Human Capital Management: Benefits, Functions & Core Aspects

Human capital management (HCM) converts human resources (HR) departments' typical administrative functions—recruiting, training, payroll, compensation, and performance monitoring—into opportunities to increase engagement, productivity, and business value. 

 

Human Capital Management views the workforce as a basic company asset whose value can be maximized via smart investment and management, just like any other asset. It refers to the process of attracting talent as well as supporting and encouraging individuals to realize their maximum potential. 

 

HCM may assist your firm in improving employee performance and retention. In this post, we will explain what human capital management is, what functions it fulfills, and what advantages it provides.

 

What is Human Capital Management? 

 

Human capital management (HCM) refers to the procedures and instruments used to attract, recruit, train, develop, manage, and retain personnel in order to fulfill company objectives. 

 

Organizations that rely on their people to achieve their goals devote resources to developing the essential abilities that their employees require to generate outcomes. Human capital management assists in identifying gaps in employee competencies and directing recruiting efforts toward filling such gaps.

 

Using HCM techniques may aid in the creation of a strong corporate culture that encourages employee growth and dedication to business goals. Employees have greater influence over their careers and are encouraged to commit their skills and talents to the firm in the long run.

 

Human capital management is the activity of attracting, recruiting, training, developing, and retaining the best personnel in order to meet short- and long-term goals. 

 

The method enables businesses to invest in their personnel in order for them to contribute at the maximum level to the attainment of corporate objectives. Employees are viewed as precious resources that must be used to their full potential via human capital management.

 

Organizations that rely on their workers to achieve the majority of their goals devote resources to growing and developing the key skills and competences that their employees require to produce outcomes. 

 

Human capital management assists them in identifying gaps in their competencies and focusing recruitment efforts on filling such gaps. Employees will be more satisfied since they will be working in roles that allow them to exploit their abilities. Human capital management produces a devoted workforce that helps the firm achieve its goals.

 

Human Capital Management is the practice of attracting, recruiting, training, developing, and retaining the best employees in order to achieve short- and long-term goals. 

 

The system enables businesses to invest in their employees in order for them to contribute at the highest level to the achievement of business objectives. Employees are viewed as valuable resources that must be used to their full potential by human capital management.

 

Also Read | Guide to Human Resource Development 

 

 

Benefits of Human Capital Management

 

The most significant advantage of human capital management is that it enables organizations to maximize the value of their employees. It simplifies human resource tasks and provides several other advantages. Here are some of the advantages  of human capital management:

 

1. Improve Human Resource Management

 

The primary benefit of human capital management is that it provides a method for managing a company's human resources. It develops an overall system for the human resources department to use in delivering the best talents and training them to achieve organizational goals.

 

2. Improve the Hiring Process

 

Human capital management that is effective makes it easier to attract the best candidates to your organization. It provides hiring managers with a database of candidates who have the most relevant job-specific skills and experiences. 

 

Interviewers and the company's public relations team can use human capital management to position the organization as an ideal employer, attracting candidates who can deliver results. This system also improves the onboarding process and makes it easier for new candidates to integrate into the organization.

 

3. Determine Capability Gaps

 

Human capital management plays a critical role in identifying workforce capability gaps. This allows the human resources department to adjust the recruitment criteria in order to fill positions that will improve the organization's ability to achieve its goals.

 

4. Improve Workplace Communication

 

Indeed, excellent human capital management allows for a greater flow of data and information throughout the organization.

 

The organization must be willing to invest in instances that allow for the detection of communication failures such as noise, the identification of which professionals have the most difficulty communicating, and the implementation of strategies to help them develop this weakness. As a result, much more effective communication can be developed.

 

5. Improve Employee Satisfaction

 

You'll need to combine HCM technology with your HR processes to increase employee engagement and job satisfaction if you want to foster a culture of happy and productive employees.

 

It is possible to increase people's satisfaction by carrying out actions that promote the development of human capital, primarily because they foster a sense of belonging to a group and importance in achieving its goals.

 

Also Read | Introduction to Workforce Analytics

 

Functions of Human Capital Management

 

Human capital management's primary function is to increase the value of people's resources so that they can contribute meaningfully to the organization. The following are functions of human capital management in a business:

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Functions of Human Capital Management

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1. Recruit Talent

 

Attracting and hiring talent to help the organization achieve its goals is one of the most important functions of human capital management. It gives the human resources department all the tools it needs to position the organization as an ideal workplace for the best candidates and make the recruitment process run smoothly.

 

2. Orientation

 

Human capital management necessitates the effective and efficient onboarding of new employees. It introduces them to the company culture, job requirements, and expectations, as well as creating an enabling environment that assists them in fitting into their roles.

 

3. Employee Development and Training

 

Another function of human capital management is to provide adequate training to employees so that they can deliver the best results for the organization. 

 

It fosters an environment that encourages growth and development in order to help people acquire new skills and capabilities that will enable them to deliver better results and advance their careers.

 

4. Retention of Employees

 

Human capital management aims to increase employee job satisfaction by allowing them to contribute to organizational goals by using their skills and knowledge. This creates a sense of belonging while also making employees feel valued and committed to their employers.

 

5. Performance Evaluation and Feedback

 

Human capital management develops multiple performance measurement systems in order to improve productivity and efficiency. 

 

This practice, through a variety of employee reviews and surveys, can assist management in identifying gaps in training, resources, job satisfaction, and other factors that can affect workforce effectiveness. The company can then use this information to provide feedback to help all parties to improve for better results.

 

6. Access to Data is Provided

 

Human capital management provides a repository of actionable insights that can assist management in adding more value to their employees. Data from performance appraisals, employee benefit claims, skills, turnover rate, and other vital statistics can assist the organization in adjusting its strategies and practices to improve the work environment and achieve goals.

 

Also Read | Guide to Workflow Management

 

Core Aspects of Human Capital Management 

 

Human Capital Management encompasses a broad range of talent acquisition and management processes that occur throughout the employee life cycle. To gain a better understanding, divide the entire spectrum into three broad aspects of Human Capital Management - 

 

• Talent Acquisition (TA),

 

• Talent Management, 

 

• Talent Optimization

 

and dive deep into the nuances within each of these categories. 

 

1. Talent Acquisition

 

It is always best to begin at the beginning of the employee life cycle. To be more specific, it begins with Talent Gap Analysis before the TA processes. 

 

Predictive workforce planning tools, such as SAP HR Analytics and Oracle HCM Cloud, use a holistic analysis of current talent distribution, immediate talent requirements, and business strategies to map future requirements.

 

Solutions such as SuccessFactors, SilkRoad Life Suite, Taleo (Oracle talent cloud), ClearCompany HRM, and TribeHR provide tools for locating and acquiring the right talent. In today's impatient and volatile environment, finding the right match is as difficult as it is necessary. 

 

A good ATS, for example, not only makes the smart recruiter's job easier, but it also improves the candidate experience. Because recruitment is the first point of contact between an organization and a prospective employee, the system's management is critical.

 

2. Management of Talent

 

The nature of talent that modern organizations must manage has changed more in the last decade than it had in the previous 30 years. Work is no longer a location, but rather a function, with teams spread across continents, freelancers pitching in, and increasingly flexible work hours. 

 

Human Capital Management systems must be aware of and conscious of these new changes to the work environment. Keeping this in mind, the following are the essential features of a talent management HCM system:

 

• Attendance and timing

 

With an increase in remote workers, freelancers, and globally dispersed teams, it is critical to track time and attendance while also meeting security requirements.

 

TimeAttend and CeiPal Workforce are two tools that make it easier to track and manage on-the-job timings, leave applications, and security requirements. Furthermore, HCM tools enable self-service by allowing employees to manage their own data, resulting in increased transparency and engagement.

 

• Payroll

 

While the emphasis on non-monetary aspects of work has grown, compensation and benefits will always be a key motivator. No matter how hard we try to eliminate the transactional nature of jobs, the paycheck, while not the only thing that matters, certainly matters a lot. 

 

Payroll management has been done using Human Capital Management tools for many years because it is one of the easiest things to automate.

 

• Management of Performance

 

HCM systems encourage and facilitate improved communication. These mechanisms enable anytime-anywhere access, aid in goal planning, align individuals and teams on relevant business objectives, and enable 360-degree task tracking. 

 

Organizations can boost productivity in more employee-friendly ways by using tools such as Performly, AssessTEAM, PerformancePro, and BirdDogHR.

 

3. Talent Optimization

 

Finding the right talent is only the first step in the journey. There can be no room for stagnation on that journey. Without losing sight of business goals and objectives, organizations must constantly strive to create avenues for talent optimization - for individual and collective growth. You must prepare your employees for the future. Here are four ways that the right HCM can help:

 

• Career-pathing
• Mapping Competencies
• Planning for Succession
• Development and learning

 

Also Read | What is HR Analytics?

 

Organizations can use a tailored HCM solution to train their employees not only for immediate skill requirements, but also for future skill requirements. 

 

Coursera, for example, uses AI to enable skill benchmarking (Artificial Intelligence). Organizational leaders can make the right career-pathing decisions in advance with efficient cloud-backed, data-driven HCM systems, providing both the organization and the individual with a map to follow.

 

It can be concluded that the goal of HCM is to optimize and maximize an organization's human capital's economic, or business, value in order to gain a competitive advantage. Effective human capital management enables the organization to pursue human capital initiatives with success.