Approaches of Human Resource Audit

HR audit involves examining and reviewing the organization’s existing policies, procedures and practices regarding recruitment and selection, orientation and placement, training and development, job analysis and design, job evaluation, compensation, morale and motivation, employee health and safety, social welfare, industrial relations, etc.

According to Eric Flamholtz, “Human Resource Audit is a systematic assessment of the strengths, limitations, and developmental needs of its existing human resources in the context of organizational performance.”

Normally, in an organization, not all HR policies are formal and written; there are many informal policies, not officially documented. The HR audit involves the review of all the HR policies, procedures and practices currently adopted by the organization, irrespective of whether they are formal or informal.

The audit also helps to check that the company complies with the legal requirements and regulations regarding employees as laid down by the government of the country. By means of an audit, the company can determine its strengths and weaknesses in the area of HRM and plan accordingly to improve its processes and procedures related to the human resource function.

Human Resource Audit also called Personnel Management Audit is well practised in Western developed countries. In India, there is no lull audit like financial audit of the personnel or Human Resource activities in an organisation. Audit is evaluation, examination, review and verification of completed activities, to see whether they represent a true state of affairs of the activities in the department audited.

Human Resource audit refers to an examination and evaluation of policies, practices, procedures to determine the effectiveness and efficiency of the Human resource management and to verify whether the mission, objectives, policies, procedures, programmes have been followed, and expected results achieved. The audit also makes suggestions for future improvement as a result of the measurement of past activities.

There are mainly five approaches in the study of Human Resource Audit.

They are:

(i) The comparative approach

(ii) The outside consultant approach

(iii) The statistical approach

(iv) The compliance approach

(v) The management by objectives-MBO approach

(i) Comparative Approach:

In this approach, the auditors can collect and analyze data of their own company and also compare the data of different firm or company. After comparing the data of different companies, then the auditors choose the best one, which, is most suitable for the organisation. Thus, comparative approach helps the auditors to get best data.

(ii) Consultant Approach:

The organisation performance can improve only by an outside consultant. Consultant approach gives different types of ideas to the auditors which is most essential for comparative purposes in the organisation.

(iii) Statistical Approach:

In the statistical approach, certain statistical measures of performance are developed based on the company’s existing data. For examples-absenteeism and accident rates. These data help the auditors in assessing the positive and negative aspects of company’s performance.

(iv) Compliance Approach:

In the compliance approach, auditors review the past results and actions of the company’s policies and procedures. The check work of the auditors to go with the legal norms of the company’s policies and procedures.

(v) Management by Objectives (MBO) Approach:

The management by objectives approach deals with the specifications of goals against which performance is assessed. In this approach, managers set objective in their specific areas of responsibility.

The methods for evaluating and disseminating data take the form of:

(a) Comparison between time periods.

(b) Comparison of organisations.

(e) Trend lines, frequency distributions and statistical co-relations.

(d) Ratio analysis voluntary turnover rate

(e) Classification of data.

(j) Graphical or pictorial display.