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Objectives, Importance, Types & Limitation of HR Audit

HR Audit

What are Objectives of HR Audit ?

HR audit looks after the effective functioning of the HR department of the organization. It evaluates the systematic implementation of policies and procedures in the human resource department and also evaluates its working environment.

  1. HR audit rectifies the mistakes done by human resources while performing their tasks and provides suitable corrective measures as soon as possible.
  2. It checks whether the HR functions are carried-out as per the set policies and procedures of the organisation or not.
  3. It measures the errors as well as positive aspects of the HR department. It ensures whether the HR department is following the policies regarding the recruitment, training, placement, promotion, workplace environment, employee grievances, etc., according to the organisational rules and regulations or not.
  4. It is the responsibility of the HR audit to assess all the functions of the corporation and search out for those functional areas and activities which require cost-cutting. These functions include staffing of new employees, selection, training, holding-on of potential employees, separation of human resource, etc.
  5. HR audit also helps in maintaining discipline among the employees by evaluating their behaviour and actions frequently and making them realise their responsibility towards the benefit of the organisation.
 Hr Audit

What are the importance of HR Audit ?

Human Recourses audit is very important for any organization. Some of its noteworthy roles are as follows:

  1. 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.
  2. 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.
  3. 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.
  4.  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.

How many Types of HR Audit?

An HR audit can be of the following types:

  • A Compliance Audit: A compliance audit checks whether all the departments are following the rules and regulations of the organization or not.
  • Best Practices Audit: In this audit, the tasks executed by the HR department are compared with the ‘best practices’ of the other organizations. Efforts should be made to make their practices the ‘best practices’ among all other similar organization’s.
  • Strategic Audit: A Strategic audit evaluates the contribution of HR practices to achieving strategic goals of the organization. It also checks the improvements made in the performance of the employees by providing them with proper working conditions.
  • Function Specific Audit: This audit focuses on specific functions performed by the HR department. These functions include recruitment, training, salary, promotion, etc.

What are the limitations of HR Audit ?

The following are some of the limitations of HR auditing:

  1. 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.

  • 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

  • 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.

For example, just 51% of people utilize the performance appraisal form; this suggests that the majority of people use it, but nearly half of them don’t.

Conclusion:

True, any HR audit can be a complex, time-consuming, and resource-intensive process. However, the benefits far outweigh the effort. You can redesign your company’s processes and systems to support business objectives and goals.

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Author

Neha Viswakarma

Director Quality HUB India

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