Why Human Resources is Critical for Business Success

January 22, 2020
Posted in: Other Growth

Table of Contents




In recent years, the role of the human resources (HR) professional in small businesses and large corporations alike has gone from basic hiring, firing, processing payroll, and managing employee benefits. It’s become a comprehensive position that focuses on, among other things, ensuring that employees are engaged. HR plays an essential role in developing a company’s strategy as well as handling the employee-centric activities of the company. Today’s human resources department isn’t your grandmother’s “personnel” department.




Why the Human Resources Department is Important


Although not every organization understands the importance of their HR department, human resources professionals are the backbone of the company. Overall, their job is to ensure that the company receives a high return on the investment in its employees. 

Having an HR team on board can increase the understanding of how vital human capital is to a company’s success. Human capital is even more critical at smaller companies where employees often perform cross-functional duties.  If just one person leaves the company, this can have a significantly adverse effect on the company’s profitability.

Here are other reasons why HR is essential to a company’s success:


Recruitment Process

The HR department tends to the recruitment needs of the company. HR professionals not only determine when recruitment is necessary for each department but handle the interviewing and selection process as well. During the interview process, they evaluate candidates to ensure that the company will benefit from the potential employee’s qualifications. HR also looks for signs that the candidate will be a good fit for the company’s culture


New Hire Onboarding

Besides recruiting and interviewing potential candidates, the HR department is tasked with planning and scheduling the onboarding activities for new hires. Onboarding is the process by which new employees acquire the knowledge, skills, and behaviors needed to be effective members of an organization. An effective onboarding program uses formal meetings, videos, or printed materials to help new hires integrate into the organization and its culture. These tools lead to positive experiences for new hires including greater job satisfaction, better job performance, and reduced job stress. 

Planning an effective onboarding process can be an involved endeavor but the company will benefit in the long run as new hires get acclimated to their new positions at a faster pace.


Improving Employee Satisfaction

The HR department is constantly working to improve the quality of employees’ work lives. This department doesn’t hire and onboard new employees then leave them to their own devices. HR is continually creating and implementing programs and policies such as incentive opportunities and on-site daycare services. Through carefully designed employee surveys, focus groups, and an exit interview process, HR determines what factors contribute to employee dissatisfaction and addresses those issues to keep employees motivated and engaged.

Their job includes supporting employees in balancing their personal and work lives. For example, on-site daycare services are made available to ensure that employees don’t have to miss work due to their regular babysitter being ill or their children being on a school break. Showing concern for employees as individuals will increase loyalty, commitment, and reduce staff turnover.

HR also oversees employee benefit and incentive programs. They aid employees by providing guidance in the completion of applications and by processing claim forms.  HR also keeps employees updated with new information or programs that become available to them. 


Acting as Intermediary

Workplace conflict among employees is inevitable given the differences in personalities, work styles, backgrounds, and experience levels. HR often acts as the go-between when an employee has an issue with management or with another employee. HR professionals are specially trained to resolve workplace conflict and restore positive working relationships. HR also works in collaboration with other departments to achieve the goals and maintain the standards of the company.




Training & Development

HR conducts needs assessments to determine the type of training and development necessary for improving employees’ skills and qualifications. The department then develops the appropriate training and development programs. HR is responsible for ensuring that current employees receive opportunities for continued education and upgrading of skills. Ongoing employee training is vital for a company to maintain a world-class workforce.  It’s a strategy that can reduce turnover and increase employee retention.

HR regularly finds or creates various types of training programs such as first aid or software classes to keep employees abreast of technological advances in productivity tools and ways to remain safe in the workplace. They also make arrangements for employees (and management) to take refresher courses as needed.

HR develops performance management systems to ensure that employees don’t remain in jobs that aren’t a match for their skills and experience. This will prevent employees from remaining on the payroll when their performance doesn’t meet company standards.


Maintaining Employee Records

HR maintains the database that contains all of the information the company needs for each of its employees. This includes personal and confidential information such as the employment contract, job responsibilities, compensation history, discipline records, and performance evaluations. Whenever this information is needed by management or external agencies, it’s readily available.  


Legal Compliance

HR ensures that the company is in compliance with both federal and state employment laws regarding such matters as the minimum wage, termination of employees, and non-discriminatory employment practices. This department is also responsible for informing all employees of these laws and keeping them abreast of any changes.  


Public Relations

HR plays an active role in establishing productive relationships with other companies, the company’s target market, and the community by arranging business meetings, seminars, and other events. Engaging in public relations activities helps the company maintain its position as a viable competitor in its industry. 


Improving Corporate Image

HR is also important because they manage and protect the company’s image.  Most companies aim to be regarded as an “employer of choice”. Employers of choice  are those that are lauded for their exemplary treatment of employees. They’re the companies for whom people want to work. By protecting the company’s image, HR can recruit the most qualified candidates and retain the most talented and productive employees.

HR is also responsible for making sure all employees are aware of the company’s philosophy and principles and that those principles are adhered to. HR accomplishes this by recognizing desirable traits during the hiring process and by implementing thorough orientation and onboarding procedures. 


Budget Control

HR impedes excessive spending by developing methods for reducing labor costs. These methods include minimizing job posting expenses, employing a well-structured recruitment process, and negotiating better rates for health care benefits and incentive programs. In addition, HR ensures that wages are competitive and realistic by studying the labor market, employment trends, and salary analysis based on job function. This is especially important at smaller companies where budget constraints are commonplace.




When Is It Time to Hire an HR Manager?


For most small businesses with fewer than 50 employees, the owner generally assumes the role of HR manager.  In fact, a recent study found that 41% of small business owners prefer to handle HR functions themselves. That’s a significant undertaking for someone already pulled in a hundred directions.

Or, the office manager handles the day-to-day tasks of onboarding new hires and administering payroll. Hiring an HR consultant is another way small business owners establish their HR processes. Once the system is set up, either the owner or a designated employee then handles the day-to-day maintenance of the system.

The 50-employee threshold is the point at which concerns over compliance with employment laws affect many small businesses, according to Donald F. Kuratko, Professor of Entrepreneurship at Indiana University. Here are the signs that it’s time to hire an HR manager.


You Have 50+ Employees

The more people you hire, the more your HR-related tasks will increase, whether it’s an employee relations issue, onboarding session, payroll matter, or benefits management. As the owner, your time is better spent on business strategy. 

That’s not to say that employees aren’t an essential component of business strategy. However, managing HR functions shouldn’t be your primary focus. You’re likely already wearing many hats, sacrificing time to keep expenses at a minimum. If you’re personally dedicating 18 or more hours a month to HR, it may be beneficial to re-evaluate how you invest your energy. Furthermore, if you’re overwhelmed this can trickle down to staff and destroy employee morale and the bottom line.

Your office manager may not have minded handling HR tasks when there were 10 employees, but with 50 employees he/she may be overwhelmed. Once your employee headcount reaches that number, HR tasks can take up a great deal of time. Managing HR functions in addition to the responsibilities for which the office manager was hired becomes a challenge. The company is best served by bringing on a dedicated HR manager.


You’re Actively Hiring

As your business grows, you need to hire the right people to help you manage the growth. These people will help you get the job done in the most effective and cost-efficient way. It takes time and skill to find talent, whether it’s full-time employees, temporary staff, or interns. This involves more than posting job ads on career websites. You need someone with the training and experience to sift through hundreds of resumes and applications, schedule and conduct interviews, and make a competitive offer. A skilled HR professional can ensure that new hires are a good fit which will lead to a higher retention rate. Recruiting, hiring and retaining talent requires a strategic approach and HR managers understand how to implement strategies that will meet your hiring and retention needs.

In your company’s startup phase, it’s critical that your employer brand is established. By doing so, you’re helping your company succeed. Establishing your employer brand involves the creation of a strong company culture, engagement of employees, and investment in training and professional development. There’s no one-size-fits-all approach when it comes to your employer brand. It takes time and effort to create a work environment in which employees can thrive. By hiring a skilled professional to manage HR, you increase your chances of becoming an employer of choice and retaining your valued employees.


You Want to Ensure Compliance with Employment Laws

Once you reach an employee headcount of 50, employee relations issues are bound to increase. You’ll need to have a thorough understanding of federal and state employment laws to avoid fines, penalties, or lawsuits for non-compliance. Again, it’s unlikely that you, as the owner (or the office manager), have the available time and expertise required to efficiently handle this responsibility. 

If the cost of hiring an HR manager is holding you back, consider the cost of not hiring one. Freeing up your time to handle more strategic activities and ensuring that you’re compliant with employment laws and the IRS (thus avoiding fines) is well worth the cost. An HR professional can ensure that employees and contractors are properly categorized for employment tax purposes. The penalties and fines for not doing so can be hefty. If you’re uncertain about how to categorize your workforce, this may be the best time to bring on an expert who can mitigate risk and relieve you from stressing over potential penalties.

 If your budget doesn’t allow for hiring a full-time HR manager, consider getting part-time assistance or using an HR consultant or service. 

If you’re contemplating hiring an HR professional, make sure the rest of your employees understand and appreciate how this role will benefit the company and the individual employee. The HR role should be viewed as a partner in achieving business goals, which makes hiring the right person paramount. The person hired for this role will facilitate employees in performing at their best. 

Here are some of the functions the HR professional can perform:

  • Recruiting, onboarding, and training
  • Compensation, payroll, and benefits management
  • Employee engagement and workplace culture
  • Compliance with federal and state employment laws




What to Look For in an HR Manager/Employee


Generally, an HR manager must be able to help companies reach their goals and motivate employees to reach their potential. To accomplish both, the HR manager must have the skills needed to identify candidates for employment that have the characteristics that will make them successful in the role for which the company is hiring. 

In order to effectively provide the human resources support a company needs, an HR manager candidate should possess the following skills and experience:


Expertise in HR Practices

A successful HR manager will have a solid educational background regarding the functions of human resources and will have attained at least a bachelor’s degree (preferably a master’s degree). He/she should also display willingness to stay abreast of best practices and the latest trends in HR management. 

This knowledge and expertise will lay the foundation for effectively managing the daily challenges that will arise in their role as HR manager. 


Engaging Presentation Skills

An effective HR manager needs to be able to capture their audience’s attention, keep them interested, and deliver the message in a positive and engaging manner. This person needs to be a lively, captivating presenter.

Presentation skills are especially important for an HR manager to have since they will conduct training sessions for new hires and present management with a plethora of information. Written presentation skills are important as well since the HR manager will deliver some information to employees and management in written form. Documents should have proper grammar and punctuation, be concise, and still hold the reader’s attention.



One of the most important traits an HR manager can possess is the ability to get organized. This includes strong time management skills and the ability to efficiently follow through on tasks.  Deadlines need to be managed and tasks completed timely to ensure that the needs of the employer and employees are met. On an average day, there will be numerous tasks to balance ranging from handling employees’ personal issues, hiring and firing, and preparing a recruitment strategy for a hard-to-fill position.


Ability to Multitask

Because of the variety of tasks associated with the role, an HR manager must be able to effectively switch directions throughout the workday. The manager could have to handle a sexual harassment complaint one minute, answer a benefits-related question the next, and then prepare an onboarding presentation after that.

When dealing with human capital, there’s always an issue to resolve and every employee will feel that their issue is the most important. Employee A who has a compensation issue won’t care if the HR manager is in the middle of assisting Employee B with an issue. The HR manager will be expected to handle both issues simultaneously. An HR manager also needs to be flexible enough to handle the company’s constantly shifting and evolving priorities. 


Ability to Deal with Ambiguity

An HR manager will have to deal with many issues that aren’t clear-cut. For example, if an employee presents a discrimination complaint, the HR manager will have to use sound judgment to properly assess the matter to determine if discrimination, in fact, took place. The best available information or tool is often used to arrive at a decision. HR managers must be able to discern when they should consult an attorney, expert, or fellow HR professional for guidance.


Strong Ethics

In order to adhere to company policies and keep employee information confidential, an HR manager needs to possess a strong sense of ethics. To win the trust of department managers and employees, discretion and honesty are two invaluable traits the HR manager must have.


Strong Communication Skills

A primary function of the HR manager is facilitating communication between opposing sides whether it be between co-workers or between management and employees. Being able to effectively communicate with both business owners and employees is a key skill that all HR managers must possess. All forms of communication (oral and written) presented to staff at the various levels of the company must be clear, concise, and effective.  

An HR manager should also be able to negotiate and mediate. When conflicts arise between co-workers or between management and employees, an HR manager needs to be able to help both sides find a solution that works for both parties. 




Leadership Abilities

An HR manager must assume a leadership role in the company and be willing to be at the forefront of the company’s endeavors even if there’s no precedent to follow. If your company is the first in your industry to attempt something, there’s a certain amount of risk involved and the HR manager must be willing to take it.


Ability to Motivate Others

For the company to reach its goals, its workforce needs to be highly motivated. An HR manager must understand what does and doesn’t motivate employees. Motivation tactics besides offering incentives need to be employed. The workforce needs to be encouraged to maintain a high level of quality in their work and to support the company’s mission and their role in it.

An effective strategy involves motivating department managers, with the expectation that it will trickle down to the employees they manage.


Strong Conflict Resolution Skills

Although dealing with conflict is never pleasant, an HR manager will need to be able to help both sides reach a compromise. If conflicts aren’t addressed, they may work themselves out or become full-scale crises. The HR manager needs to use critical thinking skills to effectively resolve the conflict. 

This requires gathering all pertinent information, zeroing in on the issue, devising possible solutions, and then negotiating a compromise. Conflicts in the workplace are bound to happen but the HR manager needs the right skill set to ensure that they’re properly handled.



To best serve the company, an HR manager needs to stand firm when faced with opposition from employees or management regarding unsound ideas. 





HR Solutions 


As a small or medium-sized business owner, you’re wholly responsible for your business. That includes marketing, customer service, and accounting. You may not have the time to devote to your company’s day-to-day human resources needs. However, the human resources function is one of the most vital resources a company can have. To meet your business goals, you need capable and trustworthy employees and there are tasks that must be completed to ensure that you find them. Once these employees are found, there are more tasks that must be completed to prepare the employees for success. As a time-strapped business owner, you have options for having your human resources needs met. 

Working with an in-house human resources professional or an HR consultant can free you up to handle the more strategic aspects of running your business. Either of these experts can step in and manage the culture of your company’s workforce and handle your continually needed HR functions.

Whether they be in-house or part of an HR consulting agency, human resources professionals can handle a wide range of responsibilities based on the needs of the company. These professionals can manage recruiting and interviewing potential employees, as well as onboarding the employees once hired. HR professionals can also manage the relationship between the employer and employees as well as process payroll and manage employee benefits.

Human resources professionals work with the management team to implement policy changes and facilitate the administrative functions of a company. A comfortable work environment and satisfactory compensation and benefits have been shown to directly correlate to an employee’s tenure with a company. It’s no secret that hiring and training new employees is one of the most expensive functions in a company. By working with human resources professionals, the small to medium-sized business owner can ensure that employees receive adequate training and competitive pay and benefits. Harmony between employees and a safe environment where employees feel valued can also be fostered. 


In-House HR Team


For some business owners, hiring an in-house human resources team is the ideal solution. This arrangement affords them the opportunity to meet face-to-face with HR at any time and have matters handled more quickly. Another benefit of hiring an in-house HR team is the personal stake these employees have in the company since they’re being provided with benefits. Other legal protections may apply to an in-house HR professional versus a consultant.  

There are, however, some significant downsides to hiring full-time, in-house human resources professionals. As mentioned above, hiring and training new employees is one of the most expensive functions of a company. In some parts of the country, talented and experienced human resources professionals come at a premium. In smaller towns, it’s more difficult to find quality workers since many of the most qualified workers are already employed and it may require paying more in wages and benefits to attract these workers to a company.

On the other hand, if an HR consulting agency is engaged, the company would only have to pay a flat rate based on services provided.  Another downside to hiring in-house HR professionals is having to recruit, hire, and train a replacement if a team member leaves. Again, this negatively impacts the bottom line.


HR Consultant 


With the full-time salary of an HR professional ranging from $74K to $220K plus benefits in Massachusetts and $62K to $186K in North Carolina (as of November 2019), your business could benefit from the expertise and experience of an HR consultant without having to pay a full-time salary. Smart business owners may already use outside consultants to handle other pertinent functions such as accounting or marketing. Why not let an HR consultant take the burden of HR management off of your shoulders?

If you decide to outsource your HR department, you’ll be joining the likes of top tier banks and small businesses across the country. There are many benefits to working with an outside consultant who will generally have a reputation for being professional and producing strong and consistent work. The consultant will also have a network of contacts from a wide range of industries and a breadth of experience to draw upon. 

Most HR consultants specialize in a particular area of HR management but still possess generalist skills to manage employees effectively. In addition to the benefit of obtaining HR support without paying a full-time salary, establishing a remote work arrangement allows business owners to hire from multiple markets and take advantage of different price points across a wider market. 

If you have an existing in-house HR team, an HR consultant can act to strengthen the team. A consultant can also step in and help a company complete short-term projects when there’s a time crunch. For example, a consultant can help a company find new benefits solutions at a more favorable price, then train the existing team on continuing the process in the future. This saves the company time and overhead expenses. Because HR consultants desire to receive a great recommendation or be rehired for future projects, they typically provide exemplary services whereas in-house HR professionals receive a salary or hourly wages and aren’t as motivated.


What to Look For in an HR Consultant

To ensure that you’re working with a top-notch HR consultant, the consultant should:

  • Have a proven track record of success with similar projects or be experienced in similar industries. During the screening process, ask the consultant to describe a project they didn’t handle successfully.
  • Be familiar with on-line training methods as well as in-person training. An effective HR consultant should be able to help your employees learn at their own pace, as well as with instructor guidance.
  • Have readily available references and/or testimonials. Speak with the references to get a sense of the services provided and the results achieved.
  • Be connected to the marketplace and have a firm grasp of the latest trends and best practices in HR management.



Final Thoughts – Why Human Resources is Critical for Business Success


You’re well versed in the inner workings of your business. However, you might not be as knowledgeable about human resources management. That’s okay because your time is better spent on revenue-generating activities. Fortunately, there are HR solutions that will free you to concentrate on what you do best. Whether you hire a full-time HR employee or engage the services of an HR consultant, you’ll be excited about the results they help you and your employees achieve.


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