Personnel department

The human resources department in the company: Tasks, Organization Challenges

The HR department in a company is largely responsible for its success. It takes care of both day-to-day business and strategic recruitment issues.

Importance of the HR department

The personnel department (often also referred to as Human Resources, HR or personnel management) is the central point of contact for all employee issues and personnel-related tasks in the company. Its main task is to look after and deploy the company’s most important asset – its employees – in the best possible way. A well-positioned HR department makes a significant contribution to the company’s success, as it ensures that the right employees are in the right place at the right time and feel comfortable. In this article, we shed light on the diverse tasks of an HR department, discuss whether every company needs an HR department, show different organizational forms and give tips on how to separate operational and strategic HR tasks in a meaningful way. We also look at current challenges for HR and how HR software can support HR departments. Finally, we look at the question of whether an HR department can be outsourced and how HR work and corporate culture are linked.

Note:

The HR department in a company is largely responsible for the success of the company, as it not only ensures that processes run smoothly, but also that the required skills are available.

Tasks of the HR department

An HR department covers the entire employee life cycle – from recruiting to hiring to leaving. The most important tasks include

• Personnel planning and recruitment: Determining personnel requirements and recruiting suitable employees. This includes planning how many and which qualifications are needed, as well as recruiting new talent via various channels (including employer branding). The aim is to always have enough qualified employees on board to achieve the company’s goals.
• Onboarding and staff deployment: New employees are trained and integrated, and all employees are optimally deployed. Good staff deployment planning ensures that there are no staff shortages or overcapacity. At the same time, HR ensures that new colleagues have a positive start (onboarding).
• Personnel administration & payroll accounting: All administrative and legal aspects relating to employees are managed here. This includes employment contracts, digital personnel files, payroll accounting, time recording, vacation management and compliance with legal regulations.
• Personnel development & support: The HR department strengthens employee development through training, further education and feedback systems. It establishes performance management and a constructive feedback culture in order to promote strengths and reduce weaknesses. Advising managers on personnel issues and general employee support (e.g. in cases of conflict or crisis) also fall under this area.
• Employee retention & culture: In order to retain good employees in the long term, the HR department develops employee retention measures – from benefit programs and health offers to career planning. HR also acts as the guardian of the corporate culture and ensures a working environment in which employees remain motivated and productive.
• HR controlling & strategy: Modern HR work is increasingly data-driven. HR departments analyze key figures (e.g. fluctuation rates or applicant numbers) and make decisions based on them. In addition, the focus is shifting to strategic HR work: HR managers are involved in long-term corporate strategies, plan future skills requirements and help shape change processes. More and more companies are recognizing that HR should not just be an administrative function, but a strategic partner to management.

Does every company need an HR department?

Small companies in particular are often faced with the question of whether they need their own HR department. The fact is: HR tasks arise in every company, regardless of whether it is a start-up with 5 people or a corporation with 5,000 employees. The question is rather who takes on these tasks. In very small companies, there is often not (yet) a formal HR department – here, for example, the owner or another employee takes care of recruitment, contracts, payroll, etc. “on the side”. This works up to a certain point and can lead to bottlenecks and errors in the long term. HR management requires specific know-how (e.g. in employment law) and sufficient time. If the management does everything on its own, the growth of the company often suffers because HR issues run on the side.

An HR specialist is worthwhile from a certain size

Many small and medium-sized companies create their first dedicated HR position from around 20 to 50 employees. A frequently used rule of thumb is a ratio of approximately one HR specialist for every 50 employees in the company. Initially, this first “all-rounder” usually takes on all HR tasks single-handedly – from recruitment to payroll accounting – often in addition to other administrative tasks. As the company grows, the HR team also grows (e.g. specialists for recruiting or personnel development are added).

Note: The appropriate size of the HR department in a company cannot be clearly determined on the basis of general figures. It depends on various criteria such as the complexity of the environment. In general, however, it is assumed that there are 2 to 4 HR staff per 100 employees.

It is important to understand that the functions of an HR department must be covered, even if there is no separate department. Alternatively, smaller companies have the option of using external services. For example, payroll accounting can be outsourced to a tax consultant or recruiting agencies can be used to find personnel. HR software can also help to manage personnel processes without the immediate need for a large HR team.

Practice Tip:

Many companies start without an official HR department, but should at least define clear responsibilities. Examples: Who writes employment contracts, who takes care of applications? If necessary, advice should be sought at an early stage. At the latest when HR issues place an excessive burden on day-to-day business or require specialist knowledge, it is time for professional HR support – whether internal or external.

Organizational forms of the HR department

There are various models for organizing and structuring the HR department, depending on company size, industry, location and culture. No one approach fits all; mixed forms are often ideal. Below we describe some common forms of organization:

Classic hierarchical HR department

The traditional variant is a line organization with a clear hierarchy. At the top is the HR manager as part of the management team. Below this, there may be team leaders for sub-areas (e.g. recruiting or personnel administration) and executive HR employees. Communication and directives run vertically from top to bottom. The advantage: clear responsibilities and decision-making channels – everyone knows who is responsible for what. This model is particularly suitable if structured management and control are required.

Centralized vs. decentralized HR organization

For companies with several locations, the question arises as to whether there should be a central HR department (at the head office) or decentralized HR teams at the individual locations. Central HR units enable uniform standards and bundled expertise. On the other hand, local HR managers can respond more quickly and specifically to local needs. A middle way is often chosen: certain processes are managed centrally (e.g. uniform employer branding or centralized HR software deployment), while other tasks are handled locally (e.g. HR support for site employees).

Breakdown by task area

An HR department can also be structured internally according to function. There are then specialist teams that take care of recruiting, personnel development, payroll accounting or personnel marketing, for example. This division of tasks offers the advantage that employees can concentrate on their specialist area and build up expert knowledge. In larger companies, such a functional division is often found (e.g. a recruiting team, a payroll team, etc.). It is important that the teams still work closely together, as HR topics are often interlinked.

Shared-Service-Model

Routine tasks are bundled centrally here – often even across departments. For example, companies set up service centers that handle all administrative activities such as data entry, contracts, certificates, etc. for HR and other departments. This allows the HR specialists to concentrate on the content of the work, while the service team efficiently handles the daily standard processes. A shared service center can be organized internally or function externally as an outsourced unit.

Matrix-organisation

In a matrix structure, HR is not only active as a separate department, but also works together with other departments on cross-divisional projects. HR employees are then assigned to specific business units or projects, for example (similar to the concept of HR business partners, who each look after a business area). The HR department provides expertise and services and is involved in various interfaces within the company. This model promotes exchange: HR employees are in closer contact with the core business and other departments benefit from HR expertise directly in the team. However, the matrix organization requires clear agreements because employees are assigned to several departments.

Network and outsourcing model (Shamrock)

With this relatively new approach, only a small core of HR employees remain in the company and many tasks are outsourced to external service providers. The image of the Shamrock cloverleaf stands for this: At the core, the permanent HR people, a “leaf” of external specialists (e.g. employment law experts, payroll providers) and another of temporary staff or freelancers who provide support as required. This model offers a high degree of flexibility and cost control because expertise can be purchased externally when it is needed. However, the internal HR core must be able to coordinate very well and keep an eye on the corporate culture, as many of those involved are external to the company.

As you can see, the spectrum ranges from classic hierarchies to agile, distributed models. The appropriate organizational form depends on the company’s goals and framework conditions: a start-up with 30 people is more likely to need an all-round HR manager, while an international corporation will have both central guidelines and local HR teams. HR departments also often evolve over time – for example, from a purely administrative position to a strategic business partner model as the company grows.

Separate strategic vs. operational HR tasks

In HR work, a rough distinction is made between operational (ongoing, administrative) and strategic (forward-looking, formative) tasks. Operational HR tasks include, for example, preparing pay slips, managing vacation requests, drawing up employment contracts, writing references, organizing job applications, etc. – in other words, all the routine processes that make up day-to-day HR work. Strategic HR tasks, on the other hand, deal with longer-term issues: How do we attract and retain the right employees? What qualifications will we need in the future and how do we develop them? How can managers be better managed? How do HR measures support the corporate strategy?

In practice, the challenge is that day-to-day business often takes up so much time that there is hardly any room for strategic considerations. The trick is therefore to divide up the tasks wisely so that both are covered. Here are some approaches:

• Division of roles in the HR team: Larger companies today like to rely on the HR business partner model. HR business partners provide strategic advice to managers and are close to the business, while HR generalists or consultants primarily manage operational and administrative tasks. Routine tasks such as vacation requests, time bookings or simple employee inquiries are ideally delegated to an HR service team (internal or external). This allows the business partners to focus on personnel planning, talent management and cultural work. Smaller HR teams can also split up internally: For example, one person primarily takes care of administration, the other HR development and strategy.
• Use of technology and automation: Many operational processes can now be supported or fully automated with software. For example, digital HR systems take over time recording, automatically create documents, remind employees of deadlines or prepare salary runs. This significantly reduces the administrative workload and HR employees gain time for strategic issues. One example: If vacation requests no longer have to be maintained manually in Excel, but employees submit them themselves online and the system automatically shows the status, HR only has to intervene in special cases.
• Prioritize and delegate: Even within a small team (or if the managing director also takes care of HR), you should consciously reserve time for strategic work. Operational day-to-day business can often be delegated, be it to an assistant, a working student or an external service provider. It is important that strategic HR tasks are recognized as such and are not constantly displaced by ad hoc issues. This only works if the organization plays along and gives HR a seat at the management table.

To summarize: Operational excellence (efficient processes) and strategic foresight (forward-looking planning) should go hand in hand. Both are important. Clever division of labor and digital helpers enable the HR department to handle routine tasks without neglecting its strategic role. This transforms the HR department from administrator to designer within the company.

The biggest challenges currently facing HR

HR departments today are faced with numerous challenges that have various causes. In addition to a change in employee preferences, which has been particularly noticeable in recent years (keywords here include the desire for shorter working hours or working from home), it is becoming increasingly difficult for many companies to find qualified staff.

Here are some of the most pressing issues currently facing HR managers:

Skills shortage and talent acquisition

There is a war for talent in many sectors. Qualified specialists are scarce and hotly contested. Companies have to work hard to attract applicants and fill vacancies. This requires creative recruiting strategies, fast processes and often a rethink of requirements. Generation Z, for example, has different expectations of employers than previous generations – striking the right note here is a challenge for employees in the HR department.

Digitalization and technological transformation

HR processes are increasingly being mapped digitally, from the digital application process to the people analytics dashboard. HR software, AI and automation are changing the job profile in HR. The challenge lies in selecting the right tools, ensuring data protection and data security and training employees in the use of new technologies. At the same time, HR itself must become digitally competent in order to effectively manage remote and hybrid work (home office), for example.

Adaptability in times of change

The last few years have shown how quickly the conditions on the labor market can change. The coronavirus pandemic, the boom in working from home and economic fluctuations are causing a lot of movement and uncertainty at the same time. The HR department in the company must therefore be able to react with great agility. This means, for example, implementing hygiene concepts or short-time working in the short term, but also being resilient in the long term by establishing flexible working models. The term VUCA world (volatile, uncertain, complex, ambiguous) describes the environment: HR is faced with the task of guiding the company and its employees safely through constant change. Change management and continuous learning are thus becoming core competencies in HR.

Diversity and inclusion

Even if some companies are now backpedalling on this, diversity, equity and inclusion (DEI) are not just buzzwords, but important goals of modern HR work. Diverse teams have been proven to bring more innovation and success. Nevertheless, many companies struggle to create genuine equal opportunities. HR is faced with the task of breaking down prejudices in recruiting, promoting inclusive corporate cultures and implementing programs for more women in management or for the inclusion of people with disabilities, for example. This requires commitment at all levels – from management to individual employees.

Employee engagement and retention

Employee loyalty to the company is essential, especially in times when employees can be easily poached. HR must ensure a high level of motivation and satisfaction – for example through good development opportunities, appreciation, work-life balance offers and a positive working atmosphere. The mental health of the workforce is a particular challenge. Stress, the risk of burnout and the separation of work and private life when working from home are issues that HR must address with preventative measures and awareness-raising. Closely linked to this is a performance-enhancing corporate culture.

Legal changes and administration

Last but not least, HR is constantly struggling with increasingly complicated legal requirements, be it data protection (GDPR), working time laws, verification laws or reporting obligations. Keeping up to date and meeting all deadlines and documentation requirements ties up capacity. At the same time, employees today often expect more transparency and opportunities to have a say, for example via employee surveys or co-determination committees, which requires additional coordination.

The list goes on – from demographic change and the expectation of meaningful work to the trend towards New Work. It is important that HR sees itself as a learning function: The ability to constantly adapt to new conditions and proactively develop solutions is probably the greatest challenge of all. The clever use of technology can help here, as can the exchange of best practices in HR networks.

How HR software supports the HR department

In view of the challenges mentioned above and many routine tasks in companies’ HR departments, it is not surprising that digital solutions are becoming increasingly important. Modern HR software can relieve HR departments enormously and improve processes. The advantages of such tools are obvious: centralized data, automated processes, less paperwork and transparent communication. Let’s take a closer look at the areas in which HR software typically provides support – and how Papershift Pulse, for example, a modern all-in-one HR solution, covers these tasks.

All HR data in one place

Employee master data, contracts, absences etc. are stored centrally in the software. Instead of dealing with Excel lists and paper files, HR has all the information at its fingertips. Papershift Pulse follows the “one platform and all done” approach – all important tasks from recruiting to digital contract signing are bundled in one system. This avoids isolated solutions and data breaks between different tools.

Automation of routine processes

HR software takes over repetitive tasks. For example, Pulse can be used to automatically create employment contracts, generate documents at the click of a mouse and manage digital personnel files. Onboarding checklists and offboarding processes can also be standardized and tracked automatically. This reduces errors and saves time. In Pulse, for example, the entire onboarding and offboarding process is mapped digitally: from the onboarding plan to the return of company equipment, everything runs according to an automated workflow.

No more paperwork

Digital workflows and e-signatures significantly reduce paperwork. Papershift Pulse enables electronic signatures on contracts, for example, and ensures that all necessary information is recorded online. This eliminates the need to send documents by post or scan them. For HR, this means less filing and searching for archives – and more time for the people in the company instead.

Self-service and employee communication

Good HR software also involves employees. Pulse, for example, includes an integrated chat and features for the employee cycle, enabling transparent communication from the first day of work. Employees can access certain data themselves (e.g. their digital payslips or vacation days) and address concerns directly to HR. This promotes a personal connection and increases satisfaction because information flows quickly.

Recruiting and applicant management

Special modules or HR software integrations help with job advertisements, applicant tracking and communication with candidates. In Pulse, for example, recruiting functions are seamlessly linked to onboarding. As soon as a candidate is hired, their data can be transferred to the system and the onboarding process can be started. This ensures a smooth transition from applicant to employee.

Analytics and reporting

HR software can process key figures in real time – e.g. fluctuation rates, sick days, recruiting lead times – and thus enable well-founded decisions. Some solutions offer people analytics dashboards. This allows HR to see trends at an early stage and take countermeasures, for example if dismissals increase or applications fail to materialize.

Using HR tools like these makes the HR department more efficient and strategic: routine work is drastically reduced, human error is reduced and HR teams can focus more on conceptual issues. Digital support also means that remote or distributed teams can be better managed because everyone involved has the same up-to-date information.

Growing companies in particular, which do not yet have a large HR team, benefit when software relieves them of administrative work. But established HR departments can also use digitalization to cut out old habits and become more agile. It is important to involve employees at an early stage and introduce the systems carefully. Then nothing stands in the way of noticeable relief and better HR service quality.

Is it possible to outsource the HR department?

The idea of outsourcing all or part of the HR department sounds tempting to some companies – especially to save costs or to buy in missing expertise. In fact, some HR tasks can be handled very well externally. A classic example is payroll accounting: this is often outsourced to external payroll service providers or tax consultants who specialize in this complicated area. Recruiting (e.g. via headhunters or recruitment agencies), company health management or selective training can also be outsourced.

Some companies go even further and outsource almost the entire HR process – be it to external HR consultancies or so-called PEOs (Professional Employer Organizations), which take over the management of employees. In the Shamrock model mentioned above, for example, the external part forms a major component: less important or very time-consuming activities are consistently outsourced to service providers. In such cases, the company often only retains a small internal HR core, which takes over coordination and agrees strategic issues with the management.

Advantages of outsourcing

External specialists bring expertise and routine to the table. They are always up-to-date (e.g. in terms of employment law), have tried and tested processes and often achieve a high level of efficiency thanks to their specialization. This can be more cost-effective for a company than retaining staff internally – especially for tasks that are very time-consuming or do not occur on a regular basis. In addition, you can focus more on your core business if HR basics are in good hands externally.

Disadvantages and limits

Complete outsourcing of the HR department is nevertheless rare, as HR is closely intertwined with the corporate culture and the employees on site. An external service provider never knows the company as well as its own people. There is a risk that the personal component will be lost. Employees often want an internal contact person for important matters who understands the company’s circumstances. The ability to react quickly can also suffer if you first have to call in a service provider for every problem. In sensitive areas such as staff appraisals, conflicts or cultural issues, it is difficult to fully involve external parties. Many companies also fear that outsourcing will make them too dependent on one provider.

Practical solutions

A middle way often works well. Routine and administrative tasks (payroll, standard contract texts, legal issues) can be easily outsourced, while core areas are kept in-house. This gives the HR department more capacity for strategic tasks and maintaining employee relations. Despite outsourcing, it is important that someone is responsible for internal management and quality control – be it the HR manager or a member of management with personnel responsibility. This contact person coordinates the external service providers and ensures that they fit in with the corporate culture and strategy.

Rating

Yes, you can outsource your HR department – but not every company should. Those with few internal HR resources can quickly gain professionalism through outsourcing. However, the company then also loses some direct control over HR processes. It is important to weigh things up: What do we absolutely want to control ourselves (e.g. recruitment and culture issues) and what can others do better or more cheaply (e.g. payroll)? A careful risk and benefit analysis is essential here.

Note: Outsourcing HR tasks harbors both opportunities and risks for companies, which must be weighed against each other.

HR department and corporate culture

Corporate culture, i.e. the values, norms and customs that are practiced in a company, is closely interwoven with HR work. You could even say that HR, together with management, is the guardian and shaper of culture. But how exactly do HR and culture influence each other?

First of all, HR helps to shape the culture in the company through its actions. Like managers, the HR department is a role model for how people treat each other in the company. For example, if HR sets an example of transparency and fairness (for example in communication or promotion processes), this will have an impact on the entire company. Conversely, it will be difficult to establish an open, appreciative culture if HR policy is non-transparent or bureaucratic. HR should therefore embody the values that the company is committed to.

In concrete terms, the HR department influences the culture in many ways: during the recruitment process, HR makes sure to find candidates who are a good fit both professionally and culturally. During onboarding, HR conveys the company’s most important values and behaviors to new employees, for example through orientation events or mentoring programs. Through training and development programs, it promotes certain cultural aspects – for example, a culture of learning and sharing by offering regular training sessions. HR also designs performance appraisals and recognition systems so that they fit in with the culture: If teamwork and a spirit of innovation are desired, this should be reflected in the feedback and bonus system. Last but not least, HR uses employee surveys and feedback channels to ensure that a culture of openness is created in which employees can contribute their opinions. All of these measures help to build and consolidate the desired corporate culture.

On the other hand, HR must also orient itself to the existing culture. Every company ticks differently: HR will act differently in a traditional company with a steep hierarchy than in a hip tech start-up. HR measures never work in isolation from the context. That is why a smart HR department regularly analyzes what the current culture is like, where there may be friction and how cultural changes can be supported. In major change projects, such as the introduction of agile methods or mergers, the HR department often takes on the role of a change agent: it helps to allay the fears of the workforce, organizes workshops on new values or initiates team events to strengthen team spirit. In short, HR actively supports cultural transformation processes.

The interaction is also reflected in the new use of the term: HR departments in modern companies are sometimes referred to as “People & Culture” teams – a deliberate emphasis on the fact that, in addition to administrative people issues, cultural work in particular is anchored in HR. Empirical evidence shows that a strong, positive corporate culture leads to greater employee commitment and even better performance. HR makes a decisive contribution to shaping this culture and keeping it alive.

The HR department and corporate culture are therefore inextricably linked. HR ensures that cultural values are implemented in everyday life – be it through HR processes, the promotion of collaboration or the development of managers as cultural role models. At the same time, the lived culture provides the framework in which HR measures take effect. Investments in good HR work therefore pay off twice over: They not only improve processes, but also strengthen a culture in which employees enjoy working and are successful. In this way, HR ultimately creates the basis for long-term corporate success, because satisfied, committed employees in a healthy culture are the best capital of any organization