD audit is important for employees at various levels for current as well as the future development. However, enhanced role clarity of HRD department and HRD function and increased understanding of line managers about their HRD role is an essential aspect of its success.

Benefit # 3. Reformation of Other Management Practices:

HRD audit recognizes the strengths and weaknesses in the some of the management systems existing in the organization. At the same time it also points out the lack of systems that can augment human productivity and employment of the existing capability base which in turn may have an effect on the performance of the employees. In a small number of cases an HRD audit has facilitated the management look at some of these sub-systems and work procedures.

Preparation of a manual of delegation of powers, clarification of roles and responsibilities, reformation the manuals of economic procedures and systems, amplification of the information systems, and distribution of information are some of the ensuing activities in this direction.

Benefit # 4. Superior Recruitment Policies and Extra-Professional Staff:

An HRD audit reveals the skill base required for smooth functioning of the organization. It gives direction for the proficiency requirements of employees at various levels and provides a base for recruitment policies and procedures. This results in strengthening the recruitment policies and procedures and helps in working out new recruitment and retention strategies.

Benefit # 5. Altering the Styles of Top Management:

One of the objectives of HRD is to create a learning organization by making the top managers of the company exhibit a developmental style of management. The prerequisite of such a style is an empowering attitude, participative style of management, and an ability to translate errors, conflicts and problems as learning opportunities. HRD audit provides subtle feedback to the top management and to initiate a change process.

Benefit # 6. Enhancement in HRD Systems:

The HRD audit has helped most of the organizations in understand the effectiveness of their HRD systems and re-design the HRD systems.

Benefit # 7. Supplementary Planning and Cost-Effective Training:

One of the major benefits of HRD Audits is that it answers the question of returns on investments made in training. The process of identifying training needs and utilization of training inputs and learning for organization growth and development are evaluated. Post-training follow-up and dissemination of knowledge relating to it helps organizations strengthened its training function by introducing a systematized and developed training policies system.

Benefit # 8. Enhanced Focus on Human Resources and Human Competencies:

One of the benefits of an HRD audit is to focus on new knowledge, attitudes and skills required by the employees in the organization. Observations are made about the technical, managerial, human and conceptual competencies of the staff at various levels. This helps organizations identify and focus sharply on the competency requirements and gaps.

The audit sets up a system of role clarity and accountabilities. More understanding is developed to the gaps between desired and real competencies. This helps in straightening and strengthening things out.

Apart from the above stated benefits, an HRD audit can also give significant inputs about the existing state of the accountabilities of employees. Quality improvements require a high degree of employee involvement and in a number of cases the HRD audit has helped finding out and fixing the performance gaps.