effectiveness of these systems. Similarly, 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 record their opinions about ways to improve the induction training method. • Is the organization’s HRD structure adequate to manage the HRD in the company? To address this question, HRD auditors examine how well the existing HRD structure can handle the present and future HRD needs of the company. This examination assesses the existing skill base of the HRD staff, their professional preparation, their attitudes, their values, their developmental needs, the line manager’s perceptions regarding them, and other issues of interest to the client. Temporary task forces and other contingent organizational activities are examined as well. • Are top management and senior management styles of managing people in tune with the learning culture? To address this question, an attempt is made to examine the leadership styles, human relations skills, and com- petencies of senior managers. A key issue is how much their manage- ment style contributes to a learning environment. The HRD Audit Examines Linkages with Other Systems The HRD audit examines the linkages between HRD and other systems such as total quality management, personnel policies, and strategic planning. Based on the results of this examination, the consultants offer recommendations about: • The future HRD strategy required by the company; • The structure the company needs to have for developing new competencies; • The systems that must be strengthened; • The styles and culture that are compatible with HRD processes in the company; and • Other issues identified by the client. The HRD Audit Is Business Driven The HRD audit always keeps the organization’s strategic objectives clearly in focus. At the same time, the consultants attempt to increase the professional- ism of HRD in the organization. By keeping the organization’s strategic objec- tives in focus, the HRD audit attempts to evaluate HRD strategy, structure, system, staff, skills, and styles and their appropriateness. It should be emphasized that the HRD audit is not a problem-solving exer- cise. It may not be able to provide any solutions to specific problems the orga- nization is facing. For example, it may not offer solutions to pressing industrial relations problems or corrective action problems with individuals. In other USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 121 09_962384 ch04.qxd 2/3/05 12:01 AM Page 121 words, the HRD audit is not a tool for troubleshooting organizational perfor- mance problems. However, it may be able to throw light on the root causes of the problems. It will not give feedback about specific individuals. It will, how- ever, give feedback to organizational leaders and other stakeholders about the HRD department, its structure, competency levels, leadership, and processes, as well as the influence of HRD on the other systems. The Methodology of an HRD Audit The methods for auditing the HRD function have been used in many organiza- tions (Rao, 1999; Rothwell & Kazanas, 2003). A team of auditors visits a cor- poration and uses many methodologies to assess the appropriateness and adequacy of the various HRD systems, strategies, structures, competencies, cul- ture, and processes. The audit starts with a briefing to the CEO and the chief of HR, who may set an agenda and focus areas for evaluation. The interview with top managers starts with an in-depth investigation of the organization’s strategic plans and uses that as a basis for outlining the organization’s competency requirements. The current competencies, structures, and HRD systems are assessed for their capability to position the organization for the future. Suggestions are made to improve ways of achieving the future business goals and plans. The HRD audit is contextual and, at the same time, relies on the available knowledge of the potential of the HRD systems to help the organization realize its goals. To answer the questions posed in the previous section, auditors use various methods. They are described in detail below. 1. Individual Interviews. The auditors normally make it a point to inter- view the top managers and senior managers individually. Such individ- ual interviews are necessary to capture their thinking about the organization’s future plans, to obtain sensitive information, and to gather information about management style and corporate culture. Top managers also have a good perspective due to their strategic positions. Union leaders, departmental heads, some strategic clients, and infor- mal leaders are also individually interviewed. In addition, if the organi- zation is small and is manned by professionals, the auditors make an attempt to enlarge the audit coverage and interview randomly selected people from different levels and functions. 2. Group Interviews. It is not feasible to meet the thousands of people who may be employed in very large organizations. The authors have found that, in this situation, group interviews—sometimes called focus groups—are a good means by which to collect information about the effectiveness of existing systems. Group interviews typically include four to eight individuals, preferably drawn from the same or similar levels in the organization. In Asia, this is important because junior 122 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 122 employees are freer to express their views without the presence of senior managers. However, it is quite common to have cross-functional representation of employees in the same group. If the organization is large, the auditors make an attempt to conduct group interviews for each function separately so as to keep the levels homogenous. In both individual and group interviews conducted for an HRD audit, the fol- lowing open-ended questions are often asked: • What do you see as the future growth opportunities and business directions of the organization? • What skills and competencies do members of this organization have that you are proud of? • What skills and competencies do you need to run your business or to perform your role more effectively at present? • What are the strengths of your HRD function? • What are the areas where your HRD function can do better? • What is good about your HRD subsystems, such as performance appraisal, career planning, job rotation, training, quality circles, induction training, recruitment policies, performance counselling, worker development programs, HRD departments, and so on? • What is weak about them? What can be improved? • What changes do you suggest to strengthen HRD in your organization? • What do you think are the ways in which line managers can per- form more development roles? 3. Workshop. In some cases, large-scale workshops are substituted for individual and group interviews. Workshops may be conducted for groups ranging in size from thirty to about three hundred. They are gathered in a room and tasked to do the HRD audit. Normally, in the workshop the participants work in small groups either around various subsystems of HRD, such as performance appraisal, or around different dimensions of HRD; do an analysis of organizational strengths, weak- nesses, opportunities, and threats; and make a presentation. 4. Questionnaire Method. A questionnaire is a powerful tool for an HRD audit. In this method, comprehensive questionnaires can be developed for assessing various aspects of HRD, including its subsystems, their execution, and impact. Such questionnaires should be administered to company executives at the outset of an HRD audit. The questionnaire can be administered individually or collectively to groups. One approach that the authors have found to work is to select respondents at random, call them to a room, explain the audit objectives, and USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 123 09_962384 ch04.qxd 2/3/05 12:01 AM Page 123 administer the questionnaire. This approach ensures many respondents complete the questionnaire. Rao and Pareek have developed other questionnaires since the time the first comprehensive HRD audit ques- tionnaires were prepared. These questionnaires assess various HRD dimensions—including the competencies of the HRD staff, line man- ager styles, and approaches used in the implementation of various HRD systems (see Rao, 1990, 1999). 5. Observation. HRD auditors should physically visit the workplace—includ- ing the plant, the machinery, learning centers or classrooms, discussion rooms, the recreation and eating facilities, and other places created by the organization to promote work-life balance. In some countries, employees live in a colony or have special living places owned by the organization or created exclusively for the company, such as hostels, a hospital or dis- pensary, and schools. If this is the case, auditors should visit these as well. These visits afford HRD auditors opportunities to observe how con- genial and supportive the climate of the company is. Such first-hand observation by HRD auditors is essential because employees are not likely to give their best if they live or work under bad conditions. 6. Analysis of Secondary Data. The analysis of secondary data can yield insights into the company’s HRD assets and liabilities. For example, in a company employing nearly fifty HR people, only two had received technical training in the HRD area. An analysis of the training pro- grams revealed that few had attended any HRD program in the past five years. The analysis of secondary data can prompt such insights. 7. Analysis of Reports, Records, Manuals, and Other Published Literature. HRD auditors should also take time to analyze reports, records, manu- als, and other relevant literature. Examples include annual reports, marked handouts, the organization’s training calendar, the organiza- tion’s HR manual, and various circulars. An analysis of such docu- ments can provide useful information about the organization’s strengths and weaknesses. Preparing for the HRD Audit The organization has to prepare itself for the audit. All diagnoses are painful, particularly if improvement is necessary. If improvement is warranted, then key priorities must be identified and implemented. That requires more work. Hence, undertaking an audit requires courage from the HR department. As preparation for the audit, the auditors must become familiar with the cur- rent HRD system. They do that by undertaking a thorough examination of doc- uments. Exhibit 4.1 delineates a list of documents needed by the auditors before the audit. 124 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 124 USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 125 Exhibit 4.1. Checklist of Audit Documents ❏ Personnel manual ❏ Manpower planning guidelines ❏ Recruitment policies ❏ Promotion policies ❏ Performance appraisal manuals ❏ TQM manuals ❏ Quality circles, shop-floor committees, etc., guidelines ❏ Suggestion schemes and other guidelines ❏ Training policy guidelines ❏ Succession planning and career planning guidelines and methods ❏ OD interventions, if any, taken by the organization ❏ Activities of the HRD department—annual reports, etc. ❏ Training calendar and reports of training activities ❏ Diagnostic and evaluation studies ❏ Reward systems—policies and guidelines ❏ Communication systems and reports ❏ In-house newsletters and other communication mechanisms ❏ Delegation manuals or guidelines ❏ Job-rotation and transfer policies and practices ❏ Organizational structure of HRD department ❏ Small-group activities, shop-floor committees, and details ❏ Exit interview guidelines and data ❏ Documents dealing with facilities offered to employees ❏ Worker education and training programs ❏ Welfare schemes and facilities ❏ Residential colony facilities guidelines ❏ Climate surveys, culture studies ❏ Previous HRD audit reports ❏ Other studies undertaken by trainees and students ❏ Age profiles grade-wise and department-wise for assessing retirements, etc. ❏ Attrition rates, department or unit-wise, and exit interview data ❏ Any other documents having implication for HRD strategies ❏ Organization charts, if necessary From T.V. Rao, HRD Audit. New Delhi: Response Books/Sage India, 1999. 09_962384 ch04.qxd 2/3/05 12:01 AM Page 125 The HRD Scorecard Rao (1999) has introduced the concept of the HRD scorecard, a series of four letter grades assigned by the HRD auditors based on the audit results. They assign letter grades for the following dimensions: 1. The HRD Systems Maturity indicates the relative maturity of the systems in place. 2. The HRD Competencies Maturity indicates the competency level of the HRD managers, whether line managers have the attitudes required to learn and grow, and whether the styles of top managers are aligned to the organization’s HRD philosophy. 3. The HRD Climate indicates whether the organization’s strategic goals and the HRD culture are aligned. 4. Business Linkages indicates the extent to which the HRD systems, competencies, and the culture are aligned with the business goals. The letter grades range from an “A+” to an “F,” where A+ indicates an extremely high level of maturity and F indicates an extremely low level, or total lack of maturity. The HRD scorecard helps to identify, at a glance, the areas where the firm needs to focus. Consider the scorecard of the hypothetical com- pany shown in Exhibit 4.2. The scores shown in Exhibit 4.2 indicate that this firm possesses high com- petency levels of HR and line staff and reasonably good HRD systems. The HRD culture has not yet fully developed (or the HRD systems did not yet have their impact). The business linkages of all the systems are weak. The organi- zation therefore should pay attention to improving business linkages of the HR systems. 126 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION Exhibit 4.2. Sample HRD Audit Scorecard Systems Maturity HRD Competencies HRD Culture Business Maturity Maturity Linkages B+ A C D 09_962384 ch04.qxd 2/3/05 12:01 AM Page 126 THE HRD AUDIT AS AN OD INTERVENTION Results of HRD Audit Interventions The author’s experience in initiating OD with the aid of the HRD audit in India has shown the following results. The audit in several organizations resulted in establishing organizational sys- tems and processes such as potential and performance appraisal, career plan- ning, training, and mentoring. The most frequent changes seen were the installations of performance appraisal and job rotation efforts. In a few companies the HRD audit has resulted in the formulation of clear-cut policies on promotion, employee communication, and reward and recognition. In other organizations, the HRD audit seemed to have drawn the stakeholders’ attention to issues like developing trust, collaboration, teamwork, and a quality orientation. In a few others, the HRD audit resulted in increased role clarity. In one organization, as the audit started with the issues of future strategies, top managers could not identify what those plans were. They indicated that the plans came from the multinational head office, and they had no freedom in influ- encing them. The turnover from Indian operations was negligible and therefore the parent office paid little attention to the corporation. As a result, the top man- agement could not communicate the future of the organization clearly to the employees. This affected to some extent the morale and motivation of employ- ees. The corporation has good practices and the employees were proud. On the basis of the HRD audit report, which indicated the difficulties in ensuring employee commitment without an appreciation of the company’s future plans, top managers negotiated and planned the future strategic plan for the company. In another company, the HRD audit indicated the need for developing local workers as HRD managers and the need to reorient the HRD systems to fit the local culture. The company recruited an HRD manager on a short-term basis. That manager designed a number of HR systems and also trained the local line managers in HRD. The systems designed were integrated into the TPM, ISO 9000, and other such interventions. The examples cited in the paragraphs above indicate that the HRD audit can prompt many insights about ways to improve company performance. HRD Audit Failures In at least two cases in the author’s experience, the HRD audit was not suc- cessful. In one case, the HRD manager was very enthusiastic about having the HRD program audited. The audit report indicated a very poor state of HRD in USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 127 09_962384 ch04.qxd 2/3/05 12:01 AM Page 127 the company. The staff competencies were rated as poor; the practices were ques- tioned; and improvements were suggested. The benchmarking data also indi- cated this company to be a poor performer in HRD, although the company itself was profitable and was successfully meeting competitive challenges. Although the audit started with an interview with the CEO, no opportunity was provided to the auditors to make a presentation to the CEO. As a result, the audit report did not receive any attention, and the auditors considered the effort a waste. In another company, top managers commissioned the audit but were busy with the reorganization of a critical marketing function. Top managers devoted all their time and attention to the reorganization and did not create an oppor- tunity to learn about the audit findings. The auditors felt that some audit find- ings were directly related to business improvements in the planned reorganization, but the auditors were not positioned to draw top management’s attention. The effort did not produce results. These two examples seem to make it clear that the following processes in the HRD audit have the greatest potential in initiating and managing change: • The initial interviews with top managers; • Benchmarking data on the HRD audit questionnaire supplied to the company; • The presentation made to the stakeholders by the auditors at the end of the audit; and • The report itself and the way the report is handled. Results of a Research Study Jomon (1997) conducted a research study to identify the factors influencing the use of an audit as a change tool. He studied four organizations that were audited about three years after the first audit. He tried to assess the influence of the following variables in the effective use of an HRD audit: • Management styles; • Organizational characteristics; • A profile of the HRD department; • The competency levels of the HRD department staff; • The CEO’s commitment; and • The HRD chief’s commitment. Jomon’s study indicated the following in each of four companies: Post-Audit Scenario: Organization 1. Soon after the audit, the management held a number of meetings and a final action plan was formulated. Although 128 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 128 the action plan covered HRD at the policy-making level, at the operational level, and at the departmental level and contained a joint action plan for the HRD/training department, the reports as well as the plan were kept confiden- tial. The following changes were brought about as a result of the audit exercise: • A system to assess the potential of higher-level people based on key competencies has been established; • Promotion policy is now shared with everyone; • Employees are aware of their potential career paths; • Mechanisms to help employees plan their work efficiently were set up and employees were helped by their supervisors to plan their work effectively; • Employees now go for training with a clear understanding of the knowl- edge and skills they are expected to acquire from the training; and • Regular circulars, notices, and bulletins give adequate information to the employees about the company, the market situation, the changes in the environment, and so forth. Post-Audit Scenario: Organization 2. This company had shown substantial changes in a three-year post-audit period. The current situation was character- ized as follows: • Clear personnel policies have been established, including promotions policy, communication policy, reward and recognition policy, and many more; • Team spirit at this company is of a high order as conveyed by the employees themselves; • Performance planning review and development (PPRD) systems have been revamped and a well-structured feedback mechanism is in place now; • Key performance areas (KPAs) provide role clarity and direction to the employees in their work, and role clarity is very high among employees; • External training programs are chosen carefully after collecting enough information about their quality and suitability; and • Action-oriented research is very well-established and taken seriously and acted on. Post-Audit Scenario: Organization 3. The first audit was conducted in 1993. A management council meeting was organized to discuss the strengths and weak- nesses of the organization and the recommendations from the audit. Strategic USING THE HRD AUDIT TO BUILD CONVERGENCE BETWEEN HRM AND OD 129 09_962384 ch04.qxd 2/3/05 12:01 AM Page 129 issues related to HRD were also considered at this juncture. The status in 1997 is presented below: • Manpower requirements for each department are identified well in advance; • Key competencies have been identified and a system is in place for assessing the potential of people for higher-level responsibilities; • Employees also participate and contribute to annual performance plans; • KPAs provide role clarity and direction to the employees in terms of their work; • A very high level of role efficacy exists—as stated by the employees themselves; • OD initiatives, research orientation, communication, empowerment, and reward systems are yet to be established; and • The HRD staff, although inadequate in number, was considered highly competent. Post-Audit Scenario: Organization 4. In this company, weaknesses highlighted by the HRD audit included the following: • No potential appraisal system and an ad hoc performance appraisal system; • No career planning system; • Lack of role clarity; • Poor induction procedure; • Absence of mentoring; • High confusion and friction in values and approach; • Lack of initiative and a mechanical approach to work; • Human orientation was missing; • Operators were treated badly; and • Personnel policies were not development-oriented but were discipline- oriented. Once the HRD audit report was submitted, the HR chief called all the man- agerial staff for dinner and presented the findings. Based on the discussions, an 130 PRACTICING ORGANIZATION DEVELOPMENT, 2ND EDITION 09_962384 ch04.qxd 2/3/05 12:01 AM Page 130 . in your organization? • What do you think are the ways in which line managers can per- form more development roles? 3. Workshop. In some cases, large-scale workshops are substituted for individual. analysis of such docu- ments can provide useful information about the organization s strengths and weaknesses. Preparing for the HRD Audit The organization has to prepare itself for the audit. All. companies: Post-Audit Scenario: Organization 1. Soon after the audit, the management held a number of meetings and a final action plan was formulated. Although 128 PRACTICING ORGANIZATION DEVELOPMENT,