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How Can Human Capital Management Help Increase Productivity?

Human Capital Management (HCM) is about maximising your return on people by investing in them just as seriously as you would in technology or property.

How can human capital management help increase productivity?

Published on:

10 Dec 2020

In these fast-moving times, it’s rare for people to work for the same company until retirement. With a robust human capital management strategy, you can provide experiences that motivate people to stay loyal and productive.

Your people are your competitive advantage, so make their time with you as hassle-free, engaging and seamless as it should be.

Replacing an employee in an SME costs an average of six to nine months salary. So what can businesses do to keep highly skilled employees from leaving and therefore retain their value?

What is Human Capital Management?

Human Capital Management (HCM) is about maximising your return on people by investing in them just as seriously as you would in technology or property.

It sums up the approaches used by businesses to recruit and retain talent, manage employees effectively, provide them with skills and learning opportunities, and motivate and develop them.

HCM can help companies to improve all kinds of human resources processes and functions such as onboarding, training and development, payroll, compensation and performance management.

For example, investment bank Goldman Sachs delivers a raft of programmes throughout people’s careers ranging from benefits and wellness to talent assessment.

In Oracle’s definition, HCM refers not only to strategy but also IT applications and software that firms use to implement it.

These include cloud-based HCM systems for the primary HR functions such as payroll, benefits, compliance, managing talent, planning and managing the workforce, as well as delivering services such as help desks and employee self-service (ESS).

How can Human Capital Management Help Increase Productivity?

HRM defines the management of people by the business or HR team using traditional tools and processes. HCM makes the tools and processes more effective and turns them into opportunities.

You could say HCM solutions are like HRM but on steroids.

The 3 Primary Functions of HCM

  1. Acquiring Talent

As part of the talent acquisition process, HCM can make recruitment more straightforward and engaging for your candidates.

It begins with sourcing and screening people, checking CVs, matching their skills with the business’s needs, scheduling interviews, and carrying out background checks aided by an applicant tracking system (ATS) that stores the data and tracks their progress throughout.

The last step is ‘onboarding’, bringing them into the company, orientating them and getting them started.

Managing Talent

Human resources professionals now have to juggle a wide variety of talent, from contractors to part-time workers and full-time staff working different hours.

Talent management includes time and attendance, payroll, performance management, and cultural development aspects such as rewards and recognition programmes and grievance procedures.

Developing Talent

By developing and optimising your talent, HCM can make a significant impact on your business.

As Emily He writes in HRO Today, learning programmes should not be one-size-fits-all but tailored and refined to meet different employee needs and the various generations represented within your business.

The Benefits of a Robust HCM Strategy

When businesses do HCM correctly, it helps HR teams to be proactive and:

  1. Attract the right staff

  2. Onboard them effectively

  3. Nurture and retain talent

  4. Optimise people management

  5. Drive engagement

  6. Manage performance

  7. Adjust rapidly to change

  8. Design high performance work systems (HPWS)

  9. Increase business productivity

Let’s take some of the challenges facing SMEs now. With the right HCM strategy in place, you can more easily manage flexible working trends. For example, using tools such as video and messaging to onboard new people as homeworking and blended or hybrid working steadily increases.

You can adjust your strategy to take into account changing demographics and generations’ working styles. For example, you might introduce a variety of more meaningful reward and recognition schemes to appeal to millennials and baby boomers.

Increasing Workplace Productivity

If you genuinely believe employees to be at the core of your business, you can’t pay lip service to HCM. You must put human resources at the centre of your business and HCM strategy.

Using HR to its maximum potential is essential if you want to introduce an HCM strategy that makes your employees more engaged and productive.

Your HR manager can measure how productive your employees are by setting their objectives and targets, measuring them against them and by making sure they are completing tasks effectively. If they’re working to their full potential, your revenue will increase.

One strategy that SMEs find useful is to manage people more profitably using ‘profit-based’ assessment. You look at how much money your sales people are making for every pound of their salaries.

They’ll be able to improve motivation through bonuses, rewards schemes and other incentives and provide them with learning opportunities that also keep them engaged.

Out With the Old

HR is often one of the last aspects of running a business that SMEs consider or, if they do, the function is underused.


Too many small-to-medium businesses see HR as a cost that companies must minimise, not something to develop and leverage. In contrast, SMEs see HCM as an advantage characterised as big-company corporate. Not so.

SMEs can also use HR and HCM to look at how effectively and efficiently staff are being recruited and managed.

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