Understanding the Basics: What Is Human Capital Management Software?
In this blog post, we discuss human capital management and its value to organisations. We also answer common questions about HCM, and explore how technology improves HCM and business performance.
This story, written by Workday Staff Writers, originally appeared in English on the Workday blog. We thought our local readers would also find it interesting.
This blog is part of a series explaining the technologies that help companies manage their people and money.
Profound shifts are happening in the world of work. How, when and where people work is constantly in flux.
Today’s workforce encompasses five generations, a range with different workplace needs and expectations. The workforce is also more nimble than ever before with salaried, hourly, contingent and contract workers. In the digital economy, skills are the new currency, and the value of scarce skills is on the rise.
At the same time, people have broader expectations of work. They want more than just a pay cheque. This new world of work, this new workforce, and this new social contract between work and worker requires new ways of managing human capital.
In this blog post, we’ll discuss human capital management and its value to organisations. We’ll also answer common questions about HCM and explore how technology improves HCM and business performance, and helps drive organisational agility.
What is human capital management (HCM)?
At its most basic level, human capital management (HCM) is the practice of managing, recruiting and developing a workforce, and is overseen by an organisation’s human resources (HR) department. Yet there’s much more to HCM that involves not just direction from HR, but engagement from people managers across an organisation: workforce planning, providing learning opportunities, and building a diverse and inclusive culture, to name a few. Because a happy and engaged workforce is so critical to a company’s success, and helps attract more great talent, smart businesses view HCM as a highly strategic practice.
Years ago, HCM was dominated by a mindset that personnel were to be “managed.” Today, leading-edge companies see stellar HCM as something that enables people to be their best, most productive, and most engaged selves. In a people-first culture, an HCM mindset also views employees as the most important of all company assets. That’s true for good reason. Research shows that better, more prepared and more diverse workplaces deliver superior results. To get there, good human capital management practices are key.
Leading-edge companies see stellar HCM as something that enables people to be their best, most productive and most engaged selves.
Why is human capital management important to success?
Human capital management is important because people are the heart of any company, the source of its ability to innovate and compete. An effective HCM approach allows businesses to hire the best talent possible, maximise their potential and further develop them for greater success. The executive leadership of forward thinking organisations, including the CEO, CFO, and COO, view human resource leaders (such as the chief human resources officer, or CHRO) as strategic partners, and expect them to help advance corporate objectives through strong leadership.
In summary, human capital management is important for:
- Recruiting, hiring, and retaining the right talent.
- Onboarding talent to the organisation.
- Creating an atmosphere that’s inclusive, diverse and provides meaningful work.
- Enabling career choices through personalised learning experiences, mentorship opportunities and career path visibility.
- Enabling employees to perform to their highest potential.
- Fostering equitable workplaces.
- Safeguarding compliance with regulations and laws.
- Paying your workforce.
Human capital management software supports all aspects of the HCM function and eliminates manual processes. Such software may bring talent planning, management and analytics together in a single system so companies can help people reach their full potential now and into the future. The best HCM software makes it possible for a company to manage HCM processes effectively and support its workforce in faster, smarter and more agile ways than it ever could before.
At Workday, human capital management software is an all-in-one solution. Instead of having separate applications for talent management, workforce analytics, and so on, human capital management software integrates those functions into one platform. What’s more, HCM software can help an organisation plan future staffing needs by sharing information with other enterprise applications, such as payroll or financial management software. HCM software may be sold stand-alone or as part of a larger enterprise solution.
How does an HCM system enable employee success?
Today, a shift in the fundamental nature of work, new technology and the needs of new generations are changing how work gets done, employees engage and organisations operate. As a result, companies are reimagining performance management to focus on the future rather than past contributions.
Workday's cloud-based HCM solution has been designed to cope with this changing world, enabling employee performance and success in a number of ways, including:
- Contribution: By adding goals into an HCM system, employees can better understand their current objectives and expectations, and easily track and highlight their achievements in the system.
- Capabilities: Information collected by HCM systems like Workday enables employees to understand their strengths and growth areas based on feedback from managers and peers. Taking this one step further, learning applications (like Workday Learning) can recommend relevant content to help grow certain skills or prepare them for the next role.
- Career: The No. 1 reason people quit their jobs is the inability to learn and grow, according to the 2019 Deloitte Global Human Capital Trends report. To help employees think about next moves or how to grow careers, data within an HCM system like Workday can show the job moves of others who have held similar roles. Employees see how peers and mentors grew and moved organically within the company so they can understand possible career paths and live an agile, always-learning work life.
- Connections: Deepening relationships with peers is critical to increasing employee engagement and delivering business results. Through an HCM system like Workday, employees can build out their own internal networks by connecting with peers, as well as find mentors with the specific skills and experience, to develop or further their careers and improve their understanding of the business.
- Compensation: Employees want to be fairly rewarded. The compensation functionality within HCM systems like Workday enables managers to gain insight into performance and make comparisons across the team to ensure equitable compensation.
A shift in the nature of work, new technology, and the needs of new generations are changing how work gets done.
What are some of the key priorities for functions of human capital management?
In today’s workplace, among the key priorities for human capital management include:
- Talent acquisition. Human capital management plays an important role in the recruitment process. It ensures that human resource professionals hire the right people for the right job.
- Mining for scarce skills. Many companies are in the midst of digital transformation. This means they need new skills—and, given our fast changing world, they need to find people that have them, or have a desire to reskill or upskill, very quickly. For example, a machine learning-powered “skills ontology” like Workday Skills Cloud helps companies cleanse, understand and relate job skills data. The functionality enables organisations to gain a greater understanding of what skills they have, identify talent gaps and forecast and plan for skills needed today and in the future.
- Enabling talent development. Change is the constant that businesses must prepare for, and the skills and jobs that are valuable today may not be the same in a few years’ time. Within the HR department itself, chief human resources officers rank competence with using new tools and technology, and cognitive ability to cope with constant change, as the skills of most benefit to their function in the next five years. Across organisations, a personalised employee experience, including in terms of training and learning, is now expected. For workers to engage and grow with an organisation, they need visibility into work that matches their skills, interests and job histories. HCM systems can enable access to information that helps employees plot their career trajectories, connect with others who have gone before them, and identify openings and potential training opportunities. The organisations that will thrive are preparing now to enable their employees to develop new skills and extend competencies.
- Uncovering skills gaps. By leveraging HCM systems with embedded machine learning, such as Workday, companies can mine data sets, including performance reviews and job histories, to create snapshots of key strengths and missing skills or experience across their organisation. With insights into skills gaps, companies can intervene in a timely manner with targeted training programs and personalised development plans to rapidly up-skill their workforce.
- Enabling better decisions. Companies need access to the right data at the right time. Also, given growth in the amount of available data, companies need assistance making sense of the data. Powered by machine learning and AI, augmented analytics searches through millions of data points generated by a business, looking for patterns and trends. From those patterns, companies can glean data-driven insights about a wide range of topics, including the employee experience, diversity and inclusion and belonging. The most advanced HCM systems even make recommendations on what actions should be taken, in plain language.
In today’s digital, fast-paced world, HR functions have expanded beyond the traditional responsibilities.
How is the role of HR evolving?
In the past, HR was often associated with administrative duties, such as gathering, filing and storing paperwork and establishing and enforcing regulations. Today, HR is transforming. In today’s digital, fast-paced world, HR functions have expanded beyond the traditional responsibilities. Seven key attributes of an effective HR leader are:
- A strategic partner. HR contributes to the development and success of business plans and objectives, and the people part of a company is considered a strategic contributor to business success.
- An expert in talent acquisition. Today’s HR executives formulate employer brands to attract talent and promote their workplaces.
- A leader in benefits and compensation. Benefits and compensation are critical to attracting and keeping key talent. Employees increasingly seek more flexibility in terms of benefits, perks, work hours and so on. Successful HR departments are taking note and innovating.
- A learning advocate. Today’s employees want to continue to develop skills and capabilities and HR plays a role in fostering continuous learning far beyond initial training of new hires.
- An employee advocate. HR helps establish the company culture and climate in which people feel included, valued and empowered to do their best work.
- A leader of change. Today’s HR leaders frequently lead change initiatives for their organisations, and work to minimise resistance to change.
- A compliance leader. Workplaces are monitored by a bevy of data privacy, labour and employment laws, and human capital management is critical to a company’s ability to comply and stay abreast of new and changing regulations, such as the European Union’s General Data Protection Regulation (GDPR).
What is the benefit of having HCM software?
Companies are deploying HCM software to improve efficiency, planning and agility, and to drive a better employee experience. For example, Norconsult, one of Scandinavia’s leading multidisciplinary consultancy firms for social planning, engineering design and architecture, has more than 3,800 employees in 97 offices across four continents. Previously, Norconsult had multiple HR systems and no single source for people data. Instead, there was one source for performance management, one for recruiting, and another for learning—all across different geographies. The disparate data sources meant it took weeks to get necessary data pulled together. From a talent management perspective, Norconsult relied on spreadsheets to match employee skills with requirements across the business. That was time-consuming and inefficient.
By moving its HR data into Workday, a single system for human capital management, Norconsult achieved access to real-time, accurate data and visibility into the skills it had or didn’t have across the organisation. In other words, for organisations that want to ensure they're ready for a changing world, HCM software is a key piece of technology.