What is Human Capital Management?
Human capital management (HCM) is a set of practices related to people resource management. These practices are focused on the organizational need to provide specific competencies and are implemented in three categories: workforce acquisition, workforce management, and workforce optimization.
An Human Capital Management solution is an integrated system that automates Human Resources (HR) processes and provides employee self-service (ESS) capabilities.
What are the elements of an Human Capital Management?
The applications that help to enable human capital management include:
Core administrative support:
- Personnel administration
- Benefits administration
- Portal/employee self-service
- Service center
Strategic HCM support:
- Workforce planning
- Competency management
- Performance management
- Compensation planning and strategy
- Time and expense management
- Learning (education and training)
- Recruitment (hiring and recruitment)
- Contingent workforce management
- Organization visualization
- Reporting and analytics (workforce analytics)
What is the Importance of HCM?
1. Promotes a better culture and values
People both inside and outside the company now have access to information about business decisions, employee opinions, salaries, and management techniques. Employees now have a plethora of job opportunities at their disposal, as well as a better understanding of how various organisations operate. As a result, leaders now treat their employees more like customers.
The organization's culture can adapt to a dynamic work environment by taking into account job design, management, leadership development, and work environment. Finally, it leads to higher employee retention and engagement, which boosts productivity.
2. Strengthens organisational structure
Companies are rethinking the composition of their structures, in tandem with a greater investment in human capital. Prospective employees want more autonomy and decision-making power. Businesses concentrate on changing organisational structures to accommodate employees.
Many organisations believe that giving employees more freedom to make decisions and manage their work makes them more accountable and adds a new layer of meaning to their job.
Strategic Human Capital Management entails:
- Improving practical recruiting strategies
- Terminating Employees
It has the potential to make or break how your company is perceived, who prefers to work there, and how you find the best candidates for open positions.
Hiring someone to fill a gap is never a good idea. If the individual is not a good fit, the organization's future may be jeopardised.
Hiring teams must understand a candidate's background, interests, and professional goals and abilities in order to create a comprehensive plan for that employee's progression within the organisation.
4. Fosters talent
Human capital management provides organisations with strategies for implementing professional development programmes and managing employee performance. Employees want to improve their skills in order to advance in their organisations and careers. It also enables organisations to strengthen from within, lowering costs and increasing employee retention.
Having key milestones and systems for tracking performance will help you navigate when employees succeed and when they require assistance. Employers can efficiently allocate benefits by implementing metrics to track productivity and performance.
What are the benefits of an HCM?
HCM systems reduce labor costs, increase efficiencies, and optimize processes. Here are the 10 ways in which an HCM solution can improve the life of your business:
1. One unified platform
It gives managers single-source access to real-time employee data. Reports show that integrated systems reduce compliance risks, produce accurate time and attendance data, improve employee productivity and engagement, and create valuable data analytics and reporting for exceptionally informed business decisions.
Finding the most qualified talent in a competitive job market can be challenging. Having a robust recruiting system can assist with these challenges. HCM solutions help managers hire, source, track, and evaluate the best candidates with the following components: job posting, applicant and résumé data management, interview tracking, background screening, applicant communication, and streamlined conversion of application information into employee files.
3. Human resources
Wouldn’t it be nice to be in fire prevention mode instead of firefighting mode all the time and be able to focus more on the people than the paperwork? The right HR management technology can help you do just that by reducing paperwork, producing accurate results, and automating things like onboarding/off-boarding, incident and discipline tracking and asset management. Additional critical elements include the management of all employee data and the ability to host all company-related documents such as employee handbooks, procedures, and safety guidelines.
4. Benefits administration
Employee benefits are typically the second-largest business expense after payroll and are often viewed as a form of compensation. HCM systems offer businesses a solid solution that includes: benefit plan overviews, defined eligibility, open enrollment communications, and the ability for employees to make life event enrollments/changes.
Accuracy is critical in payroll. A sophisticated HCM system offers a built-in, robust, geospatial tax engine automating look-up of multi-state and local applicable taxes. Standard statements and reports also become available in real-time without conducting pre-pay processes, while payroll managers retain the ability to create custom reports simply and quickly. Employees can also view pay statements securely from their electronic devices through ESS.
6. Time and labor management
Utilizing a cutting-edge, automated time and attendance system streamlines processes associated with payroll. TLM offers employee scheduling, accrual tracking, job costing, efficient management of time off requests, and many more features. These systems help businesses eliminate time theft, paper time cards, and human error.
Does your organization need more features than those included in a basic TLM scheduler? If so, an enhanced scheduling module encompasses all of the TLM features and functions and adds budget and workload definition, open shift visibility, scheduling to skill and proficiency, color coding for rapid visual recognition, and the ability to schedule change alerts.
With an integrated solution, you can track all employee information and create reports that provide actionable information for decision making. Reports can often be exported in multiple file type options. On-demand, customizable dashboards also provide instant and real-time workforce data. Since reporting is also a critical function when it comes to compliance, HCM solutions will create reports for things like ACA, payroll, and tax filings as well as for EEO and FMLA.
9. Improved security
HCM solutions can improve your business's security by reducing the amount of paperwork and related security risks. These systems include - or should include - very tight security protocols with access rights carefully customized to your organization's needs.
10. Measurable ROI
Investment in HR software can lead to substantial cost savings. If you choose software that specifically meets your business's needs, you will be able to reduce costs to deliver HR services because many functions will be completed by the software and others will take a lot less time.
Reduced costs will also come from increased manager/employee accountability through self-service, reduced data entry errors and duplication, and improved insight through reporting and analytics. These solutions can also help avoid costly pay and accrual errors and better manage staffing to reduce unplanned overtime.
What is the difference between HRM and HCM?
HCM is the more all-encompassing term, describing functions that are part of the strategic management of human capital in an organization from talent and applicant tracking to time and attendance and analytics. It also includes budgeting, performance management, and onboarding as well as.
HRM systems encompass the elements known historically in human resources information systems focusing on the core payroll (originally and oftentimes called HRIS or Human Resources Information Systems.) Additional technology systems used to manage HR functions are included under this umbrella such as benefits administration, employee self-service, and management reporting.
Also read, What is Human Capital Management the ultimate guide.
AI in Human Capital Management
AI in HCM can be defined as the application of smart technologies such as artificial intelligence, machine learning, natural language processing (NLP), and deep learning to automate routine HR tasks, deliver personalized experiences, and gain actionable insights from HR data. Click here to learn more.
Much like the industrial revolution that transformed manufacturing, technologies like artificial intelligence (AI), machine learning (ML), and deep learning are transforming the way we live, work and communicate. These systems that constantly consume information to improve the accuracy and efficacy of human tasks hold great potential when paired with human innovation.
As the focal area of HR shifts from administrative tasks to improve workforce productivity, AI in talent management can help organizations streamline processes, improve functional efficiency, and make more informed people decisions that directly impact the bottom line. So, let’s look at some of the basic concepts in AI in HCM and explore the key use cases.