White Paper The Impact and Value of HCM Table of Contents Introduction.... 2 What is HCM?.... 2 Strategic Initiatives to Address the New Marketplace Environment... 3 Defining Contributory Roles......................................................................3 The Measurement of Achievements.... 3 HCM Leads Directly to Positive Results.... 3 The Stratification of HCM.... 4 Key Findings.... 5 Market View.... 5 Conclusion.... 5 About the Author.... 6 Page 1 of 6
Introduction It is no secret that a performance-driven HCM strategy will provide the intelligence to make critical business decisions and will impact the bottom line directly. This white paper will explore the impact of HCM (human capital management) on businesses today. Over the last several years, we have seen sweeping changes in the marketplace in practically every industry. One of the big changes has been the fact that an organization today has no choice but to compete in a global marketplace. For the company that has been content to purvey services or supply goods to the local area, this is no longer enough to be effectively competing against other companies in the same industry. The company in today s arena must be ready to adapt to an environment that has changed completely, albeit overnight. Its customers have changed. What has been satisfactory in previous years no longer measures up to the mark. And shareholders have not changed their demands, despite an even more competitive environment. Nonetheless, armed with the appropriate strategies and technology, a company can very quickly measure up to the mark. All it takes is some judicious decisions and careful fact-gathering, alongside a critical awareness of the impact that is being made. At the same time, this company, having availed itself of the new technologies and the new sociallyaware media that is being used by everyone today including its customers, must now start to consider human capital as a company asset and its measurement as a strategic part of business management. What is HCM? Surprisingly enough, if you look for a definition of human capital management, or HCM, in an online dictionary you are probably not going to find it. However, a definition of this phrase can be found in more financial and business web sites on the Internet, rather than from lexicographical sources. HCM is described as an approach to employee staffing that perceives people as assets (human capital) whose current value can be measured and whose future value can be enhanced through investment (Rouse, 2012). What this means is that the organization that is using an HCM approach, is going to support its employees with performance expectations that are consistently communicated to them and clearly defined at the outset. It is no secret that HCM forms a key part of ERP (enterprise resource planning) and HCM software can automate much of the record keeping related to HR s requirements for performance management and the systems for rewards and incentives. Page 2 of 65
Strategic Initiatives to Address the New Marketplace Environment There is good reason to implement an HCM strategy, particularly in the new market economy that is socially-driven. This new marketplace makes it even more imperative for management and senior executives to be able to justify any decision, backing it with examples of successful business cases, and ultimately putting into place an HCM strategy which underlies the measurement of human capital as being a strong company capability. These types of initiatives will raise performance expectations and cause managers to constantly strive for innovation and the lifelong support of continuous improvement. This will mean rewarding employees and holding them accountable for achieving their specific business goals. Another benefit of these initiatives will be a move toward compliance with regulatory and industry or government legal requirements. And, by no means least in the list of benefits from the application of HCM, is the streamlining of talent management and incentive programs. Defining Contributory Roles Each employee contributes to the company in a unique way and these contributions can be measured to gauge performance. HCM provides critical business intelligence to permit investment in human capital and run metrics on the impact of those investments. Also, an employee can be motivated by many different factors which can also be integrated into their objectives to increase job satisfaction. Ultimately, this approach will also give the individual a clear understanding of their own contribution to the company s more strategic goals and objectives. The Measurement of Achievements Having included an HCM strategy in the overall company strategy, the company has already articulated its direction, goals, and objectives so every employee has a clear understanding. Just as in the overall company strategy, HCM strategy must also be included in the culture, values, and corporate mission of the company so that everyone from CEO down to the newest employee understands that HCM is part of the process. HCM Strategy Leads Directly to Positive Results The key to positive outcomes from strategic goals is clear communication and useful feedback. It is paramount to have an objective framework that starts at the top and is integrated at all levels of the organization so that every employee understands what is expected to be successful at that company. In today s highly critical environment where everything is exposed to social media, it is even more important to be focused and have a strong positive corporate image. Page 3 of 65
The Stratification of HCM HCM is a set of stratified management layers. How they work is from the top down and from the bottom up. The stratified layer of individuals as employees is entirely separate from the human capital layer, which takes on the business perspective. According to Yukl (2010) Human resources and relations are more important when the work is complex and difficult to learn and so competencies become a high-priced resource. And this becomes a strategy that depends upon company services being delivered by experts who are unique in their field. This contrasts with organizations who produce their wares with processes that are either completely automated or who have minimum supervision with hardly any employees or those who have outsourced practically their entire business. Other examples are organizations that have plenty of employees with no real skills, no need to cooperate with each other, or are ready to work for wages close to the legal minimum. The organizational structure is spread out into roles that are unique. These roles are managed as set specifications for each employee, an impersonal designation that is similar to the statement of requirements that is set up before a contract is signed. The importance that is attached to the definition of roles permits the company to impartially define requirements so that they have enough suitable employees for the foreseeable future. And planning for present-day and future needs is driven by the roadmap created by the HCM process. The human asset denotes the individual level of the strata described above. The individual will have mapped out for themselves a set of highly specific review dates which include milestones of development and measured assessments. Also on this individual level, performance issues will be addressed. An individual s way of behaving at work can be taken in hand through the use of counseling. Inexperience and unfamiliarity can be compensated for with adequate training and use of shared learning resources. Individuals who do not appear to apply themselves may be encouraged by mentoring or frequent company awareness-raising exercises. The stratum of human capital comes between the individual role and the individual employee. Because it is business-focused, it will include the instigation of performance indicators and specific milestones to be attained by each individual. Through this methodology, critical competencies that are required in order to produce the desired outcome at the appropriate level can be measured with objective assessments using specific performance criteria. This is the stratum on which business decisions in HCM are managed. Decisions made here center on the company s strategic goal achievements as well as minimizing risks and preparing for the company s future. This is done through the use of competency gap reduction and succession planning. Page 4 of 65
Key Findings A recent poll, investigating post recession trends on the kind of challenges that are thought to be a strong influence on business during the next 10 years, revealed a shift from pure cost-cutting to investment in innovation as well as expansion in global markets and the use of technology to accomplish goals -- including HCM. In spite of perceived notions that the past recession would have an impact on talent retention, it was also noted that over half of these executives who were polled did not have a formal talent management strategy. It quickly became obvious that the HR focus on talent management -- in particular recruitment, performance management, talent assessments, and succession planning -- are giving HR departments trouble since they are hard-pressed to meet the expectations of leadership. Market View The market is replete with HCM providers from the leaders to open source, and there are plenty of choices. The clear leaders in enterprise software provision are: ADP, Oracle, and SAP but there are also many others who offer comparable packages and should also be considered. Many providers are uniquely involved in HCM and also areas such as ERP and CRM. It should be thought out carefully if you are considering using the same vendor who is also providing your ERP or CRM deployment. With ERP, a component part could be HCM, delivered as an add-on business process, but, with CRM, it may well appear to be better to have a different provider. But all of this must be judged at the outset and a thorough project plan must be established to determine the best possible solution. Some of these providers also provide a cloud-based solution that might be a more affordable option. Conclusion HCM is a measure of quality in the company where it has decided that it is employees are a capital asset rather than a disposable resource. We have demonstrated how this works and how it is a stratified methodology that focuses entirely upon setting targets, measuring performance, and aligning this performance with company goals and objectives. This makes the process more attainable and certainly more tied to the overall mission of the organization. Page 5 of 65
About the Expert Steve Tuffill, is a freelance technical and creative writer based in Valencia, CA. Steve has worked in business computing for some 25 years, and has been writing since 1998 covering many technical and business-related topics. He has written for Toolbox since 2006. You can reach Steve at stevetuf@gmail. com About Ziff Davis Ziff Davis, Inc. is a leading digital media company specializing in the technology market, reaching over 40 million highly engaged in-market buyers and influencers every month. Ziff Davis sites, which feature trusted and comprehensive evaluations of the newest, hottest products, and the most advanced ad targeting platform. Ziff Davis B2B is a leading provider of online research to enterprise buyers and high-quality leads to IT vendors. More information on Ziff Davis can be found at. Copyright 2012 Ziff Davis, Inc. v111912 Page 6 of 6