7 Reasons Why HR is So Important for Business Success

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how can human resource management contribute to a company's success

Have you ever asked the question, “Why is human resources important?” For small businesses and large corporations alike, the human resources department is important for business success. HR professionals perform more duties than simply handling the open enrollment season once a year or processing payroll on a bi-weekly basis.  Effective human resources in a business can help develop:

  • a company’s strategy
  • the organization’s employee engagement activities
  • the overall company culture

We discuss the importance of HR within an organization and why HR is crucial for the success of your company.

Budget Control

The HR department develops methods for trimming the costs associated with workforce management.  This helps curb excessive spending and saves the company money in the long run. A strong HR department can help improve an organization’s bottom line.  These methods may include negotiating better rates for employee benefits such as healthcare insurance. In addition, the HR department studies and analyzes employment trends.  They also analyze the labor market and salaries based on job functions to ensure the company’s wages are competitive and realistic. Since some small businesses have strict budgets to which they must adhere, this function of the HR department is particularly helpful.

Related Resource: 50 Most Affordable Small Colleges for HR Degrees

Employee Satisfaction

For better or worse, the HR team has the responsibility of determining whether employees are satisfied, not only with their supervisors but also the job and related duties as well. Since it can be difficult to measure satisfaction as it is an ambiguous measurement at best, HR specialists must carefully:

  • design employee surveys
  • oversee focus groups which can help uncover the overall workplace culture
  • implement an exit interview strategy to determine how the company can improve in relation to its employees

In other words, the HR department determines the causes and/or reasons behind employee dissatisfaction for current or previous employees and addresses those issues in the best way possible to boost morale and motivation throughout the company.

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Training and Development

Human resource business professionals conduct assessments for the company’s employees in order to determine the type of training and skills employees must have to properly and efficiently perform their duties. It is important to ensure that all employees have the qualifications and skills necessary to meet the demands of a position.

New companies or businesses in the expanding stage may especially benefit from identifying training needs for existing employees. Companies often task this responsibility to the HR department.  In most cases, it is less expensive for these specialists to handle training and development than it is to hire more qualified candidates or additional staff. This strategy in human resource management helps to improve employee retention and thus reduce turnover.

Related Resource: What is the Purpose of Human Resources?

Conflict Resolution

There will be conflicts in the workplace, regardless of how satisfied employees are with their jobs, their managers and their co-workers. Given the diversity of work styles, personalities, levels of experience and backgrounds of employees, it’s a given that arguments and disagreements will happen. An HR manager or specialist specifically trained to handle relations between employees can identify and resolve these conflicts between a manager and employee or two employees and thus effectively restore positive working relationships throughout the organization. In addition, being able to resolve conflicts may increase employee satisfaction and increase the morale of the workplace.

Performance Improvement

Yet another responsibility of the HR department is the development of performance management systems. Without a human resources specialist to construct a plan that measures employee performance, employees may end up in jobs that aren’t suitable for their expertise and skills. Not only will this contribute to employee dissatisfaction, but individuals who consistently fall below the employer’s expectations for performance may sneak by on the payroll, thereby costing the company money on low-performing employees that are not helping the business to succeed.

Recruiting New Talent

In many organizations, HR professionals are responsible for recruiting new talent.  They might use social media to share job postings or employee testimonials.  By sharing photos of day-to-day activities or special activities, potential employees can learn about the culture of the organization and decide whether it might be a good fit for them professionally.

HR plays a role in developing an employee referral program to attract new talent.  Providing incentives to current employees encourages them to share openings within their personal and professional circles.  An effective referral program can also boost employee satisfaction.

Hiring New Employees

You’ve got plenty of great applicants, but how do you hire the right candidate for the job?  While HR may not have much to say about who gets the job, they have several responsibilities along the way to support managers who are in the position to make that decision.  Often HR is responsible for screening applicants to make sure only those who meet the requirements are considered for the job.  They may also check credentials and prescreen candidates to save time.  Background checks or credit checks may also fall on the shoulders of the HR department.  Once the hiring committee has decided on who they’d like to offer the job to, HR may facilitate the job offer or assist in salary negotiations.

Human resource management helps improve the effectiveness of an organization.  From improving company morale and developing methods to ensure high performance standards to resolving conflicts among employees and ensuring a company stays within its budget, there are many reasons why HR is important for business success.

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