The 12 Key Functions Of Human Resources - AIHR

HR has many important functions in the organization. These include recruitment, performance management, learning and development, and many more. In total, there are 12 key functions of Human Resources Management.

If we want to understand the functions of Human Resources, we need to understand what Human Resource Management (HRM) is.

According to Storey (1995), HRM is a distinctive approach to employment management that seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an integrated array of cultural, structural, and personnel techniques.

In this article, we will go over the 12 Human Resources functions and explain how they help move the organization forward.

ContentsHuman resource planningRecruitment and selectionPerformance managementLearning and developmentCareer planningFunction evaluationRewardsIndustrial relationsEmployee participation and communicationHealth and safetyPersonal wellbeingAdministrative responsibilitiesFAQ

Let’s dive right in.

1. Human resource planning

The first HR function is all about knowing the future needs of the organization. What kind of people does the organization need, and how many? Knowing this will shape recruitment, selection, performance management, learning and development, and all other Human Resources functions.

In brief, human resource planning is a continuous, data-driven process to make sure that the organization has the right people in the right place at the right time to achieve its strategic goals.

2. Recruitment and selection

The second HR function involves attracting people to work for the organization and selecting the best candidates.

Attracting people usually starts with an employer brand. In fact, businesses with excellent employer brands receive 50% more qualified applicants. Clearly, being an attractive employer has plenty of advantages – just as it is the other way around. A good example of the latter is the tobacco industry which struggles to attract talent due to its tainted reputation.

With a strong employer brand and the right sourcing strategies, you’re already halfway there. Once candidates apply, the selection process is an HR instrument to pick the best-qualified and highest-potential candidates. It’s vital to build an effective recruitment a selection process, as bad hires can cause productivity drops of up to 36%.

Technological developments in recruitment have gone very fast, and as a result, there are different types of recruitment tools for each part of your recruitment funnel.

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3. Performance management

Performance management is essential in ensuring that workers stay productive and engaged. Good performance management involves strong leadership, clear goal-setting, and open feedback.

While (bi)annual performance reviews in which the employee is reviewed by their manager are still common, 69% of HR professionals believe that in the near future, performance management will become more frequent and include natural conversations.

360-degree feedback is also gaining popularity as a performance management tool. With this type of feedback, peers, managers, subordinates, and sometimes even customers review the employee’s performance, which can be very helpful in uncovering areas of potential improvement.

Performance management is also an instrument to close the gap between the workforce you have today and the one you want to have tomorrow by helping employees develop future-ready skills and competencies.

Revamping performance management at BBC

The BBC overhauled its performance management to foster a high-performance culture, focusing on meaningful, reflective discussions rather than frequent appraisals.

By integrating stakeholder views, organizational data, professional expertise, and scientific literature, the BBC shifted to semi-annual, quality discussions on job goals, performance feedback, and career development.

This evidence-based approach led to 91% of employees engaging in performance reviews, with notable improvements in goal clarity, feedback utility, and career discussions, demonstrating the value of a nuanced, evidence-informed strategy.

4. Learning and development

Enabling employees to develop the skills they need for the future is an essential responsibility for HR. This is also related to the first HR function we listed, human resource planning, in which HR bridges the gap between the workforce today and the workforce needed in the near future.

Traditionally, organizations have a set budget for learning and development. This budget is then distributed among its employees. In some countries, this spending is mandatory. For example, companies with an annual pay bill of more than £3 million in the UK pay a mandatory rate of 0.5% designated for the professional education of their employees.

In other countries, like Belgium and the Netherlands, L&D falls under the employer’s responsibility to take care of its employees. In the third group of countries, like the US, this is almost unregulated territory.

Despite the differences in regulations, almost all employers understand the value of investing in the (future) skills of their employees. It’s the responsibility of the HR department to lead these efforts in the right direction. What’s more, HR plays an increasingly important role in upskilling leaders and managers.

According to Janice Burns, Chief People Officer at Degreed, while organizations must balance economic factors and prioritize based on value opportunities, investing in employees’ skills is essential for retention and, ultimately, retaining value for the organization.

“Creating a space where employees can upskill not only has holistic benefits but also fulfills the needs of the individual. Employees now, more than ever, are seeking ways to better themselves for their professional future. Employers who provide L&D resources for skill growth are fostering an environment of motivation and investing in their employees – empowering them for their future endeavors,” explained Burns.

5. Career planning

The fifth function of Human Resources Management is career planning, guidance, and development for employees, together also referred to as career pathing.

Showing employees how their ambition can align with the future of the company helps to engage and retain them. For the organization, there are the benefits of better succession planning, higher productivity, and a stronger employer brand.

“Organizations often prefer to source talent internally, promoting existing employees whenever possible,” said Ben Schwencke, Business Psychologist at Test Partnership.

“However, this approach only works when your staff has the capability to advance, displaying the requisite abilities, skills, and knowledge. By considering likely career trajectories, HR practitioners can ensure that their workers are well-equipped to advance past their existing roles, saving them from seeking talent externally,” Schwencke noted.

6. Function evaluation

Function evaluation is a technical aspect of HR. It involves comparing various parts of the overall HR operation. This can include the quality, and availability of workers, job location, working times, the economic situation, job responsibilities, and how much value a job adds to your organization. The idea behind function evaluation is that similar jobs should be rewarded similarly.

There are different ways of internally ranking functions.

• Ranking method: A method in which subject matter experts rank functions in terms of how much they contribute to the organization as a whole. Functions are paired, and raters have to decide which one is more valuable. This is done with all functions, and based on the outcome, a ranking is established.
• Classification method: Jobs can also be classified into different categories using classification methods. In this case, jobs are categorized and then ranked within these categories to come up with a ranking. Categorizations can include education, experience, the degree of specialized skills needed to do the job, the degree to which these skills are in-demand, and so on.
• Points method: Jobs are categorized according to the factors the organization believes contribute most to its success. Points are then awarded to each category for every job. These categories can include key competencies like problem-solving, technical knowledge, communication and influencing skills, innovative capability, business acumen, and so on. These competencies will differ per organization.
• Personal method: In this method, the job itself is not evaluated but the person doing the job is. Here, employees are rewarded based on their skills and competencies.

Function evaluation helps the HR department ensure that the company is successful at both a strategic level and with service delivery and support. That way, the company is able to deliver the level of services required while operating strategically.

7. Rewards

Rewarding employees for their work is another essential HR function. Compensation and benefits are integral to attracting the right kind of candidate for the role, and company. These will vary across different fields, countries, and cultures. In some countries, such as the US, health insurance is often part of a job offer. However, in countries such as the UK, where a public health system provides most of the healthcare, this is not as common.

The total rewards framework shows that rewards are more than just money and other monetary benefits. They can also be relational and psychological outcomes.

Rewards include salary but also growth and career opportunities, status, recognition, a good organizational culture, and a satisfying work-life balance. For example, fantastic colleagues and meaningful work are also rewarding to employees. The monetary reward of the job consists of financial rewards and other (secondary) benefits.

The Employee Value Proposition (EVP) sums up all these aspects. The EVP of your company is distinct from the external image and brand. It is the image a company reflects to its employees. Rewards are thus much more than just financial. Here is a non-exhaustive overview of total rewards:

• Base salary
• Performance-based pay
• Bonuses
• Social environment
• Job security
• Status
• Alternating work
• Autonomy
• Growth opportunities
• Feedback
• Formal and informal development opportunities

75% of organizations expect compensation to become more challenging in the near future, and only 53% are fairly confident or very confident in their total rewards package. It’s up to the HR and Compensation & Benefits teams to design a total rewards strategy that works for their employees and the business.

Functions 1 to 7 all fall within the scope of what’s called talent management; they aim to attract, develop, motivate and retain (high-performing) employees.

KMPG US compensation & benefits package update

KPMG US has significantly enhanced its benefits and compensation package, focusing on mental, physical, social, and financial wellbeing. Initiatives include a 10% cut in healthcare premiums without reducing benefits, introduction of healthcare advocacy services, and a new retirement contribution plan replacing the old 401(k) match and pension programs.

Additionally, KPMG US has increased flexibility for employees with up to three weeks of caregiver leave, 12 weeks of paid parental leave (plus disability leave for birthing parents, totaling up to 22 weeks), and the inclusion of Juneteenth in the holiday calendar.

8. Industrial relations

Another function of HR is maintaining and cultivating relationships with labor unions and other collectives and their members.

Unionization is still prevalent in Europe, although it is declining overall. The most recent data shows that 92.2% of employees in Iceland were a member of a union, and 67% of employees in Denmark. However, in the UK and Estonia, only 23.5% and 6% of employees, respectively, were. In the US, trade union membership is low, with 10.3% of employees being members.

Maintaining good relations with unions will help to spot and resolve potential conflicts quickly and will also be beneficial in more difficult economic times when layoffs or other actions are required.

9. Employee participation and communication

According to Dave Ulrich, one of the key roles of HR is to be a credible activist for the employees. Employees need to be informed and heard on different topics that are relevant to them. Communication relates to spreading information relevant to employees.

Being a People Advocate is one of the four core HR competencies we at AIHR have identified for the future of the HR workforce. People Advocacy includes culture building, people practices, and being a workplace champion and communication expert.

Linda Shaffer, Chief People and Operations Officer at Checkr, highlights the importance of the communication function of HR.

10. Health and safety

HR plays an important role in creating and implementing health and safety regulations. Making these regulations part of the company culture is one of the main functions of HR.

A famous example is the energy and petrochemical company Shell where it is forbidden to walk the stairs without holding the railing – also in the company’s HQ. This is part of Shell’s ‘Goal Zero’, which stands for zero accidents. Although holding the railing is much more important on an oil platform, safety is such a big part of the company culture that safety roles are applied everywhere.

The pandemic also raised awareness about health and safety in the workplace. In fact, 43% of employers say job candidates are asking about safety and health protocols, which shows that creating a safe workplace needs to be a priority for HR.

11. Wellbeing

Another key HR function is supporting employees so that they can do their best work. This involves proactively promoting mental, physical, and financial wellbeing.

HR professionals also assist and take care of employees when they run into problems and when things don’t go as planned. Problems in the workplace and outside can negatively impact employee performance, engagement, and productivity. This, in turn, harms a company’s bottom line. With 81% of employees feeling at risk of burnout and 51% of workers worldwide being worried about their financial future, a focus on employee welllbeing is increasingly important to your organization’s success.

A holistic wellbeing strategy led by your HR department must work at the level of one-on-one communication with employees and communication across teams and companies. For example, a company may offer an employee assistance program through which anyone with mental health issues can access counseling. On an organization-wide level, the company could hold a mental health awareness day.

Three UK’s wellbeing strategy

Three UK, a British telecommunications provider, implemented a wellbeing strategy to support their employees throughout the introduction of 5G and beyond. Some of the initiatives included a free flu jab, a meeting-free period on Wednesdays, and three paid days off a year for personal moments.

The strategy’s success is evident, with 83% of office employees expressing satisfaction in exit surveys. The company’s eNPS score increased from +16 to +24. What’s more, the flu jab program reduced sickness by 25%.

12. Administrative responsibilities

The final function of HR is its administrative responsibility. These include personnel procedures and Human Resource Information Systems (HRIS).

Personnel procedures involve the handling of promotions, relocations, discipline, performance improvement, illness, regulations, cultural and racial diversity, harassment, bullying, and so on.

For each of these situations, HR needs to develop and follow policies and procedures to successfully handle employee requests, concerns, and complaints or overcome these challenges.

Human Resource Information Systems (HRIS) store employee data. HR is responsible for purchasing, implementing, and managing these systems so that they can use the data for better decision-making.

More effective HR processes at GLS

GLS, a national logistics leader, streamlined its HR and payroll processes across the U.S. with an HR software provide Paylocity, replacing multiple legacy systems.

This consolidation enabled rapid recruiting, onboarding, and training, crucial in an industry with over 90% turnover.

The implementation of Paylocity allowed for faster payroll processing, efficient onboarding, and improved employee engagement through a single platform. This significantly improved operational efficiency and HR responsiveness.

Over to you

HR is a multi-faceted role that enables companies to get the most out of their workforce. As an HR professional, you need to have a wide-ranging skill set to perform across these core HR functions. Within HR, education cannot end with gaining your core qualification. Society and the workplace are constantly changing and evolving. You, too, must continuously develop to lead your workforce confidently through change.

FAQ

What are the main functions of HR?

The main functions of HR in an organization include HR planning, managing the recruitment and selection process, and overseeing employee relations, compensation, benefits, performance management, and learning and development programs. Additionally, HR plays a critical role in ensuring compliance with labor laws and regulations, workplace health & safety, and implementing strategies to maximize employee engagement and productivity.

What HR functions can be outsourced?

Organizations often outsource HR functions such as payroll processing, benefits administration, recruitment and staffing, and legal compliance. This allows them to focus on core business activities while leveraging the expertise of specialized external providers to manage complex or time-consuming HR tasks efficiently.

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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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