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Human Capital Management - A Complete Guide

Human Capital Management - or HCM - is changing the way workforces are managed. This resource page explains the ins and outs of HCM and what it might mean for your organization. Get in touch with us if you have any questions or want to learn more.

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    Introduction

    Financial capital is critical for a healthy business, but it’s not very helpful without your organization’s greatest asset, your human capital. But while we’ve developed sophisticated systems for managing our finances, systems that encompass every transaction from the largest to smallest, most businesses have yet to roll out a similar system for the people they employ.

    Unified systems for human capital management are now finding a home in more and more companies, as cloud-based technology meets a deeper understanding of the needs of growing organizations. These are some of the basics when it comes to understanding exactly what that means.

    What is Human Capital Management?

    Businesses are accustomed to engaging in a wide variety of processes related to their past, present, and potential employees. This includes areas as diverse as recruitment, payroll, managing performance, promotions and raises, time-off requests, references, schedules, benefits, training, severance, and more.

    Because of this broad scope of activities, there are typically multiple systems for tackling various clusters of tasks. A given company might have one system encompassing time and attendance, another for documenting performance issues, a third for tracking compliance with governmental or industry regulations, and a fourth for dealing with new job applicants.

    This fragmentation made a great deal of sense when businesses operated primarily on paper. It makes little sense to keep punch cards in the same file cabinet as emergency medical contact forms. Given today’s technological advancement, though, it’s becoming increasingly clear that integrating all these various processes into a single platform makes more sense.

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    After all, a person who applies, becomes an employee, goes on leave, returns, earns a new credential, gets promoted, drops to part time, and then leaves the company is still the same person throughout, and all of these aspects affect their work as part of your business.

    This is the foundational idea behind human capital management: the idea that the diverse aspects of managing the individuals in your business should work together as a single system. Instead of breaking employees into parts and attempting to manage each one in isolation to the others, it tackles your workforce as a collection of whole people, from applicant to retiree.

    How HCM Benefits HR Departments

    In businesses that have advanced beyond the micro-enterprise stage and have an HR department (even if it’s just one person), human resources employees take on responsibility for a wide swath of the processes that fall under the umbrella of human capital management. This means that implementing this kind of unified system can have a profound impact on how HR departments operate.

    Onboarding and Key Paperwork

    Onboarding new employees is a process that involves a lot of paperwork in a very short period of time. In their very first day, it’s expected that employees will:

    • Verify their authorization to work
    • Set up federal, (and, where applicable) state and local tax withholding
    • Set up their payroll preferences
    • Be briefed on benefits and the processes for signing up and using them
    • Provide demographic information for the EEOC
    • Receive and review information about policies and practices
    • Sign any nondisclosure or non-compete agreements
    • Set up logins and passwords for any secure data or systems
    • Provide emergency contact information and medical needs

    And all this is just the parts of onboarding new employees that HR is often responsible for. It doesn’t even include introductions, tours, or learning about the job itself. Typically, each of these will be handled one task at a time, often through a combination of paper documentation and multiple digital systems, each of which has its own unique front-end quirks and login requirements.

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    Human capital management platforms allow these to take place within a single ecosystem, allowing HR managers to focus on helping new employees tackle the forms themselves, not the system requirements for accessing them.

    Payroll and Taxes

    Payroll takes up a huge amount of time and energy within HR departments. Needless to say, this one area in operating a business where mistakes can have a profound negative impact on employee satisfaction, so it’s critical to have a system that works. A good payroll system needs to be able to:

    • Cut checks for employees who prefer them, while also handling direct deposit
    • Handle overtime, paid time off, and variable pay rates for individual employees
    • Manage tips, commissions, and other pay structures
    • Calculate and manage tax payments across locations
    • Manage pre-tax payments for benefits, charitable contributions, and other purposes
    • Integrate with timekeeping and attendance systems.

    In reality, many payroll systems require a significant amount of input from HR employees in order to make all this complexity run as a functional system. A human capital management platform eliminates integration issues by being designed as a single system from the start. This frees up HR employees to focus on the more human aspects of their work, allowing both people and technology to focus on the aspect of the job they do best.

    Employee Benefits

    From the employee side of things, benefits might as well be magic. They sign up, money moves around, and insurance, retirement plans, vacation time, and employee assistance plans just … appear. On the human resources side of things, this magic looks like a lot of hard work. It starts with printing or purchasing information on various benefits.

    Then comes the annual Hounding Of The Procrastinators bonanza during the open enrollment period. There’s the fielding of the inevitable “But I thought I was eligible for …” questions. And then, for each new hire and employee with a qualifying event, you get to start the process over again, on an individual basis.

    When working with a human capital management system, this process becomes greatly simplified. Enrollment reminders (and re-reminders, and RE-re-reminders) can be programmed in automatically. Details related to benefits and their associated costs are updated as they evolve from year to year.

    Employees can manage their own changes (within the limits you set), so that they’re not constantly coming to HR to tweak this or that. While so many of these feel like minor odds and ends at times, they add up. No longer having to tackle a lot of this manually can be a huge relief for an overstretched department.

    Compliance Tracking

    No matter what industry you’re in, there’s something you need to be tracking for compliance with laws, licensure, accreditation, or other requirements. Employee continuing education? Sufficient fire drills? Health department inspections? Sufficient staff members certified in XYZ? Teacher-to-child or direct care staff-to-patient ratios?

    Are you meeting your environmental impact goals for the grant you received? When were the fire extinguishers last inspected? Whose background checks needs to be renewed?

    These can feel like entirely separate issues at times. After all, what does collecting Equal Employment Opportunity data have to do with providing sufficiently heat-resistant gloves for welders? However, they all play a key role in one major objective: keeping you in business.

    The ability to track all of these in one place (and be notified when one requires your attention) lets you look at the overall needs of the organization when it comes to compliance. This way you never find yourself focusing so hard on maintaining your license to operate that you end up floored when your insurance company decides it can’t cover your warehouse anymore.

    How HCM Benefits Managers

    While HR tackles a lot of the overarching issues regarding employees as a whole, individual people are most often seen by their own direct managers. Human capital management systems also streamline and support this side of the management process.

    Recruitment and Hiring

    Yes, HR is often a key part of the recruitment and hiring process, in addition to hiring managers. In a well-functioning organization, both work hand in hand to develop an effective job description and posting, narrow down the candidates, organize screenings, assessments, and interviews, and negotiate salaries and benefits.

    But even in these high-functioning environments, disparate systems aren’t doing anyone favors. A hiring manager may express interest to a candidate who approaches them through their network, only to find that HR already rejected them due to the lack of a desired credential. A candidate might have an email answered by two different parties, sometimes with two different answers.

    A better system allows hiring managers and HR professionals to partner using one platform for the entire hiring process, from the very first posting to the new hire’s first day on the job.

    The best recruitment and hiring programs should be able to:

    • Integrate into your website and accommodate your branding
    • Be intuitive and straightforward to use for both the people who are engaged in hiring and for potential candidates
    • Track all communication with clients, especially offers and rejections
    • Track assessment results
    • Track interview notes and rubrics
    • Include sophisticated and flexible search capabilities
    • Allow for attached documents in a variety of formats such as cover letters, resumes, portfolios, certifications, etc.
    • Store applicant data securely
    • Integrate seamlessly with an employee’s file once hired

    Too often, recruitment software is limited in scope, meaning key information that goes into making an offer or rejection is lost with every new position. With a single platform that accommodates not only all stages of the hiring process but also the process of managing the hired employee for the length of their tenure at your business, this information is retained over the long term, providing you with the data you need to analyze and improve your hiring process with each hire. (What’s more, a good HCM platform will do some of this analysis for you, providing new insights for you to reflect on.)

    Scheduling, Time, and Attendance

    Those who manage teams of people often find themselves spending an undue amount of time focused on scheduling, time, and attendance. This includes creating optimal schedules for hourly employees, (particularly those with variable shifts), managing overtime, checking for accidental errors and deliberate payroll fraud, and dealing with habitual tardiness or excessive absences.

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    It’s a lot of work, especially for someone who was probably put in a management position because they were good in their area of expertise, not scrolling through spreadsheets of clock in-clock out data.

    Human capital management systems can cut hours from the time managers spend on these areas. A good one will:

    • Integrate with your time-tracking system tech, including mobile apps, biometric systems, badges, geolocation technology, or traditional punch systems
    • Adapts to your labor allocation needs
    • Can scale with your business as you add employees and locations
    • Allow for limits on certain schedules
    • Immediately alert managers of any discrepancies or concerns regarding time and attendance
    • Create user-friendly reports without the need for in-depth programming or database knowledge

    Of course, these are the qualities of a good timekeeping system in general, so why try human capital management? Imagine being able to easily link attendance habits with employee reviews, check proposed schedule changes against compliance requirements, or check for available paid time off without having to log into a completely different program? That’s the benefit of HCM.

    Performance

    Managing performance is at the heart of what managers do. They track, observe, and analyze results. They provide positive and negative feedback. They praise when deserved and discipline when needed. They set goals and deadlines and hold people accountable.

    Every manager eventually comes up with a system for organizing all of this information. (Or at least, every good manager does.) What human capital management platforms do is create an environment where all this information can be kept in one place, where it can be used more effectively. Performance monitoring includes things like

    • Storing past and present performance reviews and goals
    • Tracking disciplinary measures over time
    • Managing performance improvement plans and providing alerts when deadlines to meet performance goals are near
    • Tracking awards, bonuses, and specific incidences of praise
    • Storing notes and personal assessments
    • Stores templates and rubrics for meetings, assessments, and reviews
    • Maintains adequate performance documentation to support a decision to promote or terminate, as needed.

    Dealing with performance issues can be one of the most challenging aspects of the job for new managers (and even experienced ones), so adding a degree of cohesion to the process ensures that managers and teams are better equipped to do their jobs overall.

    Training and Development

    Developing staff members and helping them expand their knowledge and skills is a key part of managing. Unfortunately, this is often a haphazard process, with individual employees often needing to take initiative to prompt their supervisors about their desire to grow, track down training opportunities, or even remind them of important deadlines for staying in compliance with licensure or accreditation requirements.

    Human capital management platforms allow managers to go about training in a more systematic and comprehensive fashion. Examples include:

    • Tracks continuing education requirements and deadlines
    • Tracks completions, certifications, test scores, and evaluations
    • Tracks costs for reimbursement
    • Keeps track of approved classes, instructors, or providers
    • Keeps track of classes, instructors, or providers that proved not to be acceptable and should not be used again
    • Allows managers to share and edit training schedules
    • Allows employees or managers to search trainings by category
    • Allows managers to assign trainings to a given employee or group of employees
    • Allows employees to request trainings quickly and easily

    When everyone is on the same page when it comes to training, top performers are able to expand their horizons while those who are new or struggling can get a boost when they need it.

    How HCM Benefits Employees

    The vast majority of the people in your organization are neither managers nor HR professionals. They’re your boots-on-the-ground employees. They’re responsible primarily for their own work and collaborating effectively with their peers.

    Employees range from custodians to engineers to clerks to teachers. Their jobs are as varied as the businesses in which they work. But all employees, in any role or industry, benefit when they are able to access important information and communicate efficiently within a system that is intuitive and easy to use.

    Manage Personal Information

    Workplaces need to keep a surprisingly large amount of personal information about their employees. When these records can only be updated by a handful of people in HR, it can lead to bottlenecks and out of date documentations. With a human capital management system, employees are able to manage their own information, including

    • Name, address, phone number, and other contact information
    • Marital status and emergency contact information
    • Critical medical information, such as allergies
    • Visa or citizenship status
    • Federal, state, and local tax withholding
    • Certifications, licenses, degrees, and other credentials

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    Tax season and open enrollment aren’t the only times employees need to access this kind of information. A landlord or mortgage company might want to see proof of steady income. An employee who is considering fertility treatment would naturally check on the details of their health insurance coverage. An employee who plans to ask for a raise might look at their pay rate history in order to help make their case.

    One benefit of a human capital management system makes sure all this information is easily accessible to each employee.

    Find Key Company Information

    Of course, not all information is personal. Sometimes an employee wants to know

    • Contact information for a particular department
    • A piece of information in the employee handbook
    • A form or template used for a particular job
    • A calendar of events and trainings
    • Important company announcements

    This can all be put on a company’s intranet, if it has one, but keeping it in the same location as one’s personal information makes it more convenient to access both.

    Submit Requests and Communications

    Asking for permission for one or another thing can be time-consuming and complex, especially since each type of request may require its own unique method of communication. Within a human capital management platform, requests for time off, disability accommodations, mentorship, trainings, or a change in shift can all be tackled in one place.

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    It makes sense to take pride in the systems you’ve developed up to this point. After all, it takes creativity and ingenuity to patch together a variety of technology, processes, and procedures, and develop something that works for you. But as you grow, it can make sense to set that aside in favor of the right system for where you are now, now where you were a year ago.
    Ready to get systematic in with your company’s future? Get in touch, and our HCM experts will walk you through what that might look like for you.

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