Tuesday, May 8, 2012


When I presented my HRD Audit book to the Secretary Department of Company Affairs, Government of India   (Dr. P. L. Sanjeeva Reddy) about ten years ago, he had a quick read and promptly requested me to send a note so that he could incorporate in the law to make HRD Audit a compulsory part of Audit. I was not prepared for it. I was afraid that once it is made compulsory it will generate lot of business for HR people alright but people will do all kinds of things in the name of HRD audit and I was not confident of the competencies in the Government to implement such a powerful concept by educating so many people in HRD Audit.  Looking back I realise that I missed a great opportunity to bring a novel idea for implementation. Infosys has already done some form of human capital estimate in financial terms and started including it in their balance sheet.  Making HRD audit mandatory or even if optional in the interest of companies would have brought a revolution in the field of HRD and would have got many institutions to include this as a part of their curricula and also would have improved the quality of HRD in the country. This is one more instance of my modesty preventing me to be effective in disseminating my own work and contributions.

The first person to conceive of HRD Audit for corporations is Aditya Vikram Birla in early nineties. In early nineties, sometime in 1991-92 to be precise he asked the Heads of all his units to get a HRD Audit done. Indo-gulf Fertilisers was the first to ask me from IIMA.I was very happy that I was requested as we were feeling already that HRD concepts promoted by us since the L&T Days is not being correctly understood by many companies. Many of them simply renamed their training departments as HRD Institutes or departments or re-titled the Personnel Function as HR Department and are not doing right things or things right. For some of them HRD meant reviewing performance appraisal as that is how our conceptualisation of HRD began. In L&T itself Performance appraisal was sometimes equated with HRD. It was an opportune time to review and revisit HRD, the way it is implemented in companies. Birla Group Chairman’s decision was God sent for me to have an opportunity to propagate HRD in its true spirit.  Aditya Vikram Birla apparently asked all his business Heads to get independent audits done. I requested Dr Udai Pareek to join me in this audit. Both of us visited Indo-Gulf, evolved a methodology to audit the HRD. Subsequently a few other units of Birla group requested us. Some of them went to other institutions but we were the only one from IIMA to evolve a comprehensive methodology and implement to the core.
We defined HRD Audit as a comprehensive evaluation of the current human resource development strategies, structure, systems, styles and skills in the context of the short and long-term business plans of a company.  HRD audit attempts to find out the future HRD needs of the company after assessing the current HRD activities and inputs available.
We outlined a methodology where the consultants or the Auditors visit the company camp there, understand the short and long term business goals and strategies of the company by interacting with the top management and then examine various systems, processes, activities and practices in the company evaluate their effectiveness and then suggest a plan to improve the same.
The questions and answers give a t the end of this paper answer many issues relating to HRD Audit.
Once Indo-Gulf was done many other units followed. I still remember one of the unit Heads (CEO) of the group travelling all the way from his unit to Ahmedabad to get us to change some sentences in our report as they don’t convey the right impression of the good work he is doing and Aditya Babu may misunderstand. We had to explain to him the meaning and also assure him that it is in the interests of the company the report is interpreted the way we have written. In another case the HR Head who appointed us to audit HRD came in for severe criticism for not implementing HRD systems properly and he was upset temporarily when his CEO who read the report expressed his unhappiness with the poor implementation of HRD in their senior managers meeting. We had to assure him that such criticism is in the interest of the HRD department and is not to be taken personally. At the end he privately mentioned to me “Rao saab I am so happy with your report though I was upset on that day. Now I have full support of the top management and his approach has changed. Earlier he would throw away all my suggestions looking at the cost. Now he looks at the benefits and more resources are flowing”.
Since that time the HRD Audit methodology was formulated twenty years ago, we have done audits for several companies and also conducted programs to train the Auditors. We have also come up with the “HRD Score card 2500” as a mechanism to convert audit results into points through a scientific measurement system.
However my disappointment is that many HRD Managers are afraid of getting their function audited. An indicator of this is the dwindling number of HRD Audits conducted in recent years. I ask myself the question why this is. The following reasons come to my mind:
1.       Because the HRD Departments are doing such a great job there is no need for an outsider or for an internal team to audit the function?
2.      Because HRD Heads are so busy that they have no time to get this done? As Robin Sharma puts it they are so busy driving their car they are not able to take time to refuel the car?
3.      Because they are afraid of criticism?
4.      Because they do not know what HRD audit can do to them and their function?
5.      Because they think that it is expensive?
6.      Because they feel auditors who are largely HR consultants and are not likely to know the difficulty circumstances under which a HR Head or Manager has to work?

 Whatever may be the answer HR Heads are missing something.  I hope to clarify through this paper any myths HR Heads have about HRD Audit. It is a great tool to strengthen HR Function and put at the level at which it deserves to be put. As I argued in my book on Hurconomics the results of a good Audit if implemented well can lift up the intellectual capital and share holder value of the corporation.  It can also lift the level of the HRD function. This is talent era and those who can contribute the development of talent are contributing to the organizational impact and getting them to do more work and a better standing in the society. HRD Audit is meant to lift up the HRD function and through it company performance.  It is not expensive u but ahs to be done by people who are trained to ask right questions and observe right things.
I am giving below a few clarifications of the concept.

Concepts of HRD Audit
   HRD Audit is Comprehensive

HRD audit starts with an understanding of the future business plans and corporate strategies.  While HRD audit can be done even in organisations that lack well formulated future plans and strategies, it is most effective as a tool when the organisation already has such long-term plans.  The HRD audit starts with attempts to answer the following questions:                      

F  Where does the company want to be ten years from now, three years from now and one year from now?  (Answers to this question ensures business linkages part of the HRD score card)

Answer to this question needs to be provided by the top-level management.  If there are long-term plan documents these are reviewed.  On the basis of the answers to these questions the consultants finalise the subsequent audit strategies and methodology.  The consultants make an attempt to identify the nature of core competencies the organisation needs to develop in order to achieve its long-term five to ten year plans.  The consultants also attempt to identify skills required to be developed by the company at various levels (example, workmen level, supervisors level, junior management level, middle management level, top management level, etc.) and with respect to various functions (finance, production, marketing, etc.).  Listing all these core competencies and skills for the future is the starting point of HRD audit.  The HRD audit normally attempts to assess the existing skills and the competency gaps in order to achieve the long-term business goals and short term results of the company. The competencies may deal with technical aspects, managerial aspects, and people related or conceptual. They may cover knowledge base, attitudes, values and skills.
F  What is the current skill base of HRD staff in the company in relation to various roles and role requirements? (HRD Competencies Score on the HRD score card)
This is assessed through an examination of the qualifications of HRD staff, job descriptions, training programmes attended, etc.  Besides this, through interviews an attempt is normally made to identify the skill gap in the organisation. Training needs and performance appraisal forms provide further insights. Departmental heads and other employees provide insights into the competency and other skill requirements.
F  What are the HRD sub-systems available today to help the organisation build itself competency base for the present, immediate future as well as for long term goals? (HRD systems maturity score of the HRD score card)

The auditors attempt to identify various HRD sub-systems that are available to ensure the availability, utilisation and development of skills and other competencies in the company.  These HRD sub-systems evaluated and the framework are presented in Chapter 2. All the HRD tools existing in the organisation are listed and studied in detail.
F  What is the current level of effectiveness of these systems in developing people and ensuring that human competencies are available in adequate levels in the company?  (HRD systems maturity on the HRD score card)

Assessing the effectiveness of each system makes this.  For example, the effectiveness of performance appraisal system is assessed by discussing with employees, individually and in groups, about the efficacy of the system.  The auditors look at the appraisal forms, look at the linkages between appraisal and training, conduct questionnaire surveys to assess the extent to which coaching and other components of other appraisals are being utilised and also conduct workshops if necessary to assess the effectiveness of these systems.  Similarly, in relation to induction training, the consultants make it a point to meet those who have been through the induction training recently or those who are in the process of being inducted into the company and take their views to improve the induction training methodology etc.
F  Is the HRD structure existing in the company adequate enough to manage the HRD in the company? (Contributes to HRD competencies score)

In the next stage, an attempt is made by the auditors or consultants to examine whether the HRD structure at present can handle the pressing and future HRD needs of the company.  This examination will assess the existing skill base of the HRD staff of the company, their professional preparation, their attitudes, their values, their developmental needs, the line managers perceptions regarding them, etc.  In addition to examining the full time staff, the HRD structure is also assessed in terms of use of task forces and other mechanisms.
F  Are the top management and senior manager styles of managing people in tune with the learning culture? (answers to these questions contribute to the HRD culture score of the HRD score card)

Here an attempt is made to examine the leadership styles, human relations skills, etc. of senior managers. The extents to which their styles facilitate the creation of a learning environment are examined.
   HRD Audit Examines Linkages with Other Systems

The HRD audit also examines the linkages between HRD and other systems like total quality management, personnel policies, strategic planning etc.

Suggestions are made on the basis of evaluation on the above questions about the future HRD strategies required by the company, the structure the company needs to have for developing new competencies and the systems that need to be strengthened, the styles and culture that has compatibility with HRD processes in the company particularly the styles of the top management, etc.
   HRD Audit is Business driven

HRD audit always keeps the business goals always on focus. At the same time, it attempts to bring in professionalism in HRD. In keeping the business focus at the centre, HRD audit attempts to evaluate HRD strategy, structure, system, staff, skills and styles and their appropriateness.
HRD Audit is not a problem solving exercise. It may not be able to provide any solutions to specific problems the organisations is facing  - for example Industrial Relations problem, or discipline problem, poor performance problems etc. However, it may be able to throw insights into the sources for the problem. It will not give feedback about specific individuals. It will however give feedback about the HRD department, its structure, competency levels, leadership, processes, influence of the HRD on the other systems etc. HRD audit is against the HRD framework
HRD audit is comprehensive. However it is possible to focus on one or more systems thoroughly.
Action on HRD audit is entirely in the hands of the CEO and his HR Head and the auditor has no control over this.
For more details: see “HRD Audit” and “HRD Score card 2500” Sage Publications by T. V. Rao and also “Hurconomics’ by the same author, Pearson Education. Also www.tvrls.com and www.hrdaudit.org. TVRLS and Malaysian Open University Conduct courses on HRD Audit and there a programs schedule in May in Bangalore and July end in KualaLumpur


Joseph George said...

Because of the label alone, HR Managers will be slow to the idea. PCMM for example is an assessment of goals and practices that checks on evidence that have documents of intent and documents of practice. The lesson is that business goals take precedence even if people are at the heart of enterprise. In organisations where leaders consider that the product of business is 'people' the label of the audit here may not matter. That is a different logic that runs counter to conventional practice. In today's world, HR leaders prefer to cosy up to partners who will make the HR profession look good to business sponsors. Face-saving, status and fame through paid publicity are the commercial game. Authenticity, openness and proactive improvements are an act of courage and truthfulness. Business education and business ethos have socialized the 'safety' of alibis to such authenticity. It may take business leadership the courage to call the HR bluff yet again. This profession has to heal itself one way or the other. It is not a question of how, but of when.

IVNS Raju said...

Yes because of the label alone the system of recalibrating the HR Systems in an organization is yet to see the light of the day. The scope of Internal Audit is now getting expanded based on the vision and ease of the business leadership. In my last two organizations E&Y did the HR audit in addition to the aduit of all accounting processes, in their own way based on the ToR and the scope agreed up on. I am sure that
PWC, Deloitte, KPMG like organizations can provide wide ranging audit services. I agree with Dr. Rao that every work process shall have a feedback mechanism and HR Work Processes are not an exception to this.

Charu Sharma said...

Again a piece worth reading and learning. Well, I would not talk of imbibing at this stage because HRD Audit per se is still a challenging idea to be accepted by the organizations. We often feel disgusted at a long approval list of the PSUs and the kind of checks they perform. The philosophy behind it this is to ensure that everything is in the right place and nobody gets blamed for anything. Same I would say is the idea behind HRD audit. Going through the books, you have written, the idea is simple and aims at the good of all.

The challenge lies in the unorganization of the companies. The HRD is still the most neglected department. It is mainly confined to the staffing. The whole of HR dept is busy is conducting interviews, managing high attrition rates, and in the name of HRD, the Manager coordinates the dates and logistics for the induction of new recruits. The plight is that the vicious cycle never comes to an end.

The HRD audit is in a nascent stage. Its adoption will need a very high sense of integrity, enormous amount of intellect, even a greater conviction in the betterment of processes. It could very well be linked with the concept of HR Accounting. I don't think there is any need of explaining the benefits of installing of this. In future, only the organizations which hold a true value for its people, will survive, rest all will creep in the darkest corners.

There is a dire need of some accreditation for HRD Audit which compels the organizations to follow the basic processes. It would act the CHARACTER certificate of the organizations.

Hari said...

Auditing is an opportunity for introspection if it done voluntarily by the HR Managers. Most of us spend lot of our time and effort in conducting internal surveys, building systems and processes and administering training programs without estimating the relevance and impact of the same on our business. The HRD Audit methodology developed by TVRLS addresses this and enables HR Managers to assess the ground reality.
HRD Competence and Business Impact assessment are the Magnum Opus in this Audit process. If all of us in HR undertake this auditing in our respective companies and concentrate on the weak areas identified, I am sure we can enhance HR credibility in the business. HR audits have proved that Business aligned HR teams tend to create sensible and impactful People policies and processes for the organisation. I do not find any reason for HR Managers to shy away from this introspection. This is something like unwilling to clean up our own house.

T. V. Rao said...

We are offering a Certified HRD Auditors program from May 21 to May 24 2013 at TVRLS Bangalore. The last date for registration is 18th May. We have offered this very successfully in countries like Malaysia in recent times after doing this for several years in India. TVRLS alos announced high concessions for B-School faculty. I hope HR fraternity will make use of this.

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