What is Human Resource Management? How does it help a company manage productive employees while maintaining a positive workplace culture? Here are essential things you need to know.
Recruitment. Job Orientation. Performance Appraisal. Compensation & Benefits. Learning & Development. Do these terms ring a bell to you? You might already have an idea what they are; especially if you own or are working in a company. Yes, these are just a few of the functions of Human Resource Management.
You could be a startup founder looking to better understand the activities in a Human Resource department. Or perhaps you’re thinking of pursuing a career in HR. If you’re searching about Human Resource Management and its important contribution to a company, this article is for you. Additionally, this resource will explain all the acronyms and jargon surrounding HR. Let’s start.
What is Human Resource?
In a nutshell, human resource refers to an individual or group of people that work or contribute their time and skills to an organization. It involves all the people that comprise an organization’s workforce.
In Full Scale’s example, our human resources include software developers, content writers, graphic designers, project managers, development managers, utility crew, nurses, HR generalists, and admin staff. All these people work together (in one capacity or another) for Full Scale, its clients, and sister companies.
It may sound a little tacky to call people human resources. However, this is the collective business term for anyone working for a company. A human resource can be regular or temporary employees, working full-time or on a part-time basis.
With the continuous rise of the gig economy, more people find it ideal to work as independent contractors and freelancers. These are people who work for someone or a company on a contractual basis but without the traditional labor contracts given to regular (temps) employees.
What is Human Resource Management?
Human Resource Management (HRM) describes a function that focuses on the recruitment, onboarding, and management of the company’s employees. They are known simply as human resources.
Essentially, the human resource department creates and implements policies concerning the relationship between the organization and its employees. HR departments may differ in the structure, size, and goals of the company.
HRM works through professionals who perform HR-related tasks. In small businesses, it’s quite common to see an HR generalist handling all HR activities. In comparison, large companies may hire people in special roles dedicated to specific functions.
These roles include benefits, talent acquisition, immigration, and recruitment. While these HR roles are different, their functions and role may overlap from time to time.
7 Areas of HR Management
When we talk about human resource management, there are different areas considered as the pillars of human resources. These are:
Remember that initial interview and battery of tests you took before you were employed? Well, that’s part of the recruitment process in Human Resources. Recruitment and selection of potential candidates is a critical HRM responsibility. People are the company’s most prized asset. Therefore, finding the best talent is indispensable to an organization’s success.
Recruiting candidates starts when a new role is open. First, the direct supervisor or manager discusses this need with the business owner to see if they have the budget for a new employee. Once they have a go signal, the manager then sends a request to the HR department with a job description for the role.
Finally, HR starts its recruitment process. Companies may have different recruitment strategies. However, these are the most common:
- Talent search
- Reference checks
- Job offers
- New employee onboarding
There are times when the HR department receives tons of job applications. In this case, they’ll use preselection platforms such as HackerRank (for programmers and developers) to help them filter out the best candidates. Successful candidates will then move to the next phase, where they undergo a series of interviews and assessments.
Compensation & Benefits
Compensation and benefits are some of the foundations of Human Resource Management. Basically, compensation is the remuneration that an employee receives in exchange for their service. Fair and reasonable pay is vital to retaining and motivating talented people.
Essentially, compensation includes salaries, bonuses, overtime pay, sales commissions, profit sharing, etc. The money is paid directly to employees for their work; given monthly, semi-monthly, or based on performance.
Similarly, employee benefits are non-financial rewards. This can include health insurance, life insurance, 401(k) plan, vacation leaves, gym memberships, company car, laptop, flexible work arrangements, and others.
The goal of offering benefits is to reward employees for their hard work. Hence, a solid employee benefits package will attract the right candidates and make you stand out from competitors.
As soon as an employee starts working on Day 1, Performance Management takes effect. It’s an HR basic that entails tracking and managing employees’ performance in their respective roles.
Employees typically have a list of responsibilities that they need to take care of. In addition, performance management provides a system for employees to receive feedback on their performance and suggestions for improvement.
It includes tasks such as one-on-one performance appraisals, evaluations of peers, teams, and clients. The result will be the basis for categorizing high and low-performing employees.
Also, the management and Human Resource departments share the responsibility of creating an effective performance management process. The direct manager or supervisor monitors and leads his or her team members. On the other hand, the HR team provides the support the employees need to grow and succeed in their roles.
Learning and Development
With Learning & Development (L&D), employees have an avenue to learn new skills, improve their job performance and advance in their careers. More importantly, providing ongoing training opportunities shows a company’s commitment to its employees’ growth.
Employee L&D, along with sound policies, can support an organization to achieve its long-term objectives. Most companies allocate a budget for Learning and Development; which is then given to trainers, leaders, and employees seeking training or learning opportunities.
Generally, the L&D budget includes all program costs. These can be the program design, operational costs, program delivery, certification, and higher education program costs.
How should an organization move forward when key employees leave the company? This is the question that Succession Planning aims to answer. It’s a planning process that ensures that the business continues its operations even when key employees are no longer available (either resigned, retired, terminated, etc.)
Moreover, Succession Planning recognizes qualified people and prepares them to become future leaders to fill leadership roles on short notice. In this way, the company can reduce recruitment costs since they hire a replacement from within.
For example, when a Senior Operations Manager sends her resignation, the company should quickly find a ready replacement from the company’s current talent pipeline. It’s a pool of qualified candidates ready to fill the vacant role of the resigned employee. So, the Succession Planning efforts are dependent on the L&D policies and the replacement’s performance ratings.
Human Resource Information System
While not inherently an HR activity, Human Resource Information System (HRIS) is a tool that supports all the other areas in Human Resources. In the past, Human Resources Management used separate technologies for each function.
For example, a Recruitment Specialist may need an Applicant Tracking System to keep track of all the applicants and synchronize their recruitment and selection process. In Learning & Development, a company can invest in a Knowledgebase System where the teams upload and distribute learning content internally. Meanwhile, the Compensation & Benefits team uses a digital payroll system to process their payroll-related tasks.
However, all these tools can be blended into one platform which is the HRIS. It’s an all-in-one database. It can store applicant information, and employee demographics, track working hours, compute salaries and deductions, etc. It’s designed to centralize all Human Resource information. In this way, one can easily retrieve employee data without opening several sheets or web pages.
HR Data Analytics
Over the years, Human Resource Management has made some key innovations driven by data. Essentially, the HRIS is a data-entry tool; the organization then uses the data collected in HRIS to make informed decisions.
HR Metrics and HR KPIs are two of the methods used to monitor and measure data. They answer how an organization is performing in a given metric. Moreover, this type of reporting hinges on the past and present trends found in the data. Likewise, HR management uses them to create future predictions such as employee turnover rate, workforce need, etc.
Using analytics to measure data, the Human Resource team can create better data-driven decisions and garner support from the management.
Want to know about Data Analytics? Watch this related video:
Bridging the Gap Between People and Company
In summary, the growth and longevity of a company lie in how it successfully equips its human resource management operations. Whether you’re a fledgling startup or a big enterprise, it’s important to understand the value that HRM brings to reap long-term success.
This primer should give you a basic idea of the crucial role Human Resource Management play in managing people so that you can ultimately increase your business performance.
To achieve that goal, you simply can’t do it on your own. You need a trusted outsourcing partner who can point you to the right people at a reasonable price. At Full Scale, we help founders find and work with expert-level software developers without the exorbitant cost of building an in-house human resource department.
We are an offshore web development firm in Kansas City with a goal to help startups scale for growth. If you’re ready to score the best results for your business, we’re here for you.
Contact us to get your FREE consultation.