What is an HCM and how do you know if you need one?

Employees are, in a real sense, the only way any company can make money. They are the most valuable asset that management has at its disposal. So, just as executives see fit to invest in physical and digital infrastructure for daily operations, maintaining human infrastructure is equally critical for positive cash flow.

Human capital management (HCM) can help do just that. So let's explore what it is and how it works.

What is human capital management (HCM)?

As mentioned, HCM stands for “human capital management” and is basically a philosophy, game plan, and strategy all in one. It unifies human resources, talent management, workforce management and everything that keeps people working in the company, and operates with the idea that each task directly affects the organization's results.

HCM is also a particular software solution, like CRM. HCM software helps you put this ideology into practice, giving you tools to better manage each area as you set and meet goals.

How does human capital management work?

Think of HCM as employment lifecycle management.

HCM can be very easily compared to sales funnels, sales cycles or customer journeys. Sales and marketing teams seek to identify the right customer personas, find ways to attract buyers who fit those profiles, give them compelling reasons to engage, and then attempt to solidify brand loyalty and increase networking through positive experiences. . In the simplest sense, your collective goal is to turn strangers into customers who support and share the brand.

This is the idea behind HCM, only with internal teams. Human resources professionals identify skills gaps in the organization, work to acquire needed talent, help manage and support the existing workforce, and assist current team members and leadership.

What are the elements of human capital management?

According to IBM“Human capital management focuses on adding value to an organization's employees so that they can deliver the best results. [and provide] “A process for optimizing the performance and efficiency of a company's workforce, delivering an overall strategy to guide talent attraction, recruiting, onboarding and training, benefits administration, and reporting.”

They go on to list seven distinct areas of functionality covered by successful HCM practices (and, by extension, HCM software solutions):

1. Talent management.
2. Recruitment and hiring.
3. Incorporation and training.
4. Benefits administration.
5. Time, attendance and payroll.
6. Employee self-service.
7. Reports and analysis.

At its core, the purpose of HCM is to bring a more intentional and strategic approach to the way companies work with their internal staff, ideally leading to happier employees, higher productivity, and better profit and loss (P&L) statements.

Benefits of human capital management (HCM)

When implemented correctly, HCM helps teams:

• Put the right people in the right positions.
• Attract capable talent and streamline onboarding.
• Increase employee satisfaction.
• Reduce turnover.
• Minimize overhead costs related to human resources.
• Address issues related to work culture, discrimination and more.

Again, these are obviously goals and objectives for any professional or team involved in such processes, with or without HCM. The differences here, mainly, are how HCM brings everything under one umbrella and makes explicit connections between them and with the overall performance of the company.

Challenges of human capital management (HCM)

Unfortunately, the challenges HCM faces are the same ones it is designed to address. How to attract and retain talent? How do you earn employee loyalty?

Recruitment and attrition

The issue of finding and retaining employees is more central to the conversation than ever. In fact, in a “Big Quit” post-pandemic job market, it is harder (and more critical) than ever to find the right staff and give them reasons to stay.

Demographic disparities

Many of the difficulties of recruitment and attrition are linked to this. The workforce is more diverse than ever, by age, race, origin and more. From technical skills to DEI concerns, there are a lot of things to balance to keep employees comfortable enough to do their best work.

Training Concerns

Of course, differences between employees will also exacerbate any complications related to their training. Skill gaps, adoption of new software or processes, ongoing education and training – all require intuitive and valuable training for easy and efficient learning.

Workplace toxicity

People put a lot of time and effort into their work and need to feel safe and respected to perform well. We also know more as a society about various human needs and how to satisfy them. Keeping employees on staff now requires demonstrating some basic human decency and understanding of new advances in mental health and diversity.

Decentralized workforces

Remote work is not “new” in itself, but it has never happened before in this volume. Some entire companies now operate without a head office, and it's not uncommon for decent-sized organizations to have team members logging in from a dozen different countries or time zones. Simply running payroll can be a struggle, but it's important to make sure everyone in the company is supported and paid appropriately.

Do I need human capital management (HCM)?

Ask yourself the following questions:

• Are you having difficulty finding reliable and capable employees?
• Does your organization see higher turnover rates than others in your industry?
• Would you like to reduce the overhead costs you incur with your current HR practices?
• Has it been longer than you can remember since the HR professionals on your team were able to take a vacation?
• Do you get a lot of complaints from employees (or worse, negative company reviews on Glassdoor, etc.)?
• Do you want to facilitate income generation across the board?

If any of those questions yield a “yes,” then you can benefit from HCM practices.

How to get started with HCM

1. Audit your current settings

Examine your current processes, benefits, training and policies. Identify any gaps you see or opportunities for adjustment. Are there less valuable areas you can trim and free up money for other improvements?

This is also a good time to gather employee feedback, through anonymous feedback submissions, surveys, or public discussions. You can ask your managers to speak with their direct reports privately and pass on helpful feedback to HR or a senior manager. You can then use that information to see how you can create an optimal workplace for current and future employees.

2. Create a plan

With whatever information you've gathered, create a plan. What are your priorities? How much room do you have in your budget? How much bandwidth does HR have to implement changes?

Discuss with your HR team or important stakeholders what you can manage and how to address it effectively. You can create a schedule for multiple deployments, or you may prefer to make major changes all at once.

3.Make changes

Put your plan into action. As changes are made, you may need to make further adjustments and modify existing plans to ensure everything goes as smoothly as possible. Be prepared for setbacks and use them to further improve new processes.

Messaging is also important to keep employees informed and comfortable. Be transparent about what is happening and welcome feedback as everyone goes through the changes together.

4. Be patient

Approach this the same way you would any other major release.

Changing policies, practices or processes always comes with hurdles and hurdles. The future will be a difficult road, especially when changes affect people and their workflows. Stay the course despite turbulent waters. Persistence is your friend: Continue your efforts to maintain the new system with good intentions, and as time goes by, consistency and accuracy will improve.

How to Choose a Human Capital Management System Solution

You'll want to start by establishing a baseline of your organization's specific needs and use case details. We have a checklist to help you get started, but keep in mind that there may be elements unique to your business.

Using that foundation, review the best HCM software to see which one best suits your needs. Narrow that list down as much as you can with careful evaluation and review expert and customer reviews to get a better idea of ​​the benefits and drawbacks of each. And if you can, attend any demos or sign up for free trials of the software to get a better idea of ​​how it might work for your particular business.

With enough research and consideration, you should find a solution that is a good fit for your needs.

If you want high-level power in employee management, hiring, and onboarding, our favorite HCM software is Rippling. It has customizable reports and workflows, automated payroll and tax compliance, and attentive customer service.