Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

Q.1 Discuss the conceptualizing of HR Audit.

Conceptualization of HR Auditing

Auditing has evolved, becoming increasingly speciÞc, until the term functional audit has emerged. The
objective of a functional audit is to diagnose, analyze, control, and advise within the boundaries of each
functional area of the company.

The HR audit is a type of functional audit. Thus, as a Þrst approach, one could say that HR auditing
consists of diagnosing, analyzing, evaluating, and assessing future lines of action within the framework
of HRM. HR 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 deÞning
future lines of action in the HRM Þeld. Thus, HR auditing must perform two basic functions [Cantera,
1995]. First, it must be a management information system whose feedback provides information about
the situation in order to facilitate the development of managing processes or the development of HR.
On the other hand, it must be a way of controlling and evaluating the policies that are being applied, as
well as the established processes.

It can be understood that in order to secure the operative efficiency and user or client satisfaction, an
appraisal of the results of the HR function is necessary. According to this approach, the results obtained
can be valued from certain HR policies (an external type of measurement), or from the results of the
policies or the policies themselves. The results can be valued through their cost (a measurement
internal to the function) [Walker, 1998]. This would lead the company to consider some basic
questions. Are adequate HR policies being developed? Are the desired results being obtained? To what
extent do they add value to the company? The purpose of this work is to offer a few guidelines for the
appraisal of the HR function, which is in itself the basis for the auditing process. The objective is to set
conceptual limits for its content and to present the different approaches with which the HR audit can be
presented.

Approaches to HR Auditing

HR auditing has evolved in recent years to the point that it has ceased to be a mere instrument of
control and has become a necessary decision making tool in personnel related matters according to the
global objectives of the company. As a result, all of the functions and competencies of HR auditing are
being progressively expanded. This is creating a distinction between its component elements and the
different types of HR audits. In this way, Walker [1998] differentiates between two approaches relative
to HR auditing: those centered in the

Function’s internal aspect, and those centered on the external aspect. From an internal perspective, as
in any staff function, there is a trend of valuing its actions as a result of the activities undertaken and
its costs. In this way, the department. Capability would be judged on its ability to supply certain
services to the organization at the lowest possible cost. Under this approach, the operational
measurements traditionally used are those which refer to quantity, quality and reliability, or cost and
speed, therefore placing the focus on activities, costs, or productivity ratios.

From an external perspective, if it is understood that the ultimate appraisal of the effectiveness of HR is
based on their impact on the company’s results, then the measurements should include results
obtained outside the function.
Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

Another well-known classification of HR audit approaches, which is used to structure the present work,
is the difference between three focuses, which are the legal audit of performance or conformity, the
operative or efficacy-based audit, and the strategically audit.

The Legal Approach in HR Auditing

This best concept of HR auditing is based on a legal outlook. According to Antona [1993, p. 2], the
audit of performance or conformity consists of .making an inventory of the social situation of the
company, considering the labor law norms and regularly verifying the company’s compliance with the
applicable regulations.. Thus, this concept is centered on the verification that the current labor laws are
being fulfilled. The audit should verify if the firm’s policies, practices, and documents regarding
employee hiring, retention, discipline, termination, and post-employment are both fair and legal
[Higgins, 1997]. These practices and policies must: prohibit discrimination by offering equal
employment opportunities; protect the employment seeker from being discriminated against on the
basis of age; carry out minimum wages; and contain provisions regarding mental disabilities and
reasonable accommodations for disabled workers.

According to Nevado [1998, p. 49], the basic functions of the audit of conformity or of performance as
an element of HR auditing are threefold. The best function is examining to see if the firm is fulfilling all
its administrative social obligations, as well as those relative to the collective rights of its personnel.
The second is to study the relationship between the employees and the firm based on the legal
statutes. The final function is verifying if the firm fulfill its financial obligations (for example, social
security payments), as well as its informative ones.

Concern about labor risks has created a function within HRM with the purpose of altering working
conditions by identifying the risks that could stem from them and implementing necessary preventive
measures. Such preventive activity could but perfectly into the legal approach of HR, although the
effort that the company can make in this sense can go beyond.

the application of the existing risk prevention laws. The requirement for labor security and hygiene is a
part of the search for quality of life in the workplace, which is becoming increasingly demanded from
companies.

Focus of the Function Audit

The function audit centers on .observing if the procedures applied are the adequate ones and if they
function correctly. That is, checking to see if the relationship between objectives and procedures is a
satisfactory one and if this has been achieved in the most cost effective manner. [Nevado, 1998, p.
50]. The function of this level of the HR audit is to study and analyze each one of the speciÞc areas of
HRM. The analysis should center on the planned measures, the method of implementation, and the
results obtained. In order to carry this out, the areas that are to be studied must Þrst be identiÞed.
Afterwards, a list of the indicators that will serve to analyze each of them must be made. These
indicators can be either quantitatively (absolute numbers or ratios) or qualitatively derived from the
responses given by the people involved (management, employees, or external experts). A list of the
indicators corresponding to the different areas of the HR function could contain some of the following.

1) Description of the Company.s Staff.

Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

The complete staff can be described by: hierarchic levels, years of service, qualiÞcation, sex, and
nationality; the number of permanent and temporary employees, interns, and physically or mentally
challenged employees; and indexes of personnel rotation and absenteeism.

2) Job Analysis:
Job analysis can include: the number of described posts and occupants per post; the degree to which
the job description cards have been updated; the degree of detail in the job description cards; and the
methods used to analyze and describe the jobs.

3) HR Planning:
Planning includes the methods employed to plan personnel needs, the measures adopted to cover
future personnel needs, and the temporary planning horizon.

4) Recruiting and Personnel Selection:

This includes: the number of days needed to fill a vacant post; the number of applications received by
work place categories; the average amount of days between the reception of the application and the
Þnal answer; the average cost of recruitment and selection per job post; the degree to which internal
and external sources of recruitment are used; the average number of candidates that do not pass the
selective tests; a study of the reliability and validity of the selection tests; and the degree to which the
recruiting efforts but the company’s business plan.

5) Training
The training indicators are: the procedures followed and the frequency with which personnel training
needs are analyzed; the criteria followed to developed the content of the training programs; the
evaluation criteria of the efficacy of the training programs; the percentage of the HR budget dedicated
to training; the average number of hours of training per employee; and the percentage of employees
that participate in training programs by work place categories.

6) Development of Professional Careers:

These indicators include: the percentage of people promoted per number of employees; the percentage
of vacancies covered internally and externally; and the average time per employee it takes to receive a
promotion.

7) Retribution
Retribution can be measured by: the average wage per employee and wage difference among
employees; the Axed and variable components of retribution; the percentage of remuneration linked to
the employee’s yield; and the internal equity and external competitiveness of the retribution system.

8) Performance Evaluation
Evaluation indicators include: the level of usage for promotion or career; the level of feedback of results
to the company’s personnel; and the degree to which poorly performing employees are assisted in
improving their performance.

9) Work Conditions
Work conditions can be assessed by the frequency and index of the graveness of work- related
accidents and by the labor accident and sickness prevention policies that are in place
Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

Q.2 What are the goals of HR Audit.

GOALS OF THE AUDIT

An audit is a means by which an organization can measure where it currently stands and determine
what it has to accomplish to improve its human resources function. HR audit also helps companies to
figure out any gaps or lapses and the reason for the same. The goals of the audit can be of two types
i.e. short-term or long-term. Short-term goal can solve any recent problems in the organization and
long-term goals are the objectives that have greater impact on the goodwill of the organization. Read
box 4.1 for understanding the concept of long- and short-term audit goals through example.

Example of short-term and long-term audit goal:

Suppose in a steel plant, many workers are leaving because of safety issues. So the senior HR manager
decides to verify the safety and health issues in the factory. So in this case short-term goal is to solve
the problem and try to retain the workers.
Long-term goal is to increase the job-satisfaction among workers and increase the goodwill of the
company as a better employer.

The main goal of the HR Audit is to ensure that proper controls, policies and procedures are in place for
each of HR functions, and that records, disclosures, and other information are consistent with plan
documents and in compliance with applicable laws and regulation. The other important goals can be as
follows: 1. To ensure effective utilization of human resources.
2. To review compliance with tons of laws and regulations.
3. To motivate human resource department that it is well-managed and prepared to meet potential
challenges and opportunities.
4. To maintain or enhance the organization's reputation in the society.

Q.3 What are the different types of interview?

Types of Interviews
Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

All job interviews have the same objective, but employers reach that objective in a variety of ways. You
might enter the room expecting to tell stories about your professional successes and instead find
yourself selling the interviewer a bridge or editing code at a computer. One strategy for performing
your best during an interview is to know the rules of the particular game you are playing when you
walk through the door.

The Screening Interview

Companies use screening tools to ensure that candidates meet minimum qualification requirements.
Computer programs are among the tools used to weed out unqualified candidates. (This is why you
need a digital resume that is screening-friendly. See our resume center for help.) Sometimes human
professionals are the gatekeepers. Screening interviewers often have honed skills to determine whether
there is anything that might disqualify you for the position. Remember-they do not need to know
whether you are the best fit for the position, only whether you are not a match. For this reason,
screeners tend to dig for dirt. Screeners will hone in on gaps in your employment history or pieces of
information that look inconsistent. They also will want to know from the outset whether you will be too
expensive for the company.

Some tips for maintaining confidence during screening interviews:

• Highlight your accomplishments and qualifications.

• Get into the straightforward groove. Personality is not as important to the screener as verifying
your qualifications. Answer questions directly and succinctly. Save your winning personality for
the person making hiring decisions!
• Be tactful about addressing income requirements. Give a range, and try to avoid giving specifics
by replying, "I would be willing to consider your best offer."
• If the interview is conducted by phone, it is helpful to have note cards with your vital
information sitting next to the phone. That way, whether the interviewer catches you sleeping or
vacuuming the floor, you will be able to switch gears quickly.

The Informational Interview

On the opposite end of the stress spectrum from screening interviews is the informational interview. A
meeting that you initiate, the informational interview is underutilized by job-seekers who might
otherwise consider themselves savvy to the merits of networking. Job seekers ostensibly secure
informational meetings in order to seek the advice of someone in their current or desired field as well
as to gain further references to people who can lend insight. Employers that like to stay apprised of
available talent even when they do not have current job openings, are often open to informational
interviews, especially if they like to share their knowledge, feel flattered by your interest, or esteem the
mutual friend that connected you to them. During an informational interview, the jobseeker and
employer exchange information and get to know one another better without reference to a specific job
opening.

This takes off some of the performance pressure, but be intentional nonetheless:

• Come prepared with thoughtful questions about the field and the company.
• Gain references to other people and make sure that the interviewer would be comfortable if you
contact other people and use his or her name.
• Give the interviewer your card, contact information and resume.
• Write a thank you note to the interviewer.

The Directive Style

Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

In this style of interview, the interviewer has a clear agenda that he or she follows unflinchingly.
Sometimes companies use this rigid format to ensure parity between interviews; when interviewers ask
each candidate the same series of questions, they can more readily compare the results. Directive
interviewers rely upon their own questions and methods to tease from you what they wish to know.
You might feel like you are being steam-rolled, or you might find the conversation develops naturally.
Their style does not necessarily mean that they have dominance issues, although you should keep an
eye open for these if the interviewer would be your supervisor.

Either way, remember:

• Flex with the interviewer, following his or her lead.

• Do not relinquish complete control of the interview. If the interviewer does not ask you for
information that you think is important to proving your superiority as a candidate, politely
interject it.

The Meandering Style

This interview type, usually used by inexperienced interviewers, relies on you to lead the discussion. It
might begin with a statement like "tell me about yourself," which you can use to your advantage. The
interviewer might ask you another broad, open-ended question before falling into silence. This
interview style allows you tactfully to guide the discussion in a way that best serves you.

The following strategies, which are helpful for any interview, are particularly important when
interviewers use a non-directive approach:

• Come to the interview prepared with highlights and anecdotes of your skills, qualities and
experiences. Do not rely on the interviewer to spark your memory-jot down some notes that
you can reference throughout the interview.
• Remain alert to the interviewer. Even if you feel like you can take the driver's seat and go in any
direction you wish, remain respectful of the interviewer's role. If he or she becomes more
directive during the interview, adjust.
• Ask well-placed questions. Although the open format allows you significantly to shape the
interview, running with your own agenda and dominating the conversation means that you run
the risk of missing important information about the company and its needs.

The Stress Interview

Astounding as this is, the Greek hazing system has made its way into professional interviews. Either
employers view the stress interview as a legitimate way of determining candidates' aptness for a
position or someone has latent maniacal tendencies. You might be held in the waiting room for an hour
before the interviewer greets you. You might face long silences or cold stares. The interviewer might
openly challenge your believes or judgment. You might be called upon to perform an impossible task on
the fly-like convincing the interviewer to exchange shoes with you. Insults and miscommunication are
common. All this is designed to see whether you have the mettle to withstand the company culture, the
clients or other potential stress.

Besides wearing a strong anti-per spirant, you will do well to:

• Remember that this is a game. It is not personal. View it as the surreal interaction that it is.
• Prepare and memorize your main message before walking through the door. If you are
flustered, you will better maintain clarity of mind if you do not have to wing your responses.
• Even if the interviewer is rude, remain calm and tactful.
Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

• Go into the interview relaxed and rested. If you go into it feeling stressed, you will have a more
difficult time keeping a cool perspective.

The Behavioral Interview

Many companies increasingly rely on behavior interviews since they use your previous behavior to
indicate your future performance. In these interviews, employers use standardized methods to mine
information relevant to your competency in a particular area or position. Depending upon the
responsibilities of the job and the working environment, you might be asked to describe a time that
required problem-solving skills, adaptability, leadership, conflict resolution, multi-tasking, initiative or
stress management. You will be asked how you dealt with the situations.

Your responses require not only reflection, but also organization. To maximize your responses in the
behavioral format:

• Anticipate the transferable skills and personal qualities that are required for the job.
• Review your resume. Any of the qualities and skills you have included in your resume are fair
game for an interviewer to press.
• Reflect on your own professional, volunteer, educational and personal experience to develop
brief stories that highlight these skills and qualities in you. You should have a story for each of
the competencies on your resume as well as those you anticipate the job requires.
• Prepare stories by identifying the context, logically highlighting your actions in the situation, and
identifying the results of your actions. Keep your responses concise and present them in less
than two minutes.

The Audition

For some positions, such as computer programmers or trainers, companies want to see you in action
before they make their decision. For this reason, they might take you through a simulation or brief
exercise in order to evaluate your skills. An audition can be enormously useful to you as well, since it
allows you to demonstrate your abilities in interactive ways that are likely familiar to you. The
simulations and exercises should also give you a simplified sense of what the job would be like. If you
sense that other candidates have an edge on you in terms of experience or other qualifications,
requesting an audition can help level the playing field.

To maximize on auditions, remember to:

• Clearly understand the instructions and expectations for the exercise. Communication is half the
battle in real life, and you should demonstrate to the prospective employer that you make the
effort to do things right the first time by minimizing confusion.
• Treat the situation as if you are a professional with responsibility for the task laid before you.
Take ownership of your work.
• Brush up on your skills before an interview if you think they might be tested.

The Group Interview

Interviewing simultaneously with other candidates can be disconcerting, but it provides the company
with a sense of your leadership potential and style. The group interview helps the company get a
glimpse of how you interact with peers-are you timid or bossy, are you attentive or do you seek
attention, do others turn to you instinctively, or do you compete for authority? The interviewer also
wants to view what your tools of persuasion are: do you use argumentation and careful reasoning to
gain support or do you divide and conquer? The interviewer might call on you to discuss an issue with
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Semester: 3 - Assignment Set: 1

the other candidates, solve a problem collectively, or discuss your peculiar qualifications in front of the
other candidates.

This environment might seem overwhelming or hard to control, but there are a few tips that will help
you navigate the group interview successfully:

• Observe to determine the dynamics the interviewer establishes and try to discern the rules of
the game. If you are unsure of what is expected from you, ask for clarification from the
interviewer.
• Treat others with respect while exerting influence over others.
• Avoid overt power conflicts, which will make you look uncooperative and immature.
• Keep an eye on the interviewer throughout the process so that you do not miss important cues.

The Tag-Team Interview

Expecting to meet with Ms. Glenn, you might find yourself in a room with four other people: Ms. Glenn,
two of her staff, and the Sales Director. Companies often want to gain the insights of various people
when interviewing candidates. This method of interviewing is often attractive for companies that rely
heavily on team cooperation. Not only does the company want to know whether your skills balance that
of the company, but also whether you can get along with the other workers. In some companies,
multiple people will interview you simultaneously. In other companies, you will proceed through a
series of one-on-one interviews.

The Mealtime Interview

For many, interviewing over a meal sounds like a professional and digestive catastrophe in the making.
If you have difficulty chewing gum while walking, this could be a challenge. With some preparation and
psychological readjustment, you can enjoy the process. Meals often have a cementing social effect-
breaking bread together tends to facilitate deals, marriages, friendships, and religious communion.
Mealtime interviews rely on this logic, and expand it.

Particularly when your job requires interpersonal acuity, companies want to know what you are like in a
social setting. Are you relaxed and charming or awkward and evasive? Companies want to observe not
only how you handle a fork, but also how you treat your host, any other guests, and the serving staff.

Some basic social tips help ease the complexity of mixing food with business:

• Take cues from your interviewer, remembering that you are the guest. Do not sit down until
your host does. Order something slightly less extravagant than your interviewer. If he badly
wants you to try a particular dish, oblige him. If he recommends an appetizer to you, he likely
intends to order one himself. Do not begin eating until he does. If he orders coffee and dessert,
do not leave him eating alone.
• If your interviewer wants to talk business, do so. If she and the other guests discuss their
upcoming travel plans or their families, do not launch into business.
• Try to set aside dietary restrictions and preferences. Remember, the interviewer is your host. It
is rude to be finicky unless you absolutely must. If you must, be as tactful as you can. Avoid
phrases like: "I do not eat mammals," or "Shrimp makes my eyes swell and water."
• Choose manageable food items, if possible. Avoid barbeque ribs and spaghetti.
• Find a discrete way to check your teeth after eating. Excuse yourself from the table for a
moment.
• Practice eating and discussing something important simultaneously.
• Thank your interviewer for the meal.
Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

The Follow-up Interview

Companies bring candidates back for second and sometimes third or fourth interviews for a number of
reasons. Sometimes they just want to confirm that you are the amazing worker they first thought you
to be. Sometimes they are having difficulty deciding between a short-list of candidates. Other times,
the interviewer's supervisor or other decision makers in the company want to gain a sense of you
before signing a hiring decision.

The second interview could go in a variety of directions, and you must prepare for each of them. When
meeting with the same person again, you do not need to be as assertive in your communication of your
skills. You can focus on cementing rapport, understanding where the company is going and how your
skills mesh with the company vision and culture. Still, the interviewer should view you as the answer to
their needs. You might find yourself negotiating a compensation package. Alternatively, you might find
that you are starting from the beginning with a new person.

Q.4 Explain compensation system.

Compensation System

Employee compensation system along with the benefits programs, are one of the most complex HR
systems. A reward system should help support the organization's strategic mission, motivate
employees, and reward performance. Compensation systems should be both externally competitive and
internally equitable. Auditors may want to work with a compensation expert when reviewing this area.
A review of the organization's salary administration process is also important to determine how
employees are paid throughout their careers, including merit increases, variable performance pay,
promotions, bonuses, stock options, and deferred compensation, to name a few.

Base salary

During the audit, auditors should ensure that: a compensation philosophy has been developed that
defines how the organization wants to pay people with respect to its position in the labor market; there
are current job descriptions for each position; an effective market analysis has been conducted; a
salary structure has been developed to help manage pay, and an appropriate job evaluation system is
being used to slot jobs into the salary structure.
Auditors should verify controls to ensure that the confidentiality of personnel data is maintained,
additions to base pay are appropriately calculated and authorized, full compliance with tax and other
deductions is made, terminating employees' payrolls are processed appropriately, and payroll costs are
in line with budgeting objectives.

Sales incentives

Sometimes past incentive programme may be a reason for disappointment to both you and your
salespeople. At the time of HR audit, sales incentive programme should be crosschecked because a
payment less than the worth may lead the sales team to underperform or fail as a result. Corporations
use incentive programs to drive behavior and it is a well known fact that what gets rewarded gets done.
To ensure that the incentive programme at your organization work, you may use.

The 80-20 principle

Twenty percent of the salespeople make eighty percent of the sales and profits. Too often, sales
incentives are geared to the entire sales force. This may seem to be a fair strategy, but a strategist
Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

should remember that these 20% people are already motivated. That means that the sales incentives
should be good enough to
1. keep these motivated sales personnel going and
2. light a fire under the next twenty percent – the next logical group

The results have shown that this doubles the business in a more cost efficient manner.

Keep it simple: Good salespeople look to simplicity to make things happen. Thus the organization
must keep the incentive program sweet, simple and attainable. There can be no ambiguity. Anything
less will result in a lack of interest, as well as a waste of time and money that can sometimes spill over
into other departments whose task it is to administer and account.

Productivity incentives
HR audit should employ meaningful methodologies of productivity measurement to evaluate and
monitor the performance of a business operation. Productivity measurements must show a linkage with
profitability and should clearly demonstrate how efficiently (or inefficiently) a company is using its
resources to produce quality goods and services.
The auditor should analyze if a realistic means of measuring progress has been employed or not. More
importantly, he should ensure that the organization has made realistic goals and performance targets
that can be reached through productivity improvements.

Executive bonus programs

In most of the companies, title and seniority mean more when it comes to bonus pay. By granting
bonuses according to title and seniority, companies turn them into entitlements, not incentives. Due to
this, executives, who does the field work and put in more labor do not get that much of the bonus. HR
auditor should ensure that the organization links incentives to performance as the only fair and
rationale way to reward employees. Bonus plans by design, should be geared to reward employees for
short-term performance.
In implementing a bonus program, employers must first establish how the program fits into their
overall compensation philosophy as well as set criteria that need to be met for the reward. There are
some that believe in paying low salaries and highly aggressive incentives, while others believe the
exact opposite. Regardless, the auditor should check if the executive bonus plan fits the uniqueness of
the company.

Team based incentives

Since in most of the big organizations, a project is assigned to a whole team together and the
performance on the project depends on the collective performance of the team, the HR auditor should
check if the due reward is being paid to the collective performance of the employees.
There are primarily two ways to offer team based incentives, viz.
1. Team based
2. Gain sharing
The auditor should also check if the employees are satisfied by the allocation method employed. The
methods of team based incentive allocation are:
 Equal incentive payments
 Differential payments based on contribution to goals
 Differential payment according to base pay

Most often than not, the teams like the second one of the above methods of the incentive allocation. At
the time of the audit, it should also be checked if the team is being told about the team based
incentives entitled to them, and the allocation method involved or not.

Exempt and non-exempt status determination

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Semester: 3 - Assignment Set: 1

This concept is more prominent in USA where the HR auditor should analyze if the finance department
has correctly determined whether a salaried associate should be exempt or non-exempt? Exempt status
is regulated by the Fair Labor Standards Act (FLSA). When determining exemptions, employers must
first consider the way in which the employee is paid (hourly vs. salaried), then they must review the
duties and responsibilities of the job. Although, there are a number of unique position that provide for
exempt status. The majority of employers must use what is referred to as the “white-collar exemption
tests” to determine exempt status. There are four main exemptions, executive, administrative,
professional, and out-side sales, that positions can be placed in based upon the duties and
responsibilities of the job. The determination is never, made based upon the job‟s title or the manner
the position is paid.
Overtime computation

According to the labour laws in India, when a worker works in an employment for more than nine hours
on any day or for more than forty-eight hours in any week, he shall, in respect of such overtime work,
be entitled to wages at double the ordinary rates of wages.
The labour laws also state that the workers should be given double the normal salary when they work
overtime (extra hours, either on working days or weekly offs). But many a company do not do so. They
might, for example, not pay the entire double amount and instead replace it with an amount that is
definitely higher than the basic, but still less than the double. This will definitely create employee
unrest over time and the productivity is bound to suffer. At the time of HR audit, the auditor must
make sure that no such practice is being undertaken and the employees are getting their dues
properly.

Q.5 Write a note on Audit of HR Function.

Audit of HR Function

The purpose of a Human Resources audit is to assess the effectiveness of the Human Resources
function and to ensure regulatory compliance. The audit can be conducted by anyone with sufficient
Human Resources experience. Having experience working in more than one company is a plus, as it
provides the auditor with a broader perspective. There's an advantage to having the audit conducted by
an external consultant. Because the external consultant has fewer biases about the organization and
has less personal interest in the outcome than an employee of the company, the external consultant
may be more objective.

Collect Data

Assess the mission, vision, strategy, and culture of the organization, from whatever written material
there is in the company (check with the department or person who handles public, customer, or
shareholder relations). Collect existing data such as:
1. Hiring statistics (acceptance rate, hiring rate, hiring projections)
2. Turnover
3. Compensation and benefits philosophy and practice
4. Exit interview summaries
5. Employee complaints (discrimination, harassment, safety, other)
6. Promotion and advancement practices and trends
7. Human Resources budget and expenditures

Where possible, compare the data you collected with market data. This information will provide you
with a point of view for the next phase of the audit: the interviews. If, during the interview,
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Semester: 3 - Assignment Set: 1

discrepancies arise between the data and the interviewee's answer, you can explore the reasons for the
discrepancy(s).

Conduct Interviews

The purpose of the interview is to collect input from the internal customer on their Human Resources
needs and how those needs are being met. Begin the interview with top management. Next conduct
interviews with a sample of subordinate managers including first line management. The topics to
discuss during the interview include:

1. Perceptions of the company and its goals

2. Strengths and weaknesses of top management
3. Employee perceptions of the company and top management
4. Relations with subordinates
5. Support of career goals for self and employees
6. Major Human Resources issues
7. Which Human Resources functions work well
8. Which Human Resources functions need improvement

Conduct the Regulatory Compliance Audit

The following areas should be audited as part of the regulatory compliance audit:

1. Personnel files and recordkeeping (contain only job related information)

2. Pay equity
3. Job descriptions (ADA compliance)
4. Legal postings
5. Equal Employment Opportunity and Affirmative Action
6. Forms (applications, internal forms, etc.)
7. Workers' Compensation
8. Fair Labor Standards Act
9. Family and Medical Leave Act
10. Legal reporting

Summarize the Results

Consolidate the information you collected. Compare the results with market surveys. Determine which
practices are good/popular/effective/competitive. Determine which practices need improvement.
Recommend specific improvements referring to the results of both the Effectiveness audit and the
Regulatory compliance audit. Justify the recommendations. Determine how to measure whether the
improvements are successful.

Obtain Approval from senior Management

Present the preliminary results and recommendations to senior management individually. Point out how
these recommendations will support their needs. Obtain their support, then present the final results
and recommendations to the senior management staff for final approval.

Implement the Program

Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

Consider implementing the program in part of the organization as a pilot program. Monitor and
measure success and seek to continuously improve processes. Be prepared to modify the program if an
organizational change requires it.

Q. 6 Write a note on design and implementation of competencies model.

Design and Implementation of competencies model

During an HR audit, due attention must be paid to find out if the competencies model has been
adequately designed and developed or not. There are three ways in which competencies models may
be developed:

1. Behavioral Indicators: Behavioral indicators describe the behaviors, thought patterns, abilities
and traits that contribute to superior performance.

2. Evaluative Competency Levels: Exceptional competencies of high performers are set as

standards for evaluating competency levels of employees.

3. Competencies Describing Job Requirements: This approach is useful for organizations

having multiple competency models. Competencies required in a particular job are described.
Job specific competency models help in structuring focused appraisal and compensation
decisions.

To identify role-specific competencies required industry specific, functional and behavioral

competencies, which need to be developed for enhanced performance. The approach for
developing a competency framework for a particular role is as proposed below:

 Understand strategic business context of the organizations in term of its structure and
environmental variables.

 Detail role description for positions. Defining and scaling (relative importance and mastery level)
of specific behaviors for each identified competency as a measure of performance.

 Develop competency framework taking into consideration the core values and the culture of the
organizations in addition to specific functional and level requirements. This should gel with the vision
and mission of the company.

 Validate the competency framework through a workshop, which should include functional
experts and top management personnel in order to define critical and desirable competencies. And also
to substantiate the extent to which the competencies differentiate between high and average
performers by validating the content and criteria.

The auditor should establish the link between people and roles through effective measuring tools that
evaluate the performance of the person in the HR Audit role.
Sikkim Manipal University - MBA - MU0013– Human Resource Audit

Semester: 3 - Assignment Set: 1

On-the-job performance of the individual is evaluated on the basis of a performance management

system.
The assessment centre is a powerful tool in the hands of the management for selection and
development. As a selection tool it can be used for management promotions, fast tracks schemes, high
potential list and change of functional role. As a development tool, it is helpful in succession planning,
identifying training needs and career development.
Designing and conducting a potential assessment centre should follow basic principles in term of
accuracy, fairness, reliability, legality, efficiency, multiple assessors, multiple tests and
optimal stress to increase performance. It would involve two types of exercises, i.e., group exercises
and individual exercises.

Group Exercises
For potential assessment, the following group exercises are conducted:
 Assigned Role Exercises: Used to assess negotiating skills, decision making skills, and risk taking
skills;
 Unassigned Role Exercises: Used to assess ability to handle uncertainty, change orientation,
ethical behavior and global orientation; and
 Team Exercises: Used to assess ability to work in a team and solve problems efficiently.

Individual Exercises

For potential assessment, the following individual exercises are conducted:

 In-Basket Exercises: Used to assess ability to plan, organize, decide, manage and delegate;
 Learning skill Inventory/Psychometric Inventories: Used to assess ability to learn, leverage
knowledge and indicate behavioral patterns; and
 Interpersonal Effectiveness Module: Used to assess interpersonal effectiveness,
excommunication skills, patience and interpersonal skills.

Inputs for analysis of an individual’s potential and behavioral patterns are also collected through
multilateral feedback, behavioral event interviews, career aspiration interview, career history, etc. In
order to minimize assessors’ bias and ensure objectivity and uniformity multiple trained assessors for
each competencies assessment are used.