The 6 Key Functions of Human Resources

HR departments are responsible for a business’s most valuable asset: its people. The Blueprint goes through six of the key HR functions.

Updated June 2, 2020

The department of human resources regularly gets a bad rep. It’s often painted as overly bureaucratic, outdated, and out of touch with the realities of day-to-day business.

While many employees might believe that the HR department’s responsibilities start and end with setting and enforcing company policy, the core functions of HR departments affect every aspect of the employee lifecycle.

While the overall role of HR departments differ from organization to organization, there are several key human resource functions that almost all HR departments perform.

Here are the key functions of human resources to help move your company forward:

6 main functions of a human resources department

A well-run human resources department can help your business achieve its goals through effective people management. Here, we go through the six main functions of an HR department, and how each serves a business’s needs.

Function 1: Recruiting, hiring, and onboarding

This is arguably the human resource department’s most important function of all. The HR department is responsible for strategizing exactly how to attract, select, and onboard candidates for the organization.

Because an organization’s lifeblood is its employees, making sure the right calibre of candidates are hired is crucial for future success. Each employee’s contribution plays a huge role in a business’s growth. Essentially, a bad hire is bad for business.

Recruiting and finding new potential candidates is just step one. Once the position has been advertised, it’s also the role of the HR department to steer the candidates through the hiring and onboarding processes. In short, HR is generally responsible for the entire talent acquisition process.

Examples of HR’s role in recruiting, hiring, and onboarding

The HR department’s role in recruiting, hiring, and onboarding employees is extensive. Here are a few examples of how HR prepares for these processes.

  • Workforce planning: HR departments will engage in workforce planning, which is a strategic process of identifying and forecasting the organization’s long-term talent needs in accordance with its business goals. This process looks at issues such as future talent gaps, recruiting strategies, and skills development.
  • Onboarding: Taking charge on the way that new employees are onboarded to the organization is another key HR function. Their onboarding checklist includes tasks such as scheduling new hires’ training, preparing and processing employment documents, and preparing for employee orientation.

Function 2: Human resource planning

Human resource planning is the art of preparing a company for its future staffing needs. Similar to workforce planning, it’s the process of not only making sure that the organization will have the right people for the right positions, but also about anticipating future vacancies from retirements, promotions, resignations, and terminations.

Human resource planning is an integral part of strategic human resource management, which is the process of aligning HR practices with the company’s overall business strategies.

BambooHR New Hires & Additions Report

BambooHR software runs a variety of HR reports, such as new hires vs. terminations.

Examples of HR’s role in human resource planning:

The longer an open role is left unfilled, the more it costs a business. Planning ahead to fill vacancies reduces business costs and gaps in productivity.

  • Identifying and filling skill gaps: This process includes creating a skills inventory to assess and quantify current employee skills that the business might not be using, planning for upskilling existing employees, and identifying where you might need to hire fresh talent.
  • Forecasting for future requirements: HR departments need to look at new market trends, competitor analyses, and new technology that will have an impact on future human resource planning.

Function 3: Benefits and compensation

HR departments are also responsible for employee benefits administration and compensation.

This includes helping set salary ranges for open positions, building competitive benefits packages to attract quality employees, pay adjustments for promotions and accomplishments, and performance incentives such as bonuses and commissions.

Zenefits Cost of Benefits

Zenefits gives businesses insight into the overall costs of employee benefits.

Examples of HR’s role in benefits and compensation management

Benefits and compensation management is one of the main functions of HR, and one of the most tangible for employees.

  • Benchmarking compensation structures: This includes looking at third-party salary data surveys such as The Bureau of Labor and Statistics, which provides years of comparative wage data broken down by occupations at the national, state and metropolitan level. This helps organizations compare their current salaries and benchmark future salary ranges in order to remain competitive.
  • Using software to support compensation decisions: Compensation data can be complex, so many organizations are turning to people analytics to help understand their employees, the implications of modifying compensation packages, and making sure pay is equitable across the organization.

Function 4: Performance management

When it comes to evaluating employee performance, HR’s main role is in making sure employee assessments are carried out in a standardized, fair, and accurate way.

While old HR management focused heavily on goal-setting and attached linear outcomes of either "achieved" or "not achieved," the area of performance management in recent years has focused more on relevant employee output results, such as productivity and quality of work.

Performance management software has also strengthened the role of HR in performance management, providing functionality for 360-degree feedback loops, access to key HR metrics, functionality for self-assessments, and setting goals based on more tangible and realistic criteria.

Examples of HR’s role in performance management

Performance management is a key for businesses wanting to align employee output with strategic business goals. Here are a few areas where HR departments play a role in this.

  • Goal setting: HR departments work with relevant managers to develop appropriate strategies for helping employees achieve their goals. They also ensure that resources, such as training and coaching, are available to help reach those goals.
  • Managing performance evaluations: This includes managing, maintaining, and enforcing performance evaluation schedules and policies, monitoring employee and manager feedback, and analyzing key performance data to inform strategic objectives.

Function 5: Training and development

The HR department is heavily invested in how a business manages its talent and how training and development programs support both departmental and organizational goals. Investing in employees’ development is crucial in helping them develop the capabilities to support future business growth.

Because employees appreciate opportunities to learn new skills, effective training and development has also proven crucial in retaining employees and productivity levels.

Examples of HR’s role in training and development

Training and development is key to retaining top talent, engaging employees, and enhancing performance. Here are some of the key ways that the HR department helps develop training and development programs.

  • Setting budgets for employee training and development: HR departments are responsible for determining training and development budgets, and distributing them amongst departments and employees.
  • Mapping of skills requirements: This includes taking a holistic view of the organization and identifying what skills are needed for specific roles, what skills are available at present, and the skills that the company will require in the future.

Function 6: Employee engagement

Research has repeatedly shown that employees who are engaged perform better and are more productive than their disengaged counterparts, and that businesses with highly engaged staff report higher profits than firms with low levels of engagement.

Additionally, organizations with high levels of engagement typically enjoy lower turnover rates.

HR plays a critical role in determining the methods for enhancing employee engagement levels by adapting suitable processes and programs for their organization.

At the heart of this is first understanding and measuring the levels of engagement in the organization to identify areas for improvement.

Examples of HR’s role in employee engagement

High engagement levels are critical in maintaining a healthy and productive workforce. Here are a few actions that the HR department takes to improve employee engagement.

  • Measuring employee engagement: This includes developing and distributing employee surveys and analyzing them to spot trends and areas for improvement.
  • Using HR analytics to improve retention: Using workforce analytics, HR professionals can delve deeper into the results from exit interviews to assess why employees are leaving.

HR departments contribute to a business’s success and growth

Though these tasks form the six main functions of the HR department, in reality, there are many other areas of an organization where their involvement is required.

In terms of smaller businesses, many opt not to have a dedicated HR department or employ any HR professionals, choosing to outsource HR functions or join a professional employer organization (PEO) instead.

However, as HR software becomes more sophisticated than ever, small businesses shouldn’t shy away from systems that can help them manage their small business recruiting, planning, and overall people management without the need for a full HR department.

The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.