11 Key Functional Areas of Human Resource Management

There are many different functional areas of human resources, with some companies and organizations having slightly different definitions and understandings of the different functional area of human resources depending on the type of business they run and how they conduct it. No two employers are the same!

The role of human resources (HR) has significantly evolved over the years, transcending from a purely administrative function to a more strategic partnership in organizations. As a result, the various functional areas within human resource management, also known as “human resource functional areas,” play a crucial role in today’s modern workplace. From talent acquisition to employee engagement, the importance of HR in achieving organizational goals cannot be overstated. So, what exactly are these human resource functional areas, and how do they impact the organization as a whole? Let’s dive in and explore the fascinating world of human resource management.

11 Key Functional Areas of Human Resource Management

Key Takeaways

  • HR departments play a vital role in managing various functional areas, such as Talent Acquisition and Recruitment, Training and Development, Compensation and Benefits Management.
  • HR professionals are responsible for promoting positive employee relations through Conflict Resolution & Mediation strategies to ensure an optimal work environment.
  • They also manage Performance Management programs to foster continuous improvement while ensuring legal compliance with Employment Laws & Policies.

8 HR Functional Areas Every Organization Should Manage

Whether you’re in human resource management or you’re an employee who’s trying to get a better grasp of how your HR department works, here we talk about key functional areas of human resources that will help you to better understand how this department works to protect both you and your employer. Let’s get to it!

Human resource management (HRM) is the backbone of an organization in the human resource management field, responsible for:

  • Recruiting
  • Hiring
  • Training
  • Compensating
  • Retaining
  • Motivating employees

A skilled human resource manager plays a crucial role in executing these responsibilities effectively.

The significance of HRM is evident, as it offers numerous advantages to organizations. The Bureau of Labor Statistics has projected a 7% growth in HR manager job titles across the United States between 2018 and 2028. This is in line with the current trend of increasing demand for these roles. This growth is a testament to the increasing importance of HRM in today’s business landscape.

There are several functional areas within HRM, which include:

  • Talent acquisition and recruitment
  • Training and development
  • Compensation and benefits management
  • Employee relations and engagement
  • Legal and regulatory compliance
  • Strategic human resource planning
  • Human resource technology and analytics

Each functional area plays a vital role in ensuring the organization’s workforce is well-equipped to achieve its mission, vision, and goals.

Let’s delve into the specifics of each of these functional areas.

1. Recruiting and Onboarding New Employees

onboarding Recruiting and staffing new employees is an essential part of any organization, especially when you’re working with a startup or a rapidly growing company. Most of the time, the human resources department will collaborate with the Hiring Manager throughout the recruitment process. The HR team is usually in charge of selecting potential candidates for the Hiring Manager to vet. They often use special software called ATS (Applicant Tracking System) to help with this, automatically scanning hundreds of resumes to look for keywords essential to the job role. If you’re a potential job candidate reading this, be sure to include keywords in your resume! Once suitable candidates have been found, the Hiring Manager will interview them and (usually) pick one new employee who got the job. The HR team will then usually contact the new employee and organize a start date, onboarding process, and begin discussing their salary, benefits, workers compensation rights and more.

Talent acquisition and recruitment is the process of identifying, attracting, and hiring top talent for the organization. HR managers play a crucial role in attending job fairs, scheduling and assisting with interviews, contacting references, and conducting background checks. In the realm of talent management, HRM is responsible for identifying and retaining high-quality personnel, administering onboarding and orientation processes, and offering opportunities for professional growth and development.

In the rapidly changing talent acquisition landscape, HR professionals employ a variety of recruiting tools, including job aggregators like Indeed or SimplyHired, video interviewing, and social media platforms like LinkedIn. Equally important is the onboarding and employee orientation process, which equips new employees with the crucial information and training needed for their new roles.

Effective management of talent acquisition and recruitment by HR departments aids organizations in building a strong workforce, thereby helping them meet their objectives.

2. Organizational Structure

Sometimes on organization is so large and multifaceted that it’s hard for it to retain an accurate image of itself. Employees are often unhappy while management has no idea, and this is where human resources management can help to oversee the company and gain some perspective. HR can help to define the company’s business goals and mission over the coming quarters, finding ways the business might improve by changing the way it treats some of its employees. The employees are the cogs in the machine of an organization that make it work, and HR needs to find the best way to keep everyone happy and working well. If there are changes to employment pathways or employee job skills that aren’t being leveraged, HR can take this up and make suggestions with higher management.

3. Performance Management

As the name implies, performance management is all about reviewing the performance of employees and managers, making sure that people are doing well in their assigned roles and feel like they have adequate training and equipment to complete their job functions properly. Sometimes people just don’t have the tools they need! If staff members are underperforming, you’ll often find that both their Manager and the Human Resources Department will speak to them about their performance, seeing if there’s any way that they can make it easier for the employee to perform their job better.

Training and development is a crucial aspect of HRM, ensuring that employees receive adequate training and maintain their development through various methods, such as:

  • Training programs
  • Performance evaluations
  • Reward programs
  • Tuition reimbursement programs
  • On-the-job training
  • Mentoring opportunities within the organization
  • Career development programs

HR’s role is to facilitate improved performance and retention through the provision of employee training, skill development, and career advancement opportunities.

The organization of ongoing training by HR is crucial, aiming to keep employees abreast with current trends and tools. As a human resource executive online, HR can help organize external professional development opportunities, manage the scheduling and logistics, and ensure employees have access to these opportunities for growth. Provision of training and development by HR aids in maintaining employee engagement, motivation, and productivity, thereby contributing to the organization’s overall success.

4. Employee Compensation and Benefits

We don’t go to work for fun – we join the workforce because we need money, health care, and ideally some benefits. Employee compensation, payroll and benefits is one of the key areas of human resources – HR team must organize the:

  • Employee pay
  • Health insurance coverage
  • Flexible spending accounts
  • Retirement savings
  • 401(k) payments
  • Sick leave compensation
  • Vacation time compensation
  • Company perks & freebies
  • Parking spaces & more

The benefits and compensation of employees varies widely from company to company, but you’ll find the HR department is in charge of regulating your pay (salary or hourly wages) and things like bonuses and raises too. There may be a specific person who handles only payroll, depending on the size of the company. It’s down to the HR department to determine a competitive compensation package for a certain job position, tempting potential members of the workforce away from competing organizations with similar jobs. If you feel that your pay and/or benefits are not adequate for the skills you bring to your job, then the HR and payroll team is the place to go.

Compensation and benefits management is another critical functional area of HRM, encompassing the design, implementation, and administration of competitive compensation packages, benefits programs, and reward systems. HR departments play a pivotal role in:

  • Selecting and administering benefit programs that effectively meet the needs of all employees
  • Maintaining payroll
  • Handling compensation and benefits for employees
  • Setting a position’s salary
  • Researching and sharing benefits package options
  • Managing retirement accounts and pensions
  • Instituting new employee benefits

To determine which benefits to provide, HR departments may survey their employees to ascertain which benefits are most beneficial to them or analyze market data to identify which benefits are most utilized or cost-effective. Effective management of compensation and benefits by HR departments assists organizations in attracting and retaining top talent, leading to a more satisfied and motivated workforce.

5. Training and Development

Human resources has a large role to play in the training and development of both new and existing employees, helping employees to expand their skills and envision future career planning in the workplace. The HR team might create development and training programs with key members of management, looking for ways to expand the skills or employees and start treading career pathways that allow people in the company to progress into better and better positions over time. That’s a great way to keep employees happy! Part of this training and development might relate to holding performance reviews as discussed previously, asking personnel if there are any skills or training that they would personally like to learn to better their own career. This could lead to development in specialized HR software, customer service, team work, diversity training and more. Employees should see a future at the organization – not a dead end.

6. Employee and Labor Relations

Employee relations is a complex area of human resources that mainly pertains to the laws surrounding employment in the United States. Both union and non-union workforces need HR teams that adhere to the laws and regulations surrounding how they can be legally treated and dismissed at work, among other things. Human resources must be up to the date with the latest employment laws and how these rules differ for different types of employees. All contracts must be kept up to date and re-done if the laws or regulations change at any point. New contracts may also have to be signed if an employee is promoted or demoted. Employee relations also covers things like workplace disciplinaries are how the business can legally handle infractions. For example, some places have zero-tolerance “one time and you’re out” systems whereas others have more complex “three strikes” or warning systems to give employees a second chance after a mistake. Whatever the rules at the particular business may be, the HR department is responsible for making sure that employees understand the code of conduct, their employment rights, and what will happen if they violate the code of conduct.

Employee relations and engagement is a critical aspect of HRM, aiming to cultivate positive relationships between employees and the organization, address grievances, and encourage a healthy work environment. HR managers play a significant role in:

  • Addressing conflicts between employees or between employees and supervisors
  • Discussing payroll and benefits with employees and helping to resolve any resulting issues
  • Leading training sessions on conflict resolution in the workplace
  • Responding to issues related to equity, sexual harassment, and workplace discrimination

Fostering positive employee relations and engagement allows HR departments to enhance job satisfaction, increase productivity, and promote a more cohesive work environment. Organizations that prioritize employee relations and engagement are more likely to retain top talent and maintain a positive company culture, which greatly impacts the overall success of the organization.

7. Workplace Safety and Health Issues

employee safety Another one of the most important areas of human resources, workplace health and safety is essential for ensuring employee care and safety through all work environment and business activities, whether they’re on the premises or happening remotely during business hours. The organization must comply with the Occupational Safety and Health Act of 1970, often referred to as OSHA. Occupational safety varies with organizational needs and the type of company, but it may involve prominent warning signs, safe equipment within the workplace, personnel training programs, appropriate PPE, compliance checks, risk assessments, and more. Even with all the right measures in place, some employees within the organization may have low compliance with health and safety training, at which point the HR team and management may need to consider termination.

8. Employee Satisfaction

One of the areas that doesn’t get discussed very often is employee satisfaction, but this is a key element to any human resource department worth its salt. Management may think that their workforce is totally fine when in reality there is resentment and dissatisfaction growing within the organization. This is when human resources needs to step in and measure how satisfied employees are in their positions. This can include important discussions on topics that include:

  • job functions & skills
  • training
  • development
  • pay
  • rewards programs
  • the staffing & recruitment process
  • succession planning & more

Happy employees are productive employees, so it’s in best interests of both the employee and the organization to make changes that ensure their employees are happy and able to do their jobs to the best of their ability.

Employee relations and engagement is a critical aspect of HRM, aiming to cultivate positive relationships between employees and the organization, address grievances, and encourage a healthy work environment. HR managers play a significant role in:

  • Addressing conflicts between employees or between employees and supervisors
  • Discussing payroll and benefits with employees and helping to resolve any resulting issues
  • Leading training sessions on conflict resolution in the workplace
  • Responding to issues related to equity, sexual harassment, and workplace discrimination

Fostering positive employee relations and engagement allows HR departments to enhance job satisfaction, increase productivity, and promote a more cohesive work environment. Organizations that prioritize employee relations and engagement are more likely to retain top talent and maintain a positive company culture, which greatly impacts the overall success of the organization.

Conflict Resolution and Mediation

Conflict resolution and mediation play a crucial role in maintaining a harmonious work atmosphere. Conflict resolution is a process of resolving disputes or conflicts between individuals or groups, involving finding a solution that is mutually acceptable and satisfactory to all parties involved. Mediation is a specific method of conflict resolution, in which a neutral third party facilitates communication and negotiation between the conflicting parties, to help them reach a resolution.

HR professionals are vital in resolving workplace conflicts by identifying the underlying cause, facilitating communication between the conflicting parties, and helping them reach a mutually satisfactory resolution. They can also promote a secure and respectful setting for all stakeholders in the dispute, ensuring that all voices are heard and respected, and develop policies and procedures to help avert future disagreements.

Effective management of conflict resolution and mediation by HR departments leads to a more positive and productive work environment for all employees.

Performance Management

Performance management is a critical aspect of HRM, involving the process of establishing performance expectations, offering feedback, and carrying out evaluations to guarantee employee development and productivity. HR professionals provide guidance to supervisors to help them foster productive relationships with other personnel within the organization.

Performance management is essential for ensuring that employees are meeting their goals and objectives, holding them accountable for their performance, and fostering a culture of continuous improvement and development. The advantages of performance management include:

  • Enhanced employee engagement
  • Heightened productivity
  • Improved communication
  • Heightened morale
  • Fostering a culture of accountability and ongoing improvement

Effective management of employee performance by HR departments assists organizations in optimizing workforce productivity and realizing their overall business objectives.

Employee Retention Strategies

Employee retention strategies are essential for organizations looking to enhance employee satisfaction, motivation, and loyalty, ultimately reducing turnover rates. HR generalists or business partners can work across a variety of areas or serve as labor relations representatives for unionized employees. Initiatives to increase employee satisfaction may include offering competitive salaries and benefits, providing flexible work schedules, and offering opportunities for career growth and development.

To improve employee motivation, organizations can implement initiatives such as recognizing and rewarding good performance, offering meaningful work, and providing learning and development opportunities. By increasing employee loyalty, organizations can create a positive work environment, provide competitive salaries and benefits, and offer opportunities for career growth and development.

Implementation of effective employee retention strategies by HR departments results in a more satisfied and motivated workforce, which is crucial for the success of the organization.

9. Legal and Regulatory Compliance

Legal and regulatory compliance is a crucial aspect of HRM, ensuring that an organization adheres to the increasing number of employment laws established by federal, state, and local governments. HR professionals are responsible for:

  • Monitoring and comprehending regulatory requirements
  • Implementing policies
  • Accurately classifying workers
  • Practicing equitable hiring practices
  • Providing a secure work environment
  • And other duties.

Employee health and safety encompass a wide range of topics, including:

  • Safety against harassment, discrimination, or bullying in the workplace
  • Physical safety through building fire code compliance
  • Adherence to labor laws protecting employee rights
  • Cybersecurity for safeguarding personal information

HR departments play a vital role in ensuring compliance with employment laws, labor regulations, and company policies, protecting both the organization and its employees.

Employment Law and Policy Enforcement

Employment law encompasses the legal rights and obligations that define the relationship between employers and employees, while policy enforcement refers to the implementation and enforcement of these laws and company policies within an organization. HR professionals play a key role in ensuring that all employees are aware of and adhere to applicable employment laws and internal policies. This involves monitoring employee conduct, providing instruction and education on pertinent laws and policies, and taking corrective action as necessary.

Failure to comply with applicable employment laws and internal policies could result in legal action, fines, and other penalties. It may also lead to a decrease in employee morale and productivity, as well as a negative impact on the organization’s reputation. Effective enforcement of employment laws and policies by HR departments fosters a more compliant organization, contributing to overall success.

Health and Safety Regulations

Health and safety regulations are laws and standards established to safeguard the health and welfare of personnel in the workplace, enforced by organizations like OSHA (Occupational Safety and Health Administration) in the United States. The objective of health and safety regulations is to guarantee the safety and welfare of personnel in the workplace by mandating employers to maintain a secure working environment, devoid of known risks, and equip personnel with appropriate training and protective gear.

HR departments play a crucial role in implementing and maintaining workplace safety standards and procedures to protect employees from potential hazards. Ensuring compliance with health and safety regulations allows HR professionals to provide a safer work environment for all employees and assists organizations in avoiding costly fines and penalties.

Diversity and Inclusion

Diversity and inclusion refer to the practice of creating an environment that is both diverse and inclusive, where individuals from different backgrounds, cultures, and identities are valued and respected. Promoting equal opportunities, embracing different perspectives, and fostering a sense of belonging for all individuals are essential components of diversity and inclusion.

Maintaining a diverse and inclusive work environment is essential for promoting different perspectives and ideas, which can result in more creative solutions and improved decision-making. HR professionals play a vital role in promoting diversity and inclusion, implementing policies and procedures that foster an inclusive work environment, and providing training and education on topics such as unconscious bias and cultural sensitivity.

Effective promotion of diversity and inclusion by HR departments leads to a more innovative and successful organization.

10. Strategic Human Resource Planning

Strategic human resource planning is the process of aligning an organization’s human resource capabilities with its strategic goals and objectives. It involves:

  • Forecasting future workforce needs
  • Identifying gaps in skills and competencies
  • Developing strategies to attract, retain, and develop the right talent
  • Effectively utilizing human resources to achieve overall business objectives.

The significance of strategic human resource planning lies in its ability to assist organizations in effectively utilizing their human resources to accomplish their overall business goals and ensure they have the appropriate personnel with the necessary skills and competencies in place to meet their objectives.

The steps involved in strategic human resource planning include forecasting future workforce needs, identifying gaps in skills and competencies, and devising strategies to attract, retain, and develop the appropriate talent. Challenges associated with strategic human resource planning involve identifying the necessary talent, devising strategies to attract and retain the appropriate personnel, and guaranteeing the organization has the requisite skills and competencies to accomplish its goals and objectives.

Effective management of strategic human resource management allows organizations to optimize their workforce and realize their overall business objectives.

Workforce Planning and Analysis

Workforce planning and analysis is the process of:

  1. Identifying and forecasting the workforce needs of an organization
  2. Developing strategies to meet those needs
  3. Analyzing current workforce data, such as employee skills, demographics, and performance, to determine future workforce requirements
  4. Creating a workforce plan that outlines the actions and initiatives needed to attract, develop, and retain the right talent to achieve organizational goals.

Effective workforce planning and analysis is essential for organizations in aligning their workforce with their business objectives and guaranteeing they have the requisite personnel in the appropriate roles at the appropriate time. Additionally, it aids organizations in recognizing potential deficiencies in their workforce and devising strategies to address them. Conducting thorough workforce planning and analysis aids HR departments in helping organizations optimize their workforce and achieve their overall business objectives.

Organizational Culture and Change Management

Organizational culture and change management are essential aspects of HR’s role in shaping company culture and facilitating organizational change to support business growth and transformation. HR professionals are responsible for:

  • Establishing expectations for employees
  • Developing policies and procedures
  • Offering guidance and support to create a positive work atmosphere
  • Promoting diversity and inclusion
  • Fostering collaboration and communication

HR professionals can facilitate organizational change by:

  • Formulating and executing strategies to ensure successful change management
  • Establishing a clear vision and mission
  • Notifying all stakeholders of the change
  • Providing employees with training and support

Effective management of organizational culture and change by HR departments assists organizations in adapting to new challenges, seizing opportunities, and achieving their overall business objectives.

Succession Planning

Succession planning is a business strategy utilized to ensure the orderly transfer of leadership roles to another employee or group of employees. It is essential in order to guarantee that the organization has a plan in place for filling leadership roles upon vacancy and that it has a pool of potential leaders who are ready to assume leadership roles in the future.

The procedure for succession planning generally involves:

  1. Recognizing potential leaders within the organization
  2. Evaluating their skills and capabilities
  3. Furnishing them with the requisite training and growth to ready them for potential leadership roles.

Succession planning provides organizations with the following benefits:

  • Assurance that leadership roles can be filled when vacancies arise
  • Development of a pipeline of potential leaders for future needs
  • Opportunity for employees to hone their skills and capabilities

Effective management of succession planning by HR departments helps organizations prepare for the future and ensure their continued success.

11. Human Resource Technology and Analytics

The use of technology and data analytics has become increasingly prevalent in human resource management, streamlining HR processes and enabling informed decision-making. From automating recruitment to optimizing performance management, HR technology and analytics play a vital role in modern HR operations. As the majority of HR technology, particularly human capital management (HCM) systems, are transitioning to cloud-based software as a service (SaaS) platforms, organizations are increasingly leveraging these solutions to enhance their HR functions.

HR technology and analytics not only optimize HR processes, but also provide valuable insights into workforce trends, employee engagement, and other key performance indicators. Leveraging data analysis enables HR professionals to make better-informed decisions and foster continuous improvement across the organization. In an increasingly competitive business landscape, the effective use of technology and analytics is essential for organizations to stay ahead and achieve their overall objectives.

HRM Software and Systems

HR management software solutions are designed to automate and optimize HR functions, ranging from recruitment to performance management. These software solutions help HR professionals manage various aspects of their work, such as recruitment services, payroll and benefits administration, and talent management. Some of the most widely used HR software programs include ADP Workforce Now, Bamboo HR, and Workday.

By automating and streamlining HR processes, HRM software enables organizations to focus their resources on more strategic initiatives and better serve their employees. As the role of HR continues to evolve, the adoption of HRM software and systems is becoming increasingly crucial for organizations looking to stay competitive and effectively manage their human resources.

HR Analytics and Reporting

HR analytics and reporting involves:

  • Collecting, examining, and presenting HR data to gain insights and inform decisions
  • Analyzing existing HR metrics and data to recognize trends, patterns, and relationships within the data
  • Detecting correlations between different variables

By utilizing HR analytics and reporting, HR professionals can make data-driven decisions and improve overall HR strategies.

Reporting entails conveying the analyzed data in a clear and succinct fashion, allowing HR professionals to make decisions based on data and enhance multiple facets of human resource management.

Employing HR analytics and reporting enables organizations to:

  • Gain a better understanding of their workforce
  • Pinpoint areas for improvement
  • Make data-driven decisions that positively impact employee engagement, satisfaction, and overall performance

By leveraging the power of data analysis, HR departments can drive continuous improvement and contribute to the overall success of the organization.

Cybersecurity and Data Privacy

The responsibility of HR in protecting sensitive employee information and ensuring compliance with data privacy regulations is of utmost importance. Cybersecurity involves implementing strategies, techniques, and controls to protect data assets and reduce the risk of cyberattacks, while data privacy focuses on ensuring individuals have control over their personal information and how it is collected, used, and shared.

Effective management of cybersecurity and data privacy by HR departments ensures:

  • The safeguarding of the confidentiality, integrity, and availability of personal data
  • Compliance with privacy laws and regulations
  • The maintenance of trust among both employees and stakeholders.

The Bottom Line

There are so many important areas of human resource management that are essential for any organization to function properly while keeping its employees motivated and remaining in compliance with the law. Although every business has unique structures, workforces, and organizational needs, these important tents of HR should be applicable across every business in the US, whether their industries are related or not.

In today’s rapidly evolving business landscape, human resource management plays a crucial role in the success of organizations. From talent acquisition to legal compliance, the various functional areas within HRM contribute to the effective management of an organization’s workforce, ultimately driving its overall performance and growth. As the role of HR continues to evolve, it is essential for organizations to adapt and leverage new technologies, analytics, and strategies to stay ahead and achieve their objectives.

Understanding and effectively managing the various functional areas of human resource management is essential for organizations to thrive in today’s competitive business environment. By fostering a positive work culture, implementing effective HR processes, and leveraging technology and analytics, HR professionals can significantly impact the organization’s success, paving the way for a brighter and more prosperous future.

Frequently Asked Questions

What are the 5 functional areas of HR?

Human Resources is responsible for managing five main areas of focus: recruiting and staffing, employee benefits, employee compensation, employee and labor relations, training and development, organizational structure, compliance, workplace safety and health, and employee satisfaction.

These areas of focus are essential for any organization to ensure that their employees are well taken care of and that the organization is running smoothly. Recruiting and staffing involve finding and hiring the right people for the right positions. Employee benefits include health insurance, retirement plans, and other benefits that employees may be eligible for.

What are the 7 main areas of human resource management?

HR management involves Recruitment & Selection, Performance Management, Learning & Development, Succession Planning, Compensation & Benefits, Human Resources Information Systems, and HR Data & Analytics.

What does a human resource management do?

Human Resource Management is an essential strategic role in any organization, with functions such as recruitment, training and development, employee relations, and strategic planning.

HR managers oversee the administrative functions of a company, from recruiting and hiring new staff to developing an inclusive workplace culture and advising executives on relevant policies.

How does HRM software help HR professionals?

HRM software simplifies HR processes and provides HR professionals with tools to manage recruitment, payroll, benefits administration, and talent management efficiently.

It streamlines the HR workflow, allowing HR professionals to focus on more strategic tasks. It also helps to ensure compliance with labor laws and regulations.

HRM software can be used to track employee performance and manage employee records.

What is the role of HR in promoting diversity and inclusion?

HR plays a pivotal role in promoting diversity and inclusion through the implementation of policies and procedures, as well as providing training and education to create a more inclusive environment.

By establishing clear policies and procedures, HR can ensure that all employees are treated fairly and equitably. They can also provide training and education to help employees understand the importance of diversity and inclusion, and how to create an inclusive environment.

Tehsin Bhayani

AirMason was born when Tehsin was trying to create a digital culture book, but couldn’t find any solutions in the market that had all the features he needed. In 2016, AirMason officially launched. In five years, AirMason has created thousands of handbooks for more than 1,000 clients around the world.

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