The Definition of Human Capital Management
Human Capital Management (HCM) transforms the traditional administrative functions of human resources (HR) departments—recruiting, training, payroll, compensation, and performance management—into opportunities to drive engagement, productivity, and business value. HCM considers the workforce as more than just a cost of doing business; it is a core business asset whose value can be maximized through strategic investment and management—just like any other asset.
The term HCM can refer both to a business strategy and a set of modern IT applications and other technologies that are used to implement that strategy. Though sometimes used interchangeably, the terms related HR, HRMS, and HRIS do have subtle distinctions:
- Human resources (HR): Refers to a set of traditional workforce management functions that includes recruiting, hiring, training, compensation, benefits administration, and performance management. HCM encompasses the same processes, but approaches them as strategic rather tactical or administrative.
- Human resources management system (HRMS): Refers to the set of applications and other technologies that support and automate HR processes throughout the employee lifecycle. While the terms HCM and HRMS are often used synonymously, HCM puts particular emphasis on the strategic approach to workforce management.
- Human resources information system (HRIS): Originally, the term HRIS referred to a set of HR applications built atop an HR database. It has been largely replaced by the term HRMS. In practice, HRMS and HRIS are virtually interchangeable terms.
The Key Benefits of HCM
With a robust, modern HCM solution, you can:
Attract and retain a differentiated workforce
- Quickly identify and recruit the right candidates.
- Retain talent with the right mix of compensation, benefits, and personal and professional growth
- Plan for succession in leadership and other key roles
- Identify talent for specific projects and roles
Optimize workforce spending
- Plan compensation locally and globally
- Manage time and labor, scheduling, and related expenses
- Manage expenses for specific projects and other costs
- Build a pay-for-performance culture
Respond with agility to change
- Anticipate workforce trends with powerful insights
- Adjust the workforce quickly to changing conditions
- Accelerate HR processes with self-service
- Expand operations globally
Streamline HR operations
- Leverage analytics for more intelligent workforce decisions
- Automate manual processes, from payroll to legal and tax reporting
- Lower costs while increasing employee satisfaction with consumer-grade self-service
The Functional Components of HCM
HCM transcends the nitty-gritty, daily administrative of HR departments by improving performance in four strategic areas:
Ensure that you have the right people for the right roles across the enterprise. Empower them with training and other resources so they can flourish.
- Talent acquisition: Sourcing, recruiting, and onboarding talent
- Performance management: Goals management and rich review and reporting
- Career and succession management: Talent profiling, development, and review. Proactive planning for future needs in leadership and other critical roles
- Learning: Content development and management, learning personalization, and targeted training
Attract and retain the right talent and drive value through a differentiated workforce. Optimize salary structures across the enterprise.
- Compensation: Analysis, modeling, budgeting and administration of local and global compensation plans.
- Total compensation: Deep insight into all compensation activity to executives, managers, and employees.
- Pay-for-performance: Leverage performance ratings, goal attainment, and other metrics into compensation calculations.
Control labor costs, reduce manual processes, and simplify compliance for all of your employees, globally.
- Time and labor: Accurate capture of time across integrated devices, plus tools to manage complex schedules and budgets to ensure timely compensation, while managing total labor costs.
- Schedules and availability: Manage events that impact workforce availability and budgets. Define absence plans and proactively monitor trends.
- Project portfolio management: Identify and place the best-suited people to specific projects. Manage all aspects of project execution. Enable social-driven collaboration. Capture and manage all project-related costs.
- Expense management: Define, refine, and share expense policies. Control spend and prevent fraud. Manage travel expenses and provide mobile, integrated expense processes for employees.
Attract top talent and improve productivity and employee engagement by helping employees align their work and personal lives.
- Reputation management: Measure employees’ influence inside and outside the organization to improve their personal brand. Target mentor recommendations.
- Wellness: Organize and track wellness and fitness activities.
- Volunteering: Plan and execute volunteer programs, provide personalized opportunities, and use these opportunities to develop professional skills.
HCM—A Brief History
The term “human capital” was first used in the 1950s and 60s as computing began to accelerate the automation that had begun in the industrial age. Economists and business people began to see employees not as replaceable units completing routine tasks, but as knowledge workers with specific skills and talents that could fuel business growth.
Not surprisingly, the term returned to prominence with the rise of the internet in the late 1990s. New technologies were rapidly automating a whole new set of business processes. While the internet changed the how employers and managers worked and collaborated. All of this change meant that workforce leaders had to transform how they went about attracting, retaining, and engaging talent in an evolving set of job roles.
This decade could be called The Golden Age of HCM. New digital technologies are enabling HR leaders to provide a more engaging and personalized employee experience at scale. At the same time, emerging technologies, such as data automation, predictive analytics, and artificial intelligence (AI), have added new innovations for understanding, managing, incenting, and engaging the workforce. And HR leaders have a whole new set of tools that can maximize the value of their workforce, from intelligent, social-driven recruiting and personalized retention practices to highly optimized compensation.
HCM in the Cloud
The cloud and software-as-a-service (SaaS) delivery models are quickly becoming the new normal for HCM technologies. The cloud approach accelerates deployment, turns variable capital expenses into fixed and transparent operating expenses, lowers IT costs, and drives agility by speeding and simplify upgrade paths.
Although there are many SaaS HCM providers, they are not all alike. In evaluating vendors and solutions, businesses need to ask key questions as they consider not just the HCM capabilities they want today, but the ones they will need in the future:
- Will the provider be around for the long term?
- Does the provider invest in innovation?
- Will the provider be able to secure highly sensitive employee data?
- Can the provider keep data in country-specific locations for regulatory reasons?
- Can you decide on your own upgrade path and timing?
- Will you be able to integrate HR processes with ERP, CRM, and other business processes, quickly and easily?
The Future of HCM
Clearly, technology is disrupting the world of work as we know it. New technologies are changing business strategies, eliminating job roles, and creating new work opportunities. But while traditional hierarchical structures are changing, the workforce is transforming as well—into flatter, more agile networks of teams, becoming more mobile, global, and diverse.
HCM too, is evolving rapidly. Expect to see accelerating adoption of already-familiar technologies, such as SaaS and mobile, as well as leading-edge technologies, from AI to advanced analytics.
- Mobile: Increases engagement and productivity by empowering HR, workers, and managers with consumer-grade, self-service mobile apps
- Social: Improves productivity for everything from analytics to recruiting and reputation management
- Chatbots: Serves constituents faster and more efficiently
- AI and advanced analytics: Automates key HCM functions, such as role recommendations, learning suggestions, and employee retention predictions
Transform Your HCM with Oracle Modern Best Practices
For a global, comprehensive insight into HCM strategy, emerging technologies, and best practices, check out Oracle Modern Best Practices for HR and Talent Management, which covers:
- Recruit to onboard
- Benefits to payroll
- Payroll to payment
- Time collection to payroll
- Goal setting to performance
- Career planning to development
- Talent review to succession
- Absence planning to continuity
- Employee insight to work-life alignment
- Employee separation to workforce analysis