Why are human resources (HR) important?

Your employees are your greatest resource. If you treat your employees fairly and give them the opportunity to develop, you can realize your ideas and achieve your company goals. This is where Human Resources is well positioned to help you.

What exactly is the human resources department?

Human Resources (HR) is the umbrella term for managing and developing employees in a company. Ultimately, it’s about improving employee performance.

Traditionally, HR focused on hiring and firing employees, as well as the old-fashioned annual salary review. Recently, however, HR has undergone a positive change and now covers a much broader range of tasks.

The basic functions of the Human Resources Department include:

• Recruitment
• Onboarding
• Payroll administration
• Employee benefits
• Vacation administration
• Training and development
• Labor law compliance
• Safety compliance

In addition, HR plays an important role in developing a positive company culture and improving employee engagement and productivity. The HR department is also responsible for the well-being and personal development of employees.

Why is HR so important?

It can be easy to overlook the HR department in an SME. Many entrepreneurs start out with their business, but struggle with HR management once the business begins to flourish.

Managing employees requires time and specialized skills. Human resources is an area of expertise that many entrepreneurs lack.

Regardless of skill set, the value of HR to a business is not always immediately apparent. With only a few employees, business owners feel they have their finger on the pulse when it comes to the people they hire and manage.

However, as a business grows, leaders often lack the time to attend to day-to-day HR management and recruitment, and the focus on employees can easily be lost. This is a costly mistake that can impact employee satisfaction, company culture and long-term success.

Consider the consequences of poor HR practices. When employees don’t feel supported, aren’t given opportunities, are forced to work too long, etc., their motivation to perform suffers.

If you don’t have effective HR policies in place, it will impact your bottom line. People, culture and company success go hand in hand.

An employer’s reputation is critical to attracting talent. It also impacts customers.

The importance of HR in a pandemic

The coronavirus pandemic has forced us to reevaluate the way we do business. In this context, HR is coming into focus. Companies are increasingly being judged by the decisions they have made and the way they have treated their employees.

In addition, the impact of continued economic uncertainty, telecommuting, and the all-too-real impact on employee mental health are forcing companies across the UK to put HR at the center of their operations.

From supporting managers with remote management skills to sensitively communicating the consequences of a business downturn, HR is critical to effectively managing a business during a pandemic or other significant event.

What are the main tasks of the HR department?

Recruiting and Onboarding
Finding the right employees for your company can be difficult. The hiring process can take months, and a mistake can be costly. When recruiting talent, one of the most important aspects of HR is finding the right fit. If you hire too many, too few, or recruit an unsuitable candidate, your company will suffer.

The importance of onboarding is perhaps the most underrated part of the hiring process.

Onboarding is not to be confused with orientation. Onboarding refers to the entire experience of hiring, welcoming, orienting and engaging a new employee and helping them adapt to your company’s culture.

Good onboarding increases employee engagement and increases employee retention. Poor onboarding, on the other hand, can have an extremely negative impact and cause talented new employees to be disengaged from the start.

Performance management and training

Performance management, training and development are an important part of human resources. Almost all employees have skills gaps. Performance management helps address these issues.

An effective performance management system allows managers to offer support to employees who need it and identify future superstars.

It is widely recognized that employee development contributes to better employee engagement, higher productivity, lower employee turnover and a more positive company culture.

Comprehensive training and personal development help strengthen weak links in the organization (including leaders). Investing in your people strengthens your organization and gives your company a competitive advantage.

Building and maintaining a corporate culture
A positive corporate culture is no longer a nice-to-have. It promotes employee engagement, job satisfaction and employee retention and determines the company’s success. HR plays a key role in developing, strengthening and changing a company’s culture.

Compensation, performance management, training and development, recruiting and onboarding, and reinforcing company values are key elements of the culture that HR is responsible for.

Creating the right culture is not easy.

It requires a multi-pronged approach and must be consistently nurtured (read more about culture in the workplace in The Culture Economy Report 2021). Essentially, HR plays an important role in setting the right tone for the company’s culture.

Corporate Communications
Companies need effective communication to function well. The way communication is done in a company is often determined by the HR department.

Good communication prevents misunderstandings, increases employee engagement, builds the foundation for better customer relationships, fosters innovation and creativity, and helps build a positive company culture.

Compliance with laws and regulations
HR professionals are well versed in employment law and the legal requirements a company places on its employees. This huge area should not be underestimated; a wrongful dismissal lawsuit can be a costly mistake.

In summary

Hiring a dedicated HR professional is not a luxury for SMEs, it is essential. It’s common for business owners to put on the HR hat at the start of their business, but worrying about HR and the complexities of employment law isn’t effective time management, and it’s costly to the business when things go wrong.

By outsourcing your HR or hiring a part-time HR manager, business owners can focus on growing their business. Having someone to handle employee-related issues, from absence management to parental leave policies and beyond, will keep your business compliant and your employees more engaged.

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