Human Resources

HR should be every company's killer app. What could possibly be more important than who gets hired?"

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Table of contents

    -Jack Welch

    Human resource management (HRM) is a crucial part of any business. Without HRM, organisations would not be capable of effectively recruiting and retaining employees, improving and enhancing the organisation, and they would not be able to maintain a healthy working environment. So, what exactly is human resource management? How can decision-making improve HR performance? and what are the human resource activities that can improve employee performance? Let's find out!

    Human resource management

    In order to truly understand the importance of human resource objectives, we first have to define what human resource management is.

    Human resource management (HRM) is a strategic approach to effectively and efficiently manage people in an organisation in a way that will facilitate the organisation to achieve a competitive advantage.

    Setting HR objectives

    Setting goals allows the organisation to plan and assign resources. Making certain business decisions can a lot of time and require many resources.

    If a company needs to increase its labour force, it needs a process to recruit, select, induct and train employees. This can be facilitated by effective HRM.

    The benefits of having good HRM are:

    • Reduced costs due to higher productivity, greater efficiency, and higher quality products.

    • Increased value-added, hence increased profits. This can be due to higher quality products, better service to customers, and innovation built on the performance and determination of the workforce. A workforce that is determined and motivated will be willing to do its work in the best possible way, and hence, provide good quality products.

    • More employee engagement and involvement

    • Talent development

    • Improved employee turnover

    • Good conflict management

    To learn more about setting HR goals, check out our explanation on the Human Resource Objectives.

    Decision-making to improve human resource performance

    Let's take a look at the role HRM has in business decision-making.

    Human resource management

    When we talk about decision-making in HR, it refers to a process that involves everyone. The decisions made by this function cover the whole employee lifecycle, from the period of talent identification, hiring, performance supervision, and compensation, to contract end. HR relies on market data and also internal responses, to allow better and quicker decision making.

    The link between HRM and organisational goals

    All HRM decisions have a direct connection to company goals.

    If a company's goal is to become a market leader, they need to create an achievement-oriented company culture. This can be done through HRM, by implementing an outstanding recognition policy for example.

    The function of HR, however, is becoming more complicated, as well as more crucial. Companies understand the significance of recruiting and retaining highly skilled workers. Retaining employees and preventing turnover can be one way of reducing costs. Productivity is also subject to its employees. Human resource managers are responsible for keeping employees satisfied and ensuring they comply with regulations.

    To learn more about decision-making in HRM, check out our explanation on Human Resource Management.

    How can human resources be improved?

    Now, let's take a look at how effective HRM can improve a business.

    Improving organisational design

    Organisational design is the process of arranging organisational structure so that it is in line with its culture and goals.

    Businesses are organised so they function effectively and efficiently. Businesses may contemplate improving and changing their design when:

    • There is a need for a formal structure to prevent confusion and disorder.

    • The old organisational design is not engaging and motivating enough for the employees.

    • The product/service quality of the organisation needs improvements.

    Improving motivation and engagement

    Motivation is the desire of the employee to perform or accomplish something.

    Employee engagement is the degree to which employees feel determined to work for the organisation and contribute to its success.

    The advantages of a motivated and engaged workforce are:

    • High-quality products with added value and less waste.

    • Lowers costs via efficient productivity and innovation.

    • Increased employee retention and thus decreased recruitment costs.

    Improving employer-employee relations

    Employer-employee relations refers to the relationship that exists between the two parties. The quality of the relationship will determine how well work-related problems are resolved. The benefits of good employer-employee relations are:

    • Employee loyalty

    • Employee retention

    • Preventing conflicts

    • Increased productivity

    Measuring the effectiveness of HR management in improving performance

    HRM can affect business performance in a variety of ways. This is why it is important to analyse HR performance and examine its overall impact on the organisation.

    Measuring HR performance

    Performance analysis is a method of evaluating the performance of a particular project, team or the whole organisation against set goals and objectives.

    In HR, performance analysis can provide assistance in reviewing an employee’s contribution to an assignment/project.

    In order to analyse performance, an organisation should be able to interpret the following:

    Recognising the strong influence that HR has in a company is an essential sign of how successful the company will be in the future. The following considerations explain how HR performance can be measured and interpreted.


    It is important to measure the efficiency of the HR department at applying policies, programmes, and schemes to effectively engage and manage employees. For instance, a company should examine the level of regularity, responsiveness, quality, and efficiency with which HR delivers services. Specific measures may include the type of problems the HR department is able to solve on average or the cost ratio of HR to the entire business costs.


    Output needs to be measured if HR is applying policies and strategies to maximise the recruitment, development, engagement, output, productivity, and retention of employees. This measure may comprise the percentage of newly hired employees, promotions, retention of employees, whether employees accomplished their learning goals, and the way performance is influenced.

    Management of teams

    It is important to consider how effective management strategies are at promoting positive morale, active engagement, the contribution of employees and teams, and overall productivity. The development of the team can be measured by tracking employee absenteeism and personal development plans.

    Human resource management activities to improve employee performance

    There are multiple ways in which human resource managers can ensure that they increase employee performance.

    Conduct a survey

    Try to find out what barriers are getting in the way of productivity with the help of an employee survey. If there are no systems in place for this, then there are several online platforms that permit the creation of surveys.

    Incorporate flexible work

    With the change of circumstances as a result of the pandemic, several employees might want to have the opportunity to work from home for the long term. Based on the role, flexible work programmes may increase employee productivity and reduce environmental stress, enabling better focus, decreasing unplanned meetings, and improving employee performance.

    Modernise technology and tools

    If the company has hired the best talent but uses outdated technology and tools it might obstruct productivity and create a sense of irritation among employees. While technology is expanding and improving all the time, it is essential to constantly update the tools needed so that processes run efficiently.

    Constraint budgets make it difficult for employees to do well and innovate. Therefore, even with the best workforce, it will be harder for the company to improve employee performance, retain employees, and entice the best candidates in the future.

    To learn more about how business improves employee performance, check out our explanation on Employer's Training and Development.

    As a result, over time organisations have realised the increasing importance of human resource management and the advantages it brings for the organisation in terms of a satisfied workforce, lower employee turnover, greater employee involvement and engagement. All these factors will benefit the organisation in the long term if tackled with the right strategies.

    Human Resource Performance Management - Key takeaways

    • Human resource management (HRM) is an approach for employee management in an organisation to facilitate competitive advantage.

    • Setting goals allows the organisation to plan and assign resources.

    • Organisational design is the process of arranging the organisation’s structure in line with its culture and goals.

    • Employer-employee relations denote the relationship that exists between the two parties. It involves any interaction and contact, for example, communication and work policies.

    • HR can be improved by enhancing the hiring process, educating employees, having clarity about expectations, and having reward programmes.

    • Human resource management can be measured through efficiency, output, team management, and human capital.

    • Improving employee performance can be achieved through surveys, incorporating flexible work options, and modernising technology and tools.

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    Frequently Asked Questions about Human Resources

    What are human resources?

    Human resources (HR) is a department of a company responsible for handling all employee-related matters, from recruiting through training and managing to offboarding.

    What do people do in human resources?

    People come up with approaches to effectively and efficiently manage people in an organisation in a way that will facilitate the organisation to achieve a competitive advantage. 

    What are examples of human resources? 

    Hiring, firing, and training are some examples of human resources (HR) responsibilities.

    Why are human resources important?

    Human resources are important because the workforce is managed through them and a business can achieve its objectives as a result of that. 

    Test your knowledge with multiple choice flashcards

    Incentives are rewards and techniques that are used to motivate employees to encourage certain behaviors that are beneficial to the businesses. 

    Incentives can only be financial. 

    How many key incentive types are there?


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