In a study conducted by T. V. Rao (1999), it is reported that the use of HR as an organizational development intervention is a significant focus in India and is a distinguishing characteristic of Indian organizations. The HR audit is an extensive undertaking that has yielded several outcomes in various organizations, including the establishment of original systems and processes such as potential and performance appraisal, career planning, training, and monitoring.
The establishment of explicit policies such as promotion, communication, reward, and reorganization policies contributes to the development of trust, collaboration, and teamwork. By providing opportunities for growth and development to all employees based on their work, a human focus is integrated into the business process, resulting in a higher level of role effectiveness. In addition, Nevado [1998] suggests that the audit should assess whether the personnel policies align with the overall objectives and global strategy of the company.
The HR strategy must be translated into plans and programs. This includes the introduction of the strategic audit in the HR audit process. Dolan, Schuler, and Valle [1999, p. 390] define the strategic audit as the assessment of how well HR policies and practices align with the company’s overall strategy. According to Brown [2000], the measurements used to evaluate a company’s personnel do not accurately reflect its value or performance.
To address the issue, he suggests developing a human capital index that considers four key factors. Thoroughly analyzing and evaluating these factors’ relative significance to the company is crucial. The factors include an individual’s years of experience in the industry or specific field, their position within the company (determined by job grade or organizational chart level), the range and diversity of roles or assignments they have undertaken, and their performance rating. The performance rating involves a subjective assessment of an employee’s performance, which should incorporate feedback from a supervisor as well as an evaluation of objective factors such as sales, benefits, or other relevant metrics.
The company can assess each employee’s worth on a 100-point scale using this index. It is easy to calculate and understand, ensuring fairness by considering objective factors. However, it has limitations in terms of providing insights into an employee’s knowledge, skills, values, management experience, and other relevant aspects. To address this issue, Brown has created a secondary index to evaluate an employee’s expertise and abilities.
In Grossman’s [2000] study, he proposes a comprehensive method for evaluating the HR function. The method consists of three components, with the first being efficiency measurements that analyze resource utilization. These measurements comprise turnover, quits, and discharges as a percentage of total employees, average tenure in various positions, absenteeism rates, employee productivity levels, and intellectual capital. It is important to compare these efficiency measurements to previous periods.
However, it is important to note that simply benchmarking against others in the same industry or profession is not enough. It is essential to carefully analyze the problem before making any cuts in expenditures, especially when inefficiencies are identified. While efficiency is crucial, it is equally important to consider the value-creation aspect. Therefore, it becomes imperative to establish a new set of strategic measurements that align directly with the company’s mission and strategies.
