What Is Human Resources (HR)?

Human resources (HR) is the division of a business that is charged with finding, screening, recruiting, and training job applicants, as well as administering employee-benefit programs. HR plays a key role in helping companies deal with a fast-changing business environment and a greater demand for quality employees in the 21st century.

John R. Commons, an American institutional economist, first coined the term "human resource" in his book "The Distribution of Wealth," published in 1893. However, it was not until the聽19th聽century that HR departments聽were formerly developed and tasked with addressing misunderstandings between employees and their employers.

Key Takeaways

  • Human resources (HR) is the division of a business that is charged with finding, screening, recruiting, and training job applicants, and administering employee-benefit programs.
  • Additional human resources responsibilities include compensation and benefits, recruitment, firing, and keeping up to date with any laws that may affect the company and its employees.
  • Many companies have moved away from traditional in-house human resources (HR) administrative duties and outsourced tasks like payroll and benefits to outside vendors.

Understanding Human Resources

The presence of an HR department is an essential component of any business, regardless of the organization's size. An HR department is tasked with maximizing employee productivity and protecting the company from any issues that may arise within the workforce. HR responsibilities include compensation and benefits, recruitment, firing, and keeping up to date with any laws that may affect the company and its employees.

Research conducted by The Conference Board, a member-driven economic think tank, has found six key people-related activities that HR must effectively聽do to add value to a company. These include:

  • Managing and using people effectively
  • Tying performance appraisal and compensation to competencies
  • Developing competencies that enhance individual and organizational performance
  • Increasing the innovation, creativity, and flexibility necessary to enhance competitiveness
  • Applying new approaches to work process design, succession planning, career development, and inter-organizational mobility
  • Managing the implementation and integration of technology through improved staffing, training, and communication with employees

Beginning in the 1980s, there was a push for strategic initiatives within HR departments. This movement was based on research related to the impact of employee-related issues on a firm's long-term business success. Collectively, these strategies are sometimes referred to as human resource management (HRM) strategies. HRM is a comprehensive approach to managing employees and an organization's culture and environment. It focuses on the recruitment, management, and general direction of the people who work in an organization.

An HR department that adopts HRM strategies typically plays a more active role in improving an organization鈥檚 workforce. They may recommend processes, approaches, and business solutions to management. Google is one example of an organization that has adopted a more active approach to employee relations through their HR department. The company offers tons of employee perks, and the company headquarters have a wide range of facilities for employees, including wellness centers, roller hockey rinks, and horseshoe pits. For Google, happy employees are equivalent to productive employees.

Special Considerations

Since the start of the 20th century, some companies have started outsourcing some of the more traditional administrative, transactional HR functions in an effort to free the department to recommend and implement more meaningful, value-adding programs that impact the business in positive ways. Functions that may be outsourced in this process include payroll administration, employee benefits, recruitment, background checks, exit interviews, risk management, dispute resolution, safety inspection, and office policies.