Human capital management (HCM) is a general term used to describe an approach to managing human resources that puts the needs of the current employees first. Human capital refers to those who make the production of companies possible. The current employees are the human resources that recruit, hire, develop, store, and train other employees. This human resource component of a company is called the human cost model. Companies, therefore, aim to maximize the utilization of human capital and to reduce the costs associated with the utilization of this capital. HRM thus has many applications and it has been the subject of many recent studies.
Many companies in all industries have realized the importance of human capital management to their organizational performance. With unemployment rising, companies have re-assessed their operations, including their approaches to recruiting and developing employees, as well as their strategies for retaining qualified employees. As a result, many companies have made important changes in their employment practices in an effort to improve the quality of the labor they offer and to improve the economic value of their organizations. In addition to these changes, many companies have developed specific programs to enhance the human capital management practices of their organization. Some of these programs include training, development, compensation, and other modifications aimed at attracting and retaining the best employees.
Human capital management efforts typically focus on two areas. The first area is to attract and retain top talent by keeping them in the organization. Many companies utilize various forms of recruitment and employment strategies such as targeted recruitment, placement, executive search, and exit planning. Targeted recruitment involves gathering information about the prospective employee’s skills, education, experience, preferred work environments, and other characteristics that match an appropriate candidate. Executive search, on the other hand, involves using internal human capital tools and processes to identify top talent.
The second area focused on human capital management is to maximize the return on investment made by the workers they have recruited. One approach many companies use is to use their own HR department to perform an overall review of the company’s activities, human resources activities, benefits, and training programs, and track the performance of its employees. This information can help managers determine which employees are performing their tasks to their optimum levels and which employees are not meeting their productive output standards. The review of human resources typically includes assessments of the human capital management environment, performance, and knowledge gaps in a workplace.
The third area of focus for human capital management is to promote the effective utilization of existing human capital. Various types of incentives are used such as bonuses, advancement opportunities, and the provision of professional indemnity insurance. Companies may also require workers to take participation or consultative action such as participating in employee benefit and satisfaction surveys. Managers may also establish formal or informal workshops on skills, compensation, ethics, and development. These workshops are typically designed to promote engagement among employees, develop new ways of aligning the interests of the workforce management to the corporate goals and objectives, and foster communication between management and employees.
The fourth area of focus in human capital management involves the implementation of the strategies and operations of the plans. It is vital that human resources management monitors the performance of employees and reports changes as needed. Performance management requires regular assessments of an individual’s ability to satisfy work and personal responsibilities. These assessments are most often conducted during the appraisal process when an individual is being reviewed to determine if he meets the company’s specific needs. These assessments are
usually used to determine eligibility for bonuses, professional indemnity insurance, and other professional development opportunities.
The fifth area of focus in human capital management involves monitoring the effectiveness of the overall HSM. The human resource management system should include an overall assessment of the health and growth of all employees, as well as a particular focus on the productivity of the organization’s best employees. Surveys should be regularly conducted to determine the health and growth of all employees, as well as their ability to contribute to the overall growth and development of the organization. Regular assessments of an organization’s human resource management system should also include interviews with management and key employees to determine where human resource management is currently falling short in its efforts to maximize the productive output of its employees. While these surveys may not always yield good news, they do allow human resource management to identify areas for improvement, and it gives management an opportunity to address these problems before they become major hurdles to the organization’s continued success.
By developing and implementing an effective workforce management program, the human capital management team can improve the overall quality of the organization’s performance. An effective HRM strategy also has the added benefit of producing tangible benefits for the organization, such as reducing turnover, attracting and retaining high-quality staff members, enhancing recruitment, and increasing overall employee satisfaction. These and other benefits will not only result in improved performance but will also help HRM maximize its profit.