What is Human Capital Management and Why It Matters to Your Bottom Line
You may have come across the term human capital management (HCM) and wanted more in-depth information on how or if it related to your organization. Human capital management is not business jargon, it describes the complex and crucial task of effectively managing the people that comprise your workforce.
Whether you’re the CIO of a large financial institution, a VP of Finance of a manufacturer, are responsible for operations in an unionized work environment or more, HCM is important to you. Not only is it relevant to your function but it is also crucial to your organization’s success.
In fact an increasingly greater number of business leaders and executives are recognizing the value of HCM. According to a Harvard Business Review study 43% of CEOs indicated that investing in HR as a whole was a high priority, with 71% identifying human capital as a top contributing factor to sustainable economic value.
Human Capital Management: A Definition
HCM refers to methods, processes, and practices regarding the management of your organization’s most valuable asset: your employees or workforce. Your employees are an asset (human capital) whose value and potential can be maximized via investment in them and the deployment of proper management techniques, methodologies and practices. Understanding and approaching your workforce from a financial and operational lens relates to HCM.
HCM encompasses workforce management, payroll/benefits and time and attendance, but also includes processes connected to expense management, employee leave management and the general administrative elements of managing people. Increasingly the term human capital management is used to encapsulate the software and practices used to manage employee records and talent management.
Benefits of Human Capital Management
Effective, Streamlined Talent Acquisition and Development
Finding, training and retaining an employee can be time and resource intensive for an organization. Beyond just finding a person to fill a role, you want the right candidate whose skills, training and aptitude equips them to successfully carry out their job duties.
HCM is key throughout the employment journey from acquisition to development and beyond. Through working with a qualified HCM partner, such as Covalence, your organization can greatly reduce the time taken to hire a prospective candidate via faster employee onboarding.
After the hiring and onboarding process is complete, a strategic HCM program will also allow your organization to maximize your new employee’s effectiveness via talent management. Through modernizing performance management by accurately identifying strengths and areas for improvement through continual tracking, employers can enhance and optimize their workforce’s performance and productivity.
Consider this: you want to take on a large project that will increase business and give your organization a higher profile. However you are not currently staffed up with the right type of talent to successfully carry out the project. You also will only need staff for the length of the project and they need specific and specialized skills.
Without HCM you and your HR team are unaware of the laws, regulations and general practices of hiring freelancers, contractors and remote, part-time staff. Your HR department may be more focused on the management of your permanent employees and now need to look into hiring laws, specialized onboarding, and how to handle training for temporary or part-time workers.
With HCM technology and a strategic team on call this entire process is simple and fast, allowing your organization to grow and scale up. Within a human capital management package you get tools like integrated tax and labor law compliance so you are fully compliant when you hire your contractors. You can easily access simple-to-use onboarding to get your new employees started seamlessly. And time and attendance management capabilities make it smooth to track productivity and work hours across different geographic locations or even time zones (in case your contractors are spread out across the country).
Modernized and Optimized HR Department
Implementing HCM programs and technologies can enhance your HR department’s effectiveness and empower them to serve your organization better. Cloud-based HCM can shift your HR leaders’ roles from functional to strategic by giving them dashboards, analytics, and big data to recognize workforce trends within your organization. Tracking and monitoring through easy-to-use, yet powerful reporting tools allows your HR leaders to make data-driven decisions. As an example imagine that you need to quickly hire a large number of employees with a specific skill-set. With cloud HCM your HR team can review data such as hiring patterns for this skillset or expenditure on payroll to forecast the associated time and costs for bringing on new talent.
Beyond giving your HR department actionable insights via dashboards and reporting, HCM can also save HR teams immense amounts of time. HCM technology frees up HR executives and managers to take a more strategic and advisory role for executives through self-service options for PTO, benefits administration, and more.
How Properly Implemented HCM Can Help Save Your Organization Money
Savings Via Cloud HCM
Consider the increased savings and efficiency of having your employees access HR services from any location and device without needing constant IT support. Through the cloud you can provide access to needed services with a reduced labour output from your IT team. Beyond this, powerful analytics from the cloud can give you insight into trends and metrics which help you make data-driven decisions, further reducing costs. Also note that with cloud technology there is limited to no downtime for updates to be installed/processed. This eliminated downtime increases productivity and reduces lost time. Continual updates via the cloud also mean you stay up-to-date and compliant with constantly evolving laws and regulations in regards to benefits administration.
Reduced Employee Turnover Means Reduced Costs
Employee turnover is expensive. Replacing an exiting mid-level employee can cost your organization a large sum. With a strategic and robust HCM plan and program you can foster employee retention through implementing a system which facilitates ongoing two-way feedback, modernized performance management, and continuous skills development.
Stay Compliant, Save Money
The right HCM partner and program can help ensure you stay compliant, which in turn assists your organization in avoiding substantial fines and penalties. You run a higher chance of compliance risk (and of paying fines) if your organization processes payroll manually for example. Modernizing payroll is one example of how a strategic HCM program saves your organization money.
Monitor and Control Labor Costs
With HCM technology and a HCM implementation partner you can configure the time and attendance to monitor the amount of overtime employees are scheduling. This allows you to avoid excessive overtime costs as your system can automatically alert (through email for example) you to unneeded or too much overtime work. Managers can get an overview of overtime patterns through reports and then can in turn create work schedules that align with budget constrictions.
HCM also enables your HR team to organize employees via their salary grade or position in the company. This allows HR managers get a bird’s eye view of employee salary levels across the organization. They can now track how much under or over budget employee salaries are becoming. They can also determine whether a new hire with a high pay bracket is feasible. Your organization now ensures that employee salary levels remain within budget and reduces the chances of exceeding said budget.
We hope you enjoyed this blog post! Stay tuned for more from Covalence on HCM related topics, tips and articles. Also contact us for a complimentary and commitment-free chat on how HCM can help your organization save money and why you will require a committed and knowledgeable team of HCM specialists working with you on your HCM needs.