Human Capital Management – Business Owner’s Guide
What is Human Capital Management?
According to Gartner, human capital management (HCM) “is a set of practices related to people resource management.” HCM falls into the three main categories of workforce management, workforce optimization and workforce acquisition. HCM functions are part of the strategic management of human capital in companies, which includes planning salaries and tracking performance. HCM also incorporates onboarding, budgeting, and analytics. Additionally, HCM includes core administrative support functions, such as:
- Employee self-service
- Benefits administration
- Personnel administration
In order for HCM to be successful at your company, your human resources team needs to plan, create and implement a strategy to build an efficient and productive workforce.
The Difference between Human Capital Management and Human Resources Management
One of the main responsibilities of a human resources department is to implement human capital management. Although human capital management and human resources are sometimes used interchangeably, there are differences between the two.
As seen above, HCM is an all-inclusive term and describes the strategic and global aspects of managing human capital in a company. Human resources management has traditionally centered on specific aspects of managing the workforce, for example, labor, and time management. Human resources management also focuses on recruiting, managing and directing the workforce by using:
- Management advice
- Legal advice
The Benefits of Human Capital Management
Employees are generally the biggest expense and assets of a company. An efficient HCM strategy can provide your company with advantages that can result in you having a competitive edge over other businesses in your industry.
Here are some additional benefits of effective HCM:
- Efficient hiring practices
Hiring the right employees is critical to the success and growth of your company. Given that it costs up to $5,000 to hire and train new employees, HCM plays a vital role in ensuring that you employ the most suitable people. HCM provides the framework to hire employees and also ensures that they are successful in their roles.
- Successful onboarding
The way that new employees are onboarded will determine whether they remain with your company. Including a thorough onboarding program into your HCM strategy will result in a lower staff turn over rate. HCM helps your company to make a great first impression on your new hire. The aim of a successful onboarding program is to help your new recruit to feel integrated into your company, without feeling overwhelmed. HCM software can store the onboarding documentation your new employee needs. For example, Deputy’s communication hub has the functionality to store handbooks and other documentation for easy access. In addition, our communication hub also has a read confirmation feature so that you are notified when your new hire has accessed the relevant documentation.
- Appropriate training
Providing suitable training increases your employees’ productivity and efficiency. Your HCM strategy should include the training that will be delivered to different categories of employees. It should also include various types of training delivery methods and how progress will be tracked. Your HCM strategy must include the software you will use to monitor your employees’ performance after they have undertaken the relevant training.
- Higher retention rates
According to a survey, 54% of respondents stated that advancement in their career was more important than the salary they received. This statistic demonstrates that most employees would prefer to progress within their current company, rather than search for a new role. Your HCM strategy should invest heavily in employee development in order for your dedicated employees to choose to remain with your company.
- Timely compliance
There appears to be a growth in regulations and legislation in relation to businesses. For example, predictive scheduling and sick leave laws place new responsibilities on companies. An HCM solution to accompany your strategy enables your business to adapt quickly to new laws to ensure compliance. For instance, Deputy helps to safeguard your company with responsive compliance features so that your business can fulfill the terms of new legislation and regulations in a timely way. Click on the link below today to start your free trial and find out how Deputy can get (and keep) your business compliant with laws that affect your hourly workforce.
- Satisfied employees
High employee satisfaction is linked to greater productivity and loyalty. Research shows that 42% of participants said their company’s dedication to professional development was an important factor in relation to their job satisfaction. Therefore, making investments in your employees through HCM is an efficient way to increase employee satisfaction.
Key Principles of Human Capital Management
The advantages of a HCM strategy are clear. However, your company will only realize these benefits if it utilizes a solution to capitalize on the key principles of HCM below:
- Planning wages
It can be challenging to plan and track a workforce with different skills and pay grades. Wage and compensation planning with the appropriate tools helps to reduce the incidence of unfairness in relation to pay. Your employees should receive the same level of compensation in line with industry standards, if they are doing similar work. HCM software with features, such as project management, shift scheduling, and time tracking enables your company to compensate employees on a fair and consistent basis.
- Managing expenses and time
Your profits can be affected negatively if you fail to manage your employees’ hours and their travel expenses. You also need to be vigilant in terms of overtime claims and leave requests. Your HCM should make tracking your employees’ time easy and convenient. Using workforce management software, like Deputy, provides your employees with a simple way to access their work schedules and to communicate any changes with you.
- Planning your workforce
In order to meet your goals and objectives, you must plan your workforce in the most efficient way. Workforce planning includes different facets for different businesses. For example, a corporation may need to incorporate remote working into their workforce plan. A retailer would need to consider seasonal demands when planning the shifts of their hourly workforce. A fit for purpose HCM solution will provide business owners with the reporting functionality to analyze business trends and then plan their workforce accordingly.
- Managing benefits
Your HCM strategy should include the creation, management and updating of your employee benefits package, such as health insurance. Managing benefits include:
- Creating a benefits program.
- Enrolling and training new employees into the program.
- Ensuring that benefits are competitively priced.
Your training and learning documentation must be available to all your employees, irrespective of their location. Your HCM strategy should take into account how your employees will access their training. It is increasingly expected that training materials will be provided online where employees can gain access securely, at their convenience.
- Managing temporary staff
There may be times when you need to hire consultants, seasonal staff, freelancers and remote workers. Your HCM strategy should include the processes and procedures to recruit and onboard temporary workers into your company. Temporary workers are an important addition to your team and your HCM strategy should include plans to make them feel valued.
- Managing performance
Your employees need to feel like you are invested in their growth and development. One way to show your commitment to your employees is to design a robust performance management framework. Whether your company is part of the retail, hospitality, restaurant or any other industry, you should have a system in place to provide your employees with feedback on their performance. Your HCM strategy should include rewards for high-achievers and assistance for your employees who are struggling to meet their targets.
- Managing payroll and filing taxes
Errors in payroll can result in your employees having reduced confidence in your business. It is critical to ensure that your employees get paid for all the hours they work. If you work with hourly staff, your HCM strategy needs to include the use of a shift scheduling tool that integrates with payroll software. Deputy seamlessly integrates with some of the most popular payroll solutions to ensure that your employees’ pay is accurate. Click on the button below to start your free trial of Deputy to find out how we can streamline your scheduling and payroll processes.
How to improve human capital management
Fit for purpose HCM focuses on both your new and current employees. Your HCM should include strategies to get the best out of every employee, irrespective of how long they have been with your company.
Here are some suggestions to improve your HCM:
Personalize your management approach
You should try to take your employees’ preferences and personalities into consideration when communicating and managing. This will be easier to adopt in smaller companies, but larger organizations should also aim for employee personalization. Different communication methods will resonate with different employees. For example, some employees would prefer emails, while others will rather one-on-one communication.
You should also consider the age and generation of your employees when providing communication and training material. It could be taken for granted that everyone in your company prefers online training. However, there may be some employees who have a preference for a speaker talking them through new information in person.
Utilize the right technology
To implement your HCM strategy correctly, you will need to provide your HR team with the right tools. The solutions you choose should make it easy for HR to automate processes, in order for them to free up their time. This extra time can be used to build relationships and getting to know employees. The more your HR team familiarizes themselves with other employees, the higher the likelihood that they will be able to provide personalized communication.
A key theme that should run throughout your HCM strategy is open and honest communication with your employees. Prioritizing communication with your employees helps to cultivate a workplace culture of trust. Ensuring that the lines of communication are kept open is especially important during times of change.
Letting your employees know about upcoming developments helps them feel valued – this is even the case when the news is negative. Delivering news that involves budget cuts and layoffs is never easy. However, communicating bad news to employees in a timely fashion and with empathy can help to cushion the blow.
HCM is essential to your company’s growth and profitability. How you manage your workforce impacts on whether you win new business and keep your existing customers. The wealth of your company is the human capital and having a strategy and the right tools in place will ensure a happier and more productive workforce.
Your HCM strategy should include how you will address the key principles of HCM, listed above. In relation to the solutions you choose, consider using Deputy to schedule your hourly workforce employees, while remaining on the right side of the law to safeguard your business. To see it in action for yourself, click on the button below to begin your free trial.