Human capital management is a set of practices involving human resources that focus on specific issues to improve performance in three areas. These are workforce acquisition, workforce management, and workforce optimization. Practices that are key to human capital management are core administrative support such as personal and benefits administration along with payroll and strategic support such as competency and performance management and similar tasks that include workforce planning.
Within larger companies, human resources departments generally manage human capital management, and in many applications, it is viewed as an approach to managing people whose current value can be measured and whose future value can be augmented through investments of various kinds.
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More than Just Labor
The idea behind human capital management, according to Management Study Guide, is that even though employees are considered a valuable asset, they should not be treated merely as a means to produce labor. Employees are the lifeblood of any organization or company and without them, that entity wouldn’t exist. Employees amass a valuable body of knowledge during their term of employment, making human capital a collection of skills, expertise and knowledge that increases the productivity of the business or organization.
Looking Beyond Recruiting and Hiring
Many companies focus heavily on recruiting the right people for their organizations, yet proper human capital management goes beyond that to upgrade the knowledge of existing employees through ongoing training programs. It’s simply not enough to train employees once and then forget about it. Business News Daily notes that it is critical to keep employees engaged throughout the time that they are employed. All employees should be made to feel that they have talent that is valuable to the organization. Costs such as compensation and benefits are the largest expenses of virtually any business, which means that human resource management must shift to a more integrated and strategic role to help fulfill the organization’s goals.
Personalizing Management of Each Employee
The daily management of employees in a human capital management sense requires every employee to be looked at and treated individually. In other words, management must be personal. This means taking each staff member’s personality and preferences into account when managing and communicating. Learning how each individual is wired is also crucial to success. Successfully communicating and managing employees is an ongoing process that is constantly evolving. All employee initiatives and programs should receive periodic evaluations to ensure that you are providing personalized and effective results for all staff. It’s also important to consider the generation from which each employee comes as that often dictates how you should approach them for various facets of human resource management.
Using Technology to Aid Employee Management
The correct software is now essential in the human capital management equation. The functions of human resource management software usually include elements such as payroll, benefits administration, compliance management, talent management for attracting and retaining qualified workers, time and attendance, succession planning and similar functions.
Thus, managing human capital can be considered to be a more sophisticated, 21st-century form of a human resources department. Its functions go beyond that of traditional human resources by considering human capital management as an essential part of running a company or organization.