7 Human Resource Management Basics Every HR Professional Should Know
“Success in HR is not just about managing resources. It is about inspiring and unleashing the full potential of individuals.” This is a powerful reminder from AIHR’s Chief HR Scientist, Dr. Dieter Veldsman, that HR Management is a true catalyst for professional and organizational growth.
Effective Human Resource Management (HRM) is essential for businesses of all sizes and starts with knowing the basics. In this article, we dive into the seven Human Resource Management basics you must know to understand the varied roles of HR within an organization. We also look at the history of HRM and share some of the most sought-after skills for effective Human Resource Management. Let’s get started!
Contents
What is Human Resource Management?
What is a human resource?
The 7 HR basics
1. Recruitment & selection
2. Performance management
3. Learning & development
4. Succession planning
5. Compensation and benefits
6. HR Information Systems
7. HR data and analytics
How has Human Resource Management changed and evolved?
Human Resource Management skills
FAQ
What is Human Resource Management?
Human Resource Management (HRM) is a strategic approach to managing employees to achieve better organizational performance. It aims to attract, manage, and retain employees who contribute to the company’s success, ensuring their alignment with the organization’s strategic goals and culture. HRM encompasses various functions, including recruitment, compensation, and employee development, to support and engage the workforce effectively.
For example, if you hire people into a business, you are looking for people who resonate with your company culture as they will be happier, stay longer, and be more productive than people who don’t. Another example is engagement. Engaged employees are more productive, deliver higher quality work, and make customers happier. This means that if HR can find ways to make employees more engaged, this benefits the company.
The HR department aims to provide the knowledge, tools, training, legal advice, administration, and talent management crucial to supporting and advancing the company.
This is what Human Resource Management boils down to: optimizing organizational performance through better management of human resources.
Explore the HR Management basics in the video below:
The logical next question is, who are these human resources?
What is a human resource?
Referring to people as ‘human resources’ in the business environment of today can feel weird and outdated. However, for clarity and the context of this article, we’ll continue to use this term. Besides, as one author rightly pointed out, ‘It’s not how you call it, but what you do’ counts.
Human resources are all the people who work for or contribute to the organization in one capacity or another. Together, these people make up a company’s workforce. They can be full-time or part-time salaried or hourly employees, for example, but also contingent workers such as consultants, contractors, or freelancers. Ten years ago, 15% of the U.S. workforce consisted of contingent workers; today, they account for 35%.
Non-human resources
And then there is a relatively new, non-human element to consider when we talk about human resources in the context of the workforce: robots.
Machines and robots are increasingly involved in day-to-day work in all industries, and the interaction between the human and the machine is becoming increasingly important to the organization’s success.
While these machines are not considered ‘human resources,’ there is a case to be made that they should be included and taken into account in some way as they are a part of the workforce.
Why is Human Resource Management important?
HRM involves various activities, processes, and policies – tied together in an HR strategy – that aim to align a company’s workforce with its strategic (business) objectives.
As such, effective Human Resource Management is integral to any organization’s success and plays a role in the following:
- Attracting and retaining talent: The HR department creates a comprehensive talent strategy that helps the organization recruit, develop, and retain the right people.
- Enabling managers: Managers play a crucial role in employee retention and success. HR is there to equip managers with all the tools, resources, and support they need to help their teams flourish.
- Driving strategic planning: HR works with senior leaders to keep the HR strategy in line with the organization’s objectives. This enables the HR team to identify talent gaps and create workforce plans to then proactively find the right talent for the right position.
- Fostering organizational culture: HRM plays a vital role in shaping and cultivating the company’s culture by establishing the values, norms, and behaviors that correspond with the organization’s mission and vision.
- Creating a productive work environment: A positive work environment is good for employee productivity, which, in turn, is critical to the success of the business. Various HRM practices, therefore, aim to implement effective performance management systems, set clear job expectations, and provide regular feedback, among other things.
The seven HR basics
When we talk about Human Resource Management, several elements are considered cornerstones for effective HRM policies. These cornerstones are:
- Recruitment & selection
- Performance management
- Learning & development
- Succession planning
- Compensation and benefits
- Human Resources Information System (HRIS)
- HR data and analytics
Let’s take a closer look at each of the seven HR Management basics.
1. Recruitment & selection
Recruitment and selection are the most visible elements of HR. Who doesn’t remember their very first job interview, right?
The goal of the recruitment and selection process is to find and hire the best candidate for the job, with the former focusing on attracting potential candidates to apply for the role and the latter focusing on evaluating and choosing the best candidate among the applicants.
The recruitment process usually involves the following steps in some shape or form:
- Preparing:
- Vacancy intake with the hiring manager
- Write job description
- Creating job adverts
- Sourcing:
- Sourcing candidates
- Checking the existing talent pool
- Keeping the hiring manager informed
- Screening:
- Screening resumes
- Phone screening
- Giving a realistic job preview
The last phase of the recruitment phase has some overlap with the selection process, which then continues as follows:
- The job interview
- An assessment
- References and background check
- The hiring decision
- Job offer and contract
- (Preboarding and onboarding)
2. Performance management
As we’ve mentioned earlier, an organization’s performance management practices play an important role in creating a productive and positive work environment and keeping employees engaged. According to a report by the HR Research Institute, 67% of leading organizations in performance management experienced increased employee performance, compared to only 16% of so-called performance laggards.
Performance management is the second HR Management cornerstone. It is a set of processes and systems aimed at developing employees in a way that enables them to perform their jobs to the best of their ability. Employees who are empowered to their full potential, improve the efficiency, sustainability, and profit margin of a business.
The goal of performance management is threefold:
- To help employees build on skills that enable them to perform better in their roles
- To reach their highest potential
- To boost their success while accomplishing the strategic goals of the organization.
Effective performance management is based on a continuous conversation between employees, their managers, and HR.
A strategic and systematic performance management process combines verbal and written components that take place throughout the year. It involves the following actions:
- Establishing clear expectations
- Setting individual objectives and goals that align with team and organizational goals
- Providing different types of feedback
- Regular performance conversations, such as performance reviews and performance appraisals
- Evaluating results.
Important decisions regarding an employee’s career, such as promotions, bonuses, and dismissals, should be linked to the organization’s performance management process.
3. Learning & development
Learning and development (L&D) is another HR fundamental and an essential part of an organization’s overall people development strategy.
Put simply, L&D is a systematic process that enhances people’s skills, knowledge, and competencies to improve their work performance.
Learning involves acquiring knowledge, skills, behaviors, and attitudes that result in better job performance. Examples of what learning activities can look like include:
- Reading blogs, articles, or books
- Hands-on experimentation
- Peer learning
- Lunch and learn sessions
- Attending seminars, conferences, or webinars
Development evolves around broadening and deepening a person’s knowledge in line with their individual, long-term professional goals. The idea here is to grow job-related abilities and expand someone’s potential for future opportunities.
Activities focused on development include:
- Coaching
- Job shadowing
- Leadership training
- Mentoring
L&D helps employees to reskill and upskill. It is typically led by HR, and a solid learning and development program can be very helpful in advancing the organization toward its long-term goals.
This approach allows employees to bridge skill gaps and grow into leaders. A well-known framework that connects performance management with L&D activities is the 9-box grid. Based on people’s performance and potential ratings, HR and the manager can advise on various development plans in consultation with the employee.
4. Succession planning
Succession planning involves planning contingencies in case key employees leave the organization. It is about proactively identifying top performers and potential leaders and getting them ready to fill (senior) positions as soon as someone leaves.
While crucial for the continuity – and sometimes even the survival – of the business, many companies of all sizes still don’t have a solid succession plan.
Succession planning is a complex process and if you want to navigate it successfully, keep the following three things in mind:
- Critical roles only: Succession planning focuses on roles that are vital to the organization’s competitiveness and continuity, especially senior leadership roles.
- Key talent: Unsurprisingly, for those critical roles, only top performers and potential leaders (usually internal candidates) are selected to be mentored and developed.
- Continuity: The ultimate purpose of succession planning is to ensure that someone else is ready to take over immediately when someone leaves to maintain business continuity.
- 70% of family-owned businesses don’t survive the transition from founder to second generation. The primary reason for this is a lack of succession planning.
- Poorly managed CEO transitions wipe out almost 1 trillion dollars annually for S&P 1500 companies alone, according to HBR.
5. Compensation and benefits
Another fundamental component of HR management is compensation and benefits, often called comp & ben. Fair compensation is critical in attracting, motivating, and retaining employees.
Compensation and benefits consist of all the monetary and non-monetary rewards employees receive from their employer in exchange for their labor. Examples include:
- Salary
- Bonuses
- Insurance
- Retirement contribution
- Childcare benefits
- Flexible working options
- Etc.
Getting comp and ben right is important for two main reasons.
On the one hand, making a solid, attractive offer is key to attracting the best talent. On the other hand, comp & ben and related taxes can account for up to 70% of business costs, highlighting the importance of balancing this with the organization’s budget and profit margins. HR should, therefore, closely monitor the state of compensation and benefits at their organization.
A final thing to note here is that employee satisfaction is mainly driven by what they perceive as fair rather than by how much someone is paid. How employees feel about the company’s pay philosophy and process is more likely to impact their outlook than the actual pay.
So, in addition to offering decent compensation, HR teams may want to start paying more attention to how pay transparency works and how to manage compensation perceptions at their company.
6. Human Resource Information System (HRIS)
The two final HR Management basics are not HR practices but tools to improve HR. The first one is the Human Resources Information System, or HRIS.
Most HRIS solutions support all the HR processes and practices we discussed above. Sometimes, however, the management of these functionalities is spread out over different HR systems. For example:
- HR professionals often use an Applicant Tracking System, or ATS, for recruitment and selection to keep track of applicants and new hires
- For performance management, a performance management system is used to keep track of individual goals and insert performance ratings
- In L&D, organizations utilize the Learning Management System (LMS) to distribute learning content internally, and other HR systems are used to keep track of budgets and training approvals
- Compensation specialists often use a payroll system
- There are digital tools that enable effective succession planning.
According to the annual Digital Employee Experience Audit, 30% of companies still use more than ten different HR systems. The bottom line here is that there is a significant digital element to working in HR, which is why we need to mention the HRIS when talking about the basic components of HRM.
7. HR data and analytics
The final HR fundamental revolves around data and analytics. In the last decade, HR has made a significant leap towards becoming more data-driven.
The HRIS we just discussed is essentially a data-entry system. The data in these systems can be used to make better and more informed decisions.
An easy way to keep track of critical data is through HR metrics and/or HR KPIs. These are specific measurements showing how a company performs on a given indicator. This is referred to as HR reporting.
This type of reporting focuses on the current and past state of the organization. Using HR and people analytics, HR can also make predictions. Examples include workforce needs, employee turnover intention, the impact of the employee experience on customer satisfaction, and many others.
HR can make more data-driven decisions by actively measuring and looking at this data. These decisions are more objective, which makes it easier to find management support for them.
How has Human Resource Management changed and evolved?
What Human Resource Management looks like today – and what is expected of HR professionals – is vastly different from what it looked like a hundred years ago.
From around 1900 until the 1940s, for example, HR teams were mainly expected to keep employees healthy so that they would remain productive.
During the 1980s and 1990s, HR departments ought to focus on motivating and engaging the workforce while modernizing their HR practices through technology implementations.
What we’ve seen from 1990 onwards, and still see today, is that HR is expected to be a strategic partner and able to align the business agenda and the HR agenda.
As for the (near) future, and as we enter the digital-human era of work, things will shift further, and even more will be expected of HR teams. They will have to guide the organization to adapt to workforce changes and redefine the working relationship between talent and employers.
Human Resource Management skills
To strategize and execute HR initiatives, HR professionals need to possess the following skills:
- HR specific skills, including:
- HRM knowledge and expertise
- Administrative expertise
- Employee experience expertise
- Business acumen, including:
- Commercial awareness
- HR strategy creation and execution
- Advising
- Soft skills, including:
- Communication skills
- Active listening
- Proactivity
- Digital & data literacy, including:
- HR reporting skills
- Being analytical and data-driven
- Command of technology
However, as we’ve already pointed out, the field of Human Resource Management is continuously evolving, and the skills and competencies of HR practitioners have to evolve with it.
If we go beyond what’s currently expected of HR practitioners in terms of skills and competencies and look at what they need to develop they can start to future-proof their skill set, we get the following picture:
On a final note
If there is one thing to take away from this article about the 7 Human Resource Management basics, it’s that all of these HR fundamentals are connected.
Think of these HR components as building blocks – strong management of each core element contributes to the strength of the next. Collectively, these HR fundamentals enable a workforce to perform at its best.
FAQ
Human Resource Management, or HRM, is the practice of managing people to achieve better performance. It’s about optimizing company performance through better management of human resources, which is the organization’s workforce. This involves HR practices like recruitment and selection, performance management, and learning and development.
Strategic Human Resource Management is an approach to managing human resources that aligns HR policies and practices with the long-term goals of the organization. It focuses on proactive management of people, ensuring that various HR initiatives such as recruitment, compensation, and performance management contribute to the overall business strategy and help improve organizational performance.
The role of Human Resource Management (HRM) is to make sure that the organization has the right talent to meet its objectives through recruiting, developing, and retaining employees. HRM is responsible for implementing HR strategies and practices that drive productivity, engagement, and, ultimately, performance.
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