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What Is Human Resource Management (HRM) and How Does It Work?

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    Human resource management (HRM) is key for companies to retain employees, improve development and navigate the evolving compliance landscape. Read how HRM works, the functions it serves and how to simplify the process with the right single software.

    In a rapidly evolving, technology-driven landscape, human resource management (HRM) is a critical component of any successful business. By effectively managing human resources (HR), employers can boost:

    Let’s explore what HRM is, the areas it covers and how companies can use the right HR tech to simplify HRM and engage employees.

    What is HRM?

    Human resource management (HRM) is a strategic approach to effectively and efficiently manage people. It’s a discipline that aims to help organizations gain a competitive advantage by maximizing employee performance and achieving business objectives.

    What does HRM include?

    HRM includes a wide range of processes designed to help efficiently manage the people in an organization from when they apply to their retirement. Here are five key focus areas.

    Workforce management

    Workforce management is all about increasing the efficiency and productivity of a company’s employees. Basically, it’s making sure the right employees fill the right positions at the right times. This includes:

    With effective workforce management, businesses can align their capabilities with their strategic business objectives to raise efficiency, employee satisfaction and overall organizational performance.

    Performance evaluations

    Performance evaluations give companies the ability to assess individual employee contributions and pinpoint areas for improvement. A critical component of HRM, performance evaluations help management:

    • set clear expectations
    • measure employee performance
    • provide constructive feedback
    • support employee development

    Evaluations serve a variety of purposes, from recognizing and rewarding high-performing individuals to identifying skill gaps and training opportunities. They also promote open communication between managers and employees to foster a culture of continuous improvement and personal growth.

    Job analysis and planning

    HRM allows for the systematic study and detailed documentation of the responsibilities, duties, skills, outcomes and work environment of a specific job. This process helps businesses develop job descriptions, specifications and performance standards, which ultimately improve recruiting and evaluations.

    Job analysis and planning help companies understand the exact requirements of a job and the skills needed to perform it effectively. This allows HR teams to align job roles with the organization’s strategic goals, ensuring that the workforce is capable of meeting current and future demands.

    Professional development and learning

    Professional development and learning empower employees to meet the changing demands of their roles. It’s a continuous process that starts with identifying the learning needs of employees and then designing, delivering and evaluating effective training programs.

    Professional development programs can take various forms, like:

    These programs help businesses improve skills and performance while demonstrating a willingness to invest in the growth of their people.

    Compensation and incentives

    Compensation and incentives include not only salaries and wages but also bonuses, commissions, stock options and other forms of performance-based pay. Of course, they can also include benefits like health insurance, retirement plans, paid time off and flexible working conditions.

    To attract and retain top talent, organizations need to strategically design their compensation and incentive programs, tailoring them to align with business goals, financial capabilities and market conditions. Effective compensation and incentive strategies support both immediate performance improvements and long-term organizational growth.

    What are the roles of HRM?

    Effective HRM is essential to establishing a productive and motivated workforce. It deploys a wide range of functions that help businesses achieve their goals while also meeting the needs of their employees. In other words, HRM allows businesses to create a supportive, engaging and efficient work environment.


    Staffing includes identifying, attracting and hiring the right talent to fill specific business needs. It’s not just about filling vacant roles; it’s about planning for future requirements and developing strategies to retain and develop employees. This, in turn, can help organizations stay competitive and effective.

    Workplace culture

    Another critical component of HRM is creating a positive workplace culture that aligns with the organization’s values and strategic objectives. HRM plays a huge role in shaping an employee’s work environment and fostering a culture of inclusivity and collaboration.

    Workforce policies

    Developing and implementing workforce policies help HR teams establish clear and consistent guidelines to govern employee behavior and operations. These policies usually cover a broad spectrum of topics — including concepts like ethics, conduct, safety and diversity — and provide a strong foundation for a fair and equitable workplace. HRM can help teams craft these policies and regularly review or update them to account for changing standards.

    Compensation and benefits administration

    This involves creating and managing systems for salaries, bonuses, health insurance, retirement plans and other benefits. The main objective here is to attract, motivate and retain employees. And that requires a strategic approach to make sure compensation packages are fair and competitive. HRM plays a significant role in balancing the needs and expectations of employees with broader business goals.

    Retention management

    Retention management is a set of strategies and practices aimed at helping organizations reduce turnover rates and retain valuable employees. This starts with understanding and addressing the reasons employees choose to stay or leave through:

    • satisfaction or development opportunities
    • work-life balance
    • compensation
    • and more

    Essentially, HRM helps teams implement specific initiatives that contribute to a positive and supportive work environment.

    Employee training and development

    In an ever-evolving business environment, HRM helps organizations equip their workforce with the skills and competencies needed to succeed. By providing targeted training and development programs designed to close skills and knowledge gaps, employee training and development can facilitate individual career growth and fulfill broader business objectives. These continuous learning opportunities also help promote a culture of growth and adaptability, which is crucial for maintaining a competitive edge.

    Compliance management

    Compliance management means ensuring that all employee-related practices comply with legal and regulatory requirements, including adherence to labor laws, health and safety standards and equal employment opportunities. HRM plays a critical role for businesses to:

    • stay up to date with relevant legislation
    • implement policies and procedures to meet legal requirements
    • train staff to ensure long-term compliance

    This helps businesses mitigate legal risks while fostering a fair and safe work environment.

    Ensuring health and safety

    By conducting risk assessments, providing health and safety training to employees, and implementing measures to prevent workplace hazards, HRM helps businesses develop and enforce specific policies and procedures that comply with health and safety standards.

    Worker protection

    HRM plays a major role in creating a secure and respectful work environment — one that treats employees fairly and protects them from exploitation and harm. This includes implementing policies and practices that comply with labor laws and regulations related to:

    Communication channel

    HRM also helps with the establishment and maintenance of effective communication lines within an organization. Companies can devise and implement multiple communication strategies and platforms — including meetings, emails, intranets and social media — to make sure information flows clearly and consistently between management and employees. This role is crucial for creating an inclusive work environment and ensuring that all staff members know about an organization’s policies, changes and opportunities.

    What are the functions of human resources?

    The functions of human resources are wide-ranging. For starters, HR helps an organization acquire all the right talent through recruiting and staffing, while also conducting training and development programs to improve employee skills. HR is also responsible for managing compensation and benefits to attract and retain employees, as well as performance management processes to evaluate and improve employee production. Pivotally, HR is also responsible for ensuring compliance with labor laws and regulations.

    Combined, HRM helps optimize business performance, foster a positive company culture and maintain a harmonious work environment for employees.

    What is the difference between HRM and HCM?

    HRM is a traditional approach to managing people, with an emphasis on recruitment, training, performance management and employee relations. Basically, the goal of HRM is to maximize employee performance and satisfaction.

    Human capital management (HCM), on the other hand, is a more strategic approach that integrates HRM practices with advanced technology to manage the entire employee life cycle. It sees employees as valuable assets that can be maximized through investment and management. In other words, HCM encompasses HRM but with added emphasis on workforce planning, talent management and analytics to better align its people with broader business objectives.

    Why is HRM important?

    HRM is a pivotal component of any successful organization, playing a vital role in maximizing the efficiency and effectiveness of its workforce. It’s also central to recruiting and retaining top talent, ensuring that the right people are in the right roles and creating a positive work environment that motivates employees to perform their very best.

    But HRM does more than enhance productivity; it helps businesses gain a sustainable competitive advantage, aligning HR strategy with the broader business goals. By strategically planning and implementing HR policies and practices, HRM addresses the dynamic needs of the workforce and the entire business. And, critically, it helps shape organizational culture, promote diversity and inclusion, and keep workers safe on the job. It’s an indispensable part of doing business in a rapidly evolving environment.

    What are the challenges in HRM?

    HRM faces several ongoing challenges, from navigating the complexities of labor laws and regulations to managing diversity and inclusion in a global workforce. At the same time, HR departments have to keep up with the rapid pace of technological change that affects both the nature of work and the methods used to recruit, train and manage employees. These challenges mean HR teams have to be strategic and proactive in developing policies and practices that meet the changing needs of their workforce.

    Examples of HRM

    HRM isn’t some hypothetical, pie-in-the-sky idea; it has real-world implications that have changed the course of some of the innovative companies in the world. Google, for instance, rebranded its HR department to “People Operations,” emphasizing data-driven strategies to improve employee satisfaction and productivity. This includes “Project Oxygen,” which helped the company pinpoint the traits of its most effective managers, leading to improved management training programs.

    Another example is Deloitte’s approach to performance management, which replaced traditional annual reviews with a more fluid, ongoing feedback system. It’s a change that reflected a broader trend in HRM toward continuous dialogue, emphasizing development and potential over past performance. Deloitte’s system focuses on frequent check-ins between employees and managers to set short-term objectives and provide real-time feedback, which is better aligned with today’s high-speed pace of business. Initiatives like these underscore how HRM is always evolving, adapting to the changing needs of organizations and the people who make them tick.

    What is HRM software?

    HRM software is a digital solution designed to automate and streamline the core functions and processes of HRM within organizations. This tech includes a wide range of HR functionalities, such as:

    Integrating these different aspects into a single HRM software significantly enhances efficiency, reduces manual labor and human error, and improves data management and decision-making processes. It provides HR professionals with powerful tools to manage employee information, monitor performance and effectively plan workforce needs, all while ensuring compliance with relevant laws and regulations.

    The adoption of HRM software has become a crucial component in modernizing HR practices. It offers scalability, flexibility and accessibility to enable organizations to focus more on strategic HR initiatives rather than administrative tasks.

    How does HRM software help a business?

    HRM software helps businesses automate and optimize various human resource-related tasks. This can lead to significant time and cost savings, increased accuracy and better operational efficiency.

    By consolidating different HR functions — from recruiting and payroll to performance management — into one experience, businesses can streamline their workflows, reduce paperwork and eliminate redundancies. This allows HR departments to focus on more strategic tasks like talent development and employee engagement, while also improving decision-making through powerful analytics and reporting features.

    On top of all that, HRM software helps organizations ensure regulatory compliance by tracking changes in labor laws and updating processes accordingly. It also improves employee experience through things like self-service portals, which allow employees to manage their personal information, time off and benefits. This, in turn, helps businesses create a more transparent and engaging work environment.

    Explore Paycom’s resources to learn more about HRM, HR tech and other important topics.

    DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.