7 Human Resource Management Basics Every HR Professional Should Know

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Let’s start with a brief definition. Human Resource Management, or HRM, is the practice of managing people to achieve better performance.

For example, if you hire people into a business, you are looking for people who fit the company culture as they will be happier, stay longer, and be more productive than people who won’t fit into the company culture.

Another example is engagement. Engaged employees are more productive, deliver higher quality work and make customers happier. This means that if we can find ways to make employees more engaged, we help the company.

The HR department, including outsourced HR with trusted providers such as https://www.higginbotham.com, provides the knowledge, tools, training, legal advice, administration, and talent management, which is crucial to sustaining and advancing a company.

This is what Human Resource Management boils down to optimizing company performance through better management of human resources. The next question is, who are these Human Resources?

What is Human Resource Management?

Human Resource Management (HRM) involves the strategic management of people to enhance overall performance. For instance, when recruiting employees, the focus is on finding individuals who align with the company culture, leading to increased satisfaction, retention, and productivity.

Another aspect is employee engagement, which correlates with higher productivity, improved work quality, and increased customer satisfaction. Therefore, efforts to enhance employee engagement contribute to the company’s success.

The HR department plays a pivotal role by offering expertise, tools, training, legal guidance, administrative support, and talent management, all vital for the sustained growth and development of a company.

In essence, HRM revolves around optimizing company performance by effectively managing human resources. This raises the question: who exactly are these Human Resources?

What is a Human Resource?

Referring to individuals as “human resources” can indeed feel impersonal. Human Resources encompass all individuals who contribute to or work for an organization in various capacities.

These individuals form the workforce of a company, including both regular employees and contractors. With the growing gig economy, more people are engaging with organizations on a contract basis, without traditional labor contracts.

The workforce also comprises independent contractors, workers provided by contract firms, on-call workers, and temporary help agency workers. While independent contractors may work for an organization for extended periods, agency workers may engage with multiple companies within a year. Given the differing degrees of involvement, their management and integration into the organization should vary accordingly.

Furthermore, there’s a rising presence of non-human entities in the workplace, notably due to increased robotization. Robots are increasingly integrated into daily operations, and the collaboration between humans and machines is vital for organizational success. Although not classified as “human resources,” there’s an argument for their inclusion in workforce considerations due to their significant role.

The seven HR basics

When discussing Human Resource Management, several fundamental elements are considered pillars for effective HRM policies. These foundational elements are:

1. Recruitment & selection

Recruitment and selection represent highly visible aspects of HR. We often recall our initial job interviews, don’t we?

The responsibility of recruiting candidates and selecting the most suitable ones to join the company is paramount for HR. People are the backbone of any organization, and identifying the best matches is a pivotal task.

The process typically commences with a request for new hires when a new position is established or an existing one becomes available. The hiring manager forwards the job description to HR, initiating the recruitment of candidates. Throughout this process, HR employs various selection methods to identify the most suitable candidate. These methods include interviews, assessments, reference checks, and other recruitment strategies.

In cases where there is a large pool of candidates, HR may utilize preselection tools to streamline the process by identifying promising candidates. Successful candidates then proceed to subsequent rounds, where they undergo further interviews and assessments.

2. Performance management

Once employees are onboarded, performance management takes center stage as the second fundamental aspect of HR. Its aim is to aid individuals in reaching their full potential in the workplace, ultimately enhancing the company’s overall performance.

Typically, employees are assigned specific duties that they are responsible for. Performance management provides a framework for employees to receive feedback on their performance, thus facilitating their journey toward peak performance.

Methods of performance management include formal one-on-one performance reviews, 360-degree feedback mechanisms that incorporate assessments from peers, clients, and other stakeholders, as well as informal feedback channels.

Companies often adhere to an annual performance management cycle, encompassing planning, monitoring, review, and recognition of employee performance. This process allows for the classification of employees into categories such as high vs. low performers and high vs. low potentials.

Successful performance management is a collaborative effort between HR and management, with the direct manager typically taking the lead and HR providing support. Effective performance management is critical as it empowers employees to maximize their potential, leading to improved efficiency, sustainability, and profitability for the business. Conversely, employees who consistently underperform may not be suitable for their role or the company culture and may need to be terminated, a responsibility that falls within the purview of HR.

3. Learning & development

Individuals are shaped by their life experiences, cultural backgrounds, and the societal contexts in which they grew up. Within HR, learning and development initiatives are essential for ensuring that employees can adapt to evolving processes, technologies, and societal or legal changes.

Learning and development initiatives facilitate the reskilling and upskilling of employees, with HR taking the lead in spearheading these efforts. Well-designed policies in this area can significantly contribute to advancing the organization toward its long-term objectives. One of the HR trends anticipated for 2023 involves integrating learning into employees’ day-to-day work and assisting them in developing both soft and hard skills that align with organizational goals.

Many organizations allocate predefined budgets for learning and development endeavors. These budgets are then distributed among employees, with a focus on providing greater training opportunities to trainees, future leaders, and other high-potential individuals. Given that employees may enter the company with varying levels of knowledge and experience, learning and development initiatives serve as a means to bridge skill gaps and foster leadership development.

A commonly used framework that links performance management with learning and development activities is the 9-Box grid. Based on individuals’ performance and potential ratings, HR departments, in collaboration with managers, can devise tailored development plans.

4. Succession planning

Succession planning involves preparing for potential scenarios where key employees may depart from the company. For instance, having a replacement readily available in the event of a senior manager resigning ensures continuity and can lead to substantial cost savings for the company.

Typically, succession planning relies on performance evaluations and learning and development initiatives. This process culminates in the establishment of a talent pipeline—a pool of qualified candidates prepared to step into (senior) roles should a vacancy arise. Cultivating and maintaining this pipeline is essential for effective talent management.

5. Compensation and benefits

Compensation and benefits are fundamental aspects of HR management. Ensuring fair compensation is crucial for motivating and retaining employees. Central to human resource management principles concerning compensation is the promotion of equity and fairness.

Offering competitive pay is essential for attracting top talent, although it must be balanced with the company’s budget and profit margins. HR is responsible for monitoring pay increases and establishing merit-based standards. Periodic pay audits may also be conducted.

Compensation comprises both primary and secondary components. Primary compensation involves direct monetary payments for work, such as monthly salaries and performance-based incentives. Secondary benefits encompass non-monetary rewards, including additional holidays, flexible work schedules, daycare services, pension plans, company-provided vehicles and electronics, among others.

The objective is to reward employees in ways that effectively motivate them.

6. Human Resource Information System

The final two components of HR essentials aren’t HR practices themselves but rather tools utilized to enhance HR operations. The first tool is the Human Resource Information System, or HRIS, which serves to support all the foundational elements discussed earlier. For instance, in recruitment and selection processes, HR professionals frequently employ an Applicant Tracking System (ATS) to manage applicant data and facilitate hiring procedures.

In performance management, organizations utilize dedicated performance management systems to monitor individual goals and assign performance ratings effectively.

Similarly, in Learning and Development (L&D) initiatives, a Learning Management System (LMS) is employed for internal content distribution, while other HR systems track budgets and manage training approvals.

Compensation specialists commonly rely on payroll systems, and there are digital tools specifically designed to facilitate succession planning.

While these functions can often be integrated into a single system – the HRIS, sometimes organizations opt to manage them using separate HR systems.

The main point is the big role technology plays in HR tasks, highlighting how crucial HRIS is among HR essentials.

7. HR data and analytics

The final fundamental aspect of HR revolves around data and analytics, marking a significant shift towards a more data-driven approach within the field over the past few years.

Human Resource Information Systems, as previously discussed, serve as essential data-entry systems. The information stored within these systems can be leveraged to make informed decisions and improve overall decision-making processes.

Tracking critical data is facilitated through HR metrics or Key Performance Indicators (KPIs), which provide specific measurements indicating how a company is performing in various areas. This practice, known as HR reporting, primarily focuses on assessing the current and historical state of the organization.

In addition to reporting, HR analytics enables predictive insights. Through data analysis, HR professionals can anticipate various factors such as workforce needs, employee turnover rates, and the influence of candidate experience on customer satisfaction, among others.

By actively monitoring and analyzing this data, HR can make more informed decisions, often with greater objectivity, thereby enhancing the likelihood of obtaining management support for these decisions.

Conclusion

Now equipped with knowledge of the 7 Human Resource Management basics, it’s important to recognize that these fundamentals do not operate in isolation. Instead, they interact and mutually influence one another. Consider these 7 basics as interconnected building blocks; effective management of each fundamental element contributes to the strength and efficacy of the next.

Together, these HR fundamentals form the foundation for enabling a workforce to not only improve its performance but to excel to its fullest potential.