In starting my own business, I have learned that there are many people who don’t really know what Human Resources (HR) is. When I share that I am an HR Consultant, I often hear, “So, you hire people.” I respond with, “I’m focused on employee retention, engagement and development.” Blank stares. And it’s totally understandable as many people haven’t worked in a larger company or interfaced much with HR in their careers.
I was talking to a group of friends about my business, and they shared that they think of administrative tasks when they hear the term HR. Certainly, administrative tasks are part of it, but HR is much more. There are other terms out there to encompass the HR function such as: People and Culture, Human Capital, Talent and I worked for one department that called it Great Teams! And yes, it had an explanation point at the end.
What Does HR Do?
HR (or whatever you prefer to call it) manages the employee life cycle, including recruiting, hiring, onboarding, training & development, performance management, employee engagement, benefits, compensation and termination. In addition, HR contributes to a positive work culture and helps to ensure legal compliance. Smaller companies may not need an HR department, but they still need to manage HR functions and certainly want to keep employees motivated.
Why It's Important
I’m probably a little biased, but I think that HR is essential. People are the biggest part of any business and the greatest potential strategic advantage. Without an engaged workforce (which HR has a big impact on), organizations certainly won’t be as successful and may even fail. There are also employment laws that businesses need to adhere to. In my experience, many businesses without HR support are not doing too well in that area because they don't know what they don't know. However, it can potentially be very expensive in the case of an audit, charge or lawsuit.
So, what happens if you ignore HR functions?
Bad Hires
If you’re just throwing job postings out there, you may run the risk of failing to attract the right talent and hire the right employees. Further, if you don’t know how to hire effectively (or your managers don’t), it will likely result in a lot of misses. And no company can afford bad hires.
Subpar Compensation and Benefits
These days, you can’t offer a couple of days of PTO and call it good. Nor can you just guess at what you need to pay for a position. To attract and retain good talent, you have to be competitive in your compensation and benefits practices.
Turnover and Disengagement
Turnover is expensive-1/2 to 3 times an employee’s annual salary. If you aren’t attentive to your people practices and you aren’t developing your managers, it is likely that turnover will result. And you have probably heard of “quiet quitting”? Same thing as disengagement where employees are just doing the bare minimum to get by. As you can imagine, this is expensive as well. Estimates indicate a cost of about $20K per disengaged employee.
Toxic Work Environment
Toxic work environments are no joke. Whether it’s negative conflict, drama, extreme politics or bad bosses, they all take a toll on your workforce and on your reputation as an organization. Without an HR strategy in place to help improve company culture, employee disengagement and turnover rates will continue to be high.
So, What Now?
Nothing specific, just thought it may be helpful to clarify what HR is and why it's important. And, of course, if you don't have an HR resource and need one, reach out!
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