This article has been written by Golock Chandra Sahoo pursuing a Training program on Using AI for Business Growth and edited by Shashwat Kaushik.

This article has been published by Sneha Mahawar.

Introduction

Manpower constitutes the highest percentage of expenditure, but unlike other resources, it is never exhibited in the books of account of any organisation under the capital or revenue head. As per accounting practise, the benefit of certain expenditures, which remain for years, is reflected in accounts as “Capital =Investment” and can be amortised each year proportionately. Let us suppose that one organisation incurred some Rs.1,00,000/- towards the training of manpower, the benefit of which, as per record, is five years and so Rs.20,000/- per year is to be charged to revenue (deferred revenue expenditure) till the capital expenditure is nullified. But unfortunately, no organisation resorts to this practise. A manpower audit is a new concept for judging the expenditure incurred in searching, recruiting, training, maintaining, managing and discarding the manpower for any organisation. An audit of man-power assesses systematically the strengths, limitations and developmental needs of the existing manpower in the context of organisational performance. 

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Steps involved in a man power audit

The following steps are generally adopted to conduct such an audit, though no specific guidelines are there.

Know the auditee organisation

First, know the function of the organisation and of the individual functionaries working in the organisation. Record all details of the norms of assignment for individual positions. Analyse all details to judge the sufficiency or otherwise of the availability of manpower. This is the motto of an audit.

Examine the targets and achievements

Before proceeding with this audit, audit personnel should have all the details of the targets and achievements of that organisation. Total man-days available in a year, man-days utilised, man-days short utilised with the cause of short utilisation, and percentage of performance with utilisation of man-days may be analysed.

Survey personnel

All key management personnel of the auditee are to be interviewed or talked to personally to know the managerial philosophies/cultures of the organisation. A discussion with the Union/ or association representatives, if possible, may be made to assess the available strength of manpower, anticipated manpower and the shortfall of manpower. Of course, these data are available with ease while examining the manpower of any government organisation. So far as private organisations are concerned, these data may not be available on record. These organisations create positions at any time and the management/highest boss orders at whim. There is no regularity for the creation or destruction of any function in most of the private entities. So the comment on this audit differs in form between private and public entities.

Conducting interviews

On most occasions, audits can’t be conclusive without knowing all the pros and cons of any assignment (those that are not usually available on record). And eliciting information from interviews is perhaps the most acceptable means to achieve this. Now the question arises how can the interview be conducted? What are the questions that need to be asked to aid in the audit exercise? Audit intends to know the duty allocation of individual employees. In fact, it is mention-worthy here to indicate that in many organisations, this “Duty Allocation Register” is not being maintained holistically, which is definitely not a good practise. The questionnaire should cover various aspects of how employees are treated in an organisation, such as their upgradation modes, their annual performance appraisals, training and development techniques, management succession planning, staff compensation, inter-relationships between supervisors and subordinates, motivational practises, etc. Once this information is collected, it can be linked with the documents of the organisation, and the audit may have a clear-cut view to point out in the manpower audit report. The questionnaire method of interviewing, in any case, is the direct method, which is unbiased as the auditor for the sake of conducting an effective audit, will never wish to misinterpret any information so obtained.

After the collection of the base data, the audit commences with an examination of the following issues.

Check payroll

During an audit,  it is important to check the records of sanctioned staff strength vis-a-vis personnel in position. This data in government organisations indicates the excess personnel in positions, and the pay and allowances drawn by the excess personnel should be commented on as excess avoidable expenditure due to manpower in excess of the requirement  in an audit. Similarly, personnel who are less in position compared to the sanctioned strength indicate that work is managed with fewer personnel without any hassles and so the audit may comment on this as a higher sanction with a recommendation to curtail the position of sanction. In private concerns, an audit may rely on the assignment position periodically to judge the actual staff need and hence can comment on the right footing.

Check idle man-hours/days

Cases of power failures, breakdowns of machinery, strikes and lockouts, excess deployed personnel remaining idle due to no other assignment, cases of suspended employees, etc. are indicative of the idle man-hours. An audit should investigate how these idle man-days/hours get curbed or checked. Any recorded failure may be analysed in an audit to compute the monetary loss due to idle days. In any organisation, say there is availability of three drivers against one vehicle in operation, it means that, at any point in time, the other two will remain idle unless their services are utilised otherwise. This is an exemplary case for many organisations. The duty of the audit is to check all such cases of idle man-days, for which huge expenditures are incurred in terms of remuneration and other ancillary benefits. Such comments may often take a common nomenclature, alleging nugatory expenses due to management inaction in assigning tasks.

Check expenditure on training and development

Building the right teams is an important function of management. A good team comprises trained personnel or experienced ones to make the team always lively with their knowledge, seniority and experience from certain specific backgrounds. Expenditure incurred on training and development should supplement the organisation with developing results. Since a person is born in one establishment, it is the organisation that provides all training and may be on the job or off the job as per the needs of that newly recruited person. The result of the training or the endeavour of the organisation may not be immediate, but slowly it will take its turn. Audit, hence, needs to assume that development is there. So while taking up the audit, data on the incurring of expenditures for at least the last three years may be obtained, and an easy comparison may be made on the outturn position. The audit may have some conclusion on the matter, with a general comment that it incurs huge expenditure on training and development with no impact on the outcome. Further, it may be seen in the audit that some people are given training on some specific topic. But after the completion of training, they are given some other assignment than the one in which they were trained. This may be reflected as a clear violation of training guidelines, with comments that such expenditures are unfruitful due to the utilisation of the trained manpower in a different area. This comment may make the management liable for lapses in the provision of inappropriate assignments.

Examine the selection methodology for new Recruitment

The audit needs to examine the adopted principle of new recruitment. Any new recruitment is based on the recorded need in the case of private entities and, in the case of government run organisations, on the order of government staff sanctions. Circumstances warranting such sanction or need may be reviewed in the audit to conclude the sanctity of the need. Next, an audit should check the methodology of advertising, indicating the details of the academic, professional and experience details, etc., and should check that the short-listing of candidates exclusively matches the advertised conditions. Any deviation at any point may be objected to for justifying a process of recruitment based on transparency and accountability. The audit should see that any final appointment for any position should be there only after the need has arisen and never before that. The audit may object under the head of deficiencies in recruitment to report.

Check the methodology of planning for succession

As per Drucker, a management scientist, “the real task of top management is to identify the bread winners of tomorrow.” So one way to plan for succession is to prepare to make the next in command the in-charge during the absence of the chief executive. To have a person from in-cadre is definitely more cost effective rather than to hire a person from the open market. Steps taken by the organisation to prepare for making some worthy to be in succession should be analysed in the audit. The audit should see if failure is noticed in this regard and find out the audit observation on monetary involvement to find a new hand in the absence of any in line with succession.

Review suspension cases

While someone is put on suspension in government organisations, in particular, the person gets a subsistence allowance commencing from the next day of suspension, equivalent to 50 percent of the last full month’s pay. The government gets no out-turn from such persons and instead incurs expenditures regularly. So, all such cases need to be finalised at the earliest in the interest of the government. It may be seen that in many organisations, suspension cases are continuing for years without any appropriate action to finalise the charge sheet or the case. Of course, in private organisations, such cases can be seldom found. Audit, as a sacred duty, reviews all suspension cases to point out the deficiencies in action and comment that such payments of subsistence allowances are wasteful.

Examine all cases of transfer

The frequency of the transfer of an employee from one station to another or from one position to another should be checked in an audit. One person should not be allowed to hold a position for years for no valid reason and that creates a scope for doing/performing out of the way at times. The audit should see the cost incurred for transferring an employee out of station and record the purpose holistically satisfied by such a change in position. Routinely, this should not be the practise in any government organisation. Often, it may be noticed that people are allowed to work on deputation at a different station with payments of remuneration from their previous stations. If this happens, it is a proven case that the position of manpower at the so called leftover station is sufficient, and the audit may comment under the heading of sanction in excess of the requisite manpower with the recommendation to curtail the staff strength. Of course, this position will never be available to private entities.

Review all payments of compensation

Financial incentives in any form enhance productivity. Payment of overtime or honorarium for any activity like clearance of arrears or otherwise in any government organisation should catch the attention of audits to judge the veracity of such payments. If it is noticed that such payments are there as a regular measure, the audit should comment on the payment as unwanted and without any reason.

Reporting

Next comes the phase of reporting. The task of a report is to present the case in a persuasive, decisive and action-oriented manner. The report should be balanced with a specific purpose to aid management in making timely decisions to recruit and manage the manpower in the best interest of the management. The report broadly covers the following issues:

  • Decision making involves the acquisition, development and allocation of manpower.
  • Monitoring and evaluating the degree to which the management has effectively and efficiently utilised the resources.

Achieving capacity utilisation of manpower is much closer to 100 percent.

The report, after being made ready with the initial draft, should be discussed with the management and the points of disagreement on any issue with their reasons should be exhibited in the report. Simultaneously, rebuttals in the audit should be reflected in each observation.

Conclusion

Building a team is a stupendous task. Manpower planning from a proper perspective is required to form a team to storm them with appropriate and need-based work assignments. Finally, organisation management is to fix the norm as per which the assignment can be accomplished. A manpower audit thus covers every aspect of forming, storming and norming, along with keeping in check the performance of a team. This audit involves identifying issues and finding solutions to them before they become unmanageable. Any deficiency at any stage will result in low productivity, and hence, steps need to be taken to make manpower audits mandatory for all organisations.

References

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