What Is Human Resources (HR)?

Human resources or HR is the company department charged with finding, screening, recruiting, and training job applicants, and administering employee-benefit programs. As companies reorganize to gain a competitive edge, HR plays a key role in helping companies deal with a fast-changing environment and the greater demand for quality employees.

John R. Commons, a pioneering economist, first coined the term “human resource” in his book "The Distribution of Wealth," which was published in 1893. However, it was not until the 19th century when the developed HR departments to address misunderstandings between employees and their employers.

Key Takeaways

  • Human resources is the company department charged with finding, screening, recruiting and training job applicants, and administering employee-benefit programs.
  • HR responsibilities include compensation and benefits, recruitment, firing, and keeping up to date with any laws that may affect the company and its employees.
  • Many companies have moved away from traditional in-house HR administrative duties and outsourced tasks like payroll and benefits to outside vendors.
  • A HR department helps to maintain a company's core values and culture.

Understanding Human Resources

An HR department is an essential, if not critical, component of any business regardless of the organization's size. It focuses on maximizing employee productivity and protecting the company from any issues that may arise from the workforce. HR responsibilities include compensation and benefits, recruitment, firing, and keeping up to date with any laws that may affect the company and its employees.

Research conducted by The Conference Board has found six key people-related activities that HR must effectively do to add value to a company. These include:

  • Managing and using people effectively
  • Tying performance appraisal and compensation to competencies
  • Developing competencies that enhance individual and organizational performance
  • Increasing the innovation, creativity, and flexibility necessary to enhance competitiveness
  • Applying new approaches to work process design, succession planning, career development, and inter-organizational mobility
  • Managing the implementation and integration of technology through improved staffing, training, and communication with employees

Special Considerations

HR departments perform human resource management strategies. HRM is a strategic and comprehensive approach to managing employees and the organizational culture and environment. It focuses on the recruitment, management, and general direction of the people who work in an organization.

HR is also more involved in improving the organization’s workforce by recommending processes, approaches and business solutions to management. For example, in IKEA, HR shifted its focus on values and cultural fit rather than skills and experience in recruiting employees.

The HR departments of large companies have moved away from traditional personnel, administration, and transactional functions since the start of the 20th century.

Companies outsource these functions to free the department to recommend and implement meaningful and value-adding programs that impact the business in positive ways. Functions typically outsourced include payroll administration, employee benefits, recruitment, background checks, exit interviews, risk management, dispute resolution, safety inspection, and office policies.