What Is the Importance of Human Resource Management for Your Business?

Human resource management is not merely a fancy term for overseeing personnel. It’s the overall approach to how a company manages its employees to meet strategic objectives and gain a competitive advantage. 

Functions of Human Resource Management

Human resource management can be driven by the human resources (HR) department. Depending on a company's size, the department might vary, but almost always includes administrative, operational, and strategic functions – even if one person does them all.

HR functions can be carried out using one or multiple HR systems or manually. Let’s look at some effective approaches.

Effective human resource management helps ensure that employees are working toward your company’s goals.

Tackle Administrative Tasks

Many of an HR department's administrative tasks are critical to keeping the engine of your employee base running. 

An HR administrator role could include:

• Preparing and distributing offer and termination letters
• Organizing and maintaining employee records
• Tracking sick and vacation days
• Providing relevant employee information to payroll systems
• Updating company policies
• Answering employees’ queries about HR-related issues

These are the basic HR tasks required to comply with many U.S. federal, state, and local government requirements. They can be completed using standard office software or automated using a human resource information system (HRIS). To choose what works for your company, consider the size of your employee headcount, the volume of employee transactions, and the cost of hiring HR administrators.

For a company of roughly 10 people, employee records can probably be adequately maintained in a spreadsheet. Companies with more than 100 employees, though, will benefit greatly from using specialized HRIS software.

In between is a gray area – any given company will want to make the switch depending on how much manual administration the organization’s owners and managers are willing to handle.

Manage Operations

Operational functions are similarly needed to keep the employee engine up to par.

Basic HR operational functions include:

• Talent management, such as recruiting, hiring, and retaining employees, as well as employee relations and support
• Compensation and benefits
• Training and development
• HR regulatory compliance

Each of these functions can become complex and might benefit from one or more HRIS options. For instance, if you hire only one or two people per year, you won’t have many candidates to track or interviews to schedule. But if your company is growing and multiple roles are being recruited at one time, an applicant tracking system (ATS) may help keep the process organized and save HR’s and managers’ time. ATS software is used to track candidate information and resumes, enable recruiters to match job openings to suitable candidates, and support the overall hiring process.

Add Value with Strategic Activities

If administrative tasks and operational functions are core to HR, strategic activities are the difference between good human resource management and great human resource management.

A strong HR management function links HR strategy with the company’s larger mission. Without this connection, your company might not be reaping the full rewards of your employees’ hard work.

Here are strategic people-related questions that HR strategists might consider:

• Are we managing and using our people resources effectively?
• Can we identify missing competencies needed to enhance individual and company performance?
• Do we tie individual performance appraisals and compensation to key competencies?
• Do we have effective and efficient approaches for designing business processes, succession planning, and career development?
• Does our employee base have the skill sets the business needs to grow?

The best way to answer these questions is to analyze the underlying data. For example, review performance appraisals to determine whether the overall message or rating aligns with the company’s mission. You can also assess if the employee earned a bonus or salary raise or needs further training to support their career growth.

Get Support from HR Information Systems 

For many organizations, HRIS software is an essential contributor to efficient HR management. HRIS can help employers manage more efficiently by automating various aspects of HR, such as payroll, benefits administration, and compliance. Some may also include a combination of recruiting, performance management, training, and reporting modules.

Perhaps the most important benefit of HRIS software has become a cliché: having “a single source of truth.” The one central database common to HRIS deployments is a much more secure and trustworthy approach to employee record-keeping. It's essential that all HR data be stored securely and in line with data privacy regulations in the jurisdiction – or jurisdictions – in which the business operates.

Another benefit is efficiency. Having all HR data stored in one place not only improves accuracy, but it also saves time searching for the information stored in multiple electronic or paper files. Many systems also have a self-service component that allows department managers to run that employee birthday report by themselves (without pestering someone in HR) or lets employees submit a home address change directly into the system.

Many payroll companies provide systems that can act as a workforce management tool, basically enabling you to track and integrate all information that impacts payroll. But great HRIS software can go beyond workforce management to talent management as well. This should simplify the work done to hire, retain, and develop employees' talents. The right system could let you track and analyze performance and compensation, help evaluate diversity statistics, or provide self-directed learning.

Using HRIS should help free up leaders' time to manage bigger picture initiatives toward fulfilling the company’s strategy. 

The Bottom Line

Effective human resource management can help you ensure that employees are working toward your company’s goals. Accomplishing this in an efficient manner usually requires some process automation and system support. The right HRIS software can provide leaders with data and information to make important operational and strategic business decisions.

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