7 Human Resource Best Practices | A Mini-Guide To HRM - AIHR

HR has evolved considerably in the past decades and continues to do so. Yet, core HR best practices have persisted, serving as guiding principles that Human Resources departments can rely on for developing people-related strategies that move their organizations forward and spur business growth.

An HR benchmark survey of over 2,000 small businesses showed that the fastest-growing companies were 20% more likely to embrace HR best practices.

What do HR best practices entail, and why are they so important? In this article, we’ll go over the 10 best practices for HR that are crucial to effective Human Resource management and offer tips for implementing them.

ContentsWhat are HR best practices?The impact of HR best practices10 HR best practices to implementA reality check on Human Resource Management best practicesHow to implement HR best practices: 9 tipsFAQ

What are HR best practices?

HR best practices are an overarching set of Human Resource Management (HRM) processes and actions that work universally to add value and support an organization’s success. HR leaders choose to follow and customize best practices in designing people strategies to get optimum results.

HRM has two schools of thought on how to manage people: best fit and best practices.

• The best-fit philosophy states that to add value, HR policies should align with the unique business strategy. This means that HR should focus on the organization’s and its employees’ specific needs. In this view, HR isn’t “one size fits all.” It’s flexible, adjusting strategies to support the organization’s mission and vision.
• The best practice viewpoint argues that there is a set of universal HR processes that lead to superior business performance. According to its proponents, certain bundles of HR activities support companies in reaching a competitive advantage regardless of the organizational setting or industry (Redman & Wilkinson, 2009).

With these kinds of discussions, the truth often lies somewhere in the middle. This means that the HR strategy and subsequent HR activities should be aligned with the organization’s strategy for optimum efficiency (a.k.a. strive for best fit). This alignment has also been referred to as Strategic Human Resource Management. At the same time, there are best practices that have been shown to lead to superior performance for the organization. If HR executes these practices correctly, it’s able to add substantial value to the business and foster goal achievement.

These best practices should be at the heart of every organization’s HR strategy and HR strategic plan and be applied to different HR functions, such as performance management, learning and development, and employee relations.

The impact of HR best practices

Implementing HR best practices means setting up a framework that becomes a stable foundation for building a stronger organization.

By following established best practices, HR can make beneficial impacts in the following ways:

• Driving overall business performance: Effective HR practices that align employees’ goals with the company’s objectives show employees how their contributions matter. This encourages better performance across teams for improved business outcomes.
• Reducing operational costs: HR best practices focus on improving employee productivity, efficiency, and retention. This minimizes recruitment, training, and turnover costs to boost the bottom line.
• Building a sustainable competitive advantage: Steadfast people practices that attract and retain top talent give companies a consistent edge over competitors who neglect these areas and often face higher turnover, lower morale, and productivity issues.
• Improving adaptability to market changes: A dynamic, well-managed workforce can quickly pivot and effectively respond to industry shifts and other external pressures. This ensures the business’s ability to remain resilient and relevant in changing environments.
• Supporting scalability: Strong HR practices create a secure base that supports continuity during organizational expansion and workforce challenges. Businesses can adapt, grow, and scale efficiently without being affected by issues such as talent gaps.

10 HR best practices to implement

HR professionals need a working knowledge of HR best practices before they can make them come to fruition.

In his two books, Competitive Advantage through People (1994) and The Human Equation: Building Profits by Putting People First (1998), Jeffrey Pfeffer, a business theorist and management author, proposes a set of best practices that can increase a company’s profit. When these HR principles are combined (or bundled), their impact is even more profound. These HR best practices are:

1. Providing security to employees
2. Selective hiring: Hiring the right people
3. Self-managed and effective teams
4. Fair and performance-based compensation
5. Training in relevant skills
6. Creating a flat and egalitarian organization
7. Easy access to information

We also suggest another three best practices to add to the list, which are:

8. Transparency
9. Employee engagement
10. Performance management

Let’s explore these practices one by one.

1. Providing security to employees

Life is unpredictable, and people want their work to be a stable factor. When employees feel secure in their jobs, they’re more likely to commit to the organization and contribute their best efforts over the long term. This stability creates a foundation for loyalty and motivation, reducing the likelihood of turnover and the costly, time-consuming process of replacing and training new hires.

From the employee perspective, the ability to provide for themselves and their families is, in essence, why people come to work. Hence, the concept of job security underpins global HRM practices. According to a survey of 1,100 U.K. professionals, job security is among the top 3 most important factors when considering a new job. There is both a formal contract (labor for money) and an informal contract (you put in some extra effort, we take good care of you) between the employee and the employer.

When employment security is threatened, such as during restructuring or a layoff, tension and fear ripple through the organization, which, in turn, impacts organizational performance. An AuthorityHacker study of full-time U.S. workers revealed that if they lost their jobs, 42% did not have enough money saved up to support them until they found new employment.

Organizations that prioritize job security not only foster a more engaged, loyal workforce but also protect their investment in people. By minimizing turnover, they reduce the costs associated with recruiting, onboarding, and training, creating both a financial and cultural benefit that keeps them competitive in the long run.

2. Selective hiring: Hiring the right people

Selective hiring enables an organization to bring in employees who are fit for the job and can bring the most worth to the business. Research shows that productivity for high performers is 200-300% more than average performers. Hiring the right people is, therefore, a key to building a competitive advantage and an indispensable HR best practice.

In today’s digital world, many different recruitment tools are available to aid in making the right selection. More and more companies diligently keep track of their recruitment metrics to see how well they are doing in this regard.

Commonly used selection instruments are structured and unstructured interviews, general mental ability tests, personality assessments, work tests, peer interviews, and reference checks. These pre-employment assessments are used to uncover three key candidate characteristics:

1. Ability: Is the person able to do the job? Does the person have the right technical and soft skills? Is the person savvy enough to do the job well?
2. Trainability: Can we train this person to improve their skills? Does the person have the aptitude to learn and keep developing?
3. Commitment: Will the person commit to their work and the organization? Will we be able to retain this person once they’re up to speed and fully productive?

Bank holding company Capital One conducts case interviews in its hiring process. These assess communication, problem-solving, and quantitative analytic skills within real business problem scenarios that candidates would encounter in the position they’re interviewing for.

Building a structured and fair selection process must also be prioritized to exemplify legal requirements, internal diversity goals, and that a more diverse workforce better reflects society. This can be very beneficial for understanding wider consumer behavior and the needs of different customers.

3. Self-managed and effective teams

High-performance, self-managed teams are vital to organizational success. Self-managed teams operate with a high degree of autonomy, where members take ownership of their roles and collectively make decisions to achieve shared goals. Diverse ideas flow and are then processed and combined to create innovative concepts. Research shows that the best teams are cognitively diverse and psychologically safe. This means that team members can generate differing ideas while feeling comfortable bringing up and discussing them.

Creating and nurturing such teams is one of HR’s core responsibilities. HR can use tools like Belbin’s Team Role Inventory, GRPI, the Hackman model, and other team effectiveness models to form well-balanced teams. Effective HRM also includes directly supporting teamwork. This can be done in several ways, including methods such as measuring team performance, rewarding team excellence, and advising management on techniques and tools to facilitate teamwork.

For instance, building materials consulting company Principia has a fully remote and geographically dispersed staff. Leaders wanted to align employees and enhance teamwork so they could work together better. They arranged an emotional intelligence training session that focused on self-awareness and developing the team’s relationships. Brooke Cowell, VP of Marketing at Principia, said afterward, “I think we’ve learned to be more emotionally aware of others and give individuals the opportunity to express their opinions and listen. We’re more aware of our interactions with each other, and I think that’s also helped with our connections.”

Lastly, HR plays a role in encouraging collaboration across teams and departments within the organization. Tools like Organizational Network Analysis can help identify collaboration opportunities, ensuring that teams, both self-managed and otherwise, work effectively within the larger organizational structure. Other tools for facilitating teamwork include communication software, feedback tools, project management tools, and other task and goal-setting software. These can facilitate communication and help teams be more efficient.

4. Fair and performance-based compensation

Compensation is a key element for successful talent management. To hire and retain the right people, you’ll need to offer reasonable compensation and benefits.

A robust compensation package takes the form of financial (base) pay and employee benefits. You must follow market trends across your field, as well as adjacent fields since many of the best employees can come from other career areas. Then, you will be able to understand the average rate of pay and where your company ranks in the compensation offer.

Beyond just base pay, linking compensation to performance and contributions motivates employees to excel and feel a personal stake in the company’s success. For instance, you can consider implementing performance-related rewards like profit sharing, shared ownership, or stock options. These are great ways to create employee commitment to the company’s long-term vision and retain high-potential employees.

One practical tool to assess your workers’ performance and potential is the 9 box grid, where every employee is placed within a 3×3 matrix based on two dimensions: performance and potential. The grid segments employees into nine categories, ranging from high performance and high potential (often seen as future leaders) to lower performance and potential (who may need additional support or development). As an organization, you want to retain your “Exceptional Talent specifically”. They are people with unique skills (i.e., hard to replace) who are very valuable to the business. Offering competitive compensation is a must in this case.

Amazon demonstrates the importance of the compensation best practice with its annual wage and benefits review to stay competitive. In September 2024, Amazon announced a significant increase in pay and benefits for hourly front-line fulfillment and transportation employees to show its appreciation for their hard work and contribution to the company’s accomplishments.

5. Training in relevant skills

After recruiting the best people, you need to ensure that they remain frontrunners in the field. This has become even more relevant today as the rate at which technology is developing is growing exponentially. How do we create an organization in which the rate of learning matches the pace of change? Learning & development has become a way to stay innovative, grow faster, and sustain a competitive advantage.

Employers increasingly invest in skills-specific forms of training. Corporate eLearning growth has been exponential and will continue at the rate of 15.52% annually by 2033. Thanks to the internet, everyone is connected and can learn anything, anytime, anywhere. In addition to formal learning, on-the-job learning also plays an important role, with an increased focus on feedback, coaching, and peer learning.

Learning is also becoming increasingly important for the latest generations, such as Millennials and Gen Z. According to Gallup, younger employees rate learning and career growth as much more important compared to older generations. These generations of workers are actively looking for development opportunities and see these as a way to grow in their profession. What’s more, not offering employee development is related to higher levels of employee turnover.

Don’t forget about your own HR training

Just as organizations must invest in upskilling their workforce to stay competitive, it’s equally vital for you as an HR professional to keep their your skills sharp.

AIHR’s HR training programs offer self-paced courses that equip you with practical tools and knowledge to implement HR best practices, refine HR strategies, and boost your impact within the organization. GET STARTED

6. Creating a flat and egalitarian organization

This best practice in HR principles is rooted in the egalitarian practices of Japanese management. Although we just saw that some employees are more critical than others for the organization’s success, this shouldn’t be communicated in such a way. Every employee is a valuable member of the organization and should be treated as such.

In Japanese organizations, this is expressed with common canteens, company uniforms, and similar sickness and holiday entitlement. Such an egalitarian culture shows that everyone deserves equal respect and could help in promoting the sharing of ideas.

7. Easy access to information

Information accessibility focuses on ensuring that employees know where to find the knowledge or data they need and who within the organization can provide expertise or answers. This is often a logistical challenge, especially in larger organizations, where information is frequently siloed. Employees need quick access to knowledge that helps them do their jobs effectively without spending extra time searching or guessing who to approach.

The benefits of making information accessible are twofold. First, it fosters a culture where employees feel supported and trusted with knowledge relevant to their roles. Second, it enables employees to contribute more meaningfully and share ideas because they’re informed and up-to-date.

HR can help by organizing resources like internal newsletters, knowledge databases, and directories that clarify who holds specific knowledge or expertise. Tailored communication channels for diverse employee groups, such as women, non-native language-speaking employees, and LGBTQ+ individuals, can also help ensure that information is accessible and inclusive.

Check out our Learning Bite to learn more about the 7 HR best practices!

8. Transparency

Transparency goes a step beyond information accessibility by focusing on what information is shared and the openness of communication, particularly regarding key business decisions, challenges, and changes. Transparency requires that leaders not only make information available but also proactively communicate it to everyone in a straightforward, honest manner.

In practice, transparency means leaders openly discuss both successes and failures, and they involve employees in understanding the company’s direction and rationale behind decisions. Even adverse circumstances and unpopular decisions are tolerated better by employees when they understand the reasons and learn about them upfront and directly from leaders rather than through the rumor mill.

Employees are less likely to feel blindsided by changes or challenges if they are informed early, which builds trust and loyalty over time. Transparency can also include sharing metrics like pay scales, performance measures, or market insights that help employees feel more connected to the company’s overall journey.

HR should advocate for transparency by opening and maintaining communication channels and distributing vital information regularly. Other transparency builders include published pay scales and performance metrics, forewarnings of market conditions and potential risks, financial results announcements, and employee feedback mechanisms.

Asana, a work management platform, makes its board meeting minutes available to employees so they have firsthand knowledge and context of where the organization is headed.

9. Employee engagement

Employee engagement has been an HR catchphrase for many years. Unfortunately, ongoing efforts to enhance employee engagement haven’t produced the desired outcomes. Gallup research shows that 62% of workers worldwide are not engaged and estimates that it costs the global GDP 8.9 trillion U.S. dollars.

HR professionals must dig deeper into what energizes employee engagement at their organizations. Known drivers of employee engagement are:

• Meaningful work
• Growth and development
• Recognition and appreciation
• Autonomy and empowerment
• Effective communication
• Wellbeing and work-life balance
• Trust in leadership.

While it makes sense that these concepts can create a stronger connection between employees and their jobs, they may not all carry the same weight at each company. HR teams must gather data and be in touch with employee sentiments to understand the unique ways these play out and what achieving them looks like at their organizations. Only then will engagement initiatives make a positive impact.

10. Performance management

Performance management is the process of managers directing and optimizing employee performance through communication and feedback. The result is growth for the employee and reinforcement of organizational goals.

The four stages of performance management are:

1. Planning: Establishing performance expectations and goals and defining how success is measured.
2. Monitoring: Tracking how employee performance is aligning with goals and providing appropriate feedback.
3. Developing and reviewing: Analyzing performance data to find ways to remedy underperformance or encourage strong performance.
4. Rating and rewards: Rating employee performance as the basis for rewards or consequences.

Incorporating performance management into day-to-day activities keeps it relevant. Banking and financial services company HSBC uses an HR app that allows managers and employees to share two-way performance feedback. They can also capture achievements in real-time and access performance and development plans and online learning.

Not all employees will learn new skills and grow professionally on their own accord. Without an established performance management system, employees are left to do their jobs without guidance. This can lead to frustration, burnout, and disengagement on their part, resulting in lackluster growth for the organization.

A reality check on Human Resource Management best practices

It turns out that some of these HR best practices contradict each other or don’t play out as ideally in the real world. Take employment security. While this practice sounds great in theory, in reality, many companies rely more on flexible contractors who don’t have the same job security as traditional employees. According to Marchington and Grugulis (2000), “the reality is that employment security is only offered when and for as long as it is convenient to the employer.”

Training is another example. A lot of organizations invest heavily in training, but just offering it doesn’t necessarily improve competitive advantage. Often, training focuses on skills that don’t align with employees’ actual work and organizational objectives or is offered simply because there’s extra budget. What matters is whether the training helps achieve the company’s strategic goals. The Kirkpatrick-Philips model can help measure if training truly impacts performance and provides a return on investment (ROI).

Lastly, selective hiring aims to build a competitive edge by consistently hiring top performers. The reality, though, is that hiring “perfect” candidates every time is almost impossible. Instead, hiring candidates who are consistently better than your competition can make a meaningful impact over time.

How to implement HR best practices: 9 tips

As every HR professional knows, much takes place behind the scenes of everything HR presents to employees. Here are some tips to help you execute and make the most of HR best practices at your organization:

1. Secure a sufficient budget: Many HR best practices require a significant investment in additional resources. Evaluate what these might be and ensure that the funds and means are approved for the necessary technology, training, and employee programs to support the practices. For example, you can use a prioritization matrix template to make decisions about where you need the resources most.
2. Get leadership buy-in: Leadership involvement lends credibility and helps secure success for any HR initiative. When leaders model transparency and prioritize employee wellbeing, it sets a tone of acceptance and encourages wider adoption throughout the organization.
3. Upskill HR professionals: It takes a knowledgeable HR staff to govern best practices. Provide regular training opportunities on topics such as employee engagement, performance management, and communication. Additionally, recommend the latest trends, tools, and techniques that can equip HR teams to lead these initiatives effectively.
4. Use data-driven decision-making: Relying on data leads to decisions based on facts instead of assumptions or instinct. Track progress on key metrics like turnover, engagement, and performance. This data will reveal which areas need attention and provide insight into how to refine and optimize HR strategies.
5. Leverage technology: Technology allows HR to automate and streamline tasks and processes, as well as collect data throughout the employee life cycle. Human resource information systems (HRIS) simplify the administrative end of certain best practices, such as tracking performance, training, and recruitment data. HR apps and software programs also make information more readily accessible to employees.
6. Foster continuous feedback loops: Open workplace communication won’t happen without an intentional approach. Create a variety of channels for ongoing discourse between employees and management. These should involve both formal (i.e., surveys, town halls, scheduled meetings, and regular one-on-ones) and informal (i.e., spontaneous check-ins and casual conversations occurring through work-related interactions) methods.
7. Standardize processes: Systematic HR processes with clear guidelines are easier for employees to follow while also reducing errors and ensuring consistency. With fairness and equal treatment of all employees being such an essential element of HR practices, standardization is a must. Uniformity in hiring, compensation, and performance management procedures builds trust between employees and HR/management.
8. Monitor and adapt policies: With continual external and internal changes affecting every organization, HR procedures and policies can become outdated. It’s important to periodically review them for relevance to the current circumstances and new regulations. Then you can update them to respond more appropriately to both business goals and employee needs.
9. Understand the collective effect of HR best practices: When best practices are combined, we call them “bundles.” For example, guaranteeing employment security is more of a benefit when you have high-performing employees that you really want to keep. This means that the employment security best practice, combined with selective hiring, leads to more value than the individual practices.
10. The same goes for selective hiring, relevant training, and fair compensation. You want to choose employees with growth potential, invest in them with learning and development, and reward them appropriately when they show superior performance.
11. By leveraging these bundles, effective HRM can add tremendous value to the business and help the organization succeed in reaching its goals.

A final word

Organizations that adopt these 10 best practices institute the groundwork for effective Human Resource Management that empowers employees and the organization to thrive.

However, while HR best practices may be universal, there is no one-size-fits-all approach to them. Each HR department must associate these practices with their company’s operations and goals. For instance, selective hiring must be based on profiles of the employee characteristics that fit the organization’s needs and training must be tailored to which capabilities are required to carry out the organizational goals.

Once these best practices are linked to what the organization is striving for, you can create an HR function that adds considerable value in reinforcing success.

FAQ

What are some HR best practices?

The ten HR best practices to implement are:– Employment security– Selective hiring– Self-managed and effective teams– Fair and performance-based compensation– Training in relevant skills– A flat and egalitarian organization– Easy access to information– Transparency– Employee engagement– Performance management. What does good HR look like?

Good HR enriches an organization by providing support that helps employees thrive and make strong contributions that achieve business goals. Which company has the best HR practices?

Companies often recognized for their admirable HR practices include Google, Cisco, Hilton Hotels, and Netflix. However, these are large, high-profile organizations that are open to more scrutinization. There may be many smaller organizations with exemplary HR practices that aren’t in the public eye. You can also check out the list of best companies to work for by the Great Place To Work to discover companies with strong HR practices. Follow us on social media to stay up to date with the latest HR news and trends LinkedIn Facebook Pinterest Twitter

Erik van Vulpen

Erik van Vulpen is the founder and Dean of AIHR. He is an expert in shaping modern HR practices by bringing technological innovations into the HR context. He receives global recognition as an HR thought leader and regularly speaks on topics like People Analytics, Digital HR, and the Future of Work.

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