A Comprehensive Guide to HR Best Practices You Need to Know This Year [Infographic]
HR best practices have been under close examination for many years and continue to be a hot debate topic in business circles.
So what is the definition of HR best practices?
It is the idea that there are universal HR principles that provide companies with optimal business performance, regardless of which organization or industry they are applied to.
However, we can’t discount the principle of the best fit either. It’s important to align HR goals with the overall goals of your organization, so that the HR, business, and strategy departments are all on the same page. When you’re able to combine these two ideas and achieve best practices and best fit, you’re practicing what’s called strategic human resource management.
To help HR departments focus their efforts on HR best practices, we’ve compiled a list of some of the best human resource practices. Try these out in your own organization and see how they can help you increase engagement, improve retention, and more.
How Were These Best HR Practices Gathered?
Some HR strategies have been around a long time and are entrenched in HR as “best practices” despite little proof that they contribute to company goals or performance.
We’ve compiled the best HR practices of companies by using the Bersin study, which analyzed 140 HR best practices to find which ones had the highest impact opportunities for companies. We’ve also included case studies and examples of HR best practices from companies that have made the top of Fortune magazine’s 100 Best Companies to Work For list in 2013-2014 and Glassdoor’s 2014-2015 winners of the Employees’ Choice Awards.
The Difference Between HR Practices and HR Activities
Before we dive in, it’s important to clarify the distinction between HR practices and HR activities, since without a clear understanding it is possible to intermingle the two. Both are needed for an HR department to fully reach its potential, and for an organization to optimize its human capital investment.
HR practices involve the strategic operations of HR. They form the foundation and guidance for managing the company’s employees and should coordinate with the executive business plan. Some examples of HR practices include:
- Setting the mission and goals of the HR department
- Planning, organizing, and managing the HR department
- Measuring the effects of programs
- Creating programs to improve the quality of the work environment
- Developing talent and future leadership
- Conducting motivational programs
- Working with management for ongoing performance evaluations
- Overseeing employee advancement opportunities
In contrast, HR activities are the daily activities to implement the strategies determined by HR practices. They allow the mission and the goals of the HR department to be carried out. HR activities may include:
- Recruitment and selection
- Training and development
- Compensation and benefits
- Employee and labor relations
- Safety and health
- Employee attendance and time off
In the most basic terms, HR practices look at the questions of what an organization wants to do and why, and HR activities address how.
HR practices should create a natural progression to HR activities so that the activities directly correlate with practices. If one or the other is neglected, it can create a disconnect that will be felt throughout the company. Your company can function this way, but not at its best.
When HR practices and HR activities are aligned and working hand in hand, HR departments have the ability to thrive, and your company benefits. Optimum human resources involves an understanding and integrated approach to HR practices and HR activities.
Introduction to HR Best Practices
We’ve identified the top HR best practices that can give you the most bang for your buck. In other words, if you focus on improving these areas, you’ll likely see the greatest results. These areas include recruitment and selection, training and development, transparency, employee benefits, employee incentives, compensation and evaluations, compliance, and terminations.
1. Recruitment and Selection
Companies seeking to hire high-performers are turning to innovative processes to streamline hiring.
There are many different ways to assess whether someone will be a good fit for the company, both as a high-performer and as a cultural fit. While not every innovative hiring process will be right for your team, you can learn from companies who have paved the way and provided data for the rest of us. Here are a few strategies to consider.
- Panel-Based Interviews: When it comes to interviewing panels, Google’s study of its interviewing practices showed both the ideal number of panelists and ideal number of interviews to be four or fewer. The study showed that scores from a panel of four interviewers made the same hiring decision 95 percent of the time as panels made up of more than four interviewers, and that any interviews beyond four added little or no value to the process. In fact, more interviews simply wasted time and resources and led to disinterest and frustration for both sides.
- Better Advertising for Job Openings: Many organizations are doing a poor job at advertising their open positions and attracting quality candidates. If your company wants to attract top talent and find high-performers, you should not only list what skills you want the employee to have but also give the job searcher a reason to seek out your organization over another.
When it comes to posting the perfect job ad, you should include some information about your organization—what technology you use, what kind of products you create, your mission and vision, and more. Including this contextual information (instead of only a grocery list of skills you’re looking for) can encourage more candidates who believe in your organization’s mission to apply. The best candidates can always learn additional skills; what you want are employees who are going to be engaged from day one.
- Internships: If your company intends to hire the majority of your interns, you should seriously consider paying them. While structuring your intern program, it’s good to know that 60 percent of paid interns receive job offers, whereas only 37 percent of unpaid interns get job offers―only one point better than the 36 percent of graduates who receive job offers without an internship. If you intend to move an intern to a full-time position, invest in them early on.
- Video Interviewing: Video interviewing can be a great tool for saving time and allowing you to get a feel for the enthusiasm and passion an individual has for your organization before you bring them in for an interview. It can also help you weed out potential candidates who aren’t serious about applying because video interviews represent a small investment on the candidate’s part.
- Be Selective: As an HR department, you want to hire the best people who will contribute to the value of your company and not detract from it. Hiring poor performers can really affect your company, whereas hiring top performers can boost productivity by up to 400 percent, no matter your industry or job type you are looking to fill. One way to streamline your process and be selective is to utilize digital tracking. This allows you to keep track of recruitment metrics such as which hiring sources send solid candidates your way, and offer acceptance rates. Knowing which sources send you solid candidates can help you cut down on ineffective referral sources, and knowing what your acceptance rate is can help you fix inefficiencies in your hiring process or inadequacies in your compensation offers. You can also use other tools like interviews, personality assessments, or reference checks to further streamline your process or make it more selective.
2. Training and Development
You’ve taken the time to find employees you want to hire, but your responsibility to them is only just beginning.
It is an HR best practice to invest in training and development opportunities to improve your current workforce, focus on skill-specific training, and realize the value that young workers place on learning. As industries are advancing at an ever-increasing pace, you can support and encourage your employees to grow as well, keeping them more engaged in their work and your organization.
- Invest in Training and Development: Some of the best practices for training employees might involve bringing on interns to reduce training costs before hiring them full-time. Once you’ve found your ideal employees, you’ll need to keep them at the top of their field, and as technology develops at an ever-increasing rate, the importance of training employees cannot be overlooked. If you want your pros to stay pros, you need to keep training them.
- Focus on Skill-Specific Training: Another crucial element HR departments must implement is to focus on skill-specific forms of training. You might have a great general training program, but if you are focused on teaching skills that don’t line up with the work requirements or company objectives, you are wasting time and money.
- Younger Employees Value Learning: HR best practices for training should also consider the fact that many young employees value learning more than their predecessors, and your employee turnover rate could increase greatly if you don’t offer opportunities for growth and development.This is actually great news for employers because it means you have a workforce full of employees who are ready to increase their skills, advance in their careers, and train for new positions.
A crucial HR practice is to always maintain transparency and be open with employees regarding the success and failures of the business. Organizations that foster an open environment of feedback and communication make employees feel trusted, respected, and valued.
In order to be a high-impact HR department, you should:
- Promote Collaboration and Idea Sharing: Focus on creating an environment that promotes collaboration of ideas and information sharing. Employees who are informed about business operations are better able to share their ideas, and think it’s important to be able to contribute to company decisions that impact their careers.
- Maintain Openness and Transparency: When companies are honest and open with their employees, it promotes a culture of trust between both employer and employee.
As an HR department, you should also avoid focusing on efficiency and cutting costs above all else, as this could actually be less effective in the long run. Instead, promote practices that create transparent environments and encourage information sharing.
4. Employee Benefits
There is a myriad of benefits you can offer employees, but which ones provide the greatest value? The best benefit plans take a strategic approach to accomplishing company goals and retaining great employees as well as ensuring your employees understand their benefits.
- Choose Benefits that Show You Value Employees: Learning from other human resource practices can give you some great insight into where you can focus the company budget when it comes to employee benefits. It also helps you understand which benefits may actually help you retain the best employees. You can choose to provide medical and dental coverage, health and fitness centers, subsidized tuition, or any other benefits that will show you value your employees.
- Use Benefits to Solve Workplace Issues: Google is a great example of using benefits to solve workplace employment issues. Several years ago they noticed that the number of women working for the company was gradually decreasing. Google did some research and found that the decrease was mostly younger women who left to have children. In an effort to retain employees and maintain their bottom line, Google implemented a five-month maternity leave policy with full pay and benefits. This benefit alone led to a 50 percent increase in their retention rate of women.
While Google’s approach certainly isn’t feasible for all companies, it is important to identify where you are losing money and why you might be struggling with employee retention. If you want to hire and keep the best talent, you have to treat them like they’re the best talent and show you value your employees.
5. Employee Incentives
Incentives have their pros and cons. For incentives to be effective, this HR best practice must be implemented in the correct manner, or you risk demotivating your employees instead of motivating them. Here are some HR best practices for providing effective employee incentives.
- Know what Motivates Employees: Some employers have found it helpful to motivate employees by using commision or productivity as an indicator of a raise, and not to limit raises to an annual review or bonus at the end of the year. Employers who simply raise wages once a year regardless of performance are not incentivizing employees to do their best because employees begin to simply expect the raise no matter what.
- Pay Raises vs. Bonuses: As far as the topic of bonuses goes, another study by Google found that employees valued a base-pay raise over a single bonus, because it has long-term effects. So if your company is weighing the overall benefits of pay raises versus a handsome bonus, go with the pay raise.
- Be Creative with Incentives: While HR might hear the word “incentive” and think of monetary rewards, there are other incentives that keep employees motivated, such as a recognition and rewards program or the use of social recognition to acknowledge employees for the work they do.
Providing the right incentives shows employees that you care about them and the value they add to your company.
If you want great employees, you need to have great compensation plans in place. Above-average employees deserve above-average compensation, and you want to show your employees that you value them and the work they do.
Some HR best practices for compensation include:
- Combining Good Benefits with Compensation: A combination of good benefits and compensation (also known as a total rewards package) can help show employees that the company values and appreciates their contribution as workers and their well-being as people.
- Vary Compensation Options: Upping your compensation offer doesn’t always mean adding more numbers. You could offer other types of compensation such as additional vacation days, gift cards, company discounts, stock options, or profit-sharing.
- Compensation Transparency: A winning compensation strategy comes down to two elements: transparency and communication. A study published by PayScale found that most employees don’t actually know how their pay compares to the rest of the market. Of the employees who believed they were being paid below market rate, 77 percent were paid at market rate, while an additional 12 percent were paid above market rate. Only 11 percent of people who said that they are underpaid actually were paid less than the median market rate. In short, if your employees don’t understand your organization’s comp strategy, and if your leadership never communicates that strategy, then employees are much more likely to become dissatisfied on that point.
Whatever the compensation strategy of your company, it should be based on the productivity and contributions of the employees, and the managers in your organization should be prepared to communicate about it.
7. Compliance Issues
The best way to handle compliance issues is to avoid having them in the first place. That being said, it can be very difficult to juggle the complexities of compliance issues with the daily tasks of running other human resources practices in the workplace. Here are some human resource practices to prevent compliance issues.
- Utilize HR Software: One great way to avoid compliance errors is to use HR software to simplify your HR compliance practices. This will help you find and correct errors quickly and avoid future compliance issues.
- Designate a Point Person for Your HR Team: One of the best ways to stay up-to-date with compliance is to designate a point person for your HR team, who has the responsibility to keep up with new regulations and changing labor laws. They also have the responsibility to convey this information to the HR department, which ensures everyone is on the same page when it comes to legal considerations.
Hiring, employee classification, and wage requirements all require constant attention to stay in compliance. Utilizing your point person and your HR software can help you stay one step ahead of any upcoming changes to HR.
This is probably the toughest place to implement HR best practices because it will always be difficult for those involved. HR best practices include learning from employees who are terminating their employment as well as understanding which topics to be sensitive of for legal reasons. Issues that may warrant termination should always be addressed before they reach a boiling point. However, when it does come to terminating an employee, you shouldn’t wait on the decision.
- Show Empathy, but Not Sympathy: HR professionals Amy Schrameck and Jeanne Knight recommend informing the employee as to why they are being let go; showing empathy, but not sympathy for the employee.
- Stand Your Ground: Stand your ground even if the employee gets emotional or says they will do better. You should be confident enough in your decision to not waver in your resolve when terminating an employee.
- Conduct an Effective Exit Interview: One of the best practices for HR professionals when going through the termination process (whether voluntary or involuntary) for an employee is to conduct an effective exit interview. A good exit interview can help emphasize things the organization does well and things they could improve upon. Exit interviews should be conducted face-to-face, if possible; otherwise, send a survey and try to follow up on the results in person. You don’t want to make the exit interview feel stiff. Rather, you are trying to gain real insight into what the company can do to retain people in the future.
As you implement these HR practices, you may discover that employees who leave soon after being hired did not have a good indication of what the job entailed when they were hired, and you might consider revamping your hiring process.
Summary of Best Human Resource Practices
Using these types of human resource practices in the workplace can increase employee retention and happiness. This is good news for your company because engaged employees have been found to be up to 20 percent more productive than unhappy ones. If your employees are in sales, happiness can increase their sales by up to 37 percent. Employees feel happy when they receive necessary training, use their skills and abilities to do their best work, and feel appreciated and valued. All of these are good indicators that your HR team is on the right track.
Innovative Companies Leading the Way
If you’re still looking inspiring HR best practices, then turn your attention to companies that are making headlines for being in the top 100 companies to work for.
Google is a great example we’ve used in this article because they have tried many innovative approaches. One thing that has contributed to Google’s success is providing an environment where employee happiness is a high priority. They provide amenities like free healthy meals, on-site laundry and fitness centers, paid parental leave, and on-site childcare.
According to Business Insider, a full “73 percent of Google employees find their jobs to be meaningful,” and the pay doesn’t hurt either, with an average salary of $140,000. Even newer employees regularly make around $93,000 per year. Google provides transportation and a flexible work environment, including telecommuting for work. They also strive to maintain transparency and encourage employees to set high goals and learn from setbacks.
This company made Fortune’s 2014 list of the Best Companies to Work For and it’s easy to see why. Amex offers a flexible work environment with excellent benefits including paid leadership training, 20 weeks paid parental leave, on-site fitness centers, and reimbursements up to $35,000 for surrogacy or adoption expenses.
This positive work environment extends to the management as well, and 92 percent of American Express employees think that their management is honest and ethical in business.
If your organization is dedicated to HR best practices and tries to follow these principles, you could see higher employee retention and happier employees who contribute their best. The HR practices of your company can be the highlight of your business by implementing flexibility and training within the HR department. Who knows, you may even end up on Fortune magazine’s 100 Best Companies to Work For in a few years.