Table of contents
- Introduction to human capital
- What is human capital management (HCM)?
- Human capital management vs. human resource management (HRM)
- Current and future trends in human capital management (HCM)
- The way forward with HCM
Introduction to human capital
America’s rise to one of the wealthiest nations in the world was partly due to the accumulation of knowledge and workers’ skills over the past two centuries. Human capital refers to the productive capabilities of human beings, which can be enhanced by investing in education, on-the-job training, and health.
Just as nations have realized the power of investing in their people over the last decade, organizations have realized that developing human capital is crucial to their growth, productivity, and efficiency. As a result, human capital services have emerged as the key to both wealth creation and gaining a sustainable competitive advantage.
What is human capital management (HCM)?
Human capital management (HCM) is a defined set of practices in areas such as applicant tracking, workforce analytics, budgeting, performance management, onboarding, and more. In short, HCM manages an organization’s workforce to sustain effective decision-making.
Human capital management vs human resource management (HRM)
The key difference between HRM and HCM is the objective of each approach. For example, in the employee training process, HCM involves identifying the competitive skills employees need to bring value to the organization, whereas HRM involves identifying proper training techniques, tracking and measuring the success of training methodologies, and assessing what employees learn through their job performance.
Recruiting and hiring is another area in which HRM and HCM complement each other but have divergent objectives. HCM involves identifying employees with the necessary skills to bring value to the organization. Once these employees are identified, HRM’s role is to create and manage a streamlined recruiting and onboarding process that enables the organization to fill vacancies with the best people.
Current and future trends in human capital management (HCM)
Today, having an accurate idea of HR trends is essential when it comes to keeping your company up to date and managing the HR sector more proactively. Let’s take a closer look at trends in human capital management that are making news worldwide.
Newer organizational structures
Newer organizational structures are emerging in response to business requirements. For instance, agile delivery methods require a different organizational structure than traditional delivery structures. Such design changes have far-reaching effects on systems such as compensation, career progression, and performance management.
Furthermore, future organizations will increasingly work with virtual teams and efficient structures, thereby changing the concept of an organization as a physical space. Organizations and HCM experts need to think about who now constitutes human capital and how to optimally engage and utilize this capital.
Meeting the specific requirements of multiple generations will redefine how traditional human capital management (HCM) systems are viewed. For example, Millennials place greater emphasis on challenging work compared to growth opportunities, whereas previous generations place a higher premium on growth. There will be a growing need to create a personalized employee experience customized for each individual in the workforce.
With the war for talent on the rise, helping employees thrive and keeping them updated on the latest trends and skills is essential. Otherwise, the effort spent trying to optimize employee performance and increase productivity will not be sufficiently targeted, and organizations will end up wasting a lot of resources on developing training programs that could be more efficient.
Some barriers to creating great training programs include the fact that some employees may not have time to participate while others may feel such programs need to be more relevant to their day-to-day work. From conducting a skills gap analysis and choosing the right learning management system to conducting assessments and measuring their impact on performance, every step must be targeted accurately in human capital management.
Check out our blog for tips on creating successful learning and development programs that truly impact employee performance.
Since top talent is limited, leaders need to understand their employees’ desire for work–life balance. Some workers are juggling aging parents and young children. Younger workers are not willing to sacrifice their quality of life for pay. Future trends require careful human capital management so workers feel valued and rewarded and can maintain a satisfactory work–life balance.
Johnson & Johnson, which promotes a culture of well-being, offers employees a free course called Energy for Performance where employees learn about activities that are proven to boost energy. It also helps employees identify the most significant components of their lives.
Identifying and acquiring the right talent is a constant priority for many businesses, particularly those feeling the effects of growing skills shortages. Devising an effective HCM strategy can help to improve recruitment and talent acquisition in various ways, such as by automatically filtering applications, measuring and analyzing candidate engagement, implementing an onboarding process, and so on.
Identify potential skills deficiencies in your current workforce
The skills gap analysis template helps you take stock of the skills available in your organization and those needed in the future so you can make efficient decisions on training, recruitment, and workforce planning.
Senior leadership is only one of the major determinants of organizational effectiveness and an essential consideration in HCM. The quality of an organization’s CEO and the quality of those who hold senior executive positions clearly affect the organization’s performance as well as employees’ motivation and satisfaction.
Modern leaders can provide the most important daily motivation and sense of direction to members of an organization. In addition, these leaders should possess technical and organizational knowledge regarding strategy implementation, change management, and work processes that shape the workplace culture.
To survive in a dynamic environment and achieve a competitive advantage, human capital management is of immense priority and thus has become very important. Organizations are concerned with implementing ways to manage human capital because only an organization’s workforce can make the organization different from its competitors. It is also hard for competitors to duplicate a company’s workforce.
Nowadays, organizations need help to improve employees’ performance by effectively implementing their human resource practices. Human capital management will lead organizations towards better decision-making, effective communication, and generating creative and innovative ideas.
The way forward with HCM
A strategic approach to human capital management involves obtaining answers to the questions below:
- What are the key performance drivers that will create value in the future?
- What are the skill sets currently available in the workforce?
- What skills are needed in the future to meet organizational goals?
- How can we overcome the challenge of attracting, developing, and retaining talents?
- How can we develop a culture of continuous learning and a learning environment in the organization?
- How can we effectively capture, record, and use available knowledge?
HR leaders can use valuable data to answer these questions and predict employee journeys. HRForecast provides HCM solutions with market intelligence, workforce management, learning journeys, smart hiring processes, and other HR technologies to drive your organization towards becoming a transparent, inclusive, and agile business. Contact our experts for a consultation.
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