Why Is Human Resources Important?




People ask me, "Why is human resources important, Tim?" and I always answer, "Because your organization is about your people. Without them, you don't have a business!"

Some of you might disagree with me, but I would like to get you onboard by digging deeper into this critical subject.

In today's article, I will define what human resources is and its importance to small businesses.

Let's jump to it!

What Is Human Resources?

Human resources represents both the employees of a company and the department responsible for managing resources related to employees.

It is about:

  • Addressing all the concerns of employees.
  • Hiring qualified employees.
  • Managing employee programs and benefits.
  • Managing and building employee satisfaction, engagement, and morale.

The department that handles all these functions is called the Human Resource Department or HRD.

For most businesses, small ones included, the HR department focuses on these major functions:

  • Recruitment and staff assignment.
  • Compensation and benefits.
  • Training.
  • Labor and employee relations.
  • Overall organizational development.

Undeniably, human resources plays an essential role in any organization.

Why Is Human Resources Important?

First of all, human resources is essential in small businesses, in fact, in all types of business, regardless of size! There’s no difference if you only have 550, or 500 employees. You need a human resources department (even if it's a department of one) because it will serve as the human capital control room of your company.

Here are a few important benefits of human resources that are great to keep in mind ...


Budget Control

Nobody wants to spend vast amounts of money, especially if you own a business.

Controlling unnecessary spending and helping to save the company money long term is one of the crucial roles of the HR department.

It develops methods for cutting the costs associated with workforce management.

Here are a few tactics your HR Department can do to reduce costs:

  • Negotiate better rates for employee benefits such as healthcare insurance and retirement benefit plans.
  • Analyze employment trends, the labor industry, and compensation based on job functions and descriptions to ensure the company’s salaries are competitive and practical.

Since many small businesses must stick with strict budgets, using these tactics can positively impact the bottom line.


Improve Employee Satisfaction & Engagement

Measuring employee satisfaction is a challenging task. Why? Because employees can be satisfied with some parts of their job, but not others. Also, every employee has a different personal definition of satisfaction.

It's why human resources is important for small businesses.

The HR department can implement a few different methods to measure employee satisfaction effectively, identify areas of improvement, and implement solutions that will improve employee satisfaction.

The most common way of measuring employee satisfaction is through employee satisfaction surveys.


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Resolve Employee Conflicts

Whether you like it or not, conflicts will happen in the workplace given the diversity of work manners, personalities, levels of experience, and backgrounds of all employees, top management included.

Who are you going to call when there’s conflict? The HR department!

An HR manager or specialist is trained to manage relations between employees to identify and resolve conflicts among employees. He or she is prepared to reestablish healthy working relationships throughout the organization effectively.

Here are some tactics for HR to incorporate when there’s conflict:

  • Highlight clarity and consistency in company policies and procedures.
  • Ensure accountability for conflict resolution.
  • Never ignore the conflict.
  • Seek to understand the root of the problem.
  • Recognize different circumstances and different approaches to conflict.

Employee Training & Development

Another reason why human resources is important to small businesses is that it helps in employee training and development.

The HR department can assess employees to determine the type of skills training needed for them to perform at their best.

Here are a few ways HR can improve employee training and development:

  • Conduct regular employee training.
  • Implement cross-departmental teamwork.
  • Increase both mentoring and coaching strategies.
  • Conduct training that will enhance the soft skills of employees.
  • Encourage personal development.
  • Promote a growth mindset in the workplace.

Attracting & Retaining Top Talent

It’s the HR department’s job to attract and retain the best talent in the market.

Employees who dedicate their time and skills to a company mean more than just accomplishing tasks and filling vacant job positions. These talents are the spine of a company’s success.

Attracting and retaining employees who are qualified with the right skills, fit the company culture, and have a positive mindset will determine whether a company will succeed or not.


Improving Employee Performance

Improving performance or productivity is a vital human resources task. It’s a great way to ensure the company is making the most of their investment in people.

Also, improving performance or productivity is important in maintaining employee satisfaction.

Remember that satisfied employees perform better, which reduce costs and help the business achieve its goals.


Reduce Turnover

Employee turnover can damage a company in more ways than one. Imagine letting go of your best talents and handing them over to your competition. It could quickly become a nightmare!

Here are a few negative impacts of high turnover or attrition rate:

  • Loss in company revenue and profitability due to hiring expenses and training labor.
  • Increased workloads and responsibilities for both current and new employees could lower workplace morale.
  • Not having enough employees or inexperienced employees without complete training can result in a poor product or inferior service quality.
  • Inexperienced staff or lower-quality products could reduce marketing return on investment due to lower repeat customer referrals.

One of the best ways to reduce employee turnover is to hire the right people for the right job, and the HR department has all the right tools and skills to do so.

So there you have it!

From controlling company budget to reducing employee turnover, we've provided you seven benefits of human resources to help you understand why human resources is important.

To know more about Human Resource Management, I highly recommend reading the articles below.

Recommended Human Resources Management Articles

Why HR Is Important for All Business, Especially Small Businesses

What Every Small Business Owner Needs to Know About Human Resources

Why Is Human Resources Important?

So what do you think about this article? Do you now understand the importance of human resources to your business?

Let’s discuss in the comments section below!

Don’t forget to SHARE this article with your family and friends if you feel it's worth sharing.


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About the author, Tim Fitzpatrick

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