What Is Human Capital Management?

November 3, 2023
What Is Human Capital Management?

What is human capital management? In a nutshell, human capital management (HCM) is a business strategy that views a company’s workforce as an asset. This is a departure from the way that employees have traditionally been viewed — as a business expense.

When you think of your employees as an asset, it helps you think about how you treat them. Just as you would with other assets, you invest in them to maintain the greatest returns. When a company invests in the employee including training, employees become more productive and, therefore, more valuable to the business.

HCM encompasses traditional human resources administrative functions such as onboarding, payroll processing, and benefits administration. After all, those functions are essential for employees. However, HCM also focuses relentlessly on talent development, performance management, and engagement. The term “HCM” also refers to the technology used to implement an HCM strategy. If you are a human resources or training professional, you should understand how adopting an HCM solution could benefit your company. This article will provide an overview of what HCM does, the benefits of HCM, and tips for effectively implementing HCM in your small or medium-sized company.

What HCM Does

HCM solutions enable companies to increase the productivity of their workforces. By using the HCM approach, your company could better attract and retain top talent, respond nimbly to changing conditions, optimize spending, and streamline HR processes.

Core HR functions

HCM incorporates traditional HR functions, and HCM software enables companies to carry out essential administrative tasks efficiently. This frees up the HR staff to spend more time nurturing the talent of your workforce. Also, accurate performance of tasks such as payroll and benefits administration improves the employee experience, which helps with employee retention. Core HR processes include:

  • Payroll processing.
  • Administration of benefits and retirement plans.
  • Onboarding.
  • HR Compliance.
  • Maintenance of employee data.

Talent management

Talent management involves continually developing employees, retaining them by increasing job satisfaction and engagement, and bringing in great new hires. These actions go beyond traditional HR processes by treating employees as company assets.

  • Recruitment. Attract top talent to your company — the people most likely to give high returns on your investment.
  • Training and retraining. Employees who receive up-to-date training on the most needed skills contribute more to their employers and also experience more satisfaction with their careers.
  • Performance management. Increase performance by creating systems for tracking tasks and setting goals. Provide and schedule individualized performance reviews.
  • Compensation benchmarking. Provide competitive compensation with a compensation strategy that uses internal data and external benchmarks.
  • Succession planning. Use sophisticated HCM technology to help identify potential successors and create succession plans.

Workforce management

Another component of the HCM strategy is getting the right employees with the right skills to the right place at the right time.

  • Time and attendance management. Simplify timekeeping, make it easy for employees, and help ensure compliance.
  • Workforce planning. Anticipate and plan for your future needs for employees who will help you meet your business objectives.
  • Scheduling. Use HCM technology to create and compare employee schedules to maximize workforce productivity. Provide employees with self-service scheduling options.
  • Budgeting employee costs. Increase the efficiency of your company’s spending.

Benefits of Human Capital Management

Small and medium-sized businesses benefit from using an HCM approach in many ways. HCM solutions help SMBs get the most out of their workforce, while performing human resource duties more efficiently.

  • A more efficient HR system. Human capital management software can automate manual tasks, provide employee self-service options, and streamline the overall HR operation.
  • A stronger, more capable workforce. Improving recruitment, training, and development brings in better employees, maximizes their effectiveness, and increases their satisfaction so that they will want to stay. Along with the gains those employees help to achieve, you reduce the high costs of employee churn.
  • Avoiding talent gaps. Identify and develop exactly the skills your company needs at any given time.
  • Better return on investment (ROI). When companies invest in their employees, the revenue from increased productivity and savings from decreased turnover can provide a substantial return on the investment.
  • Tighter workforce spending. Make data-driven decisions on how to allocate your company’s workforce spending.

Strategies for Effective Human Capital Management

Let’s examine three common strategies for using HCM to improve your business operations.

Data-driven decision making

Companies usually accumulate a lot of data about their employees. An HCM system puts that data to work by providing valuable analytics. You can use employee records to help predict your workforce needs for the future and make better decisions about how to be prepared.

Data-driven decisions can help your company model the effects of change, anticipate future gaps in your workforce, identify top employees, and predict the performance of both teams and individual employees.

Employee engagement and retention

Employee turnover is expensive. On average, the cost of replacing employees who quit because they feel burned out is 15% to 20% of a company’s payroll budget. You can use HCM to fight burnout by improving employee engagement. Increasing employee engagement starts at the very beginning of the employment process — recruitment and onboarding — and continues throughout the employee lifecycle. HCM can help ensure that these early phases run smoothly and that potential and new employees feel included in the company culture right from the start.

Past the initial stages, HCM can identify ways to reward employees for outstanding work. The system can help set and measure goals and competencies and provide continuous feedback. HCM systems make it easier for employees to communicate with their co-workers and managers, both of which are key aspects of employee engagement and satisfaction. These systems help connect remote and hybrid employees with the in-office workforce and promote a feeling of being included in the company culture.

Technology integration

Software services can help your company take advantage of HCM. If you’re a small or medium-sized business, a software service can help save you time. Instead of trying to run an HCM system in-house, you can rely on the expertise of a third-party HCM provider. That way, you don’t have to use your own internal resources to maintain the system. It will be handled by the HCM provider.

An HCM provider may have the capabilities to integrate the technology with your current workflow. You can use the technology to improve every aspect of employment in your organization, making your HR processes more efficient and accurate and increasing employee engagement and retention.

What Is Human Capital Management? TriNet is the Answer.

HCM solutions help you keep up in an environment that is constantly evolving. However, small and medium-sized companies may find it too expensive and time-consuming to improve human capital management on their own. For these companies, TriNet’s full-service HCM software and service helps provide the solution, combining convenience and support with cutting-edge technology.

When you work with TriNet, you get a whole HR team dedicated to your success. You and your employees will receive the support and guidance you need to reap the benefits of HCM. TriNet’s cutting-edge HCM platform:

  • Gives you the peace of mind of knowing that your HR administrative functions are being handled efficiently.
  • Keeps you updated in HR compliance so you can comply with employment-related rules and requirements.
  • Provides employees with self-service functions that helps with their work experience where employees can access and update their information relating to HR and benefits when they need to.
  • Provides sophisticated data analytics to help management make informed decisions for the company’s future.

To find out just how easy it is for an SMB to gain all the advantages of HCM using TriNet’s comprehensive HR solution, contact us today.

This communication is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance.

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