HR Function

Why is Human Resources Important in Business?

Team discussing why hr is important


Human resources is important in business because it concerns a company’s most valuable asset - its people. 

It is responsible for the recruitment and retention of employees. It also involves the development of policies and procedures, whilst creating a positive work culture. When all these elements are effectively executed, it can lead to increased productivity, satisfaction amongst employees, and ultimately, business success.  

If you’re wondering, what is human resources in business? And why HR is important, this article should help. We'll explore the role of HR in employee engagement, talent management and development, and in driving strategic decision-making. We’ll also consider how tools like HR software can help SMBs in achieving operational efficiencies. 

What is HR?

Human Resources is an area in business that’s responsible for the management of a workforce. It covers a host of areas including recruitment, training and ensuring compliance. It plays a vital role in creating a productive and positive work environment and in fostering engagement and development amongst employees. In short, HR is essential for businesses to effectively manage their human capital and drive organisational success. 

Why HR is important to business success

As a key function, human resources is important to everyday businesses in a multitude of ways.  

One of the most significant impacts of HR is on employee satisfaction. When managed effectively, it helps create a positive work environment and fosters employee engagement by:  

  • Promoting open communication  
  • Offering training and development opportunities, and  
  • Ensuring fair and equitable treatment of all employees 

Another critical role of HR is in training and developing employees from within. By investing in the growth and development of employees, you can create a more skilled and motivated workforce. This can lead to improved performance and retention rates.  

HR is also responsible for resolving conflicts and maintaining a positive workplace culture. Both contribute to a positive working environment.  

We’re now going to delve deeper into processes and strategies. This should further uncover why HR is so important. We will look at areas from hiring and onboarding to performance management and look at the practices you can use to drive success in your business.  

HR and home working

The COVID-19 pandemic forced organisations to adapt to a new reality of remote work. HR has been at the forefront of this change. 

From providing remote training and onboarding to creating flexible work arrangements, HR has helped to keep things running smoothly, even from remote locations. 

One of the most valuable tools that SMBs can use when it comes to working from home is HR software. With the right tools in place, small businesses can manage their responsibilities from a remote location. This includes: 

  • Tracking employee time off  
  • Managing payroll and benefits, and  
  • Providing remote performance evaluations  

By using a HRIS, you can stay connected with employees. As such, it has become the best friend of SMBs when it comes to managing the workforce during the pandemic and beyond. Find out more about the benefits of HR software for remote working. 

HR processes that keep businesses operations running smoothly

In this section, we'll explore the question, why is human resources important? and how HR processes can help you optimise your workflow and achieve your business goals.  

Closely looking at these processes will help you stay on top of your game and help create a positive work environment that supports your businesses success.  


Compliance is a crucial component of human resources in business. It ensures that a company is operating within the legal framework and avoiding any penalties or fines.  

When it comes to compliance, HR is responsible for:  

  • Developing and implementing compliance policies  
  • Providing training to employees, and  
  • Monitoring compliance with laws and regulations  

Neglecting these compliance rules can prove costly. It may even result in legal action. Not only can this affect your financial stability, but it could also have a detrimental impact on your reputation.  

With this in mind, it’s crucial to have systems and support in place to ensure compliance. For example, you could use HR software to help you: 

  • Manage employee data 
  • Keep track of important documents, and 
  • Monitor compliance training 

When HR systems are used, it can help you stay organised and ensure that all necessary information is to hand.  


Still questioning why human resources is important? HR plays a crucial role in the entire recruitment process, and when not managed properly, can be costly.  

HR is responsible for sourcing candidates and ensuring that the best fit is hired for the position. It is also instrumental in the onboarding process, which sets the tone for the employee's entire tenure with your company. Effective onboarding can lead to increased employee satisfaction, retention, and productivity. 

Data management

HR also plays a critical role in data management. It is responsible for:  

  • Maintaining employee records  
  • Ensuring compliance with laws, and  
  • Protecting sensitive company information  

Without effective HR data management, businesses can face costly legal and financial consequences. A skilled team or an effective HR system can ensure that records are accurately and securely stored. This enables efficient access and management of critical information.

Performance management 

HR plays a key role in performance management by: 

  • Setting clear performance expectations  
  • Providing regular feedback, and  
  • Identifying areas for employee development  

By keeping employees engaged and developing their skills, HR can improve overall productivity. It can also help you achieve your business goals by ensuring your expectations align with your employees’.  

Without effective performance management processes, your employees may become disengaged or feel undervalued. This could lead to a decrease in productivity and potentially turnover. That’s why performance management is a key aspect of why human resources is important in business.  

Company culture 

Developing and promoting a company's culture can have a significant impact on the success of the business. It can be achieved by: 

  • Fostering a positive work environment 
  • Encouraging teamwork and collaboration, and  
  • Promoting employee engagement and well-being 

Combined, this helps create a strong and unified company culture.  

This, in turn, can improve employee satisfaction, increase productivity and enhance the reputation of your company. 


HR plays a crucial role in training and development within a company. By utilising HR data, leaders can identify areas where employees may need additional training to improve their skills 

Effective training and development programs can increase employee satisfaction and engagement. They can also improve productivity and profitability. What’s more, it can ensure that new hires receive the necessary training to become successful members of the team. 

Discover how HR can boost your business

So there you have it – why HR is so important in business. From compliance and recruitment to data management and performance, HR is key. It keeps things running smoothly and ensures your employees are happy and engaged.  

As an SMB, a key consideration is whether you recruit for a dedicated HR professional, or whether you utilise software. Often, the latter is a more financially viable option. 

Check out our HR software for small businesses page to learn more. And, if you think you’re ready to give us a try, be sure to sign up for a free trial. 

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Rich Newsome
By Rich Newsome Digital Content Writer

Rich is a content writer at Access PeopleHR and has a wealth of experience within the tech space, including HR software. Passionate about providing website visitors with informative and easy-to-understand content, Rich is committed to helping SMBs find the best solutions for their needs. With a flair for writing, Rich's content engages and educates readers, guiding them towards informed decisions.

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