What is HR? Definition, Functions, and Importance

Human Resources (also known as HR or Human Relations) is a company or organization department responsible for handling all aspects of employee relations and lifecycle. While at its most basic, HRs look after recruitment and hiring, the role is gradually becoming more diverse. From compensation and benefits to legal compliance and training and development, HRs take care of whatever impacts the productivity and functioning of the company’s resources, directly or indirectly.

While compliance with labor laws is a purely administrative function, the role of HRs has become highly strategic today as performance management, employee concerns, and training programs, to name a few, all have to be handled by the HR department.

As an organization grows, the importance of a well-functioning HR department cannot be underestimated as it affects the company culture, especially in larger companies. The Human Resources department manages the company policies and aids in the creation of the employee handbook. As a result, the overall workplace environment and employee satisfaction depend on the efficiency of human resources managers.

Human Resources Definition

When one considers what is Human Resources the main element repeated throughout is that the focus is on the people side of management. But then this does lead one to consider what is HR as a function and whether it is the same thing as HR as a department.

Key HR functions include selection and recruitment, training employees, benefits administration, employee performance management, etc. These activities are crucial to attract, develop, and retain a high-performing workforce.

HR, as a department, on the other hand, refers to a particular team that is responsible for carrying out these functions.

Thus, HR as a function focuses on the ‘what’, i.e., the responsibilities and activities required to manage people. However, HR as a department is focused on who is the team that is performing the functions.

Importance of Human Resources in Organizations (top 3 responsibilities)

Human Resources play a vital role in an organization as they take care of the human capital. Positivity, engagement, collaboration, motivation, and morale in the workplace all depend on how employees perceive their company to be, whether it is a great place to work or somewhere they dread going on Monday; all rests in the hands of the HR, as they are the enforcers of the company culture.

Building and maintaining a productive workforce: The Human Resources department is responsible for finding, hiring, and retaining top talent while at the same time providing incentives by developing the skills of employees through training. Through training, employees’ productivity is boosted, and by recognizing the contributions and skills of employees, employee motivation is increased. An engaging and positive work environment is created by incorporating flexible work arrangements and team-building activities.
Driving organizational success through employee satisfaction: When employees are satisfied at the workplace, they do not actively look for a change of job, which reduces the turnover cost and maintains institutional knowledge. Organizational goals, too, are better met as employees who are happy at work are more likely to be engaged, motivated, and productive, which leads to better performance. As an employer, the brand image is enhanced as the company is considered a great place to work, attracting top talent.
Managing change and innovation in the workplace: Organizational changes are complex for employees, and the HR team eases transitions with support, communication, and training. HR is also a platform through which employee voices are facilitated through suggestion programs and collaboration ventures. Skill development drives employees to learn new skills, making them more likely to continue at the same company, not only in their comfort zone but also providing a learning platform.

Thus, the HR team is the backbone of the company as they support not only the welfare of the employees and their productive potential. They are also the ones on whose shoulders the baton of upholding the values and policies of the company rests.

7 Key Objectives of Human Resource Management

While human resource management is pretty mind-bogglingly diverse, I have segregated its key objectives into 7 groups that cover all aspects of human resource management.

1. Recruitment and selection

A company is only as good as its people, so the HR team has quite a big cut-out on their plate as they need to attract, screen, select and retain qualified professionals. Filling job positions is not enough, as the actual ability of HR comes from being able to choose candidates with the right skills, cultural fit, and experience. This, in turn, increases productivity and reduces the scale of attrition. HRs also use multiple (and relevant) sources to find the best talent tool. For example, a tech startup could use social media to find the best talent to reach a wider candidate pool. In contrast, a retail chain that needs candidates who can build good customer rapport would use in-store interviews for its selection process instead.

2. Employee development and training

Training and development opportunities are required for employees to improve employee productivity and retain top talent. Training programs are, therefore, an investment as employee morale and engagement are improved, affecting the employee’s efficiency. Apart from strengthening the employee’s skills, this training also gives a better impression of the company’s culture; for example, a manufacturing company could provide training on safety procedures during working hours to new employees. To continue with the tech startup example, employees can be offered new courses to be up-to-date with industry best practices.

3. Performance management

The HR department is an asset to employees as it clears the company’s expectations, making it easier for employees to meet the organization’s goals as they know what is expected of them. Apart from removing the performance expectations, they provide feedback regularly and evaluate the performance of employees against established goals. High-performing employees can be recognized based on their goal achievement, which boosts employee morale while helping to identify areas of improvement. Going back to the tech company example, using a system of structured performance reviews and meetings for goal setting, employee progress can be tracked, and feedback can be provided individually to improve employee productivity.

4. Employee relations and engagement

Human resources in business don’t just look at productivity; they assist in nurturing the relationship between the company and its employees by creating a positive working environment and activities geared towards employee engagement. When employees have a strong relationship with the company, job satisfaction increases. For example, suppose the HR team in a factory sets up an employee assistance program. In that case, employees will automatically feel more loyalty towards the company, and an increase in their productivity will reflect this.

5. Compensation and benefits administration

Employee compensation needs to be competitive so that the best talent can be attracted and retained. Apart from fair compensation, employee benefits are essential in improving overall employee satisfaction. Of course, the benefits offered would vary depending on the company. While a tech company, for example, might provide competitive salaries, health insurance coverage, and other benefits, a retail chain might instead provide work schedule flexibility and special discounts to employees.

6. Compliance with labor laws and regulations

Human resource departments also have legal administrative tasks, like ensuring that local labor laws, regulations, and compliance with federal and state laws are met concerning employment, safety, and health. Compliance with laws ensures the company is safe from legal or financial repercussions and that current employees are treated fairly. Furthermore, it promotes an ethical and positive work culture. If a company is into construction, it needs to meet standard safety regulations, while a retail chain must comply with the wage and working hour laws.

7. Creating a company culture that adds brand value

Effective human resource management enhances the company’s brand value as an employer and a great workplace too. Employees appreciate a positive and engaging work environment, and through training and other such activities, they achieve career development. Take feedback sessions, for example; when employees can communicate their doubts or highlight drawbacks and are informed about their areas of improvement, they learn new things while being listened to. Thus, effective human resources management reduces frustration while motivating employees towards further productivity.

Strategic planning makes it possible to meet these 7 key objectives, which are as important as the company’s or client’s work. Compliance, competitive salaries, selection process, professional development, etc., all fall under the mantle of the HR team. Still, not all of them are core functions, the latter of which has been discussed in further detail below.

Core Functions of HR

The HR team’s main prerogative is to manage the human resources. Human resources mean people or the human capital of the organization. Therefore, it is no surprise that the 4 core functions of Human Resources encompass looking after the employee lifecycle.

1. Talent Acquisition

The foremost and most integral element in core HR functions is the acquisition of qualified candidates. To attract suitable candidates, multiple recruitment methods can be employed, 5 of which are listed below:

Job postings include using platforms like LinkedIn and Indeed or job boards and company websites.
Recruitment agencies are an easy way to screen candidates, especially for specialized roles.
Employee referrals reduce the sourcing and screening process, as current employees can be informed about the qualifications required and can source accordingly from their network.
Social media platforms are perfect for marketing the company’s culture and providing opportunities to reach a larger talent pool through social media platforms like LinkedIn.
Campus recruitment is the perfect choice when sourcing fresher candidates, as students fresh out of college are more driven to perform well.

2. Employee Development

Employee development doesn’t just equip an employee with new skills; it benefits the organization, too, in 4 ways:

Enhances productivity as an upgrade in knowledge and skills improves overall efficiency and productivity.
Improves employee morale as employees feel that the company cares about them through upskilling and values their potential.
Increases innovation and adaptability as employees are trained in the required skills, making it easier for them to achieve company goals.
Reduces turnover as employees are satisfied with their position in the company and feel more loyal as they are given space to grow.

Employee development can be facilitated in many ways, like training programs, on-job training, and cross-training. Training programs need not be offline; online courses, such as seminars and workshops, are good sources for learning. Mentoring and coaching are ways experienced employees can pass on their valuable knowledge to their juniors. Through performance management, areas of improvement can be identified, and based on this, development goals can be set and progress tracked.

3. Compensation and Benefits

Effective talent management calls for competitive compensation and benefits, as the first thing potential candidates consider is their annual salary. Therefore, in the competitive market atmosphere, it is essential that compensation packages be at par with other companies so that top talent can be attracted and retained while keeping current employees motivated.

To determine what compensation and benefits are competitive, HRs conduct market research to develop a fair, aligned, and equitable pay structure based on the performance and job responsibilities of the employee. The market research factors in the differences of roles as well as locations. Regarding raises and bonuses, it depends on the employee’s performance, the market trends, and, more importantly, how the company is situated profit-wise.

Benefits usually revolve around the top 5, as listed below:

Paid time off: Paid time off or PTO would include sick leave, annual leave, and public holidays.
Flexible work arrangements: Flexible schedules, remote working, and weekends off all improve work-life balance.
Health insurance: Health insurance can extend to the families of the employee and cover medical expenditures.
Life and Disability insurance: Through life and disability allowance, a sense of security and future safety are provided to the employee.
Retirement plans: Saving brings peace of mind, so offering employees a chance to save for their retirement shows that the company cares for their future.

Legal compliance regarding compensation and benefits cannot be ignored, as legal penalties would negatively impact the company’s image and reputation.

4. Employee Relations

The HR department needs to maintain the employee’s relations with the organization by fostering a positive work environment. Through this, employees feel respected, valued, and engaged. They promote open communication between employees and managers through regular meetings, feedback, and surveys. This creates transparency, better aligns with goal-setting initiatives for future succession planning, and helps employees improve their performance.

Besides communication, employee engagement focuses on social events, employee recognition and award programs, team-building events, and activities. Through this, employee morale and a sense of community are boosted.

Grievance address, too, is another aspect that the HR team looks after. They are responsible for establishing grievance procedures for fair, timely, and confidential concerns addressal. To maintain a positive work culture, they resolve and investigate grievances. For employees with personal or professional challenges, the HR team provides support and resources for better career paths.

By effectively managing these core functions, HR departments can significantly contribute to the organisation’s success by building a high-performing and engaged workforce.

5 Challenges Faced by Human Resource Departments (with potential solutions from experts)

The HR department makes career paths smoother for employees; however, it isn’t always a bed of roses for the HR team, as some common challenges they face require innovative solutions.

1. Adapting to technological advancements

Technological advancements are taking place rapidly with the advent of AI and big data, with the HR field no exception. While initially, there might be teething issues and a need for training, once the system is set organizations and their HR teams stand to gain quite a lot in terms of faster and more efficient working.

For example, using AI-powered recruitment software can streamline the recruitment process, and the burden on the HR department will decrease. Through this software, resumes can be analyzed quickly, and the process of identifying qualified potential candidates and scheduling interviews can be automated, needing less human supervision.

Potential solutions to this dilemma of adapting to technological advancements include:

Investing in HR technology: Implementing HR software or tools can help automate tasks and improve efficiency by leveraging the power of AI, cloud computing, machine learning, and big data analytics.
Providing training and development: People need to know how to use a particular technology and so, by equipping them with the necessary skills, they are better able to use the technology in question.
Keeping up-to-date on technology trends: By being aware of the latest technological advancements, it is easier to adapt to new changes as there is less of a learning curve.

Rather than resisting by adapting slowly and gradually to technological advancements, HRs can gain through automation and keeping up-to-date with technology trends.

2. Diversity, equity, and inclusion

Diversity, equity, and inclusion are no longer ideal for organizations. An inclusive and diverse workforce isn’t just part of a company’s brand image; it also widens the talent pool. However, the onus falls on HR managers when diversity, tolerance, sensitivity, and cross-cultural training are needed.

For example, suppose a company is criticized for not having diversity in its management or leadership positions. The company can rectify this by becoming more inclusive. Still, first, it would need to train its managers for unconscious biases and could include mentorship programs for underrepresented employees.

Potential solutions to make a workplace more diverse and inclusive include:

Setting clear DEI-based goals: Goal setting is a suitable method to be clear on results. Establishing measurable goals toward DEI will ensure that people do not take the back bench regarding inclusion as a priority.
Implementing more inclusive hiring practices: Since hiring and selection is the starting point of gaining more diversity and inclusion, hiring practices need to be inclusive so that a more diverse talent pool can be tapped.
Fostering a culture that celebrates inclusion: The workplace environment should be welcoming, respectful, and empowering for true inclusivity and diversity to flourish. Employees should feel valued regardless of their origin or gender.

A more diverse work culture not only creates a work environment of diversity and inclusivity but also helps widen the already existing talent pool and meet DEI-based goals.

3. Retention of top talent

While the shortlisting, selecting, hiring, and consequent training are all processes requiring both time and money, to lose out on top performers after all this hard work is a complete loss. Juggling a competitive market and high employee expectations is tricky, as well-performing employees need to be kept motivated and engaged.

For example, a firm can offer its best employees a further chance for professional development through leadership training, mentorship programs, and online courses. Being able to learn will not only make the workplace environment dynamic but also make the employees feel that their skill set is of value to the company, and this will build their loyalty.

Potential solutions to retain top talent are:

Offering competitive compensation (and benefits): Competitive prices are a requirement, as being paid per market value is something top talent looks for.
Investing in employee development: Employee development is invested through training and development opportunities like mentorship and career development programs.
Fostering a positive work environment: A supportive and positive work environment goes a long way in making employees feel appreciated and valued.

Human Resource teams need to blend competitive salaries with employee training and a positive work environment to retain top talent.

4. Compliance with evolving labor laws

While organizations focus on growth, it becomes difficult for them to focus on labor laws that keep evolving. To prevent the chances of costly penalties, HR departments have to be on their toes.

For example, companies must update their employee handbooks regularly to comply with laws regarding wages or leaves.

Potential solutions to keep up to date with compliance laws are:

Keeping current with legal changes: Monitoring and tracking labor regulations and law updates.
Consulting with legal experts: To ensure all laws are met, it is best to take guidance from the relevant legal counsel.
Developing and implementing clear procedures and policies: Employee handbooks must be maintained and updated.

While it is challenging to keep up with the dynamic aspect of labor laws, having a team of legal experts on stand by assists in easing the burden off the main HR team while at the same time maintaining compliance.

5. Managing remote and hybrid teams

The management of hybrid and remote working models is a new aspect to the workplace as employees now prefer flexibility in working time. For an HR, the challenges posed here are maintaining the cohesion of the team, monitoring employee performance, and looking after the well-being of employees.

For example, a company introduces a work policy with greater flexibility that allows employees to work remotely based on the requirements of their job profile and their preferences. Managers are provided training as to the management of such remote teams.

Potential solutions for handling hybrid and remote work culture:

Investing in tools for communication and collaboration: Technology that facilitates collaboration and communication among teams regardless of their location should be utilized.

Establishing clear performance metrics and expectations: Having performance metrics that employees are aware of, especially in the case of hybrid and remote employees, so that there is no confusion on expectations.
Prioritizing the well-being of employees: Helping employee mental well-being through mental health support and providing flexible working.

HR departments can address these challenges and improve the functioning of their organization, taking it towards better productivity and more positivity in the workplace.

Future Trends in Human Resource Management

The use of artificial intelligence, focus on employee experience, and the shift towards flexible working models are all future trends in human resource management. All these increase the importance of data-driven HR decisions.

1. Use of Artificial Intelligence (AI) and HR Tech Tools

“AI will not replace HR professionals, but HR professionals who use AI will replace those who don’t.”
Josh Bersin, industry analyst

While artificial intelligence cannot replace HRs, AI will help automate tasks. This will improve not only the speed of the process but also overall efficiency, performance, and productivity.

68% of CEOs believe that Gen AI will help employees accomplish more work in less time[1]. By using AI and HR tech tools, better efficiency can be achieved through:

AI-powered recruitment through automation of tasks like resume screening, sourcing of candidates, and interviewer scheduling frees up time for HRs to communicate with top talent rather than get caught up in the process.
Personalize the employee experience by tailoring development, training, and career growth recommendations.
Data-driven insights are achieved with incredible speed and efficiency by using HR tech tools that can quickly analyze huge amounts of employee data in the identification of trends and predict the needs of the future. This helps improve the decision-making process.

Thus, instead of feeling confused when it comes to the incorporation of new tools, HRs should embrace them as they help not only automate processes but also automate and improve data analytics.

2. Growing Importance of Employee Experience (EX)

“The employee experience is the sum of all interactions an employee has with the organization.”
Jacob Morgan, author of “The Employee Experience Advantage”

With employee engagement, retention, and productivity now a focus, employee experience has been found to be the main driver behind all three and has become an important yardstick for HR. To improve employee experience, HRs must consider:

Focusing on the well-being of the employee through flexible work arrangements, wellness initiatives, and mental health support.
Building a strong employer brand so that top talent it attracted and retained.
Creating a work culture that is inclusive and positive so that employees feel empowered, respected and valued. A positive work culture is another element top talent considers apart from competitive salaries.

From a McKinsley employee experience survey, it was found that those employees who had a positive employee experience have 16x the level of engagement as compared to those with a negative experience. Furthermore, positively engaged employees are 8 for likely to continue at the same company [2].

3. Shift Towards Flexible Working Models

“The future of work is hybrid, and organizations that embrace this reality will be the most successful.”
Brian Kropp, Gartner Research Vice President

It is no secret that employees value hybrid and remote work models because of the flexibility they offer, and employers are happy to comply as they get more productivity with fewer chances of burnout. HRs now need to focus on offering:

More flexibility and autonomy for the employee, especially in work arrangements.
Focusing on outcomes rather than presence means employees can work where they like and are most productive, instead of being forced to show physical presence at work.
Redesigning work environment to better suit hybrid or remote setups through collaboration tools and manager training.

A Stanford University economist, Nicholas Bloom found that even when offered the chance to work from home 2 days a week, employees are just as productive as their regular counterparts. They have the same possibility of gaining a promotion while being less likely to quit [3].

4. Increasing Importance of Data-Driven HR Decisions

“Data is not just information, it’s a revelation. If you use it sensibly, you can build businesses that will change the world.”
Mike Moritz

Using data to track key metrics like employee engagement, productivity, and turnover is a better way to create HR strategies than merely shooting in the dark. Predictive analytics is a good way to forecast future HR needs and identify potential risks. Through the use of data-driven insights, HRs are better prepared to take calls on recruitment, compensation, employee training, and development

HR’s Role in Organizational Success and Employee Well-being

The role of human resources in an organization’s success and employee well-being cannot be underestimated, as the HR team doesn’t just source and hire talent; it manages the human resources of a company, and in doing so, it:

Increases productivity as motivated, engaged, and satisfied employees are more productive.
Improves organizational performance through fostering employee relations, diversity, inclusiveness, and practical training programs.
Enhances the company’s brand value by attracting and retaining top talent with competitive compensation and benefits
Boosts employee morale through recognition, feedback, and tracked goal-setting so employees feel seen, heard, and cared for.

To sum up, through feedback mechanisms and goal-setting, the HR team contributes to the growth and productivity of the organization by getting the most out of the employee’s potential. Through training, recognition, inclusiveness, and workplace positivity, employees are kept motivated, engaged, and satisfied, and workplace harmony is also cultivated.

References