What Is Human Resources (HR)?
Human resources (HR) is the division of a business that is charged with finding, recruiting, screening, and training job applicants. It also administers employee benefit programs.
HR plays a key role in helping companies deal with a fast-changing business environment and a greater demand for quality employees in the 21st century.
John R. Commons, an American institutional economist, first coined the term “human resource” in his book The Distribution of Wealth, published in 1893. However, it was not until the 20th century that HR departments were formally developed and tasked with addressing misunderstandings between employees and their employers.
- Human resources (HR) is the division of a business responsible for finding, recruiting, screening, and training job applicants.
- HR departments also handle employee compensation, benefits, and terminations.
- Human resource management (HRM) strategies focus on actively advancing and improving an organization's workforce with the long-term goal of improving the organization itself.
- HR departments must keep up to date with laws that can affect the company and its employees.
- Many companies have moved traditional HR administrative duties such as payroll and benefits to outside vendors.
Understanding Human Resources (HR)
An HR department is an essential component of any business, regardless of an organization’s size. It is tasked with maximizing employee productivity and protecting the company from any issues that may arise within the workforce.
HR responsibilities include compensation and benefits, recruitment, retention, firing, and keeping up to date with any laws that may affect the company and its employees.
Key HR Activities
Research conducted by The Conference Board (CB), a member-driven economic think tank, found six key, people-related activities that HR must effectively do to add value to a company. They are:
- 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 interorganizational mobility
- Managing the implementation and integration of technology through improved staffing, training, and communication with employees
HR Management Strategies
Beginning in the 1980s, there was a push for strategic initiatives within HR departments. This movement was based on research related to the impact of employee-related issues on a firm’s long-term business success.
Collectively, these strategies are sometimes referred to as human resource management (HRM) strategies. HRM is a comprehensive approach to managing employees and an organization’s culture and environment. It focuses on the recruitment, management, and general direction of the people who work in an organization.
An HR department that adopts HRM strategies typically plays a more active role in improving an organization’s workforce. It may recommend processes, approaches, and business solutions to management.
Google is one example of an organization that has adopted a more active approach to employee relations through its HR department. The company offers many employee perks, including on-site wellness centers, on-site meals and snacks, fitness centers, massage programs, and ergonomic support. For Google, happy employees are equivalent to productive employees.
In 1901, National Cash Register Co., known today as NCR Corp., established what is thought to have been the first personnel department (the HR predecessor) to manage wages, workplace safety, and employee concerns.
Since the mid-20th century, some companies have outsourced some of the more traditional administrative, transactional HR functions in an effort to free the department to recommend and implement more meaningful, value-adding programs that impact the business in positive ways.
Functions that may be outsourced in this process include:
- Payroll administration
- Employee benefits
- Background checks
- Exit interviews
- Risk management
- Dispute resolution
- Safety inspection
- Office policies
The use of modern tools, such as recruitment software, can help to improve the efficiency of HR departments. In turn, that can give them more leeway to focus on adding ever-greater value.
What Is the Role of Human Resources?
A human resources department is focused on the recruitment and retention of employees within a company. HR typically finds, hires (and fires), and trains employees. It oversees employee relations and manages benefit programs. It’s the place where an employee goes with questions about their position at the company, to address concerns, and to air grievances.
What Is Human Resource Management (HRM)?
Human resource management (HRM) is a strategic approach to managing company employees, the work culture, and the work environment so that people can function as effectively and productively as possible. Typically, it involves using metrics to measure workforce success.
What Are the Five Types of Human Resources?
There are numerous important human resources functions carried out by an HR department. Five well-known types of responsibilities are:
- Recruiting, hiring, and onboarding new employees
- Handling employee compensation and benefits
- Offering employee job/career development
- Addressing work-related issues of individual employees
- Developing policies that affect a working environment company-wide
The Bottom Line
A company’s human resources (HR) department manages the life cycle of each employee—from recruitment and onboarding to training and termination or retirement. HR departments also must monitor industry trends and rules to stay on top of compliance and legal issues.
Increasingly, HR departments focus on human resource management, using strategic investments and initiatives to improve an organization's workforce. The long-term goal of HRM is to create a more positive, loyal, and productive workforce, which ultimately benefits the company.