Importance of HR Management: Human Resources, often referred to as HR, plays a crucial role within any business, regardless of its size. HR departments are instrumental in fostering the growth of companies and teams. Whether it involves being the initial point of contact for employees or overseeing compensation and performance, human resources manifests in various facets, underlining its significance for a company.
Many founders and business proprietors excel in their respective fields but may not possess innate management skills. As businesses expand, the challenges of balancing employee benefits, payroll matters, and internal conflicts can become overwhelming. At some point, management must deliberate whether to implement an HR department.
Now, let’s delve into the reasons why strategic human resource management holds such paramount importance for your business.
What Does HR Actually Do?
Numerous HR departments that have achieved success often view the company’s employees as their clientele. Adopting this perspective can assist HR in staying dedicated to its primary objective: facilitating employees in performing at their best.
Although the HR department oversees a multitude of areas, the majority of its responsibilities can be categorized into these six fundamental functions.
- Monitoring job applicants and implementing strategic hiring practices. HR’s role is to provide the company with well-qualified and dependable talent.
- Administering employee benefits and managing time off.
HR is also tasked with overseeing schedules, vacation time, and benefits such as health insurance. - Facilitating training for both managers and employees.
One of HR’s key contributions is enhancing the workforce by training managers to become more effective leaders and helping employees develop a broader skill set.
- Streamlining the onboarding process
Not every company environment is easy to adapt to, and some businesses have a steep learning curve in terms of their culture. HR’s duty is to simplify the process of integrating into the company culture. - Resolving conflicts within the workplace. HR professionals undergo specialized training to mediate disputes among employees and between employees and management.
- Addressing legal matters. Lastly, HR professionals are responsible for ensuring compliance with labor and employment laws, as well as managing complaints related to discrimination and harassment.”
As companies expand their workforce, these responsibilities tend to increase, and it doesn’t take much time before each of these tasks evolves into a full-fledged role.
Why Is Human Resources Management Important?
The significance of human resources may differ from one business to another. If you’re pondering the necessity of human resources management and contemplating whether your business can function adequately without dedicating a role to it, we will explore the significance of each HR function in the following sections.
Monitoring job applicants and implementing strategic hiring practices:
On average, the hiring process typically spans from three to six weeks, but in some cases, it may extend to several months, and in rare instances, even years.
Furthermore, there’s the risk of hiring an ill-suited candidate for the role or the company, potentially leading to future conflicts that might result in employee turnover. This, in turn, necessitates the rehiring process, which can be costly, with turnover expenses reaching as high as 1.5-2 times the employee’s salary. High turnover rates can place a significant financial strain on your company.
HR professionals play a crucial role in managing the recruitment process, simplifying the task of identifying talent, selecting the right candidate, and swiftly bringing them up to speed.
Administering employee benefits and managing time off
Salaries aren’t the sole criteria that existing and potential employees use to evaluate a job. Benefits and vacation time are also significant factors and play a crucial role in fostering engagement among your workforce.
In the year 2023, there are four main categories of benefits that employees value: time off and leave policies, health and wellness initiatives, work-life balance provisions, and retirement and financial benefits. In the absence of a knowledgeable professional who can effectively prioritize these benefits, these critical aspects often fail to receive the attention and strategic planning they require.
Facilitating training for both managers and employees
It’s a common saying that “people don’t quit companies, they quit managers.” In fact, a study involving over 7,000 participants discovered that 50% of those who left their jobs did so due to issues with their managers. However, while this is true in some cases, the solution to the entire problem is not as straightforward.
Very few individuals are so passionate about their work that they are willing to remain in the same role throughout their entire careers. Most seek upward mobility, which includes facing new challenges, taking on additional responsibilities, and seeing an increase in their income. When employees feel that their efforts and talents go unnoticed or unappreciated, their engagement levels drop significantly, and they start contemplating leaving.
Having HR professionals who can assist both employees and managers in enhancing their skills can turn the tide in this ongoing struggle. Implementing employee training and development programs enables employees to strive for more advanced roles. Simultaneously, HR training and development for managers equips them with the capability to extract the best performance from their teams.
Streamlining the onboarding process
Frequently, the onboarding process is left to happenstance. However, establishing an efficient onboarding procedure can significantly boost both employee retention and productivity.
The significance of human resources becomes evident in this context as they can enhance the onboarding experience, making it more engaging and effective. Furthermore, they have the capability to tailor the onboarding process to the particular requirements of the position in question.
Resolving conflicts within the workplace.
In 2023, the typical American employee dedicates 2.8 hours per week to address workplace disputes. As a result of 85% of U.S. employees encountering some level of workplace conflict, managers spend an average of 6 hours weekly attempting to find resolutions.
This underscores the value of having accessible HR professionals for employees to consult. HR teams equipped with conflict resolution training are well-prepared to handle interpersonal conflicts, offering a more efficient approach. Additionally, training a single HR department is a more manageable and cost-effective endeavor compared to training an entire organization of managers. Reducing office conflicts leads to increased employee satisfaction and higher engagement in their work.
Addressing legal matters.
In just 2022, the EEOC successfully resolved more than 65,000 discrimination charges. This figure does not account for all the charges that were potentially filed – it’s reasonable to assume that numerous incidents remained unreported due to factors such as fear of retaliation, insufficient evidence, and a lack of legal knowledge.
In the absence of a dedicated HR professional, it becomes challenging to stay informed about the various laws and regulations crucial for ensuring a company’s compliance. Moreover, without an HR professional to turn to for problem resolution, issues may persist without resolution (and without the company’s awareness) until they escalate to the point of litigation.
How Do I Calculate the ROI of HR?
There are two primary performance metrics for assessing the return on investment (ROI) derived from your HR initiatives: turnover rates and absenteeism.
In 2022, Americans collectively recorded nearly 1.6 million instances of absenteeism on a monthly basis. To determine your absenteeism rate, you can use the following calculation:
Absence Rate = Total Absentee Workdays ÷ (Number of Workdays in the Year x Average Company Employee Population)
The Cost of HR’s Absence
It’s crucial not to disregard an HR strategy, as doing so can lead to significant repercussions, including:
- Inadequate Hiring Practices
If you’re haphazardly posting job listings, chances are you’re not giving due attention to the interview and hiring process. This can lead to failure in attracting the right talent and selecting suitable employees, a luxury no company can afford.
- Substandard Benefits Administration
In today’s landscape, offering a mere few days of paid time off or expecting employees to handle insurance sign-ups independently is insufficient. Without an effective HR team, you also risk falling short in terms of competitiveness in the realm of employee benefits and compensation.
- Diminished Commitment to Your Organization
Twenty percent of employees are willing to accept a 10% pay cut in exchange for better working hours, and 56% prioritize stability over a higher salary. In the absence of an HR professional to ensure they receive the necessary support; employees may contemplate leaving.
- Unfavorable Employer Reputation
As mentioned earlier, many employees are dissatisfied with their company’s onboarding process, and a negative initial experience can lead to issues. The absence of structured onboarding procedures may persist without remedy unless there is someone designated for the task. Without HR professionals, there is rarely anyone within the company with the time to dedicate to onboarding.
- Toxic Workplace Atmosphere
Toxic work environments are a serious matter, capable of seriously affecting employee well-being. Whether it’s interpersonal conflicts among colleagues, an unresponsive boss, or a company culture that has turned toxic, all these factors can take a toll on your workforce. In the absence of an HR strategy to enhance company culture and mediate office conflicts, employee disengagement and turnover rates are likely to remain high.
Tips for Implementing HR Management
If we’ve convinced you of the significance and value that HR professionals and an HR strategy can bring to your organization, the next step is to embark on the journey of integrating them. Here are a couple of recommendations to help you get started:
- Develop a clear cultural vision: Instead of allowing your company culture to evolve haphazardly as it grows, it’s advisable to establish a well-defined plan. This plan should encompass policies, training, and resource allocation.
- Initiate the tracking of key indicators: If you believe that measuring your success is important, establishing a baseline for measurement is crucial. Begin monitoring or calculating some or all of the key performance indicators (KPIs) mentioned earlier, along with any additional ones relevant to your industry.
- Leverage available technology: The most advanced HR software suites make tasks like requesting or approving time off as simple as clicking a button. A variety of technological tools are available to streamline processes for you.
- Prepare for more frequent feedback: Be ready to engage in more frequent conversations with your team. Regular and positive feedback can enhance your team’s performance, and it provides an opportunity to optimize their workflows.
- Develop a results-oriented HR strategy: Start with the HR functions mentioned earlier and ensure that your strategy includes initiatives aimed at supporting your employees in achieving a healthy work-life balance.
- Consider outsourcing: While hiring an HR provider doesn’t equate to having a full-time HR team, it can offer valuable essential services and address issues that managers may not have sufficient time for.
Bottom Line
Investing in employee training is crucial for organizations to remain competitive and avoid obsolescence. Not only does it attract and retain top talent, but it also helps to boost employee motivation and productivity.
SW HR Consulting has been helping companies to build their teams and values for over 10 years. Contact us to find out more about our unique hr outsourcing services and see how our expertise can benefit you.
