Human resources entails a lot more than creating processes and systems to manage personnel. Training doesn’t mean anything if you’re only focused on the participation rate instead of its actual impact. Similarly, recruitment won’t do much if you’re just worried about reducing time-to-hire without improving the quality-of-hires. Today, HR needs to be a part of your overall business strategy, and human capital management (HCM) is the missing link!
Human capital management is the set of practices and tools that help a business manage and grow its most vital asset: its people. This management approach ties HR functions such as recruitment, training, compensation, and performance management to an organization’s strategic goals. In doing so, human capital management improves the overall business value of your workforce.
A business can make impressive leaps and bounds if it focuses on HCM and starts viewing its employees as investment opportunities.
Human Capital Management: A Holistic Approach to Human Resource Management
HCM perceives the collective skills, experiences, and knowledge of your organization as an intangible asset that holds value to the organization. It strives to improve that value through HR functions in a way that connects with key metrics and, in turn, helps the business move forward.
However, people often use the terms human capital management (HCM) and human resource management (HRM) interchangeably. While there’s significant overlap, the two areas differ — mainly on the basis of their goals and priorities.
HRM is an area of management responsible for creating the processes and support systems that help manage the talent of an organization. It ensures the business processes put in place to help personnel do their jobs and keep the business functioning are leveraged properly. HCM, on the other hand, focuses on bringing out the economic value of the personnel.
Consider employee training. It falls under both HRM and HCM. Success for HRM is measured through the utilization of the learning management system (LMS), which is tied to the training process itself. HCM measures that success through the actual impact of training on the business. For instance, if you’re training sales personnel, success would be measured through metrics like the number of upsells and the increase in revenue that resulted from the training.
Focused on Bringing Out the Best in Your Workforce
An HCM strategy should have a plan for each of the core HR functions in order to be effective. Everything from recruitment to managing performance has to be approached in a way that helps optimize your workforce.
Recruitment and Onboarding
Where HRM focuses on creating processes to easily recruit employees, HCM is focused on finding quality hires. A “quality” hire is one who has the right technical and interpersonal skills to not just fill a vacant position but to thrive in your organization. To find these quality candidates, you need a recruitment strategy that supports your business goals and processes that enable new employees to do their jobs effectively.
Your new employees will feel more satisfied with smooth recruitment and onboarding in place. According to Gallup, 70% of employees who feel they had great onboarding say they have the “best job possible.”
An HCM-focused approach screens candidates and helps new employees comfortably assume their roles based on the strategic requirements of your business. An integrated HCM solution that allows you to track applicants, source candidates from the best sources, and instantly create new employee records can help automate the entire process.
In times when employees are quitting left and right, companies need to offer more than just basic salaries. About 43% of people cited a lack of good benefits as one of the reasons to quit their jobs. An HCM-focused strategy ensures fair and accessible compensation to satisfy and retain the top talent in an organization.
HCM thinks of compensation as an investment to keep your employees happy and satisfied in hopes of preventing them from quitting. This entails keeping an eye on your competitors to ensure you’re matching their benefits so you don’t lose employees to them.
Furthermore, enable your employees to easily learn about and leverage the benefits available to them. Your staff is more likely to take advantage of the benefits if they’re aware of them. Consider getting a benefits administration system that not only educates them on the different benefits available but also helps them enroll on-the-go through self-service.
Businesses need to adapt to new technology and the ever-changing demands of their customers to remain competitive. The only way to keep up is to consistently invest in the professional development of your employees.
A comprehensive employee development strategy — with a robust training program — will help your organization thrive despite industrial, technological, and behavioral changes. Plus, it’ll help improve your employee retention rate. About 94% of workers would stay longer at a company that helped develop their careers.
Companies need the plans, processes, and tools necessary to:
- Train employees to develop new skills and polish existing ones that are critical for their jobs and that align with company requirements.
- Educate employees with knowledge that would help them become better at their jobs, such as new research, regulations, etc.
- Give employees the freedom to implement whatever they learn.
Businesses need to ensure that the money they invest in recruiting, compensating, and training their employees is put to good use. Employees have to be performing the way they’re supposed to and generating expected outputs that have an impact on the business.
The set of processes that make the above possible fall under performance management, which is another core function of HCM. It gauges employee performance with metrics that have a direct impact on the business’s bottom line.
A big part of performance management is employee feedback. Managers need to consistently give 1:1 feedback to their subordinates on their performance and should be open to receiving it themselves. That way, everyone involved understands if they’re meeting their professional expectations or not and what can be done to improve their performance.
Last but not least, HCM involves the day-to-day management of employees to optimize their productivity. It includes administrative tasks like forecasting the availability of staff, setting schedules, approving or rejecting time off requests, and resolving conflicts.
What is a Human Capital Management System?
An HCM system is a single platform solution that helps employers attract, hire, pay, manage, and empower employees to be their very best. It keeps track of employee data from the time they apply for a position through termination or retirement, often termed “from hire to retire.”
An integrated HCM software is the modern way to automate HR processes. It takes key HR and payroll functions and combines them in one system. All of your most essential employee data is accessible in one location and made to work for you through helpful alerts, workflows, and reporting functionality.
Today’s HCM solutions combine these fundamental HR functions into one system:
- Recruitment and applicant tracking
- Payroll and time
- Benefits enrollment
- Training and certifications
- Position and job management
- Compliance reporting (EEOC, I-9, FLSA, ACA)
- Performance and compensation management
Combining essential functions in one unified system means data entered once populates throughout the system, creating efficiencies and improving accuracy for the HR team. Employees and managers are empowered to view and update their own data, complete important HR-related assignments, and submit requests, thereby reducing the need for HR involvement.
HCM technology works best when it’s highly customized to your company’s needs. Your job descriptions, onboarding documents, benefits plans, pay schedules, and much more are set up in the system for you and are updated as they change over time.
Invest in the Right Human Capital Management Solution
As resignation rates hit an all-time high, it’s time to invest in long-term solutions that’ll help you drive positive outcomes for the whole company. Deploying an integrated system is one way you can gain an advantage in today’s competitive environment.
Inova’s HCM system checks all of those boxes. From an applicant tracking system to an employee communications platform, it has everything you need to automate your core HR functions. Request a demo today to discover how we can help you maximize the value of your workforce.