Human Resources Don’t Add Value: The Most Misunderstood Function in Business

HR is often dismissed as an administrative function, but it plays a crucial strategic role in shaping company culture, driving talent acquisition, boosting employee engagement, leading change management, ensuring compliance, and leveraging people analytics. Organizations that undervalue HR risk high turnover, weak leadership, and legal issues.

Deepinder Singh

2/25/20253 min read

Human Resources Don’t Add Value: The Most Misunderstood Function in Business

Human Resources (HR) is often dismissed as an administrative function, merely handling payroll, compliance, and employee grievances. Some executives even see HR as a bureaucratic hurdle rather than a strategic partner. In extreme cases, you might hear the controversial sentiment that "HR is useless."

However, this perspective couldn’t be further from the truth. The reality is that HR is not just useful—it is essential to the long-term success of any organization. HR leaders shape company culture, drive workforce strategy, and contribute directly to business performance. Companies that fail to recognize the strategic importance of HR risk losing their competitive edge, facing high attrition, and struggling with low employee engagement.

The Strategic Role of HR in Business Success

1. HR as the Architect of Organizational Culture

A company’s culture determines how employees engage, collaborate, and innovate. HR is at the forefront of defining and maintaining this culture by setting policies, onboarding new hires, and ensuring diversity, equity, and inclusion initiatives are more than just buzzwords.

Take Google, for example. Known for its innovative and employee-centric culture, Google has an HR department that focuses on data-driven decision-making and people analytics to enhance employee satisfaction and productivity. Companies that fail to invest in HR-driven culture initiatives often suffer from low employee morale and high turnover rates.

2. HR Drives Talent Acquisition and Retention

Hiring the right people is one of the most critical business functions, and it is HR that ensures organizations attract top talent. Without a strategic HR team, companies often hire reactively, leading to skill gaps and mismatched hires.

A compelling example is Netflix, which has revolutionized talent management through its HR policies. The company’s famous “Netflix Culture Deck” emphasizes hiring only top performers and treating employees like responsible adults with high degrees of freedom. This HR-driven approach has helped Netflix remain a dominant player in the entertainment industry.

3. HR Ensures Employee Engagement and Productivity

Employee engagement is directly tied to business performance. According to Gallup, companies with high employee engagement experience 23% higher profitability than those with low engagement levels. HR plays a critical role in ensuring employees feel valued, supported, and motivated through well-designed compensation plans, career development opportunities, and performance management systems.

4. HR Leads Change Management and Business Transformation

The corporate landscape is constantly evolving, and organizations that fail to adapt quickly risk becoming obsolete. Whether it’s digital transformation, mergers and acquisitions, or organizational restructuring, HR is at the heart of change management.

For instance, when Microsoft shifted from a traditional software company to a cloud-first business under CEO Satya Nadella, HR played a crucial role in fostering a growth mindset culture. The transformation required a fundamental shift in leadership styles, employee expectations, and performance metrics. Without HR’s involvement, such a massive cultural shift would have been far more challenging.

5. HR Protects the Company from Legal and Ethical Pitfalls

Many organizations underestimate the importance of HR in compliance and risk management. From employment law and workplace safety to ethical concerns, HR ensures that companies operate within legal frameworks, avoiding costly lawsuits and reputational damage.

6. HR Enhances Business Performance through People Analytics

Modern HR is no longer about gut feelings—it’s about data. Leading organizations leverage HR analytics to improve hiring decisions, reduce attrition, and optimize workforce productivity. Companies like IBM use AI-driven HR tools to predict employee flight risks and proactively address retention issues.

Businesses that fail to integrate HR analytics into their decision-making processes miss out on valuable insights that could enhance efficiency and profitability.

Why Companies Undervalue HR

Despite its strategic role, HR is often undervalued due to misconceptions about its function. Here are some common reasons:

  • HR is Seen as Costly, Not Revenue-Generating: Unlike sales or product development, HR’s contributions are not directly linked to revenue, leading executives to underestimate its impact.

  • HR is Viewed as a Support Function: Some leaders perceive HR as merely handling administrative tasks rather than being a strategic partner.

  • Lack of HR Representation in Executive Leadership: Many companies do not give HR a seat at the leadership table, limiting its influence on key business decisions.

  • Failure to Use Data to Demonstrate Impact: In organizations where HR does not leverage people analytics, its contributions can seem intangible and difficult to measure.

The Cost of Ignoring HR’s Strategic Value

When HR is ignored or reduced to an administrative function, organizations suffer. Some consequences include:

  • High Employee Turnover: Poor HR policies lead to disengaged employees who leave for better opportunities.

  • Weak Leadership Development: Without HR-led leadership programs, companies struggle to develop future leaders.

  • Toxic Work Environments: A lack of HR-driven culture initiatives results in low morale and decreased productivity.

  • Legal and Ethical Issues: Ignoring HR compliance measures can lead to lawsuits, financial penalties, and reputational damage.

Conclusion: The Real Question Companies Should Be Asking

Instead of asking, “Does HR add Value?” companies should be asking, “How can we leverage HR as a strategic partner to drive business success?”

HR is not just about policies and paperwork—it’s about people, and people are the heart of any successful organization. Companies that fail to recognize this will struggle in an increasingly competitive and dynamic business landscape.

So, if your organization still treats HR as an afterthought, the real question is: How much longer can you afford to ignore the people who drive your business forward?