Conducting hr audit mp-final

This course has been designed by Muaz Popatia muazpopatia@hotmail.com www.facebook.com/muaz.popatia.trainer
Conducting a HR Audit
By Muaz Popatia
2014

Rules of the House!
 Phones on vibration / silent.
 Take urgent calls only (leave on need basis)
 No late arrivals.
 FirstTea at 10:30 am (15 Minutes),
 Lunch at 1:00 (60 Minutes)
 SecondTea at 3:30pm (15 Minutes)
 Questions may be asked anytime (just raise your hand!)

Course Objective
 To understand fundamentals of conducting an Audit.
 To understand key concepts regarding HR Audit.
 To review some basic check-lists regarding HR Audit
pertaining to selected HR sub-functions.
 Give me your expectation also!

Contents
Understanding the Fundamentals:
The HR Cycle (Activity & Purpose Based)
Understanding how the HR function becomes a Strategic Partner?
Why is an audit required?
Understanding the “mind-set” an Auditor should have
What is an HR Audit?
The link between HR Audit and Other Audits.
Purpose & Scope of the HR Audit (HRA)
The HR Audit Cycle
The benefits of the HR Audit
Planning to Implement:
Planning the HRA (Timing and Implementation)
Preparing for HRA
HR AuditTOR (Terms of Reference)
Implementing to Conduct:
Taking the “HRTemperature”
Designing a Questionnaire
Collecting Information

Contents
HR Functions to Audit:
Recruitment & Selection
Compensation & Benefits
Orientation & Placement
Training & Development
Performance Management
Analyzing to Recommend:
Analyzing the Data.
Identifying Areas of Improvement.
Preparing Recommendations.
Reporting to Present:
Documenting the findings.
Presenting the recommendations.
Preparing a HRA report.

Understanding
the Fundamentals
Module - I

Understanding the Fundamentals
 Elections in the Jungle!
 Monkey Won; Lion lost.
 Lion threaded Lady Giraffe.
 Giraffe went to Monkey for Help.
 Monkey jumped from tree to tree.
 On question from Giraffe.
 Monkey said “Look how active & angry,
I became when you told me that the
lion threatened you.”
We need results not activity.

 The HR Cycle – Activity Based
Recruitment &
Selection
Operations
Compensation
& Benefits
Training &
Development
Performance
Management
Entry /
Exit
Short-listing, Hiring,
Interviewing &
Joining Formalities
Orientation to the
Organization and Job
Payroll & Budgets
Staff Training &
Development, and
Organizational
Development
Promotions &
Increments

 The HR Cycle – Purpose Based
Acquire
Maintain
Enhance
Reutilize
Recruitment & Selection
+
Operations
Compensation & Benefits
Training & Development
Performance Management

 How HR becomes a Strategic Partner:
Information
Analysis
Decision
HR Info in Time
HRIS
HRMS

 Audit:
Is an official inspection of an organization's accounts, typically
by an independent body.
New Audit:
The new audit definition has gone to audit all other areas of
organizations as well, some of them are:
Job Audit:
Knowledge Audit
Skills Audit
Human Resource Audit

 Job Audit:
 A tool used to classification of jobs, positions or tasks.
Revisiting Jobs to see if new classification or compensation
related matters is required.
 Knowledge Audit:
 A knowledge audit is an effort to understand where an
organization stands in terms of knowledge management and its
knowledge assets. (Knowledge management (KM) is the
process of capturing, developing, sharing, and effectively using
organizational knowledge)

 Skills Audit:
 A skills audit is essentially a process for measuring and
recording the skills of an individual or group. The main purpose
for conducting a skills audit in an organization is to identify the
skills and knowledge that the organization requires, as well as
the skills and knowledge that the organization currently has.

 Why do we need an Audit?
 Audit is supposed to help us in:
 Identify Risks
 Find BetterWays and Best Practices
 Partner with you to identify solutions
 Prevent problems.

• Audit Notification
• Entry Meeting
• Audit Survey
• Fieldwork
• Draft Report
• Exit Meeting
• Management Response
• Final Report
• Follow-up
Steps in Audit

 Audit Notification
 First letter / info to the head of the area to be audited.
 Entry Meeting
 First meeting with those who are to be audited, when and for what?
Also to decide on the basics such as equipment and space provision.
 Audit Survey
 Auditors conduct research and observe the audit areas to enhance
their knowledge of processes.
 Fieldwork
 Actual review and checking of the documents.

 Draft Report
 First report submitted on the what the Audit found out.
 Exit Meeting
 Conducted with the same personnel who attended the first meeting. Focuses on
approval and agreement on the draft report. Changes may be made.
 Management Response
 Response from the area-owners (within 30 days).
 Final Report
 Along with reply from the area-owner,Audit submits the report to
Heads/CEO/Audit Committee.
 Follow up
 After six to twelve months a follow-up is done.

 Who may conduct an Audit
 Internal Auditors:
 InternallyTrained staff who understands the process.
 External Auditors:
 An external agency (organization) auditing another.

 Internal Audit:
 Reasons:
Checking the value-addition (in our case – HR’s) to the
organization.
Conformance to Procedures.
Effectiveness processes and systems.

 External Audit:
 Reasons:
Check compliance to key legislation & regulations.
Build customer confidence / employer of choice
To verify certain claims that you may have made.

 Understanding the Mind-set an Audit should have:
(Internal Auditor)
A catalyst (for improvement)
An advisor
A reported of Facts
An internal auditor can be a type of an internal
CONSULTANT for the HR Department

 Understanding the Mind-set an Audit should have:
Attributes of Highly Effective Internal Auditors (as
Identified by the Institute of Internal Auditors) are:
i) Integrity
ii) Relationship Building (People Skills)
iii) Partnering (Service Oriented)
iv) Communication
v) Team Work
vi) Diversity
vii) Continuous Learning (Focused)

Any Questions???

 What an HR Audit is?
 Systematic Review of all HR Procedures / Processes.
 It measures that current “performance” level.
 It identifies the “way forward” to improve the HR practices
 Reveals weaknesses and strengths of the department.
 It is a diagnostic tool.

 What an HR Audit is?
 As per SHRM
 An HR audit involves an objective look at the company’s HR policies,
practices, procedures and strategies.
 To protect the company, establish best practices and identify opportunities
for improvement.
 An objective review of the company’s “current state” can help you evaluate
whether specific practice areas are adequate, legal and/or effective.
 The results can provide decision-makers with the information necessary to
decide what areas need improvement.
 An HR audit can be structured to be either comprehensive or specifically
focused, within the constraints of time, budgets and staff.

 Types of HR Audit?
 Compliance: Focuses on how well the company is complying with current
federal, provincial and local laws and regulations.
 Best Practices: Helps the organization maintain or improve a competitive
advantage by comparing its practices with those of companies identified as
having exceptional HR practices.
 Strategic: Focuses on the strengths and weaknesses of systems and
processes to determine whether they align with the HR department’s and/or
the company’s strategic plan.
 Function-Specific: Focuses on a specific area in the HR function (e.g.,
payroll, performance management, records retention, etc)

 Link with Other Audits?
 Job Skills Audit
 Knowledge Audit
 Skills Audit
 Gives you an in-sight into the utilization of your organization’s
“Human Capital”
 Human Capital: The skills, knowledge, and experience
possessed by an individual or population, viewed in terms of
their value or cost to an organization or country.

 Purpose of HR Audit
 The purpose of a Human Resources audit is to assess the
effectiveness of the Human Resources function to ensure
regulatory compliance.
 To look for potentially serious problems (time bombs)
 To find areas needing improvement
 To document processes for use in merger, reorganization
or inspection
 To address compliance issues

 Scope of HR Audit
 Can be conducted in all areas:
 Recruitment & Selections,
 Operations,
 Compensation & Benefits,
 Training & Development,
 Performance Management or
 Employee Relations & Industrial Relations.

 Human Resource Audit Cycle
Pre-Audit
Decisions
Audit
Planning
Conducting
The Audit
Data
Compilation
& Analysis

 Ultimate Goal or Benefit of HR Audit:
 To gain valuable information regarding current HR practices
and procedures & determine readiness to meet current and
projected organizational needs.

Planning
to Implement
Module - II

Planning to Implement
 How often should an HR Audit be conducted:
 You may decide based on your needs:
 On-Going Review (Legally Active Areas)
 Annual Basis
 Every 6 months
 Occasionally for certain “important” areas.

 Preparing for HRA
 You need to decide on the following:
 Who should conduct the audit:
 Internal HR Staff
 External Auditor
 Internal Auditor
 Cross Functional Team
 Company Lawyer (especially for Legal Compliance)

 You need to decide on the following:
 Which areas will be audited and for what period:
 Identify the specific area / sub-function. (Scope)
 Identify the time period for which records will be audited
 Identify the Contact Person – To resolve communication needs.
 Last but not the least:
 You may like to have a formal “Terms of Reference” signed.
 TOR: the scope and limitations of an activity or area of
knowledge

 Documents & Checklists to be reviewed:
 Policies and Procedures (SOPs)
 Records
 Previous Audit Reports
 Training Records
 Personnel Records / Staff Files
 Accounting Records
 Disciplinary Records
 ANYTHING that can prove that ongoing systems are
operating as intended and as required!

Implementing
to Conduct
Module - III

Implementing to Conduct
 Taking HRTemperature
 Before you ask someone (from the concern to-be-audited
Area) about their work. It is a good idea to have a candid
meeting.
 This meeting should be focused around “breaking the ice”
and letting the individual know that you are there NOT
to catch their mistakes but you are there to correct
them.
 You also need to show confidence in them that they are
qualified for the job. Its just that your purpose is to help
them improve.

 Designing a Questionnaire
 Identify the “risks” or what can go wrong with the function.
 The more regulated the industry the more “detailed” your checklist
needs to be.
 Make sure you check validity of licenses and permits.
 In cases of food related items, compliance with “expiry” dates is a
must.
 In factories safety is of prime importance.
 Always address the “Information Security” perspective of the
record-keeping & access.

 Steps in Conducting an HR Audit
 Collect Information
 Evaluate
 Analyze
 Correction Plan
All the steps need to be time-bound!

 Collecting Information
 Keep the evidence grid (we studied) in mind.
 All data collected should be acquired through the “focal”
point.
 Always keep one contact person.
 Keep your eyes and ears open for any observations.

 Evaluate
 Give meanings / Try to make sense of the data given.
 Note your disagreements.

 Analyze
 Compare Against standards, SOPs, Best practice or Law.

 Correction Plan
 Determine which categories need the “most” attention.
 Have a Buy-in from concerned person / team.
 Develop exact actions to be taken (time bound)
 Have responsible persons identified to carry-out the action
plan.
 Control, Monitor and Follow-up to verify.

HR Functions to
Audit
Module - IV

HR Functions to Audit
 Which areas may be addressed:
 HR Strategic Management
 Workforce Planning / Budgeting & Selection
 Training & Development
 Labor Relations
 Safety & Security
 HRIS
 HR Facilities & Equipments
 HR Staff – JDs.

 Contd…
 Communications
 Technology
 Termination
 Legal Issues
 Performance Management

 Recruitment & Selection
 Compensation & Benefits
 Orientation & Placement

 Recruitment & Selection

 Compensation & Benefits

 Orientation & Placement

Analyze
to Recommend
Module - V

Analyze to Recommend
 Analyze Data
 Data needs to be clear and error free
 Evaluate if the right questions have been asked or not?
 Check if all records and the overall record keeping process was in
place or not?
 Note down any observations you may have.
 Compare the results with standards or SOPs.
 Make sure your recommendations are realistic

 Identifying Areas of Improvement
 Determine the Areas that need immediate attention
 For each area design an improvement plan with timeline and
budgets
 Have the plan reviewed by the process owners
 Decide on the interval of time and implementation & measure
plan.
 Design a follow-up mechanism.

 Preparing Recommendations
 Results are best provided in the form of Charts or Heat Maps
(Refer to sample heat map)
 Don’t forget the classic rule of keeping it simple for Senior
Management to understand
 Include all and any resources required

Reporting
to Present
Module - VI

Reporting to Present
 Documenting the findings
 Make sure you obtain copies of all records / documents you
reviewed
 You must know the source of the document (from whom you
received)
 Ideally you should have a single point of contact and all details must
be received through this point of contact only
 Keep your checklist / note book handy
 Make notes of any observations you may have

 Presenting the recommendations
 Rather than TEXT, graphical representation of data is more
effective.
 Have the recommendations run by the middle management (if
appropriate).
 The report should be concise and interesting.

 Preparing an HRA Report
 The report should have the following (IIA declared)
traits
 Accurate
 Constructive
 Objective
 Complete
 Clear
 Timely
 Concise

 Plan the Report (decide the basic sections that need
to be included)
 Draft the Report (type out the text and check the
same)
 Revise the Report (before submission)

 Auditor (Writer)VS Reader Mindset
 Auditor:
 I want to show you lots of data!
 Accuracy
 Reasoning & Graphs

 Auditor (Writer)VS Reader Mindset
 Reader
 I want a report that is easy to read & understand.
 Accurate, Brief and to the point.
 Bottom line first and details later.

New Trends in HR
 Human Resource Management is now becoming Human
Capital Management.
 Human Assets are being viewed as good as Financial
Assets.

Muaz Popatia
 muazpopatia@hotmail.com
 www.facebook.com/muaz.popatia.trainer
 0092-321-2021764

Conducting hr audit mp-final

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