In the current era of digital transformation, businesses need to ensure the most important aspects of their operations are benefiting from the various tech solutions and efficiency-boosting innovations available to them.
For the HR department, some of the most valuable gains can be made in the area of human capital management (HCM). Better performance in this space can benefit the business in many ways, from quicker, more effective hiring to stronger management of your existing workforce through data and analytics.
What is human capital management?
HCM is a strategic approach to managing your human resources that, executed effectively, can have a positive impact in areas like:
- Performance management
The various practices that fall under the banner of HCM can be broadly divided into three categories:
Some of the more specific functions of HCM, within these three core categories, include:
- Improving talent identification and acquisition with better application filtering and engagement with passive candidates
- Boosting workforce productivity and efficiency with effective time management, scheduling and workload allocation
- Using analytics to optimize staff training and performance
As well as referring to the company's plans and policies in these areas, HCM encompasses the various IT applications and tech solutions that support HR and allow the department to execute its strategy.
Why is HCM important?
No organization can hope to succeed if the people that make up its workforce aren't performing at a high level, or if the time and budget being allocated to core functions like recruitment aren't generating results.
HCM can help you gain the visibility and data-driven insights required to understand where your most important HR processes are working well and delivering benefits, and where you need to change your approach.
On the talent acquisition front, HCM best practices can put you in a stronger position to navigate one of the most challenges facing employers today: skills shortages.
Korn Ferry has warned that, left unaddressed, the "global talent crisis" could cost developed and developing economies trillions of dollars in unrealized annual revenues.
Identifying and acquiring the right talent is essential to stay competitive now and in the future, and a well-planned HCM strategy can help you meet these goals.
Of course, hiring the right people is only the first step; you must also be prepared to keep your employees satisfied and engaged in their work if you want to get the best out of them. This is where the workforce management and optimization components of HCM come into play.
Dedicated HCM software can help you raise your standards and improve performance in areas like workload forecasting and scheduling. This minimizes the risk of people being overworked - a common problem that can lead to stress, job dissatisfaction, and burnout.
As well as helping you keep your employees happy and engaged, HCM can support workforce optimization through a data-driven approach. Collection and analysis of relevant data improves your understanding of the labor force, putting you in a better position to track trends, monitor employee attitudes and anticipate problems before they become unmanageable.
Workforce optimization also comes in the form of training and skills development. The implementation of targeted and bespoke training programs - taking into account the needs of the business and the existing capabilities and professional ambitions of your staff - should be at the heart of your HCM strategy.
People who are learning new things and moving forward in their careers will be more fulfilled and committed to their employer, while the business will benefit from a more diverse and comprehensive skills base.
Why digital transformation needs to happen now
It's impossible to ignore that digital transformation and the rapid emergence and evolution of new technologies is having a huge impact on HR and the workforce.
The HCM tools you employ to manage and optimize talent must reflect digital trends and the current pace of change in order to stay relevant.
HR is feeling the effects of digital transformation in various ways. For example:
- Process automation to reduce time spent on routine tasks
- AI-driven analytics to understand and improve the employee experience
- Shifting from on-site legacy IT systems to cloud platforms
Embracing a digital approach to HCM will help you keep up with wider trends in the business world, ensuring you aren't left behind by more agile and switched-on competitors.
Research suggests that worldwide spending on the technologies and services required to enable digital transformation will reach $2.3 trillion by 2023, accounting for more than half of all ICT expenditure.
Your HCM roadmap
To keep up with digital trends, your HCM system must be planned and implemented in a way that supports your workforce and the entire business during times of rapid change.
Here are the most important components of an effective HCM roadmap:
1. A dedicated project team
Like any major business project, HCM implementation needs clear guidance and structure, meaning there should be a dedicated, carefully chosen team in place to supervise the process.
The group should consist of people who can make a clear contribution to a successful rollout, such as technical experts and senior figures who have decision-making responsibilities within their departments.
Having this dedicated team in place can prove particularly useful with respect to change management and setting expectations across the business.
2. Stakeholder understanding
An essential part of introducing any new solution or process is understanding and outlining the impact it’ll have on stakeholders within the organization. Where HCM is concerned, these stakeholders include:
- Executives, whose main focus will be on goals like ROI and efficiency gains
- Finance, who’ll be looking for a greater understanding of labor costs
- Payroll, where streamlined processes and elimination of manual, time-consuming tasks will be advantageous
- Managers, who could benefit from more powerful administration and team management tools
- Employees, who should be consulted and kept informed at every step of your HCM implementation
3. Clear objectives
Going into your HCM rollout with a clear picture of your objectives and what you hope to gain from the move is vital because it’ll allow you to make more informed decisions about the particular types of software and solutions that are best-suited to your needs.
It can also prove highly beneficial to think about the scope and functionality of your HCM platform, particularly in terms of how these aspects serve your wider business goals.
4. Process evaluation and improvement
It's important to understand how the HCM implementation will affect your existing processes, so you can feel confident you're making the right decisions on specific platforms and software options.
Having a good grasp of your processes will contribute to a smoother rollout and reduce the risk of new solutions causing disruption. It’ll also give you a better insight into where there’s the most scope for transformation and improvement.
Don't fall into the trap of focusing heavily on how HCM can help the business that you overlook the need to invest in proper training to make the system a success.
Creating a dedicated training plan will help ensure that the people at the center of implementing and managing the system will be fully prepared to do so. HCM software vendors can help provide training or offer guidance on the key skills required to get the best results from their product.
6. Data cleansing
Introducing a new HCM platform is an exciting change, but you will struggle to gain maximum benefit from the system if you're filling it with outdated or inaccurate data.
Transitioning to a new platform is an ideal opportunity to conduct an audit of your HR data, so you can move forward with confidence that all of the details in your system are correct. Common issues to look out for include duplicated information and missing data.
When the time comes to launch your HCM system, you'll need to make key decisions such as whether to commit to a full rollout, or to go for a phased implementation.
It's important to monitor the deployment closely, firstly to identify any issues that need addressing, but also to spot positive effects and 'wins' that will help to demonstrate the value of the platform.
The adoption of dedicated HCM software doesn't end with the rollout, of course. Once the system is live, the project team will want to shift its focus to monitoring.
This allows you to focus on questions such as whether the business is making progress towards the objectives, if users are comfortable in their transition to the new software, and what might need to change so the business can gain even more advantage from HCM.