When starting a business, you’ll find yourself asking a lot of questions. When it comes to human resources, it feels like one of those things that you know you need, but you wouldn’t quite be able to define what it is if someone asked you. Of course, this doesn’t help to resolve the questions that you’ll still be left asking, like who is in charge of hiring and onboarding? Who can help oversee a possible employee conflict? Who could I turn to if I had questions regarding compliance with a new law or regulation? Not knowing the answers to these questions isn’t as important as knowing who to ask. Without quick access to this kind of information, you risk putting your business in jeopardy of some potentially costly penalties.
At Payday HCM, we understand the stress of not only having these questions but feeling like you’re not sure where to find the answers. We receive plenty of questions from clients regarding all things HR, whether it be legal compliance or employee relations. One of the lingering questions that sort of sits around all these questions, though, is what HR actually is? The term “human resources,” after all, is a little unspecific. Luckily, while it isn’t easy to outline all of the functions an HR department does, we can provide a general overview of what HR is to answer some of these questions.
So, in this article, we’ll be going over what human resources means and what human resource management is. We’ll start by diving into the history of HR and its development before we dig deeper into the actual functions of an HR department. Finally, we’ll go over why it’s important for any business to have an HR department. By the end of this article, you’ll have a solid foundation of what human resources is and a better understanding of why your business needs it.
In this article, you will learn:
What Does Human Resources Mean?
To start, we’ll dive into the history of human resource management and how it has developed into what it is today.
The History Of HR
Up until the 1900s, the concept of human resources—or personnel management as it would have likely been referred to back then—was a rather foreign concept. Employment decisions and management would largely fall on frontline supervisors, and workplace safety wasn’t as regulated or maintained as it is today.
The employment shortages of World War I, though, would lead to businesses, largely factories, creating more formal employment practices and the hiring of “employment clerks.” Personnel administration would continue to become a more popular practice and lead to the creation of the American Society for Personnel Administration, now known as the Society of Human Resource Management.
In 1954, Peter Drucker’s “The Practice of Management” would officially coin the term “human resources.” And, as workplace safety laws and regulations continued to be enacted and hiring processes continued to become more and more involved, HR would eventually work its way into almost all businesses around the world.
Modern Human Resource Management
The general concept of human resource management has stayed relatively unchanged since personnel administration first started to become a thing. Of course, this doesn’t mean that HR’s functions haven’t changed: an HR department performs a wide variety of functions and duties.
The biggest difference between the modern approach to human resource management and its previous iterations is the deviation from simply approaching HR as the “police” of the workplace. Having a comprehensive and capable HR department can help a business get ahead of the pack and improve a variety of different variables in the workplace.
What Does HR Do?
Now that we have a better understanding of the origins of human resources and how its developed over the years, we can dive a bit deeper into what an HR department does.
Core HR Functions
The responsibilities of an HR department span several key areas:
- Recruitment & Onboarding: Attracting qualified candidates, conducting interviews, and helping new hires integrate into the company.
- Training & Development: Offering learning resources, certifications, and mentorship to help employees grow professionally.
- Performance Management: Creating systems to set expectations, review performance, and encourage continuous improvement.
- Compensation & Benefits: Designing pay structures, managing bonuses, and administering employee benefits like health insurance and retirement plans.
Of course, this is by no means an exhaustive list. Defining HR is a tricky task, as there are many different small roles or functions that can fall under the HR umbrella. Generally speaking, though, these functions provide a good outline for what a comprehensive HR department looks like.
Employee Advocacy and Compliance
As stated above, when we think of HR, we often think of them as being the “police” of the workplace. In a sense, this is true, but it is undermining some of the more important functions of an HR department, which include resolving employee conflict and advocating for employees as well as ensuring legal compliance.
Conflict resolution is both a critical function of an HR department and one that is sometimes glossed over. Human resources also plays an important part in ensuring your business is compliant with a variety of different employment and workplace safety laws, including the Fair Labor Standards Act.
Outsourcing Human Resources
For many small to mid-sized businesses, outsourcing HR functions can be a practical and cost-effective solution. Third-party providers can handle tasks such as payroll, benefits administration, legal compliance, and hiring and onboarding. Outsourcing can allow business owners and supervisors to focus on core business activities while still benefiting from professional HR expertise.
This approach can help businesses to control costs, improve legal and regulatory compliance, and provide businesses with the latest in HR technology. However, it’s important to choose reputable partners and maintain oversight to ensure that outsourced HR aligns with the company's values and goals.
Why Is Having An HR Department Important?
While we’ve indirectly touched on this question throughout the article, we can now more formally answer why an HR department is crucial for smooth business operations.
HR And Company Culture
HR plays a crucial role in fostering and developing a positive company culture. This means that an effective HR department is central to a positive employee experience. Human resources can help employees feel valued through recognition programs, career development, and well-being initiatives.
HR sets the tone for workplace behavior and manages change effectively during transitions or growth phases—this includes things like an employee handbook, where employees get their first impressions of a company’s culture. When employees feel supported and understood by their HR department, they are more likely to remain loyal and contribute at higher levels.
Mitigating Risk And Enabling Growth
As we previously stated, HR plays a key role in ensuring your business remains compliant with all labor laws and regulations. Without an effective HR department, you put your business at risk of losing compliance, which could lead to possible legal or financial penalties. The FLSA, for example, includes potential civil penalties for noncompliance, which can range anywhere from $1,200 to $140,000.
Given that an HR department also plays a key role in things like training as well as hiring and onboarding, any business looking to scale or potentially grow in the years ahead will need a solid human resources foundation. This includes not only a strong team of HR professionals working within your department, but also a solid HR software.
Worry Less With Effective HR Management
Running a business comes with a lot of moving parts. As such, you’ll need to assemble a trusted team of individuals to help you manage all of them. Without a solid foundation of well-equipped professionals, you run the risk of ineffective operations, which can create lots of unnecessary stress and cost you time and money. This is where human resource management steps in: a great HR department can be the difference between years of effectiveness and growth, and countless hours spent trying to catch up. Luckily, with the information provided in this article, you’ll have the knowledge you need to start your HR journey and take your business to the next level.
Now, fully understanding everything that HR does is too much for just one blog article. That also means one article doesn’t do enough to emphasize the importance of having an HR department. As a new business, you want to make sure all your bases are covered—this includes HR. Read our article on the four reasons why you need human resources.
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