Submitted by :

Sravan Kumar

Sudhanshu Cyril

Swarupa Rani Sahu

Tamil Selven

Tejas Savani

Human Resource Audit

Simple, yet comprehensive tool in analyzing and improving efficiency

Where does HR audit result to?• Adequacy• Goals being met• Value addition

Objectives

• Evaluate current efficiencies• Baseline for future development• Review the system• Clarify desired practices of HR work and roles• Standardize practices within the company• Improve performance levels to key customers

Research

• Task of searching for and analyzing facts related to the personnel problems(solved or derived from laws).

• Investigation into any aspect of personnel management in a systematic way.

Personnel Records and Reports

Why These?• Time-time feedback.• Measures inadequacies and deficiencies in

personnel programmes.

What are these?• Record: person• Report: event

* These are to be supported by facts.

Significance of personnel records

• Revise pay scales and benefits.• Identify training and development needs.• Supply information to management and trade

unions in developing and reviewing personnel policies.

• SPOC for information required, generally external agencies.

• Conduct research.

Scope of HR Audit

• Employee development• Interim/contingent staffing• Interviewing and hiring• Organizational development• Payroll management• Problem or conflict resolution• Stress management• Substance abuse• Team building• Termination• Workplace violence

Functions of HR audit

Basically two functions• Facilitates the development of managing

processes• Controls and evaluate the policies and

established processes

Approaches

• Internal perspective approach

• External perspective approach

• Legal perspective approach

Types of HR Audit

Compliance

Best Practices

Strategic

Function-Specific

and many more…..

Parameters

• Formation of personnel policy• Planning and utilization• Recruitment and selection • Professional career development• Adaptation and training• Motivation and Stimulation• Development of teamwork spirit

Levels of HR audit

• Strategic level• Functional level• Medium (management) level

Process of HR Audit

Appointment of auditors

Coverage of HRM audit

Specifications of standards

Collection & evaluation of information

Preparation of report

Frequency of HR audit

Audit during crisis

Regular auditing

Audit Report

• Objective– To highlight areas that needs improvement– To be acted upon.

• Purpose–  to help the top management and the HRD staff to

recognize and retain the company’s strengths.

Elements of Audit Report

• Basic elements of Audit report– Table of Contents– Preface– Synopsis– Objectives, scope, methodology and technique

used– In-depth analysis of data – Evaluation discussion and analysis– Appendix– Bibliography

Benefits

• It helps to find out the proper contribution of the HR department towards the organization.

• Development of the professional image of the HR department of the organization.

• Reduce the HR cost.

• Motivation of the HR personnel.

Contd.

• Find out the problems and solve them smoothly.

• Provides timely legal requirement.

• Sound Performance Appraisal Systems.

• Systematic job analysis.

• Smooth adoption of the changing mind-set.

Issues in HR Audit

• Difficult to audit personnel policies and practices

• Fault finding• Whole process would become meaningless,

if timely actions are not taken• Data Accuracy

Case Study: Texaco

• Texaco began as the Texas Fuel Company, founded in 1901 in Beaumont, Texas. It was an independent company until it merged into Chevron Corporation in 2001.

• For many years, Texaco was the only company selling gasoline under the same brand name in all 50 states as well as Canada, making it the most truly national brand among its competitors.

• Products:— Gasoline— Convenience storeSome Locations:— Carwash— Automobile repair shop

The Problem Within

• Texaco did not audit its divisions to ensure that they were complying with equal employment opportunity obligations, but rather relied on its divisions to police themselves.

• While Texaco had a written policy prohibiting discrimination, there was no oversight of management to ensure that they were complying with Federal employment laws. In a deposition, the Vice President of Human Resources testified that he was unaware of any "periodic or systemic" effort by Texaco to ensure that all business units of the company were in compliance with federal employment laws.

• Blacks, Latinos and other oppressed nationalities working at Texaco were constantly subjected to racism--both behind the scenes and in an openly hostile atmosphere.

Violation of Federal Employment Laws

• An oil-industry survey conducted by the Mobil Corporation using 1993 data showed that Texaco had a below-average percentage of Black people in every salary bracket over $50,000

• A 1996 audit of an important Texaco division by the Department of Labor found that on a job-by-job basis, Blacks and other minority employees had to wait far longer than whites for promotion and were far less likely to receive evaluations that would help them in their careers

• In November 1996, The New York Times disclosed the existence of tape recordings wherein executive employees responsible for responding to discovery referred to minorities as, inter alia, "black jelly beans" that were "glued to the bottom of the bag.“

• The same newspaper also obtained court records, as well as government documents that disclosed that out of the 873 executives at Texaco who made more than $106,000 a year, only 0.7 percent were Black

The Suit• In 1994, six black employees of Texaco filed a racial discrimination

lawsuit against Texaco based upon their assertion that they didn't think they had received the positions nor the pay to which they felt they were entitled. For good measure their attorneys added the assertion that Texaco had established a pattern of racial discrimination.

• In short order, with strong encouragement from the NAACP Legal Defense Fund and from the Clinton EEOC, 1400 or so other black employees joined the suit which the judge quickly certified as a "class" for the lawsuit.

A Very Expensive Example of the Importance of an AuditThe settlement by Texaco, Inc., approved by the Court on March 21, 1997 contained the following major components:

– $115 million in cash to the 1400 - 1500 aggrieved minority employees;

– Over $20 million in salary increases to the aggrieved minority employees; and

– Approximately $35 million for "diversity / sensitivity training", a new corporate requirement for employees; and

– The creation of an Equality and Fairness Task Force; an independent committee selected by Texaco and the plaintiffs, with court approval, which has the power to implement personnel policies designed to rectify alleged discriminatory practices by Texaco.

In the Aftermath• Raising the number of African Americans on the payroll to 13 percent,

up from 9 percent, by 2000. In all, minorities would make up 29 percent of the company, up from 23 percent.

• Raising by more than 25 percent the number of managers who are black or female. The number of black managers would increase to 6.6 percent from 4 percent.

• Imposing new "behavior standards" for managers.

• Including women and minorities on every company Human Resource Committee.

• Increasing purchases from minority- and female-owned businesses from $135 million to about $200 million.

Conclusion

The importance of conducting periodic and systematic human resources audits cannot be overemphasized. Through the audit process, an employer is able to identify those aspects of its human resources management that are in disarray, before the problems become the subject of a claim or lawsuit. It also allows the employer to take corrective action at its own pace, on its own terms, without meddling by or interference from the courts. Because of these benefits, any wise employer will conduct systematic and periodic human resources audits, and treat them just as seriously as financial audits.