Industry Overview: Human Resources

Posted by The Editors on December 3, 2012
Human resources (HR) is a general term meant to cover a wide range of activities. Some of the work that falls to HR professionals includes hiring and firing employees, creating organizational charts and shaping corporate culture after a merger or acquisition, managing employee communications, settling employee disputes, creating benefits programs, navigating government regulations, dealing with legal issues such as sexual harassment and occupational safety, and setting up policy and programs for measuring performance, compensating, recognizing, and training employees. In other words, HR doesn't consist of a single activity or function but a huge network of them; basically, HR refers to everything related to the employer-employee relationship. Both specialists and generalists can find a home here, with specialist tracks ranging from training to pension plan administration to legal compliance. In HR, there's something for just about everyone.

Long considered a support role, in recent years HR has taken on an increasingly strategic dimension in the world of business as managers have recognized employees as a source of competitive advantage. Companies like Southwest Airlines, Nokia, Intel, The Container Store, Edward Jones, and others have shown that HR practices that create supportive environments for employees and strong corporate cultures can lead to superior returns for shareholders by being more innovative, efficient, and productive than their peers. Meanwhile, globalization has complicated the HR role, creating new challenges, such as managing employees and overseeing employee regulations in different countries and cultures, while technology has created a new array of opportunities for streamlining HR administration and practice-everything from putting benefits programs online to e-learning to automating payroll and other administrative HR tasks.

Of course, the responsibilities and activities of HR practitioners vary depending on the size of company. At a small company, the HR pro will usually wear many hats, whereas at bigger companies you'll find both generalist and specialist HR roles. Large Fortune 500 companies, for instance, divide HR into corporate and field operations, with those on the corporate side setting policy and those in the field working with divisions to implement programs and handle day-to-day issues. Many smaller and midsized businesses, or those of less than 1,000 employees, are increasingly outsourcing some or even all of the HR functions. A few responsibilities that fall to HR in both small and large organizations, such as staffing and executive recruitment, compensation and benefits consulting, and HR systems, have grown into multibillion-dollar service sectors designed to support in-house HR functions.

The issues facing HR practitioners also vary by industry. Compensation and benefits, staffing models, training, and company culture in the consumer products industry, for example, are very different from that seen in retail or health care. Similarly, "high-tech is very different from a unionized or governmental environment," says an insider, who advises that "studying up on the industry will give you a leg up when interviewing."

Whatever organization you work in, HR pros tell us that grace under fire, flexibility, and the ability to quickly switch gears from administrator to counselor to negotiator will all come in handy. Some specialist roles, such as in compensation and benefits, require more data analysis, whereas other roles, such as training, organizational development, and employee relations, require strong communication skills and a high level of emotional intelligence. Tech geeks can find plenty to keep them busy in eHR (sometimes called HRe), which involves putting HR systems online, and HRIS (for HR-specific information systems).

Demographic Transformations
A number of long-term demographic trends are affecting the role of HR. As baby boomers retire, the workforce is expected to shrink, with the possibility of a corresponding decline in economic output. As an adjunct, more employees now have elder-care responsibilities-with many juggling responsibilities for both their children and elders. Family patterns are changing as well, with a growing number of single-person households and couples without children. The retirement of the baby boomers is expected to lead to a cultural shift in the workplace as Generations X and Y take over, with work becoming more demanding, employer-employee relationships less hierarchical, and employers moving away from long-term employment relationships. In 2003, Hispanics became the largest minority group in the United States, and immigration is expected to rise to help meet the dwindling number of U.S. workers, adding complexities to managing the work force.

Labor Shortage and High-Skilled Workers
Experts forecast a labor shortage thanks to generations moving through the workforce that are smaller than the one leaving it. In particular, high-skilled workers will be harder to find, as job growth will be concentrated in sectors like education, health services, and professional and business sectors that require a skilled labor force. As baby boomers retire, the skilled worker gap is expected to hit 5.3 million in 2010, according to a National Association of Manufacturers study. Other experts expect the effects of this shortage to be felt much sooner, while some suggest that the increasing tendency for companies to outsource work offshore could mitigate the differential. Most in demand will be managers and skilled workers in high-tech jobs. This is good news for job seekers and should create big opportunities in HR. Often companies bid up salaries when labor demand is high, but the most attractive companies are still those with strong HR practices and worker-friendly environments. The strategic importance of HR will only grow as a result. Staffing agencies should benefit from this trend, too, though it won't be without challenges: "When the economy's going great," says one insider, "it's amazing, but it's also a challenge to find really good people."

The Value of HR
For many years, HR was considered an "extra" or a "nice to have," and HR folks were the first to go in a layoff. In the late 1990s, that changed. Although employees in HR are not generally considered as critical to a company's bottom line success as those in a company's revenue-generating positions, management teams have increasingly recognized HR's strategic importance. Creating a strong, well-defined culture provides a competitive advantage by attracting the best candidates. Strong company cultures have also been linked to much higher employee morale, which, in turn, reduces turnover (and the associated costs of recruiting and training new employees) and increases productivity. The importance of HR should continue to grow. "At the larger companies, HR is moving up the ladder in terms of credibility," an insider tells us. "HR VPs are increasingly being invited to sit at the executive table."

We divided the opportunities in HR into in-house staff and service organizations that include staffing firms, consultants, and HR information systems. Within each of these segments, you'll want to think about the specific functional areas you'd like to pursue.

In-House HR Staff
HR employees deal with all of these issues: staffing (everything from sourcing to orientation to retention), employee relations, compensation and benefits, training, and information systems. In larger organizations, several HR people may work on each of these functions, further subdivided into specialty areas-for example, the comps and benefits staff may include specialists in fields such as payroll, health insurance, and 401(k) plans. In smaller organizations, the HR person may wear many hats, but almost every company in the country has somebody on board to handle HR issues. As a job seeker, one thing you'll want to evaluate is the relative importance of the HR department to the companies you're considering. If the HR office is still down in the basement, right next to the furnace, you may want to cross that company off your list.

Staffing Firms
These firms replace or supplement in-house HR functions. They include companies such as Manpower, Kelly, Spherion, and smaller organizations that focus on temporary positions, adding a fee to the hourly rates of the candidates they place. It also includes the executive-recruitment firms (Heidrick & Struggles, Spencer Stuart, and others) that place higher-level candidates into full-time positions and charge clients a hefty percentage of the candidate's first-year salary. Jobs in these organizations usually require you to be a sharp judge of people and a good salesperson and negotiator. You also need the ability to think beyond the client's immediate needs. HR outsourcing providers may specialize in functional areas. For example, Manpower and Adecco provide temporary staffing; Korn-Ferry International and Heidrick & Struggles offer executive recruitment; ADP provides payroll processing; Right Management Consultants offers outplacement consulting.

HR Information Systems (HRIS)
Players here include service bureaus, such as ADP and Paychex for payroll, and IT firms such as Oracle-PeopleSoft that offer software and systems for operating the company's payroll, employee information, human resources management, and recruitment systems. HRIS has much in common with IT jobs elsewhere in a company, requiring the ability to work with users in defining needs and with vendors in understanding the capabilities and weaknesses of their wares. Success in this division also requires technical knowledge about systems and software and an ability to plan and implement training.

Professional Employer Organizations (PEOs)
PEOs are a relatively new development within HR, and they fall somewhere between in-house staff, consultants, and service bureaus. Basically, PEOs outsource the administrative part of the HR function and sometimes more, primarily from small and mid-sized businesses, handling everything from payroll taxes to benefits to regulatory compliance and tax administration. The point of PEOs is to sell benefits like health insurance and retirement plans along with expertise in regulatory compliance and legal issues to organizations that are too small to afford them on their own. The PEO can save money for its clients through achieving economies of scale while providing higher-quality and more cost-effective service than would otherwise be available to small businesses. This makes its clients more competitive by saving them time dealing with government regulation, reducing costs of benefits, and improving their ability to attract candidates. As with consulting firms, the services PEOs offer vary by the organization.

HR Consulting
Consulting for HR is a huge business. Most of the major consulting firms offer service lines related to HR. They give them fancy names, like "Human Performance" (at Accenture), "Organization" (at The Boston Consulting Group), and "Organizations, People & Performance" (at Booz Allen Hamilton). Consultants in these areas work on everything from creating more effective organizations, to managing change, to developing training programs, to managing health-care programs for their clients. The work is often strategic, focusing on the people issues of running a large company. A lot of it is data-driven, too, such as in actuarial consulting, which involves financial planning based on the company's long-term hiring projections.

Prospects for HR jobs are better than for the economy overall. Some sectors will likely see greater growth and, with it, a greater demand for HR professionals. Computer and data processing services represent the area of fastest growth, followed by residential care and home health care. This reflects a general truism within HR: Changes in lifestyle and population trends are reflected in HR opportunities.

One such example, related to the aging U.S. population, is the need for more human resources workers in hospitals and in health allied services. Hospitals ranked eighth in overall projected HR employment for 2010, and allied health ranked eighth in percentage change from 2000 to 2010.

Another area of expected growth isn't an industry per se, but rather the area of specialized HR business services. The staffing industry is rated fourth by the BLS as an area of expected growth by the end of the decade. Both BLS statistics and SHRM studies indicate that specialized third-party firms dealing in compensation, legal services, and benefits will also grow.

Do Good, Feel Good
Some may have said it was a little trite . . . but aside from those few, almost all of the HR insiders we speak to say they feel good about helping people and, at the end of the day, feel they'd done something positive for their employees. Whether you're creating a volunteer program, preparing paperwork for somebody who was promoted to a manager position, or determining benefits-really, almost everything you do-your work is designed to enhance the work environment for people in the company, and that feels good.

Finger On the Pulse
HR pros have their finger on the pulse of the company, interacting with people in different departments across the organization. "I feel connected with a large cross-section of the entire organization, and my role allows me to impact all those areas," says one insider. "I feel connected with what many divisions in the organization are doing." That your role is contributing toward creating a positive work environment for people in all those divisions just adds to the pleasure.

Secure, High-Paying Job
The Department of Labor classifies the long-term unemployment for this job as being in the low range, between 1.9 and 3.7 percent, and it classifies the salary as very high, which means median annual earnings are greater than $39,660. With unemployment in the low range of 25 to 50 percent of all jobs and salaries in the top 25 percent, what more could you ask for?

Piles of Paperwork
"The paperwork has gotten pretty heavy," an insider says. And you may find all of the paperwork to gain approvals getting in the way of helping people-probably the main reason you joined the HR ranks. Many HR pros say they went into the field for the people and complain that paperwork required to justify costs and satisfy government regulations instead takes up a huge chunk of their time. Employment applications, for instance, have gone from two to seven pages with waivers that need to be signed for background checks. These legal issues can lead to major headaches.

Many Shades of Gray
Human resources isn't like engineering: There's not a clear answer to a problem. "The human side of things is not black or white. It's ambiguous; it's not necessarily right or wrong. You don't get to the bottom of things and solve an equation. We use data, but the data doesn't drive the exact answer," says an insider. You'll need to be able to deal with ambiguity of you're going to do this job well-something some people may like but many might struggle with.

The Bad Guys
HR managers play a variety of roles, many of which can be trying. For instance, they have to sit in on the meetings where the bosses give the bad news. Several insiders say they don't look forward to that part of their jobs, although one says she found firing people for cause to be much easier than cutting back on staff during economic slowdowns. You'll also be responsible for enforcing policies that others in the organization may not agree with or like. "Having to be the bad guy is hard," says an insider. "When there are company policies that HR is looked at to uphold, most don't like you."

Human Resources Generalist
Though it sounds entry level, this isn't always the case. If the position is with a small company, it will require someone with a strong background in individual HR specialties who can act as a jack-of-all-trades for the entire company. In larger companies, the position is for someone who is just learning the ropes. Responsibilities can vary greatly depending on the company's needs. Therefore, job requirements will also vary. Salary range: $37,000 to $70,000.

Human Resources Manager
A middle management position that may require overseeing specialists responsible for several distinct areas in a division of a company. Strategic work may be involved-such as planning human resource policy and setting procedures. Usually reports to a VP of human resources. Salary range: $52,000 to $92,000.

Screens, interviews, and recommends prospective employees, and extends offers to successful candidates. A good recruiter is familiar with the job requirements of specific fields in the company. Salary range: $40,000 to $90,000.

Benefits Analyst
Qualifications can vary greatly depending on the company's needs and the person's experience. At the bottom of the scale, it can be entry level, involving carrying out benefits programs and possibly researching new ones. At the top of the scale, the position may report to a VP and involve strategy and business planning. A bachelor's degree is the minimum requirement, though on the upper scale, several years of experience is required. Salary range: $35,000 to $90,000.

Training Manager
Designs, plans, and implements corporate training programs. This position is becoming increasingly important not only because it increases worker morale, but also because it's considered cheaper to train current employees than to recruit new ones. Salary range: $52,000 to $100,000.

Compensation Analyst
Evaluates and conducts surveys and analyzes salary data to come up with the full monetary package offered to employees, including salary, bonuses and perks, such as stock options. In many cases, compensation analysts deal only with the packages offered to executives or even come in on a contract basis to help research and negotiate the package for an incoming CEO. In other cases, the compensation analyst will deal with all job categories in a company. Regardless, the compensation analyst has to be familiar with a company's job titles and responsibilities. Salary range: $40,000 to $100,000.

Labor Relations Manager
Works primarily in manufacturing or service industries and deals with labor unions. A labor relations manager prepares information for management to use when a contract is up for renewal. He or she may supervise a group of labor relations specialists. Salary range: $62,000 to $120,000.

VP of Human Resources
A very strategic position in large corporations, the VP of HR helps set the tone of the company's corporate culture. He or she brings information about the workforce to executive management so that management can set policies after mergers, acquisitions, closures, layoffs, and similar changes. This position often involves extensive travel and very long hours. It's unheard of for a person to get this job without an MBA, and often this position is filled outside the company. Salary range: $90,000 to $230,000.

Here are a few things to think about before you start looking for a job in human resources:

  • A universal plea of HR staffers everywhere is that they are tired of hearing, "I want to work with people." First, the business is about much more than working with people, and second, the hiring manager will want to know how you worked well with people. Be sure to have some specific anecdotes to share with your interviewer that will showcase your interpersonal skills.
  • Behavioral interviewing is common in this field. A manager might ask something like, "Tell me about a time when you successfully negotiated something," or "Tell me about a time when you worked with an employee who was disagreeable." Be prepared to tell the steps you took to mediate the situation and how you were directly involved in finding the solution.
  • Be prepared to show that you know about the company and industry. If you've worked in the industry, great. Talk about that experience and how the different divisions within that company work together.