As business administration has become more sophisticated and a body of knowledge has grown to reveal what practices drive the most value, Human Capital Management (HCM) has grown along with it. HCM is a strategic approach to employee management with the goal of maximizing near- and long-term company value.
HCM is especially important for small and medium-size businesses who are often competing with larger, better resourced enterprises to hire and retain top talent. Larger companies likely have large HR departments devoted to securing and retaining talent, and the software to execute at scale. Fortunately, comparable software is now available for SMBs to help deliver competitive benefits and an even better workplace environment.
With the right strategy and the right tools, virtually any company can win and cultivate the talent it needs to succeed in the market. In the process, HCM can increase operational efficiency, simplify regulatory compliance, and nurture a distinctive corporate culture.
What is Human Capital Management (HCM)?
Back when most industries were systematized – built on a manufacturing model – and people were hired to perform repetitive tasks, employees were just one more input in the economic model. “Human Resources” was an apt way to describe how employers saw that workforce.
In today’s service-based economy, employees add value. They are skilled, self-directed in many cases, and not exactly interchangeable. Employees in such businesses are one aspect of the company’s capital assets: the Human Capital. A company’s financial fortunes depend on the quality and quantity of employees’ work product. That means staffing the best possible people, encouraging a positive workplace where they can do their best work, and retaining their skills and experience for as long as possible.
This is the goal of HCM. Accomplishing this in a way that is both personalized and efficient involves the elements we detail below. And, to do that, you need the right software. The right software is the one that helps your company coordinate and execute on all the elements of HCM.
What are the Elements of Human Capital Management?
HCM still gets confused with HR. And HCM capabilities technically include HR. But traditional HR functions can be considered subtasks in comprehensive HCM operations. This means HR is managed more strategically, and involves the stakeholders best positioned to positively influence the results.
Recruiting and hiring
This used to be siloed in the HR department. HCM lets companies utilize job descriptions produced by hiring managers and even recruitment ads produced by the marketing department to directly feed online job boards and social media. Use of online candidate profilers helps more quickly and fairly identify the best-qualified applicants.
Talent acquisition and onboarding
An Applicant Tracking System (ATS) is a specialized subset of HCM. This enables systematic vetting, interview scheduling, and shared perspective as a company zeroes in on the best hire. HR can then more easily handle the paperwork.
Onboarding a new hire is a skill set all its own. The better the onboarding experience, the faster a new employee will reach full productivity and the longer they’re likely to stay with the company. In the same way CRM helps companies earn the loyalty of customers, HCM nurtures the company’s relationship with its employees.
Training
Beyond the learning required for successful onboarding of a new employee, training may be necessary for specific skills or career development. HCM involves identifying the curriculum, scheduling the training, and recording the achievements. When conducted inside robust HCM software, this can be appended to their employee records and feed their personal development plan.
Time and attendance
In an HR context, timekeeping is considered an employee management function with implications for payroll. In HCM, this information goes beyond employee management to quickly and more accurately provide executive management with data-driven insights into total business performance.
Payroll
When payroll preparation and processing is fully integrated with employee records, all aspects of compensation become easier and more accurate to manage. This can include PTO, health and other wellness benefits, 401(k) participation, and compliance-related records like FMLA leaves.
Benefits and retirement services
While this is connected to payroll, it is increasingly becoming a key factor in employees’ relationship with employers. For this reason, it is now a strategic management tool more than an administrative task. By connecting benefits to the total employee relationship inside HCM operations, it is easier to implement policy changes and monitor their effect.
Performance management
Using HCM to administer performance reviews allows both employees and employers to gain perspective from multiple viewpoints. This can make the process fairer and more holistic. It also provides a more complete and accurate record of these interactions, which serves everyone. Individual performance can even be tied to business performance metrics.
Talent management
This used to be the “art” of HR management. Now, HCM allows managers in multiple departments and at every level to leverage resident skills and expertise. This also makes it easier for employees to chart a more satisfying career path.
Reporting and analytics
As mentioned throughout this list, every function of Human Capital Management performed inside an HCM system generates objective data. This is the real treasure for any company that values its people. With this, executive management can make better strategic decisions, as well as have more accurate snapshots of their business’s health on a daily basis.
Compliance
The record-keeping function of an HCM system enables regulatory compliance regarding every aspect of employment and workplace activity. In fact, setting up HCM processes can ensure that good compliance practices are baked into business routines.
Employee engagement
This is the ultimate benefit of a robust HCM system. When employees are empowered to check their own pay records and benefits or book their own PTO, they feel more engaged. According to Gallup, not engaged or actively disengaged employees represent about $1.9 trillion in lost productivity in the U.S. economy. Tying employees more closely to your company can literally be money in the bank.
HCM Software – Streamlining Your HR Operations
In the same way that technology has allowed companies of all sizes to be more productive, HCM software helps people managers do their best work. It does this in two ways: automating routine administrative tasks, and systemizing the “softer” aspects of HR that are increasingly important to today’s workforce.
Surprising as it might seem, many SMBs are still filling spreadsheets by hand to manage many critical HR functions. When it comes to operations like payroll runs, this leaves room for costly errors that can also be ruinous for employee relations. Likewise, proper software mitigates the chance of errors in the administration of benefits programs and PTO. In every one of these cases, the effort involved in getting it done and getting it right can be exorbitant. This is especially true for SMBs for whom HR is ancillary to their core business.
The expansive capabilities of HCM detailed above may seem like a luxury for a smaller company. But hosted software solutions with subscription rates that scale with business size have put this software in reach of everyone. Most are modular, so companies only need to pay for the parts they need. Most of all, by tying all these functions together, the operation of any one aspect is less expensive and more productive than has ever been possible before.
When a smaller company uses such robust software to anchor its relationship with employees, they are better able to compete with much larger companies for that same talent. In fact, it can level the playing field such that the smaller company has the advantage thanks to an often flatter organization and more direct management contact.
What are the Benefits of HCM for Your Business?
- Increase workforce productivity and efficiency: Automate routine HR tasks, streamline operations, and eliminate paperwork and other manual processes.
- Reduce costs: Greater efficiency means lower operating expenses.
- Improve employee engagement: Engaged employees are more productive – which translates straight to the bottom line – improves their work/life balance (with features like mobile access), and reduces staff turnover, eliminating all the expense that triggers.
- Strengthen talent acquisition: Solid HCM operations let smaller companies compete with larger ones for the best talent.
- Enhance compliance: SMBs can bake compliance into their HR operations and automate the record-keeping that protects the company.
- Make data-driven decisions: Executive management gains a detailed, objective view of its business to guide long-term growth as well as day-to-day decision-making.
Find the Right HCM Software for Your Business
As you can see, elevating and expanding HR to the practice of Human Capital Management offers huge advantages. Affordable, accessible HCM software now makes this a practical option for businesses of all sizes. And SMBs might have the most to gain from the change.
Namely is among the leaders in HCM technology. As the name suggests, Namely is designed to engage salaried and hourly workers at the individual level, even inside the same organization. This drives a culture of shared mission and individual contribution, enabling outsized performance by the whole team.
What’s more, executive management has the visibility and quantitative data they need – delivered real-time in intuitive and visually compelling dashboards – to continuously refine operations. Now SMBs can better compete with much bigger companies for the talent and economic efficiencies they need.
To learn more about Namely and receive a personalized demo, contact us at https://namely.com/lp/request-a-call/
