Benefits and Limitations of Human Resource Audit

Organizations are increasingly finding it imperative to improve returns on investment, in order to stay competitive. Traditionally, accounting norms were viewed only from the financial perspective and were applied to all departments ranging from marketing, production, distribution, etc. HRM was limited to salary and administration and, while doing so, it was analysed from the perspective of provisioning and expenditure.

However, in today’s competitive scenario, it has become essential to analyse HRM activities and assess their contribution in a more systematic and methodical manner. The Indian industry has aggressively adopted various innovative systems, such as HR audit and balanced scorecard, with a macro perspective of balancing performance management across all organizations.

Human Resource (HR) Audit is not only a tool for evaluating the personnel activities of an organisation, but also an important aspect of the human resource management. It is a great deal of attention from Human Resource Practitioners.

It basically review the effectiveness of human resource practices. It gives feedback about HR functions not only to operating managers, but also the HR department about how very well operating managers are meeting their HR duties.

Benefits

Role Clarity of HR Functions: People working in HR department must be very clear about their roles and responsibilities. They should have a clear understanding that their priority should be in the interest of the organization says HR audit. The role transparency function is performed by HR audit to ensure they understand their role.

Promoting Critical Business Plans: Every organization follows certain strategic plans in order to achieve organizational goals. HR auditor’s responsibility is to convince management to disclose these plans to employees of the organization so that they can participate comfortably in the decision-making process of the company. The aim is for employees to contribute their point of view about these plans and involve themselves completely.

Analysis of HR Functions: An HR audit plays a very crucial role in analyzing the functioning of the HR department. It helps in evaluating the performance of the employees and developing their leadership qualities. If necessary, the HR audit also helps in re-designing the development system of the HR department.

Improving Organizational Competency: An HR audit helps in identifying the strength and weaknesses of the present administrative system. If there is any drawback in the functioning of the system, the HR audit tries to develop techniques by which productivity can be increased. These positive impacts are also visible in HRIS, working procedures, delegation and clarification of roles and responsibilities.

Limitations

Any audit is undertaken to evaluate the effectiveness of systems and procedures. The HRD audit is not an exception. However, if the HRD audit is held due to the directives/fancies of the CEO, it can lead to negative results. For instance, initially the top management may be very supportive of the HRD audit process.

However, when the feedback is continuously negative, they may become hostile and sometimes even aggressive with the auditors. Quite often the failure of an HRD audit is on account of failure in the implementation of corrective action based on the feedback. There have been instances when the HRD audit is used for a negative purpose, such as victimizing the HR department and removing some of the HR employees.

HR Audit should be voluntary and should be proactively undertaken by the management. There should not be any compulsion to conduct HR Audit, in order to facilitate a fair and objective report generation.

An HRD audit does not give an evaluation of the individuals, but it essentially focuses upon units and systems. However, if consultants so desire, they can give a formal feedback to the individuals.

Lack of Objectivity:

Objectivity and other necessary skills are essential for managers who are doing audits so that the interpretation of the data collected can be done properly. The absence of objectivity hampers the audit. Many companies, on the other hand, hire outside auditors with HR auditing knowledge and skills.

Generally, experts themselves conduct an audit of the HR function. While auditing, the senior audit expert should be familiar with some of the common errors of interpretation, which may crop up while analyzing the outcome of employee opinion.

These include the following:

• Making a single observation based on the report,
• Assuming consensus based on the opinions of a limited group of individuals
• Rejecting observations without conducting more study;
• Interpreting reports as valuable without examining their implications; and
• Complicating situations based on majority viewpoints while disregarding minority opinions.

Absence of Established Metrics:

 It is rare for HR audits to be evaluated based on established metrics or other performance standards in most organizations. This is one of the major problems for the organization. Therefore, senior managers are advised not to conduct audits without appropriate metrics and performance standards. Measures and performance standards can be established by b) framing a meaningful audit process

Managers consider audits to be a threat:

In some organizations, managers may have a feeling of fear about the HR audit. This is because managers think that they will be caught for doing wrong acts, if they have done any, and will definitely be punished for the wrong acts. An HR audit is used by some unethical managers to induce obedience in employees.

Organizations reduce this fear of audit by not considering audit scores to directly assess any manager’s performance. Manager7s assessment should be done considering the execution of corrective measures to reduce the wrong acts found during the HR audit. No punishment should be given, in any case, as a consequence of the HR audit.