HRM is a strategic discipline that plays an important role in competitive advantage. Here's what it does.
When I was learning about human resource management (HRM), one of the first things I learned was that HRM is a strategic discipline, not just an administrative function. The idea is that human resource management involves making decisions that are strategically important for the organization as a whole — rather than simply being concerned with day-to-day administration. Storey (1995) describes HRM as “a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a committed and capable workforce, using modern methods of human resourcing.” This means that HRM should involve an integrated array of cultural, structural, and personnel techniques designed to improve employee performance and productivity, thus improving the competitiveness of the firm.
But how exactly does this work? What are the core functions of HRM? And why do they matter?
The full set of recognized core HR functions is shown in Figure 1 below:
As you can see, there are twelve key functions of Human Resources Management. Functions 1–7 fall within the scope of talent management; these include functions related to attracting and retaining talent, forecasting and managing cash flow, and maintaining compliance while minimizing financial and operational risk. These functions vary by industry, business size, and worker types. But they also form a unified system — all of them are connected to each other and serve to create a coherent strategy for managing people at work.
Foundational and talent-focused HR functions
The foundational function of HRM is human resource planning. Human resource planning is the process of knowing the future needs of the organization. It bridges the gap between the workforce today and the workforce needed in the near future. It’s linked directly to recruitment and selection, but it’s also broader than those two functions. For example, when designing compensation plans, or creating training programs, you need to know who will be working in your company tomorrow.
Recruitment and selection is a primary HR function tied directly to the workforce plan. HR plays a key role in selecting candidates for job openings. Candidate recruitment and selection is listed as a main HR department function. In fact, many companies use the term “human resources” to refer to both recruitment and selection. As such, candidate recruitment and selection is directly linked to human resource planning.
Job analysis is the process of determining what skills and experience are necessary to perform a particular job well. Job analysis informs hiring the right people, determines appropriate compensation, and informs the creation of training programs. A good job analysis can help ensure that employees are hired for the right roles, paid fairly, and given the tools and support they need to succeed in their jobs.
Performance management is the function responsible for appraising and improving employee output. Performance management and appraisal are listed as a main HR function. Performance management encompasses incentives, feedback mechanisms, and appraisal processes. By identifying areas where employees need improvement, performance management helps improve employee output.
Learning and development is the capability-building function of HRM. Learning and development is a key HR function. Oxford University found that happier employees are 13% more productive. Learning and development supports employee wellbeing and engagement.
Compensation, rewards, and career planning are among the 12 key HR functions. Rewards and career planning aim to attract, motivate, and retain employees. They fall within the scope of talent management (functions 1–7).
Workplace relations, risk, and administration
Health and safety and personal wellbeing are two of the 12 key functions of HRM. Health and safety and personal wellbeing are listed as separate functions. Creating health and safety policies and responding to employee grievances are examples of how HR departments carry out these functions. Working with labor unions is another way HR departments manage workplace relationships. These functions support regulatory compliance, and wellbeing initiatives reduce workplace stress and sustain productivity.
Industrial relations and employee participation are the functions of HRM that manage organizational-workforce relationships and employee voice. Industrial relations and employee participation and communication: two of the 12 key functions of HRM. Practical forms of industrial relations and employee participation include surveys, feedback, and exit interviews. These measures employee satisfaction and include union relationships.
Risk management is an HR function focused on identifying and resolving potential threats to the workforce and compliance. Risk management is the process of identifying, assessing, and resolving short- and long-term risks before they become a real threat. Risk management is linked to maintaining compliance and minimizing financial and operational risk.
Administrative responsibilities are an established HR function. Administrative responsibilities are one of the 12 key functions of HRM. Smaller or nonexistent HR departments mean more focus on basics, less on strategic HR. HR functions vary by industry, business size, and worker types.