Human capital management is concerned with measurement, reporting measurements and drawing conclusions about the significance of the outcomes of measurement as a guide to future action. This is the process of human capital measurement and reporting that is considered separately in the next two sections of this chapter. But it is not the sole purpose. There is more to HCM than measurement. Human capital management focuses the attention of an organization’s leadership team on the strategies it should adopt as outlined below to increase the added value they obtain from people. It identifies those aspects of people management that demonstrably have the greatest bearing on business performance. It clarifies the returns that can be obtained in terms of increased profitability, productivity and overall effectiveness arising from the deployment, development and engagement of the people the organization needs to achieve its goals. HCM points the way to achieving human capital advantage by highlighting where and how investments in people generate the highest returns. It ensures that HRM policies and practices are developed to attain this end. These policies include knowledge management, resourcing, talent management, performance management, learning and development programmes, and reward and recognition processes.
From an organizational perspective, an HCM approach generates the following practical questions;
● What are the key performance drivers that create value?
● What skills have we got?
● What skills do we need now and in the future to meet our strategic aims?
● How are we going to attract, develop and retain these skills?
● How can we develop a culture and environment in which organizational and individual learning takes place that meets both our needs and the needs of our employees?
● How can we provide for both the explicit and tacit knowledge created in our organization to be captured, recorded and used effectively?
Strategy
To provide guidelines for action a human capital strategy can be developed making use of the data provided by human capital measurement and reporting. The Mercer HR consulting organizational performance model (CIPD, 2004a) describes a firm’s human capital strategy as consisting of six interconnected factors.
1. People – who is in the organization, their skills and competencies on hiring; what skills competences they develop through training and experience; their level of qualification; and the extent to which they apply firm-specific or generalized human capital.
2. Work processes – how work gets done; the degree of teamwork and interdependence amongst organizational units; and the role of technology.
3. Managerial structure – the degree of employee discretion, management direction and control; spans of control; performance management and work procedures.
4. Information and knowledge– how information is shared and interchanged between employees and with suppliers and customers through formal or informal means.
5. Decision-making – how important decisions are made and who makes them; the degree of decentralization, participation and timeliness of decisions.
6. Rewards – how monetary and non-monetary incentives are used; how much pay is at risk; individual versus group rewards; current versus longer-term ‘career rewards’.
From an organizational perspective, an HCM approach generates the following practical questions;
● What are the key performance drivers that create value?
● What skills have we got?
● What skills do we need now and in the future to meet our strategic aims?
● How are we going to attract, develop and retain these skills?
● How can we develop a culture and environment in which organizational and individual learning takes place that meets both our needs and the needs of our employees?
● How can we provide for both the explicit and tacit knowledge created in our organization to be captured, recorded and used effectively?
Strategy
To provide guidelines for action a human capital strategy can be developed making use of the data provided by human capital measurement and reporting. The Mercer HR consulting organizational performance model (CIPD, 2004a) describes a firm’s human capital strategy as consisting of six interconnected factors.
1. People – who is in the organization, their skills and competencies on hiring; what skills competences they develop through training and experience; their level of qualification; and the extent to which they apply firm-specific or generalized human capital.
2. Work processes – how work gets done; the degree of teamwork and interdependence amongst organizational units; and the role of technology.
3. Managerial structure – the degree of employee discretion, management direction and control; spans of control; performance management and work procedures.
4. Information and knowledge– how information is shared and interchanged between employees and with suppliers and customers through formal or informal means.
5. Decision-making – how important decisions are made and who makes them; the degree of decentralization, participation and timeliness of decisions.
6. Rewards – how monetary and non-monetary incentives are used; how much pay is at risk; individual versus group rewards; current versus longer-term ‘career rewards’.
The human capital strategy of an organization can be regarded as complementary to its human resource strategy, as discussed in Chapters 7 and 8.
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