What is Human Capital Management?
6 min. Read
Last Updated: 08/01/2018
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As a business owner, you already recognize that your employees are one of your most valuable assets. Leading firms understand that recruitment, training, and management of staff provides a competitive advantage, so they leverage human capital management best practices to generate profitable business models, high-performing cultures, and memorable brands.
Taking steps to understand and implement HCM systems and processes can set your business apart, but it will take planning and organization. To get started, explore how you can develop an effective workforce management program.
What is human capital management?
Human capital management can be described as a set of processes and tools that companies use to systematically improve recruiting, management, and performance. The human resources department uses these tools and processes to support a well-functioning company.
The role of an effective HR department has changed in recent years, and it continues to evolve with the needs and expectations of a rapidly changing workforce. Human capital management software was originally developed and targeted for large corporations, but an increase in small businesses wanting to adopt similar, cost-effective tools catered to their needs has created a shift. Such tools are now cheaper and easier to use for HR professionals with smaller teams who don't have the need for or the bandwidth to learn a more complex system. Learn more about the role of HCM and how it’s developed in recent years.
How can an HCM solution help businesses?
Your HR team is responsible for personnel management, payroll, benefits administration, and other operational tasks. When your core HR functions are running smoothly, employees have a good experience and can focus on their job responsibilities.
Having the right tools in place also enables your HR team to manage the diverse operational aspects of their job, while devoting energy to higher value human capital management strategies. These may include:
- Identifying the right talent during the recruiting process;
- Supporting and managing employees throughout their careers; and
- Developing an effective leadership pipeline.
Performance management tactics help identify leaders, manage staff reviews, and develop ongoing training and management plans that aim to help each individual excel. Clearly identifying potential leaders can aid in business and succession planning, allowing you to promote from within and capture the full value of your investments in employee development and growth. An end-to-end HCM strategy, supported by the latest in flexible and integrated HR technology, forms the basis of a high-performance corporate culture.
Innovative human resource management requires the right overarching strategy, processes, and technologies to address a company's unique needs.
What data should be reviewed?
To develop effective HCM systems, business leaders should set goals for each of the core business processes managed by the HR team, then discuss how a human capital management program will target each of those goals. Leading HCM solutions share several features designed to help businesses quickly implement the program within existing company processes:
- Integration features ensure that HR software communicates in real time with other business systems, allowing key decision makers to have immediate access to accurate data.
- Employee self-service features reduce administrative burdens on staff and decrease costs while improving the employee experience.
- A cloud-based, modular approach allows companies to modify the system as their needs develop over time, such as adding new features or eliminating ones that are obsolete.
- Strong support features give business owners peace of mind by offering 24/7 assistance not only for the initial setup and implementation, but also for ongoing issues or questions.
HR departments need data to make strategic decisions, and having the proper tools to gather and analyze this information efficiently is the cornerstone to a solid talent management program. In fact, results from the 2018 Paychex Pulse of HR Survey indicate that HR leaders are increasingly building analytics into their daily routine. Seventy-seven percent of those surveyed reported using human resource management software to communicate more efficiently with employees, make strategic decisions, and analyze the effectiveness of their hiring programs, which is up from 64 percent when the survey was last conducted in 2017. From tracking progress to informing future planning, data and analytics provide a sound foundation upon which to unroll a strategic human capital management effort.
Finding an HCM solution that’s right for your business
Any workforce management program will require time, attention, and effort. Accurate planning requires access to detailed, real-time data on everything from benefits and compensation to time and attendance. Innovative human resource management requires the right overarching strategy, processes, and technologies to address a company's unique needs. While this may seem like an overwhelming task, it doesn't need to be. Many companies reap the benefits of strategic HCM systems without the hassle of self-managing by outsourcing to a reputable company that provides these solutions.