What is HR Management? [The Small Business Guide to People Ops]

What is HR management? Human Resources is the business function that encompasses all employee-related processes. It includes the following:

1. Recruiting, Hiring, Onboarding
2. Time, Labor, Payroll
3. Training, Development, Performance Management
4. Benefits Management
5. Labor Relations
6. HR Analytics and Reporting
7. Wage and Hour Compliance

Human Resources is also called Human Capital Management (HCM) and Human Resources Management (HRM).

Who performs HR Management?

The Human Resource manager goes by different titles. Some companies have an HR Director or CHRO (Chief Human Resource Officer). The title Chief People Officer has popped up in recent years. “Happiness Engineer” and “Employee Engagement Manager” are some other creative monikers.

In a large company, there are several Human Resource specialists, each with their specific domain. For example, the Talent Acquisition manager oversees the hiring team. The team may include inhouse recruiters, outsourced recruiters and staffing agencies. The Training and Development team designs and manages training programs, creates career path programs and does skill analysis. A Benefits Management team manages benefits packages by working with brokers, choosing plans, and managing employee enrollment and changes

Depending on the size of the org, there may be a manager (or director) and team for most HRM functions. Of course, many companies outsource all or some business administration, including HR.

In small businesses, a Human Resource manager wears many hats. As companies grow, they hire specialists.

How does the Human Resource team help the business excel?

As with other departments that don’t generate revenue directly, it’s important to remember that HR delivers value. A great HR team:

• Inspires employee engagement, performance, vision and purpose
• Manages labor costs
• Protects against compliance violations

What qualities does an HR professional need?

Few positions require the breadth of expertise needed to be an effective HR generalist. The Society for Human Resource Management lists the following as must-have skills (we talk more about SHRM below):

• Communication
• HR Expertise (HR knowledge)
• Leadership and Navigation
• Ethical Practice
• Business Acumen
• Relationship Management
• Consultation
• Critical Evaluation
• Global and Cultural Effectiveness

Industry expert and thought leader Sharlyn Lauby adds Artificial Intelligence and workplace wellness to the SHRM list. Lauby argues that the modern HR leader will need to know when and how to use AI to perform tasks previously handled by humans. On the topic of wellness, Lauby explained, “If organizations want a high performing workforce, they need to create the right environment. HR has the opportunity to set the stage through the development of wellbeing initiatives.”

Now that we’ve discussed HR fundamentals, let’s explore how HR benefits the business. Profitability is a good place to start.

How does HR help lower expenses, thereby increasing profitability?

Firstly, HR determines the best value in employee benefits. This is key because wages and benefits are the largest costs. Many companies have faltered because they didn’t keep a pulse on the rising costs of health insurance. Well-managed benefits increase profitability in additional ways. For example, they increase retention which reduces hiring costs. In addition, when employees appreciate and use their benefits, they are more likely to enjoy their jobs and treat your customers well. This increases customer loyalty which also bolsters the bottom line.

Secondly, HR lowers your risk of an expensive compliance fine. The Department of Labor audits businesses of all sizes and even a relatively small fine can sink a small organization.

Small Business Compliance Violation: A Cautionary Tale

Here is an example ripped from the headlines. A January 2022 Department of Labor article highlights an Oklahoma City nursing home that was ordered to pay 27K in back wages due to compliance violations. Federal investigators found that the pay practices of three Oklahoma City-area nursing homes denied 129 workers their legal pay. A competent HR manager could have prevented the illegal practices.

Investigators with the U.S. Department of Labor’s Wage and Hour Division determined the employers failed to count on-site and off-site meetings, onboarding activities, and web-based training as hours worked. When the additional hours resulted in a workweek that exceeded 40 hours, the employer should have paid the overtime rate as the Fair Labor Standards Act requires. The investigation led the division to recover $27,135 in back wages for the affected workers. The nursing homes’ operator cooperated with investigators and changed policies to require all training to be completed on-site during work hours to avoid future violations and ensure they pay workers for all hours worked. (U.S. Department of Labor)

Thirdly, HR can determine the ROI of programs. Then you know which ones to keep and which ones to kill. Fourthly, HR can manage employee time and attendance so you don’t overpay for labor. Limiting overtime and helping managers plan shifts strategically, for example. Even modest savings on payroll makes an impact. In addition, these advantages compound as your workforce grows.

How does HR minimize small business risk?

Previously, we discussed how HR can save money by preventing violations and penalties. Let’s consider the other costs of noncompliance. A DOL action doesn’t just hurt your business financially. There is also the cost to your reputation. A damaged reputation, in turn, could drive customers away and make it harder to hire good people. Therefore, HR is key to risk management.

What qualifications does an HR professional need?

Let’s discuss the skills and experience needed to excel in HR. Note that the size of business comes into play here. For example, in many small businesses, an employee with little or no HR training is assigned the function. In this case, the employee may have to train themselves. Conversely, at a large company, the CHRO may have a master’s degree or higher.

Certainly, all business experience (and plenty of non-business experience) can be valuable for those who switch to HR mid-career. Finance, psychology, labor relations and business development, for instance.

Those who want to advance in the field get a Human Resource Management certificate. This is a credential offered by a recognized HR credentialing organization. HR certifications are designed to demonstrate proficiency in a broad range of HR topics. You can earn more and advance more quickly in your career if they have a certification and keep it current.

Which organizations offer HR certifications?

The two main HR accreditation organizations in the U.S. are; SHRM (Society for Human Resource Management) and HRCI (Human Resource Certification Institute).

What is HRCI (Human Resource Certification Institute)?

HRCI was the credentialing arm of SHRM from 1976-2014. During that time, the HRCI PHR (Professional in Human Resources) became the industry standard. In 2014, SHRM discontinued the credentialing relationship with HRCI and quit offering the PHR. In its place, they introduced their own certifications which are listed below.
HRCI still offers the PHR (Professional in Human Resources) and related designations.

• aPHR Associate Professional in Human Resources
• PHRca Professional in Human Resources – California
• PHRi Professional in Human Resources International
• SPHR Senior Professional in Human Resources
• SPHRi Senior Professional in Human Resources International (for professionals working at an international business)
• GPHR Global Professional in Human Resources

What is SHRM (Society for Human Resource Management)?

Let’s talk about SHRM. In addition to offering HR certification, SHRM is the largest global organization of HR professionals. It was founded in 1948 and boasts 300,000 members in 165 countries. SHRM offers these credentials:

• SHRM-CP Society for Human Resource Management Certified Professional
• SHRM-SCP Society for Human Resource Management Senior Certified Professional

When Human Resources managers have their general HR certification, they can consider advanced training focused on their specialty.

What software tools handle HR processes?

HR processes are well-defined and thus prime for Human Resources automation. The small business HR software market is a crowded place. There are thousands of task-specific tools that handle everything from accruals calculations to benefits enrollment. Since the adoption of cloud computing, the industry has been moving toward integrated systems that handle most, if not all HR functions.

The benefits of a unified Time and Labor system

If you are looking at HR software for your small business, we recommend a unified system. If this isn’t possible, at least integrate Time and Labor and PTO. Since timekeeping, scheduling and time off accruals are interdependent, using disparate tools can cause more problems than it solves. A unified Time and Labor system handles the mission critical tasks businesses need to operate. This is especially important if you have hourly employees.

For an in-depth guide to choosing a Time and Labor system, Download our Time and Labor Buyer’s Guide. It describes features in detail and has evaluation templates that make it easy to determine which tools you need.

How does the Human Resource team use a Time and Labor system?

Let’s talk about unified HR systems. These platforms go by various names including HRMS, HRIS and HCM.

• HRIS: Human Resources Information System
• HRMS: Human Resources Management System
• HCM: Human Capital Management

Each platform is an integrated set of tools. Generally, an HRIS is the starter system. It handles basic HR data. The other systems have expanded functionality. It’s important to choose a system designed for your business size. If your business has 30 employees, for example, a system designed for a large global organization will have tools you don’t need.

How do you use HR software?

Let’s discuss how HR technology simplifies Human Resource management. First, we’ll discuss hiring. A software solution that handles hiring processes is called an applicant tracking system, or ATS.

Hiring Automation

Firstly, the hiring team stores and manages all applicants in the system. You can create job description templates as well as emails for each hiring stage. With workflows and task triggers, when you move a candidate to the next hiring stage–say interview–the software will automatically send an email with a link to a scheduling calendar. The system pulls the candidates name, job position, and contact details into the email to personalize it.

Screening Applications

Human Resource managers can also create screening questionnaires with elimination questions. When a candidate applies, they fill out the questionnaire. If the applicant doesn’t meet the basic requirements, the system marks their application Do Not Pursue. You can still see them in the database, but you don’t need to waste time reviewing their resume.

Consider how much time you can save in the hiring process! And a quicker process isn’t the only benefit. With scorecards and structured interview templates, for example, you can more effectively applicants. This helps you find best-fit candidates. In today’s competitive hiring landscape, it’s never been more important to optimize your processes.

Digital Onboarding

When your top pick accepts your offer, you move them into onboarding without skipping a beat. An integrated onboarding module manages a digital process. The new employee completes all paperwork online and submits with e-signature. Since it’s digital, they can complete the paperwork from the comfort of their home–or anywhere with a mobile device. The Human Resource manager monitors unobtrusively from their own dashboard in the system. Digital document management from hire to retire is key to HR efficiency.

What new employees experience during onboarding sets a trajectory for months to come. Companies that create an exceptional onboarding experience are rewarded with lower turnover and employee satisfaction.

Time and Labor Automation

Similar to hiring, time and labor automation simplifies day to day employee management. This includes tracking employee work time for payroll. Plus shift planning, scheduling and PTO calculations. A time and labor system replaces paper timecards and spreadsheets.

In similar fashion, the Human Resource manager coordinates benefits enrollment, employee benefits changes and open enrollment. The training and development team manages training materials and programs.

What are the Top HR Challenges for Small Business?

We recently polled small businesses like yours to find out how the pandemic has impacted their Human Resources management. Our respondents listed hiring, onboarding and timekeeping as their top concerns. In addition, 50% of businesses polled saw a major change in their time tracking priorities and needs.

What HR Functions do small businesses outsource?

In contrast, many companies outsource Human Resource functions. This allows business owners to focus on their core business. In other words, operations that directly generate revenue. The following tasks are commonly outsourced:

• Payroll services
• Background screening
• Recruitment/hiring/temp staffing
• Benefits administration
• Performance management

In conclusion

Businesses can’t prosper without good people–and people can’t prosper without dedicated and competent HR. Small business HR professionals have gone above and beyond during pandemic upheaval (which seems to be going on forever). The fact that many businesses are thriving is due in no small part to the Human Resources managers that support employees. Bottom line? Human Resource management matters.

We’ve been through two years of the pandemic and it feels like an eternity. And all the issues we face, whether they be talent mobility or capability academies or skills models or recruiting or leadership development, are not new. They’ve been around forever. But something big did change: the role of HR has been elevated. Nobody’s having any problems with a seat at the table.

Most of you have been deeply involved in remote work, hybrid work, back to work, safe work, and critical policies at the senior executive level over the last two years. But behind the scenes, your operations and structure of HR have not changed fast enough.

…take a serious and sober look at the HR function, the skills and capabilities of your HR team, and the level of development you’re doing for each of the members of the HR organization. Predictions for 2022: Everything Is About To Change, Josh Bersin.