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The Top 10 Reasons HR is Critical to Company Growth

By Nicole Comendador | |8 minute read

The role of human resources in modern day businesses has evolved significantly in the past few decades. As more companies move towards a values-based management approach, this space is set to keep growing. Moreover, it plays an instrumental role in promoting corporate culture and stability among employees.

HR is about helping employees reach their full potential within your company by supporting the business in all areas from recruitment, training and development, health benefits and performance management to compensation plans and culture-fit assessment tools. In short: anything that will help with making people successful at work!

This can be challenging if you don’t have someone who understands how to do this correctly – but there are plenty of resources out there such as books for developing better policies around employee engagement or even articles written by experts who specialise in this field (like ours).

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10 Reasons Why HR is Important to Businesses

#1: Win the ‘war for talent’: attraction and retention of staff

The “war for talent”, a term coined in 1997 by Steve Hankin of McKinsey & Company, refers to the competitive nature of recruiting and retaining employees.

People will want to work for a company with great employees, and when you hire the right talent it can attract even more candidates. This is especially true if you’re able to keep them engaged at work by offering them opportunities for advancement and promotion.

Suppose people see that your organisation values its employees’ contributions. In that case, they may choose to stay with you, their current employer, even if they hear about other attractive opportunities elsewhere in the market.

According to a 2022 report by Gallup, only 21% of the global workforce is engaged at work while 78% are only doing the bare minimum to last through the day. An engaged workforce tends to do more productive work, stay at the job longer, and have fewer problems with absenteeism or turnover.

Employee engagement is vital to the retention of talent. It’s a good measure of how motivated, committed and connected employees are to their work.

#2: Risk mitigation and compliance

Human resources manage the business’ most important asset — its employees. While risk is inevitable in any business, they should be prepared for any scenario that will put their workforce at risk. They must have possible solutions in place to mitigate the situation and prevent further problems.

#3: Organisation design

To connect responsibilities, workflows, and procedures with the company's goals and objectives, a business must establish a good organisation design. It establishes a strategic plan which becomes the guiding principle that a company follows.

A good organisation design will determine your company’s workplace culture. It is with the help of HR that a business can administer and execute its strategic direction. HR can identify the competencies needed in each function, ensure that people are in the right roles, and provide any necessary support.

#4: Change management

Change management describes how a company would handle organisational change, which often refers to goals, processes, and technologies that you might use that can ultimately affect an employee’s workflow and the direction of a business.

Let’s say management wants everyone to return to the office by 2023. As the HR manager, you have to communicate this major change to all employees and prepare them for the upcoming transition. What could be the effect of this change? How will the return be implemented? When should it be announced?

Establishing a framework to effectively implement change or strategies helps stakeholders during the transition or transformation process. This will help employees understand and easily adapt, taking into consideration all the possible outcomes.

#5: Technology and people alignment

HR identifies and implements the tools employees need to communicate effectively and be productive. As it supports the workforce, it is also important for HR to introduce technology that will help improve workflow. In recent years, HR processes that are up-to-date and use the latest materials and equipment can make a huge difference.

For example, a self-service platform for employees to log attendance and see their payroll and benefits gives them greater access to their employment information. Online learning platforms allow employees to choose the courses or programs that are not only appropriate for their role but also those that appeal to them.

HR connects the dots between individual and team responsibilities and the rest of the business. Using technology to do so helps teams and departments stay aligned.

#6: Absence management

Work/life balance is important not only for employees but also for managers and employers. While it is inevitable, employee absence can go from being a minor inconvenience to a problem.

To prevent worker disruption, strategies and procedures dealing with employee absences are referred to as "absence management." HR is in charge of disciplining staff members who take dubious or excessive absences as well as assisting workers who miss work due to unforeseen situations.

#7: Compensation and reward management

Ideally, HR must develop a realistic compensation plan and benefits package to keep the company competitive within its area or industry.

A compensation specialist would conduct a comprehensive survey or research to keep wages in line with the organisation’s financial status. On the other hand, a benefits specialist would find and negotiate with group benefits packages that are within the company’s budget and can attract or retain employees.

The role of human resources doesn’t end with paying employees on time, it also includes giving the benefits that they deserve. A good rewards system not only keeps employees happy and productive but also makes your business a desirable workplace.

#8: Wellbeing

Well-being encompasses much more than just physical health. Having a human resources department that promotes a healthy work environment is a key aspect of any organisation. Initiatives that consider the physical and mental health of employees would not only lower the need for sick days but also minimise burnout and turnover rates.

When employees are happy, a business will thrive. Having a culture that values the well-being of employees develops their confidence, increases productivity, and encourages innovation.

#9: Diversity, equity, and inclusion (DEI)

Diversity, equity and inclusion are more than just creating a workforce that reflects the world we live in. It encompasses policies and programs that bring together people of different backgrounds, working towards a common goal with no discrimination or bias.

By establishing and enforcing these policies, HR creates an environment where employees are treated fairly, and inclusively, and where unique needs are catered for. Creating a diverse and inclusive workplace is easier said than done, that’s why having a specialist dedicated to working with DEI initiatives can help the business quickly adapt to the changes.

#10: Training and development

One of the many skills that HR needs to have is to identify potential. This is evident during the hiring process, but it can also be useful in managing existing employees.

When you already have a talented workforce, HR should encourage them through training and development. Having a comprehensive program for employees to upskill with can enhance their performance, as well as further their careers within your organisation.

Conclusion

Human resources is not just about hiring and firing employees; it also helps to set the business up for success.

The more you can make the HR department visible across all levels of your company, the more likely you’ll be able to attract and retain talent.

If you want your business to succeed, hiring qualified professionals who understand these issues will make all the difference.