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Talent Assessment | 2 Min Read

Importance of Human Resource Management


People are always an organization’s most valuable asset. They ensure organizational success by contributing to the best of their abilities towards the company’s goals. It is significant to consider the employees’ health and well-being and treat them well enough, so they align their goals with the company’s growth. And if they’re treated like cattle or being mistreated, they will dissociate themselves from such a workplace. That’s where human resources play an essential part in developing organizational strategy as well as addressing the employee-centered needs of an organization.

What is Human Resource?

Human resource (HR) is an essential department in an organization responsible for scouting, screening, recruiting, onboarding new joiners, and implementing employee benefit programs. HR managers perform essential duties like recruitment, training, handling payroll and benefits, leaves management, training, and development, safety compliance, employment law, and compliance, etc. Nowadays, HR practices are focused on creating a positive business culture and maximizing employee engagement and productivity.

Importance of Human Resource

In a small business, HR is omitted from the main process. Many entrepreneurs start off overlooking this essential aspect and end up grappling with people management issues. Staff management is no mean feat; it requires particular skills. Despite that, many entrepreneurs couldn’t immediately understand the value of HR in their businesses. With a handful of employees, business directors feel that hiring and managing new people is easy as ABC.

But as a business evolves, they often find it hard to multitask between day-to-day operations and employee management and eventually lose focus. This mistake would cost small businesses a lot, hence highlighting the importance of human resources for success. The HR process covers all aspects of employee management from hiring, layoffs, salary, looking after employees’ wages and benefits, and more.

At the same time, poor human resource management can have a detrimental effect on the organization’s bottom line. When employees feel non-aligned with the company’s way of working and are demotivated, organizational productivity is bound to suffer. With substandard HR practices, the business’s reputation can suffer. Employer’s reputation is vital in attracting potential hires and customers to the business.

Purpose of Human Resource Management

There have been instances when companies shelled out hefty bucks to fill an open position, which is quite a lot, especially for start-ups and small ventures that have limited resources. Employee onboarding and other related initiatives also increase costs. If a company makes bad hiring decisions by hiring the wrong people who quit soon after, then all that effort and resources went to waste. Various reports indicate that employees leave their jobs mainly due to poor work-life balance, salary issues, career growth concerns, or job insecurity.

The purpose of HRM is to weed out such issues in the first place and help companies in making the right hiring decisions. Given below are some key responsibilities of HR managers, which are also dependent on the organization:

  • Recruitment (both internal and external)
  • Selecting candidates
  • Onboarding and training employees
  • Evaluating the performance of employees
  • Providing compensation, benefits, rewards and more
  • Complying with labor laws
  • Maintaining a strong employer-employee relationship 
  • Training and development
  • Recognizing employee contribution and engaging employees

In big organizations, HRM is divided into various departments that come within the remit of multiple managers and specialists such as career counselors, training and development managers, employment service managers, and more. In small companies, this process is either outsourced or taken up at a small scale.

Why Is Human Resource Management Important?

The HRM goals are in alignment with the company’s missions and objectives. The initiatives involved in this process are focused on supporting employee welfare and nurturing employees, which contributes to business growth. HR managers play a critical role in strategizing and decision making for corporations and larger companies. They are responsible for identifying the skilled people and onboarding them, deciding for workforce planning, facilitating employee communication, reducing absenteeism, and employee turnover rates.

According to some experts, human resources management has become synonymous with human capital management. The reason is that HR managers put substantial efforts and resources in human capital, which includes but is not limited to jobholders’ skills, education, training, and other important factors that positively impact their performance. It also includes planning for the employment life cycle and adopting measures to keep the company’s most valuable assets attuned to its culture.

Importance of Human Resource Management in an Organization

Human Resource Management (HRM) is a development-oriented approach of acting toward people at the workplace, which centers on talent acquisition, engagement, and development of human resources. It is crucial for managers of all levels and provides scope for employee association, performance, and growth. More companies around the world are switching from personnel management to HRM  because it is a more advanced and effective way of handling employees at a workspace. It focuses explicitly on maximizing employee performance with employers’ strategic objectives in mind. Besides, there are several vital functions of HR management as given below:

Quality of Work-Life (QWL)

Quality of work life refers to how conducive and unconducive a job environment could be for the employees working in an organization. QWL speaks volumes about the employees’ perception of their work environment and their physical and psychological well-being at work. HRM based processes, therefore, aim at improving the quality of work life for employees by facilitating work autonomy, freedom, work recognition, belongingness, etc.

Maximizing Profit and Productivity

HR management focuses on both the quality and quantity of employees in an organization. In addition to this, it provides ample opportunities to motivate and enable employees to grow and advance their careers. Inspired employees strive hard to achieve their professional goals, which straight away influences organization productivity. In essence, productivity is cost minimization and profit maximization.

Adaptability of Employees

Essentially the purpose of human resource management is to enhance the productivity and efficiency of employees via training and development programs. Such programs are useful in keeping employees updated with skills that are imperative for keeping up with the ever-changing environment, structure, and technology of organizations. 

Meeting Demand-Supply Gap of Human Resource  

The importance of HR management in an organization is not just limited to managing employees but also ascertaining the adequacy of available human resources. In case the organization has inadequate employees, HR managers conduct recruitment and selection drives to fill the gap. Similarly, laying off unproductive employees comes under the purview of human resource management. 

Helping Employees Achieve Company’s Goal

Harnessing human resources to the fullest extent and building a sense of belonging among them is also an essential purpose of human resource management. For this purpose, HRM carries out activities such as rewards, compensation, and fringe benefits to the deserving people. Such activities not only boost the morale of employees but lead organizations one step closer to their objectives.

Employee Recognition 

When employees get recognition for their merits and contributions, they see meaning and purpose in their job. Moreover, human resource managers must conduct timely appraisals to differentiate between high and low performers. 

Infusing Team Spirit 

The onus to make every employee feel important is on human resource managers. They emphasize the importance of teamwork within departments and devise ample strategies that highlight the importance of teamwork. Hence, infusing team spirit is critical to help employees contribute best from their side. 

Business Sustenance

Human resource management ensures that the organization gets the best employees because a talented and capable workforce can work wonders for the company. Organization’s success and sustenance are dependent on its workforce. 

Conflict Resolution

Organizations, whether big or small, cannot stay aloof from conflicts that may arise between small teams or bigger groups. Such unforeseen instances are inevitable and are hard to let go of. HR management is responsible for sorting out such differences in a systematic way and facilitates smooth operations of the organization.

Building a Corporate Image

Sustainability for organizations means maintaining a venerable ideal image in the market. Everyone would like to associate with a company that’s prominent for its moral and social responsibility towards its employees. On the contrary, companies that consider their employees as resources and not humans are on the verge of losing everything.

How Mercer| Mettl can help?

Human resources stand indispensable for organizations of all sizes. Not only do they have the company’s best interests at heart, but they also give a conducive environment for employees to get ahead in their careers. Usually, HR professionals have to deal with many uncertain problems at work, but they take it all in their stride to look after employee’s welfare and satisfaction. The Mettl Assessment for HR managers is ideally suited for finding the most qualified, passionate, and talented practitioners. Such a test will enable you to hire the best HR professionals for a critical role in your organization.

Originally published May 1 2018, Updated April 12 2024

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About This Topic

Human Resource Management, also known as HRM, is the function that manages employees, starting from their recruitment and induction to development, appraisals and promotions, with the aim of maximizing their performance in-line with organizational objectives.

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