What is human resources? A lot of things pop into mind when the term is mentioned in business. But more than just finding out its meaning, you need to understand its significance in your startup’s success. Today, we’ll learn what it’s all about.

In a dog-eat-dog economy, the losses you encounter in business feel twice as heavy, especially when it comes to losing talents. According to a US Mercer Turnover Survey, the average turnover rate of US companies is at 22%. Recent 2021 trends have shown that the number of employees quitting in the US was around 3.4 million or 2.3% of the surveyed population. These numbers have significantly increased per state and industry.

Now, if we were to assess these numbers objectively, they don’t necessarily sound bad. As long as the hiring rate is up, you can always make up your employee count, right? Not exactly. A high turnover rate is not something to boast about. In fact, large businesses are losing trillions in employee replacement.

An old study conducted by the Center for American Progress revealed that the cost of replacing a highly skilled employee averages 213% of the position’s annual salary. And this varies for lower-ranking roles.

Society for Human Resource Management also concluded that the estimated cost of replacement is equivalent to six to nine months’ worth of that position’s salary. Hence, if a position was worth $40,000, you’d have to shell out around $30,000 to fill it. It’s safe to say that turnover cost far outweighs employee recruitment.

With that said, how do you strike a balance between retaining and hiring employees? How can you make wise decisions when it comes to handling people? That’s where human resources come into play.

What is Human Resources?

By definition, the term “human resources” can refer to the people that comprise a company’s workforce or the department that’s managing those said people. Collectively, human resources is a firm’s most valuable asset. After all, there wouldn’t be a company without the employees. But today, we’re going to focus more on the organization or the department in charge of human resources. They play an essential role in the company’s operations.

The human resources department of a company ensures the full productivity of its employees. From choosing qualified talents and giving the proper benefits to the employees, the HR department is crucial in building the foundation of a solid workforce.

Not only that, but they also handle both the external and internal issues and conflicts that arise. The goal of human resources is to keep a harmonious and productive work environment.

Why do you need HR people?

For one, you need people on the ground. As a startup founder, you’ll inevitably focus on growing your company. You’ll spend most of your time talking to clients and investors because they’re the ones who will bring in the funds. This means you won’t be able to oversee the regular operations and track how the company is doing. Hence, you need to designate that responsibility to management.

On the other hand, we also can’t forget that a large chunk of the cash flow comes from the day-to-day operations. Every successful interaction and transaction with customers brings in profit. The business benefits most when everyday things are running smoothly. And behind every successful production are several individuals putting in the work. And that, of course, is what HR manages.

Common disruptions in the workplace can dramatically decrease productivity and ruin the flow of operations. If there are relational conflicts or an employee is violating company rules, HR can implement the necessary sanctions. On top of managing the workforce, HR can also pinpoint processes, resources, and areas that need improvement.

To further understand the different HR responsibilities, we’ll need to study human resource management.

What is Human Resource Management?

Human Resource Management (HRM) is the system used to manage people within an organization. This falls into three major categories namely staffing, employee compensation and benefits, and work designation. HR professionals usually specialize in one of these categories.

HRM is efficiently designed to track the activities, performance, and status of employees. The HR department carries out these processes to ensure that the company’s goals and objectives are met.

These are some of the processes involved in Human Resource Management:

• Employee record management
• Performance evaluation
• Appraisal and compensation
• Recruitment
• Seminars and training
• Labor force organization
• Workforce Maintenance

To summarize, all workforce-related concerns fall under HR responsibility. Human Resource Management ensures the well-being of both the company and its employees. It’s important that a company maintains the quality of its operations while it grows and expands.

The Challenge of Human Resources

Thanks to the advancement of technology, a lot of the HRM processes have become much more convenient and efficient. Tools like Human Resource Information System (HRIS) have simplified and integrated the system into one cohesive platform. However, certain challenges remain in other areas.

When it comes to recruiting talent, a lot of industries are having issues with finding applicants. In fact, talent shortage has doubled worldwide and in 2030, it’s expected to have a drastic impact on business’ shortfalls.

For example, there’s a talent shortage of developers in the software industry. Given how the demand for tech is expected to grow, this is a big dilemma for most tech startups. Finding IT talent is already challenging in a limited scope, but finding qualified professionals in certain specializations is even more difficult. You’d have to invest a lot of time and resources to filter qualified candidates for your software project.

But what if there was a more convenient and cost-effective way to do it?

The same way HR processes have become more efficient through technology, recruitment strategies have also evolved through the years. Technology has paved the way for businesses to extend their reach.

One of the most popular solutions for recruitment today is outsourcing. You can outsource your business processes and focus on your core competencies. Think of it this way: outsourcing gives you access to a wider talent pool at a more affordable price. It’s a win-win situation for any startup! But doing business in foreign places needs experts. And that’s where Full Scale comes in.

Build up your Team with Full Scale

Full Scale specializes in helping startups build their software development team. Our founders, Matt DeCoursey and Matt Watson, have made it their mission to mentor and provide opportunities for business owners.

Through our large network, we can connect startup owners with competent professionals. Rest assured that we’ve chosen the cream of the crop when it comes to finding tech experts. We can help you assemble a dedicated team of software developers, project managers, QA specialists, and more!

Ready to build your team? Contact us today!