Human Resource Management (HRM) – Importance & Functions

Human Resource Management – Definition

When there is a shortage of skilled workers, human resource management (HRM) takes on a particularly important role.

By definition, human resource managers are responsible for taking full care of a company’s personnel matters and for setting up and handling all related HR processes as efficiently and smoothly as possible. This involves more than mere personnel administration – traditional personnel management. Modern HR departments actively implement activities to recruit and train employees, retain them, motivate them and put their skills and knowledge to the best possible use.

The overarching goal is always to use this so-called “human capital” to contribute to achieving the company’s goals. HR management thus plays a key role in developing organizations.

Human Capital – Meaning and Criticism

The term human capital refers to the economic value that employees create for a company through their skills and abilities, as well as that which can be increased by investing in education and training. The term has repeatedly been criticized because many people think of it as reducing humans to economic aspects alone. In 2004, it was even named “non-word of the year” in Germany.

Modern human resource management should indeed never lose sight of the need to take a holistic view of employees, with all their needs and wishes, and to respond to these. Only in this way can employees realize their full potential, be more satisfied, and thus serve the company for a long time to come.

In order to take this relationship-oriented approach into account, HR at OTRS Group, like at more and more companies, does not stand for Human Resources, but rather for “Human Relations.”

What Is the Difference Between Human Resource Management and Personnel Management?

Human resource management and personnel management are often used synonymously. In fact, the two disciplines overlap in many areas, such as looking at who should be hired and dealing with issues like compensation.

Depending on the definition, however, there are also some differences. Besides traditional tasks of the HR department, such as recruitment and personnel development, HRM includes additional tasks that are primarily intended to ensure and increase employee satisfaction in order to meet strategic organizational objectives.

Personnel management, on the other hand, is more of an administrative role. It focuses on the day to day aspects of the employee’s experience, from recruitment through job satisfaction.

What Are the Functions of Human Resource Management?

With the development of human resource management, the range of tasks for human resource managers has also increased in recent years. The basic function of HR managers is to plan, manage and shape a company’s human resources and all associated HR processes in such a way that they can achieve the company’s strategic goals. In doing so, they must reconcile their organization’s efforts to increase efficiency with the expectations and needs of its employees.

Traditional Functions of Human Resource Management

Tasks that are more administrative in nature and focus on achieving the company’s goals by setting up and deploying employee resources as efficiently as possible can be described as traditional functions of human resource management.

Acquisition and Selection of Personnel (Recruiting)

One of the most fundamental functions of human resource management is recruiting. It involves finding and selecting suitable personnel according to the company’s staffing needs. To do this, HR managers must first determine these needs and define exactly which job profiles are required.

• What criteria must a candidate meet to be considered qualified?
• What are the tasks they are expected to perform?
• What are the goals to be achieved by this?

Based on these answers, the HR department must then take suitable measures to find and win qualified applicants. These can include, for example, placing job postings on the company’s website or on job portals, active sourcing (the method of actively searching for, approaching, and recruiting potential candidates), or participating in career fairs or relevant trade fairs.

Personnel Development: Education and Training

Once employees have been hired, there is plenty left for human resource management to do. Requirements and expectations of both the company and job must be set and revisited with the employee over time. To meet these needs on both sides, HR managers must take appropriate measures. These measures are determined by first identifying the specific need and evaluating the potential benefits for the company and its employees.

For example, if a company introduces new  customer service software, training for all employees with customer contact may be necessary. If an employee expresses interest in a different area of expertise within the company in which they have not previously been employed, human resource management could provide them with internal training, depending on resources and needs. External training, coaching, and education are also common steps for qualifying and developing and retaining employees long term.

• Employee Appraisals and Compensation

The human resource management functions of evaluating employees and determining their compensation are closely related in many cases. Typically, employees are appraised in regular intervals (usually once a year) with regard to their performance, their potential and, if applicable, their behavior and personality. This assessment is usually carried out by supervisors, while HR managers are responsible for planning and documenting it or assist in doing so. Together, they derive suitable actions from the appraisal. More and more often, target agreements are used in this context. Once agreed upon, these serve as the basis for the next appraisal.

Salary adjustments and bonuses or additional employee benefits are also frequently linked to whether and to what extent an employee has achieved their target agreements. Employee appraisals are thus an important tool for human resource management to determine how employee performance should be compensated.

But there is more to it than that. HR management must develop and establish a fundamental strategy for a fair compensation model within the company. In doing so, it needs to make sure that it maintains a balance between the economic interests of the company and those of the employees. After all, a healthy, sustainably oriented company needs both cost efficiency and satisfied employees.

Modern Human Resource Management Functions

Over the years, a number of more strategic tasks have joined the traditional functions of human resource management, some of which are closely interlinked with other specialist areas. Modern HRM goes beyond the mere management of workforce resources. It places a greater focus on employee satisfaction and well-being as the cornerstones for achieving the company’s goals.

• Employer Branding

Employer branding is about strengthening the company’s image as an employer with the aim of enthusing both existing employees and potentially qualified candidates about the company as an employer. Building and maintaining the company’s reputation has become a particularly important task for human resource management as a result of the so-called war for talent. For this purpose, HR usually works together with the company management as well as with marketing and PR.

An employer branding strategy should be designed for the long term and not make any false promises. For example, if you communicate to potential candidates on the career page and in interviews that you can score points with flat hierarchies and flexible working hours, you must then also prove this. Otherwise, new employees will be gone again faster than HR managers can say “probation period passed”.

Change Management and Personnel Communication

The world in and around companies is constantly changing. Be it

• internally through strategy and personnel changes, new product developments, the introduction of new tools or the company’s growth or
• externally through economic, ecological, social, legal and political conditions.

Those who leave their staff alone to deal with all these smaller and bigger changes will lose them in the long run. HR managers are, therefore, increasingly given the task of actively helping to shape and accompany change processes. This is also referred to as change management. In this context, human resource management acts as a link between employees, corporate management and other stakeholders.

Corporate Culture and Cultural Management

When employees are doing well, the company generally does too. Part of this is ensuring that employees feel comfortable and can identify with the values and culture of the company. Creating this corporate culture and its guiding principles also falls within the scope of human resource management. The guiding principles should be developed in collaboration with and practiced by the company’s management and with the involvement of the employees.

On a large scale, there should be a shared understanding of what the company stands for, what values are important to it, and what role it plays — not only in the economic world, but also in society. On a smaller scale, this is then expressed in specific everyday behaviors, such as:

• how colleagues interact and communicate with each other,
• how the company works with customers,
• what its understanding of work-life balance is,
• how the company management leads by example, and
• how mistakes are handled.

Corporate culture is expressed in all of this and more. However, it is not a rigid construct. Rather, it lives and breathes and, like the entire company, is subject to constant change. Similar to its role in change management, HRM plays an accompanying, supporting and moderating role in the management of this culture and its changes.

Precisely because corporate culture initially appears rather abstract, companies should make it tangible for all employees not only through leading by example, but also by recording it in writing and making it transparent. For example, a code of conduct or guidelines on specific sub-topics such as corporate social responsibility are suitable for this purpose.

More Functions of Human Resource Management

The functions of human resource management described so far are only an excerpt from the many areas of activity in this field. Other tasks of HR management include, among others:

• Administration, such as payroll and personnel data management
• Personnel deployment to ensure that all areas of the company are supplied with suitable employees at all times
• Personnel organization in terms of optimally structuring the company organization
• Personnel support, for example through onboarding and offboarding, but also termination interviews as well as daily individual support for inquiries of any kind – from labor law to additional benefits
• Activities to increase employee satisfaction
• Activities to ensure employee work-life balance
• HR controlling, including reporting, in order to plan, evaluate and manage personnel-related expenses and revenues
• HR transformation, specifically the digital transformation of HR processes and HR management as a whole

What an individual human resource manager has to cover depends to a large extent on how big a company is. In smaller companies, HR managers usually have to cover a wide range of responsibilities. In larger companies with more personnel resources and more complex structures, HR managers tend to specialize in specific areas.

The Importance of HR Management Going Forward

The tasks of human resource management will neither become less nor easier in the future. Challenges in the world are always accompanied by new challenges for HR. For example, the pandemic fundamentally changed the way we work. HR managers had to respond to such changing conditions and constantly adapt individual activities as well as their overarching HR strategies.

Remote Work and Flexible Working Time Models

Home office, mobile work or remote work and teams distributed across many locations are no longer the exception, but are widespread. Even though many companies have brought their teams back to the office, many employees have come to know and appreciate the advantages of working from home and do not want to give them up anytime soon. For human resource management and executives, this means finding new ways to communicate and collaborate. Flexible working time and work location models will play an increasingly important role when it comes to attracting and retaining qualified employees.

Generational Change and Shortage of Skilled Workers

With Generation Z gradually entering the labor market while the baby boomer generation is slowly retiring, expectations towards employers are also changing. More than any generation before, Gen Z has grown up in the digital age and expects professional digital processes on the job as well. In addition, Generation Z has grown up in the midst of crises. From climate change to the effects of the pandemic, the Ukraine war to inflation, the energy crisis and the pension gap – their lives are marked by worries about the future. This reinforces their need for clear, fixed structures, regular working hours and a secure employment relationship.

Since fewer young people are joining the workforce than are retiring, the generational change will further exacerbate the shortage of skilled workers that already exists today. In this intensive war for talent, good human resource management that succeeds in positioning itself as an attractive employer and meeting the expectations of qualified employees will become all the more important.

HR Management Software – Benefits and Solutions

Digital transformation is not leaving human resource management unaffected – and that is a good thing, because HR management software makes it much easier for HR departments to make their HR processes lean, efficient and smooth. Automation saves time and money, reduces data errors and improves employee well-being, according to an OTRS survey. Thus, HR managers have more time to focus on other important, more challenging or more creative tasks that are essential to the progress of the business and the well-being of employees. This benefits HR managers, employees and the company’s success.

Preconfigured HR Processes for Future-Proof HR Management

Many companies are still at the very beginning of their digital transformation journey and are struggling with how to tackle this seemingly gigantic project. However, simply standing still is not an option.

With an HR Management software solution like OTRS, getting started with digital HR transformation is made as easy as possible. Benefit from integrated business process management (BPMS) with HR processes already preconfigured. Your HR teams can get started immediately. Typical processes and tasks, such as:

• personnel data management,
• applicant management,
• onboarding or
• sick leave and vacation requests

that occur in every HR department are already set up in the turnkey software solution. Every optimized, automated process, no matter how small, reduces the workload of HR managers and increases employee satisfaction.

An HR Help Desk Means Increased Employee Satisfaction

Modern HR management software should not only be able to map, optimize and automate processes, but should also provide functionalities for efficient and transparent internal communication. Especially in companies with distributed teams and mobile work, a digital HR help desk, specifically designed for HR-related matters, is a good way to stay closely connected with employees and with each other.

Providing employees with a dedicated point of contact for questions, assistance and issues around HR topics demonstrates care and appreciation. With a help desk solution or ticketing system, HR teams can ensure that no request is lost and that employees receive feedback or have their issue resolved as quickly as possible.

Plus, a built-in knowledge base can be a useful addition to the HR help desk, providing answers to frequently asked questions and providing step-by-step guidance on recurring processes, such as leave requests. This reduces the workload of human resource management teams as well, giving them more time to deal with complex issues.

Want to learn more about how OTRS can help you with automated HR processes? Or, ready to get started with the HR Management solution right away? Our experts look forward to hearing from you.

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