Human resource management (HRM)

It’s often said that people are an organization’s greatest resource. Yet, until fairly recently, human resource management was not considered as critical to success as other business operations, like marketing, finance or sales. This notion has been largely altered by new technology, globalized markets and changes in organizational hierarchies. Today, business leaders place great emphasis on hiring the right people and keeping them engaged.

What is human resource management?

Human resource management involves creating employee policies and procedures that support business objectives and strategic plans. Central to this mission is fostering a culture that retains employees and empowers them to be as productive as possible. HRM professionals also focus on regulatory HR compliance, recruitment, benefits administration, workforce training and development, and compensation planning.

The importance of human resource management

Human resource management is essential to helping businesses overcome three of their greatest challenges:

• People – Attracting, retaining and training the best talent
• Cash – Forecasting and managing the flow of cash through the business
• Risk – Maintaining compliance and minimizing financial and operational risk

Backed by the right technology and expertise, HRM can also help organizations grow and cultivate workplace cultures capable of adapting to change.

How does HRM work?

HR can be managed by an in-house team or outsourced to a third party.

In-house HRM

Small businesses with limited resources and employers that prefer a hands-on approach sometimes manage HR in-house. Responsibilities may be delegated to a singular person or a full department.

However, many organizations do not have the expertise or the bandwidth to handle administrative HR tasks, like payroll, or keep pace with rapidly changing legislation. In-house HRM also takes time away from the strategic initiatives and core business operations that drive growth.

HR outsourcing (HRO)

HRO means relying on third-party professionals to handle HR and payroll administration. If an organization already has an HR department, the HRO provider can lend targeted administrative support and guidance to the internal staff. In the absence of an internal team, the third-party partner becomes the go-to-resource for several HR tasks and responsibilities.

Five key parts of human resource management

HR functions can vary depending on industry, businesses size and the types of workers employed. In most cases, the primary objectives are to acquire and cultivate talent and improve communication and cooperation among workforce members. Other key human resource management functions include:

• Job analysis
  Determining the skills and experience necessary to perform a job well may make it easier to hire the right people, determine appropriate compensation and create training programs.
• Workforce operations
  Creating health and safety policies, responding to employee grievances, working with labor unions, etc., can help support regulatory compliance.
• Performance measurement
  Evaluating performance is important because it not only fosters employee growth through constructive feedback, but also serves as a guide for raises, promotions and dismissals.
• Compensation strategy
  Recognizing achievements and rewarding high performers with bonuses and other perks is a proven way of motivating employees to take ownership of business objectives.
• Workforce upskilling
  From orientation to employee development programs, workforce training serves to improve productivity, increase engagement, reduce turnover and minimize supervisory needs.

Skills and responsibilities of an HR manager

HR professionals generally are tasked with creating and administering programs that improve workplace efficiency and employer-employee relationships. Within this broad assignment are several different, but critical responsibilities, such as:

• Staffing
  Staffing a business or an individual department requires a number of key steps. Hiring managers must first determine how many new employees the budget can support, then find and interview qualified candidates, and finally, make selections and negotiate compensation.
• Developing workplace policies
  If it’s determined that a new or revised policy is needed, HR professionals typically consult with executives and other managers, write the supporting documentation and communicate it to employees. Policies may cover vacations, dress codes, disciplinary actions and other types of workplace protocol.
• Administering pay and benefits
  In order to attract and retain talent, compensation must meet industry standards and be comparable to what other employees in similar roles are being paid. Creating such a fair pay system requires careful consideration of an employee’s years of service with the business, experience level, education and skills.
• Retaining talent
  Compensation isn’t the only thing that retains talented employees. HR managers may need to proactively address issues with workplace environments, organizational culture and relationships between employees and supervisors.
• Training employees
  When employees develop new skills, they tend to be more productive and satisfied with their job. Some of the training programs typically run by HR departments include team-building activities, policy and ethics education, and on-the-job instruction and skills, e.g. how to run a machine or computer program.
• Complying with regulations
  Laws that affect the workplace – whether they’re related to discrimination, health care or wages and hours – are constantly evolving. HR professionals are required to keep up with these changes and notify the rest of the organization in support of compliance.
• Maintaining safety
  Safety in the workplace means protecting not just the physical health of employees, but also their private information. To minimize workers’ compensation claims and data breaches, HR must implement security measures and ensure that all federal, state and union standards are met.

Human resource management and small business

While human resource management is important to all businesses, the stakes may be higher for smaller organizations. For example, one incompetent employee in an office of 10 people can be much more detrimental than one in a workforce numbering in the thousands. To improve their people processes, small business owners generally can:

1. Assess current operations to determine if new hires are needed or if existing employees and production methods can be utilized more effectively.
2. Take an active role in the recruitment process and write job descriptions that match prospective talent to business needs.
3. Create an employee handbook or an official document that clearly outlines company policies.
4. Provide continuing education opportunities as needed by the particular industry.
5. Maintain a work environment where employees are treated fairly and can be productive.

HRM systems and software

Faced with rising numbers of contract-based workers and increasingly complex regulations, HR professionals have turned to HRM software to help them keep pace with changing workforce environments and people management needs. This technology is available with a variety of options to fit the needs of businesses of any size. Basic systems may offer recruitment services, payroll and benefits administration, while more robust solutions tend to include talent management, custom reporting and advanced analytics.

Why use a human resource management system (HRMS)?

HRMS are designed to meet the core needs of HR and turn basic administrative functions into critical enablers of business value. With the aid of these people-centric, data powered solutions, HR managers may be able to:

• Improve their hiring processes
• Manage people more effectively
• Optimize workforce productivity
• Engage and retain employees
• Eliminate costly redundancies
• Make data-driven decisions
• Maintain regulatory compliance

How to choose a human resources management solution

Finding the right solution often requires a strategic evaluation process, such as the following:

1. Identify what the organization would like to accomplish, change or improve and how technology can help achieve those goals.
2. Ensure that the HRMS can keep pace with the rapidly changing regulatory and statutory requirements in all applicable jurisdictions (local, state, federal, international, etc.).
3. Prioritize security and know exactly how sensitive data will be stored, transferred and backed up.
4. Look for implementation models with a change management strategy that will get the HRMS up and running efficiently.
5. Address stakeholder questions, concerns and objections to drive widespread HRMS support.
6. Ask about service plans to manage the hundreds of post-payroll tasks necessary for compliance.
7. Inquire into the vendor’s financial history and investments in innovation.
8. Get outside-in perspective by looking at peer reviews, industry analyst feedback and product demos.

Examples of HRM software

Business leaders and HR professionals who are looking for software to help them accomplish more with less resources generally have three options available to them:

• Human resource information systems (HRIS) – perform core HR functions, like applicant tracking, payroll and benefits administration
• Human resource management systems (HRMS) – offer the benefits of HRIS, plus talent management services
• Human capital management (HCM) solutions – provide a broad suite of HR capabilities, including global payroll and compliance support and in-depth analytics

HRM trends: Generative artificial intelligence (AI) revolutionizes HR

The future of HRM may lie with generative AI. This technology has the potential to optimize everyday HR tasks while proactively revealing workforce insights. Not surprisingly, an increasing number of organizations are using generative AI to assist with the following:

• Create personalized communications for candidates and employees
• Draft job descriptions and employee handbooks
• Compile suggestions for making performance reviews simpler and more consistent
• Answer employee questions about benefits, pay, time, laws and regulations
• Assist with onboarding and open enrollment
• Support learning and development programs

These use cases continue to evolve. HR leaders should try to stay up to date with generative AI advancements as much as feasibly possible.

Why choose ADP for your human resource management needs?

ADP’s HR management solutions automate and streamline key needs so that HR professionals can focus more time on their people and less on paperwork. We offer basic and customized packages with some of the following features:

• Powerful workforce reporting that turns data into a trusted source of decision-making
• Preconfigured new hire templates for a simplified onboarding process
• Self-service and mobile apps so time-sensitive tasks can be performed quickly
• Industry-recognized security to help safeguard sensitive information

Learn more about ADP Workforce Now® HR Management

Frequently asked questions about HRM

Laura Brown President, Major Account Services and ADP Canada

Laura Brown leads a team that helps midsized businesses leverage scalable, comprehensive human capital management (HCM) solutions to power performance and propel their organizations forward.

This guide is intended to be used as a starting point in analyzing an employer’s HR obligations and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.