Human Capital Management

What is Human Capital Management?

Nowadays there is a progressive movement to transform the HR function and establish a Human Capital Management (HCM) environment which gives strong emphasis on the workforce as a competitive weapon. Organizations leading the way in HR transformation are focusing less on administrative aspects and more on strategic issues of Human Capital (HC). HCM tops the list as a strategy for radically improving workforce productivity to drive higher value for the organization.

Many organizational leaders must be bewildered that, despite investing in new building, the latest equipment and technology and paying very competitive wages, their organisations still fail to achieve the impressive results enjoyed by their more successful counterparts. Equally bewildering is the difficulty leaders find in attracting and retaining the best talent for their organisations. This is of course a critical issue in HCM faced by many organizations.

There are numerous definitions for HC. Basically, HC is defined as the time, personal skills, capabilities, experiences, and knowledge of the individual. Human capital is obtained through a variety of means - formal education, job training, on-the-job learning, and life experiences. Employees bring their HC to the job, and in return, the job rewards the HC investment though pay, benefits, intrinsic job satisfaction, recognition for good performance, and opportunities to learn and advance in the organization.

HCM is about effective and efficient people management to achieve organisational goals. In management language, effective means "doing the right things", while efficiency means "doing things right". The key HCM activities are attraction, development, remuneration and retention of human talent in organizations. Today, HC is recognised as the source of competitive advantage for organizations, as it is the people who make the difference between successful and unsuccessful organizations. Effective HCM is crucial as people can make or even break an organisation. The rapid organisational change today and a new competitive environment are forcing many organizations to search for new ways of managing and maximizing their people potential. As a result we can notice the changing which are taking place in HCM. The approach in HCM is getting strategic and is a important part of organizational strategic management.

Some of these changes are based on the shift from Personnel Departments to Human Resources Departments to strategic HCM. HC functions and responsibilities are changing and intensifying at a faster pace, and to a greater degree, than many other areas of the organization. Once relegated to the back office and concerned mainly or even exclusively with transactional processes and functions, HCM in organizations are taking a greater role in strategic business activities.

This indicates the importance of HC as the key factor in the generation of sustainable competitive advantages for organizations. In order to maximize return on investment (ROI) in HCM, smart organizations are begining to integrate what have traditionally been separate HRM initiatives into a cohesive "attract and retain" HCM strategy. Developed to integrate all the tools and processes associated with people and performance, the HCM approach aligns the goals of employees and the strategic goals of the organizations to meet specific, measurable, and realistic business objectives. To deliver results, strategic decision-makers in the HCM must integrate actionable, objective, and relevant information about employee skills and capabilities to drive performance. They must put that information to work from organizational design and workforce planning to recruitment, employee development and performance management.

As the processes associated with HCM are diverse, the skills component that drives many of those processes can be managed effectively and efficiently through continous training and learning of managers. Good HCM strategies will therefore enable organizations and individuals to improve performance, unlock human potential, increase effectiveness and generate measurable and sustainable results. Remember that people or HC should also be seen as the central resource of an organization because it is not the great product or services which makes great organization but great people.