Strategic Human Capital Management: What is It?

There’s never a dull moment in the HR landscape! A couple of years ago, companies grappled with retaining employees amidst the Great Resignation. Today, HR teams face fresh challenges in the form of economic uncertainty, widening skill gaps and the phenomenon of “quiet quitting”.

In this backdrop, optimizing the workforce is important and this is where strategic human capital management becomes key.

In this blog, we will look at how strategic human capital management and workforce management can enhance workplace efficiency.

What is Strategic Human Capital Management?

Strategic human capital management is a people-centric HR approach that integrates diverse human resource processes seamlessly—from recruitment and onboarding to payroll, benefits, workforce and performance management. Implementing effective HCM strategy can result in streamlined and cost-effective employee management processes.

At the core of any solid HCM strategy lies the recognition of employees as investments. This means meticulously considering all stages of the employee life cycle, from recruitment to retirement. Neglecting any aspect of this cycle undermines the effectiveness of strategic human capital management.

Important Components of Strategic Human Capital Management

In general, an HCM strategy leverages integrated technology and robust HR processes across the following areas:

• Recruiting
• Onboarding
• HR Management
• Benefits Administration
• Performance & Talent Management
• Time & Attendance
• Payroll

Value of Implementing Strategic Human Capital Management

1. Sets your business apart
2. Powers your workforce
3. Integrates disparate practices
4. Reduces costs
5. Maximizes productivity
6. Enhances employee experience
7. Accelerates hiring and onboarding
8. Prioritizes training
9. Enhances visibility

1. Sets Your Business Apart:

In today’s global economy, being unique is the key to business success. One significant factor that distinguishes your organization is how you manage your people, who are the backbone of your business.

2. Powers Your Workforce:

Creating efficient operations and encouraging employee satisfaction are crucial to reducing turnover. Lower turnover rates translate to increased productivity, giving your company the competitive edge it needs to excel.

3. Integrates Disparate Practices:

Strategic Human Capital Management consolidates disparate solutions and processes (such as payroll, time and attendance, recruiting and onboarding) into a unified HCM strategy. While individual systems may yield positive outcomes, they often lack integration which could lead to a lack of coherence in operations. For instance, what is the value of a job application if the data does not easily transfer to your onboarding system upon hiring?

4. Reduces Costs:

Strategic Human Capital Management offers improved information accessibility and decreased administrative expenses.

5. Maximizes Productivity:

By integrating all HR functions, redundancies and duplicate work can be eliminated. For instance, transferring information from a job application to the onboarding system reduces data entry tasks. Similarly, automating time and attendance data input into the payroll system ensures accurate and timely compensation processing.

6. Enhances Employee Experience:

A strong HCM strategy that uses integrated technology does not just organize HR processes, it also enhances the overall employee experience. From job application to payroll enrolment, benefits enrolment, hour logging, leave requests and performance reviews, employees receive a holistic experience.

7. Accelerates Hiring and Onboarding:

Investing in a strategic human capital management plan can lead to a faster, more efficient hiring and onboarding process. This can, in turn, enhance employee engagement. An employee self-service platform with a user-friendly interface empowers employees and boosts satisfaction levels.

8. Prioritizes Training:

Effective training is essential for employee retention. With the right plan and tools, the time required to onboard new hires can be minimized, ensuring faster productivity.

9. Enhances Visibility:

Strategic human capital management can help you gain improved insights into your workforce and business operations. It reveals patterns in employee skills, learning and productivity, and provides insights into the impact of recruiting efforts and strategic objectives.

Link between Strategic Human Capital Management & Workforce Management

It is difficult to talk about a solid HCM strategy without mentioning workforce management. HCM discussions often involve the mention of workforce management (WFM), although they serve slightly different purposes. While HCM covers a broader spectrum of HR and people-related activities, WFM primarily focuses on ensuring both current and future staffing needs are met to maintain smooth business operations.

Within WFM, three key areas are managed:

• Time and labor: Ensuring employee scheduling and staffing requirements are met.
• Absence management: Handling time-off requests and managing employee leave.
• Workforce health and safety: Ensuring workplace compliance and safety standards are upheld.

Although strategic human capital management and WFM are deeply connected, workforce management falls under the umbrella of HCM. Though HCM covers a broader range of HR and people-related processes, it includes workforce management’s time, labor, and absence management processes to achieve common objectives.

Despite their interconnectedness, traditionally, HCM solutions focused solely on the performance, development and compensation of salaried employees, often neglecting workforce management and the challenges faced by organizations with hourly workers. However, neglecting workforce management is a significant oversight, considering it is a fundamental component of any comprehensive HCM strategy for businesses.

5 Key Steps for a Strategic Human Capital Management Plan

Now that we have discussed the significance of strategic human resource management, the next question is how to actually initiate the process.

Here are some essential steps you can follow to create a robust HCM strategy:

1. Identify Company Goals and Capabilities

Begin by identifying your company’s long-term objectives and evaluating its strengths and weaknesses. You will need to answer questions like:

• What are the company’s major goals?
• What are its core strengths and areas of improvement?
• What resources, including financial and human, do we currently possess?
• What skill sets are present in our workforce, and are there any gaps?

Addressing these questions help with a solid foundation to understand your company’s objectives that are essential for strategic human capital management planning.

2. Anticipate Future Needs

With a clear understanding of your company’s goals and capabilities, the next step is to forecast future requirements. This involves predicting the necessary skill sets and number of employees needed for future success, comparing them with your current workforce. You can consider questions like:

• What skills will the company require in the future?
• How many employees with these skills will we need?
• How does this compare to the existing workforce?

By answering these questions, you can identify future skill demands and strategize on developing the required workforce capabilities.

3. Determine Required Resources

Once future needs are identified, determine the resources necessary to achieve your company’s goals. This covers financial, human and physical resources. Questions to be asked can include:

• What financial resources are required to attain company’s objectives?
• What human resources will be needed to support these goals?
• What physical resources are necessary for your goals?

Conducting an audit of both internal and external resources provides insight into available resources and identifies areas that need attention.

4. Implement Your Plan

With goals set, future needs forecasted and resources identified, it is time to execute your strategic human capital management plan. Most companies start by recruiting suitable candidates, followed by training and development initiatives and then performance management. The specifics may vary depending on your company’s unique needs.

Key considerations here include:

• Setting realistic goals and timelines.
• Securing buy-in from upper management.
• Communicating effectively with employees regarding the strategic human capital management plans.
• Being prepared to adjust the plan as per needs.

5. Evaluate and Adapt

After executing your strategic human capital management plan, you will need to regularly assess its effectiveness and make necessary adjustments. Evaluate what is working well and what is not, and be prepared to pivot accordingly. For example, if recruitment efforts do not yield satisfactory results, consider revising your strategy.

By following these steps, your company can effectively implement an HCM strategy and enhance organizational success.

Dive Into Strategic Human Capital Management With Akrivia HCM

Oftentimes, managing an HCM strategy is easier said than done.

For this, you can always connect with professional platforms like Akrivia HCM who recognize the complexities of managing people. At Akrivia HCM, our priority is simplifying your strategic human capital management.

With our services, featuring user-friendly cloud software and robust customer support, we handle everything for you. To know more, schedule a demo today!