Master of Business Administration-MBA SEMESTER III

MU0013 Human Resources Audit

Assignment Set-2 Note: Each question carries 10 marks. Answer all the question Q.1 Write a detailed note on staffing. Staffing is a term that refers to the management of employee schedules. It can be described as the process of acquiring, deploying, and retaining a workforce of sufficient quantity and quality to create positive impacts on the organization's effectiveness. The ideal staffing level for an organization depends on the amount of work to be done and the skills required for doing it. If the number and quality of staff employed are greater than necessary for the workload, an organization may be deemed to be overstaffed or if the number of staff is insufficient for the workload, an organization is deemed to be understaffed. Effective human resource planning will determine the appropriate staffing level for an organization at any given point in time. Staffing includes various aspects to ensure the best practices in an organization. Workforce planning: Workforce planning is one of the most important activities in a business. It starts with analysis of the strategic position of the business. The results of this analysis then feed into a forecast of the required demand for labor by the business and how this is likely to be supplied. The final stage involves the creation and implementation of a human resources plan which aims to deliver the right number of the right people for the business. Specifying Jobs and Roles: Clearly defining efficiency. When employees understand what productive. Employees should also know what Employees that do not know what is expected unnecessary conflict and misunderstandings. employee roles in your company is vital to work their role is in your company they will be more is expected of them and the work they produce. of them or their role in your company can lead to

Here are some tips to help you to clearly define employee roles: clearly tell people what is expected of them. Balance the work load. Update your employee's progress continuously. Weekly progress reports should be implemented. Encourage employees to openly communicate with you and other employees. Share information about the company with your employees. Along with knowing what an employee's role is in the company, they should also be trained and educated for this role. If your company continues to grow and develop you may realize that there is a need for a new job role. When employees continue to report being short-handed and mention that some tasks are not being done this could mean it is time to plan a new job role. Management should draft a job description which states the general responsibilities of the position, along with some specific job duties to be conducted by the role.

 Get feedback from other managers and supervisors about the new job role, the job description and the responsibilities that the new employee will have. Make changes if necessary to maintain a balanced work load. Finalize the job description. It is important the job description is accurate because it is what you have based the new employee's salary, required training and skills on. Remember to help your company grow and advance it is vital that all employees know what their roles are in your company. Recruiting: It involves the process of identifying and hiring best-qualified candidate (from within or outside of an organization) for a job vacancy, in a most timely and cost effective manner. Outsourcing: Employee Outsourcing can be a cost effective alternative to the expense and administrative burden of a traditional employer-employee relationship. Outsourcing your human resource functions allows you to focus on business development and provides administrative relief from many employment responsibilities such as payroll preparation, income tax reporting, employee benefits and workers compensation. Outsourcing is accomplished by transferring many of your employer responsibilities to a Professional Employment Organization (PEO). A PEO is not simply a temp firm, staffing agency, payroll service or placement agency. The PEO acts as your off-site human resource department. Your company enters into an agreement with the PEO to establish a three-way relationship between you, your employees and the PEO. You and the PEO become co-employers instead of the traditional employment relationship. The other staffing processes involve Screening Applicants Selecting (Hiring) New Employees Succession Planning Job and Task Analysis Job Description Specifying Competencies New Employee Orientation Training and Development Retaining Employees Out placing and Downsizing (laying off employees) Exit Interviews HRD audit and staffing HR auditors review the process of staffing and policies pertaining to staffing. It includes reviewing the recruitment process, the interview process, the employee orientation process, the job analysis and job description, promotion and growth opportunities.

Q.2 Discuss the conceptualizing of HR Audit. Conceptualization of HR Auditing

Auditing has evolved, becoming increasingly specic, 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 rst 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 dening future lines of action in the HRM eld. 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 Functions 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 companys results, then the measurements should include results obtained outside the function. 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 companys 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 firms 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 specic 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 rst be identied. 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. The complete staff can be described by: hierarchic levels, years of service, qualication, 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 nal 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 companys 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 employees 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 companys 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

Q.3 Describe How to approach a HR Scorecard. This mode of scorecard is based on the assumption that competent and committed employees are needed to provide quality products and services at competitive rates emphasizing on the ways to enhance customer satisfaction. Look at Figure 9.1 for understanding the steps in HR Scorecard approach. The Seven Steps in the HR Scorecard approach to formulating HR policies activities and strategies are as follows: The first step is to formulate business strategies i.e. define the business strategy of the organization so as to be very clear about the way to exploit the human resource towards the achievement of the organizational goal.

 The next step is to outline the companys value chain activities and identify the strategically required organizational outcomes. Now after the outcomes have been decided clearly, identify the workforce requirements and behaviors expected so as to achieve the desired outcomes. The next step is to formulate HR policies and practices which are strategically relevant such as new training and grievance systems. After ensuring that all above steps are correctly conducted then develop detailed scorecard. Then design the HR Scorecard measurement system. In order to ensure the productivity, periodically re-evaluate the measurement system.

Q.4 Explain the process of workplace behaviors that support legal compliance. Workplace behaviors that support legal compliance A safe, dignified, and respectful work environment is not only mandated by the law, but also increases motivation and productivity of the employees. An example of review of business practices used to deal with allegations of harassment safe working environments should be considered especially for the females in the offices so as to make them feel confident and concentrate on work. Many smaller companies do not like writing certain aspects of ways of conducting business. For such companies, it is mere formality and they do not appreciate people-oriented culture. Though it should be avoided because it is patently illegal because laws require that companies should mention very clearly the policies about guaranteeing specific protections to employees Safeguarding employee information Employees personal information should be safeguarded. Separate files should be maintained for personal information as contrasted with employment related information. Main objective behind it to ensure that while deciding the employees career with the company his personal information should not be considered. For example while deciding whether to promote employee or not, instead of his personal information like his religion, his work experience and capabilities should be considered. The employment decision needs to be made on work/performance-related information, not the personal information. Relevant materials in the work file include information on the employees education,

related work experience, and performance evaluations in other positions within the company. An audit can clarify what information must be segregated and the laws that govern employees access to and copying of their files. Other employee information that must be safeguarded includes any materials that contain medical information. Employee performance management An audit can review companys job descriptions for compliance (i.e., to determine whether the descriptions list the essential functions of the job). Various legal issues can arise due to performance related problems of employees. Audit will help in following improvements and reviews: A 90-day written standard performance evaluation form, An annual written standard performance evaluation form, A performance management/performance improvement plan, A description of the companys policy for both voluntary resignation and company-initiated termination, Wage and salary administration program, Bonus/stock option criteria.

Safe work environment Audit practices may also help the companies to know about factors that contribute to a safe work environment. A company may choose to develop an audit sheet tailored to a particular issue, such as the companys zero-tolerance policy for harassment. For example, a company may wish to review and evaluate its practices of dealing with inappropriate harassing behavior in its workplace.

Q.5 What are the issues in Human Capital Measurement and reporting .Explain Issues in Human Capital Measurement and Reporting The human capital can be defined as "the knowledge that individuals acquire during their life and use to produce goods services or ideas in market or non-market circumstances." Organizations know that that measurement is a prerequisite for good management. As the popular saying goes, What gets measured gets managed. But in most of the organizations today, the most basic source of wealth creation human capital is not managed properly. This is primarily because most organizations systems of measurement, shaped in part by accounting and reporting requirements, are still overly influenced by measurement concepts that date back to the industrial era when physical capital was the primary source of wealth creation. Expenditures incurred on the development of the employees education and training being perhaps the most prominent are treated as costs although, these expenditures possess the traits of an investment (expenditure at one point in time that is made with the intention of generating an increase in capacity at some future point in time). But this outright focus on costs and cost cutting is not baseless. Often the known costs associated with people and their development, because measurement and accounting practices associated with human capital are remains of the industrial era, the measured costs are only a portion of the total costs. Moreover, because benefits are both uncertain and unknown, a conservative strategy has its merits. And finally, because human capital cannot be owned, spending on the development of people does not meet the traditional accounting concept of an investment, since employers cannot control the asset, i.e., the people in whom an investment is being made. There are genuine arguments in favor of the status quo with regard to measurement, accounting and reporting of human capital development and management. There are, however, also powerful arguments to be made that change is necessary. Human capital represents a huge operating cost that must be managed efficiently because of its absolute scale. At the same time because human capital is also the only asset that cannot be owned

 it must be managed wisely, but also with humanity. As a result, a strategy that focuses exclusively on efficiency and cost containment can, at best, only be successful in the short-run. This creates a fundamental paradox. Exceptional management in the knowledge era is defined by the ability to resolve this paradox through a both/and, rather than an either/or strategy. The both/and strategy requires a relentless focus on finding ways to cut costs and improve productivity, while simultaneously evoking the passion, creativity, loyalty and best efforts of the people on whom an organization relies.

Q.6 Discuss the auditing for HR professionals. Human Resource Audits ScopeHuman resource audits involve a companys strategic actions to take an intensely objective look at its HR policies, procedures and practices. This type of comprehensive review of the companys current state can help to identify whether specific practice areas or processes are adequate, legal and/or effective. The results obtained from this review can help to identify gaps in HR practices, and these gaps can then be prioritized for attention in an effort to minimize lawsuits and/or regulatory violations, as well as to achieve and maintain world-class competitiveness in key HR practice areas. Overview Human resource audits are a vital means of avoiding legal and/or regulatory liability that may arise from a companys HR policies and practices. In addition to identifying areas of legal risk, audits often are designed to provide a company with information about the competitiveness of its HR strategies by looking at the best practices of other companies in its industry. In essence, an HR audit involves identifying issues and finding solutions to problems before they become unmanageable. It is an opportunity to assess what an organization is doing right, as well as how things might be done differently, more efficiently or at a reduced cost. In todays competitive climate, companies operate within the confines of a heavily-regulated employee environment. This includes dealing with myriad complex laws and regulations. The scope of the HR function includes establishing and administering a host of policies and practicesmany of which involve compliance implicationsthat significantly influence the productivity and profitability of the enterprise. Just a handful of these are: Benefit administration issues Disciplinary matters Employee development Employees eligibility to work Interim/contingent staffing Interviewing and hiring Job descriptions Organizational development Payroll management Performance management Problem or conflict resolution Stress management Substance abuse Team building Termination Workplace violence

Given that many HR departments are both understaffed and overworked, only in retrospect do many companies become aware of the monetary costs of ignoring HR-related legal hot buttons. Noncompliance with applicable laws and regulations involves significant financial risk. To minimize the risk, many organizations purchase employment practices liability insurance. While this is a sound strategy, companies can take other proactive measures. Chief among these is a voluntary HR compliance audit. Types of Audits An HR audit can be structured to be either comprehensive or specifically focused, within the constraints of time, budgets and staff. There are several types of audits, and each is designed to accomplish different objectives. Some of the more common types are: Compliance: Focuses on how well the company is complying with current federal, state 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 strengths and weaknesses of systems and processes to determine whether they align with the HR departments and/or the companys strategic plan. Function-Specific: Focuses on a specific area in the HR function (e.g., payroll, performance management, records retention, etc.).

What to Audit Deciding what to audit will depend largely on the perceived weaknesses in the companys HR environment, the type of audit decided on and the available resources. Keeping a log of issues that have arisen but are not covered in the companys procedures or policies will help identify areas of potential exposure that can be addressed during the annual review process (if they do not need to be addressed immediately.) There are, however, certain areas in which companies are particularly vulnerable. Most lawsuits can be traced to issues related to hiring, performance management, discipline or termination. Some additional risk areas that should be carefully reviewed include: Misclassification of exempt and nonexempt jobs. Almost every company has job positions that have been misclassified as exempt from overtime eligibility. The complexity of wage and hour laws and regulations makes it easy to err in classifying a job as exempt, thereby exposing the company to liability for past overtime. Inadequate personnel files. A review of sample personnel files often reveals inadequate documentation of performancefor example, informal, vague and/or inconsistent disciplinary warnings. Performance evaluations may be ambiguous, inaccurate or outdated. Personal health information is often found in personnel files, despite medical privacy laws requiring such data to be kept separate. Accurate and detailed records are essential for employers to defend any type of employee claim, particularly unemployment compensation or wrongful termination claims. Prohibited attendance policies. Controlling excessive absenteeism is a big concern for most employers. However, the complexity of family and medical leave laws, with sometimes conflicting state and federal protections, has made many formerly acceptable absence control policies unacceptable. Absences affect workers compensation, family and medical leave, disability accommodations and pregnancy laws. Companies often have attendance policies that either do not comply with relevant laws and regulations or grant employees more protections than required. Inaccurate time records. Employers typically require nonexempt employees to punch a time clock or to fill out time sheets reflecting their time worked each week. The records generated by these systems typically are the employers primary means of defense against wage and hour

claims, so it is essential that timekeeping policies and practices be clearly communicated and consistently administered. Insufficient documentation. Reviews of employer hiring practices often uncover inadequate documentation, such as missing or incomplete I-9 Forms. Employers can be fined between $100 and $1,000 for each failure to accurately complete an I-9 Form. Fines for these violations can easily add up, with reported cases of repayment totaling over $100,000

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