Human Capital Management

HUMAN CAPITAL MANAGEMENT People are arguably the most valuable asset held by an organization today. People invent new products, find ways to creatively reduce costs, deliver quality services, and build long-lasting relationships with customers. It is also an organization’s people and the collective skills, knowledge, and capabilities they represent as human capital – that are most difficult to duplicate by the competition. Only people can manage and maximize assets so that the assets reach their full potential.

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And only people can reinvent processes, products, and ways of working so that an organization remains one step ahead of the competition. For many organizations today, long-term competitive success is tied less to the products or services they produce than to the people producing them. Human capital is a measure of the economic value of an employee’s skill set. The concept of human capital recognises that not all labour is equal and that the quality of employees can be improved by investing in them. The education, experience and abilities of an employee have an economic value for employers and for the economy as a whole.

The efficient management of the supply and flow of human assets is rapidly becoming the primary source of its competitive advantage. The traditional importance of managing of capital assets continues to be important but ever less so. This shift has been caused by fundamental changes in the economy, such as: • increasing product complexity, accelerating innovation, and shortened product lifecycles – and the attendant demand for higher skilled workers; • new definitions of work and organizational structure; and • increasing number and complexity of employment-related laws and regulations.

Human capital management is not about changing the names of things we are already doing in human resources (HR) and elsewhere. It is about acknowledging, anticipating, and acting on the human impacts of those actions. Human capital management provides a systems approach to improving the performance of an organization and its employees, by integrating initiatives that impact their performance, including restructuring, business process improvement, and new IT systems introductions, as well as more traditional HR programs, such as recruiting, retention, and performance management.

Human capital management takes the view of employees as individuals-the combination of skills, competencies, motivation, capabilities, interactions, energy, experiences, and institutional memory that create value for the organization. OBJECTIVES: • Talent management – Support people during every phase of their employment – from recruitment through training, development, and retention. Find the right people, put their talent to best use, align employee goals with corporate goals, maximize the impact of training, and retain top performers. With different HCM systems, you can develop and deploy talent more rapidly and flexibly than ever before.

The solutions support and integrate all talent management processes – so you can attract, acquire, educate, and develop talent; identify and grow future leaders; and align and motivate talent with overall objectives. • Workforce process management – Streamline and integrate essential workforce processes such as employee administration, organizational management, time management, benefits, payroll, and legal reporting. Using HCM systems, you can standardize and consolidate all workforce-related processes and data onto a single platform, while ensuring adherence to local regulations and laws. Workforce deployment – Deploy the right people with the right skills to the right positions at the right time. Create project teams based on skills and availability, monitor progress on projects, track time, and analyze results for strategic decision making. While HCM theory is molded around the age-old principle that the workforce is a company’s fundamental asset, it strives to lay out a series of steps by which employers can actually turn this idea into a reality, and thereby see positive results in areas like productivity, long term employment and a constantly rising level of profit.

A major factor contributing to the shaky ground on which some businesses stand these days is the generally low number of qualified job seekers at large in the labor market. Coupled with the problem of increasingly high rates of employee turnover, business leaders are finding it increasingly difficult to attract and retain the top talent necessary for their expected levels of productivity. That’s why one of the primary items on the list of crucial Human Capital Management goals relates to making sure that employees actually care about the work they are doing.

This not only helps a company by increasing the level of output quality, but it encourages lengthy terms of employment so that a core talent base can see a company through the important evolutions it must undergo, especially in these times of uncertainty. Another important way for an employer to capitalize on his or her workforce is by harnessing the power of HR software technology. The opportunities for workforce improvement through technology are limitless, but it is worth pointing out one of the excellent programs that can really take off through a good HCM system.

Creating employee incentives is a crucial element of effective Human Resource Management. Surprisingly, however, this field has a lot of room for error. It seems that the reason behind this is largely based around the fact that employers more often than not find themselves in the dark as to how to entice their top talent without decreasing ROI. In order to create a comprehensive program for determining what levels of pay and benefits increases will work to promote better performance, there are a myriad of factors to take into account.

BUSINESS BENEFITS: Consistently achieve corporate objectives • Align the workforce with organizational objectives. • Find the best people and leverage their talent in the right job at the right time. • Ensure that every employee understands and acts upon appropriate business objectives and can monitor their progress toward corporate goals. Retain your talent • Provide employees clearly defined career and development plans and personalized learning opportunities. • Link employee performance to ompensation programs, such as variable pay plans and long-term incentives. Proactively identify and fill talent gaps • Identify, develop, and track high-potential employees. • Ensure that future leaders can be effectively promoted from within – and that successors are identified for key positions. Lower costs of compliance and employee administration • Reduce the cost and effort of complying with local regulations through unrivaled features and functions, support structures, and expertise. Reduce HR costs by automating operational employee-related processes. Improve decision making and manage human capital more effectively • Give executives, HR professionals, and line managers reporting and analysis options that provide real-time insight into the workforce. • Identify trends at an early stage and make well-informed decisions, so that the human capital can be managed more effectively, predict human-capital investment demands, and track workforce costs and the return on investment for HR projects. Reduce risk Adapt processes quickly to changing business needs with a flexible, scalable solution. Implement value-added activities • Streamline all HCM processes. • Free employees to concentrate on value-generating activities, rather than on routine tasks. Turn HR into a strategic business advisor • Align HR activities with organizational objectives • Focus on leadership succession, workforce planning, and organizational change • Make HR services transparent • Lower HR costs and deliver better HR services – anywhere and anytime

To understand the changes and momentum in Human Capital Management (HCM), the Americas’ SAP Users’ Group (ASUG®) and SAP have established an ongoing HCM Benchmarking forum. The study analyzes several dimensions ‘ staffing, cost, organizational model, IT deployment, and best-practices adoption. The following key conclusions demonstrate how companies are meeting today’s human capital challenges: • As a first step, HR managers strive to optimize the efficiency of transactional processes through standardizing, automating, and integrating business processes, based on best-practice process and technology models. Optimizing transactional processes frees up resources that allow HR organizations to invest in more strategic functions that facilitate business growth and increase employee productivity. • Centralizing and consolidating HR operations in a shared-services environment helps increase the efficiency and effectiveness of HR processes. • Information technology continues to provide the basic foundation for efficiency and acts as the key driver for effectiveness and future innovation. Leading organizations recognize that IT supports the development of many best practices, and they continue to invest in IT to integrate systems, data, and processes across the enterprise. • Outsourcing, while used frequently for transactional processes, does not always drive top performance, either in cost or service quality. Organizations need to carefully evaluate the value, performance, and cost trade-offs in outsourced versus in-house service delivery. The Advantages and Disadvantages of Outsourcing

Organizations who are interested in outsourcing are often curious to know more about advantages and disadvantages of offshoring. By gaining insight about both the good and bad of outsourcing, organizations can decide if outsourcing is right for them. Most organization jump headlong into outsourcing, without actually finding out if outsourcing is good for their business. The advantages and disadvantages of outsourcing can help organizations decide if outsourcing is right for the business. The following is a list of the advantages and disadvantages of outsourcing: The Advantages of Outsourcing Outsourcing your non-core activities will give you more time to concentrate on your core business processes • Offshoring can give you access to professional, expert and high-quality services • With outsourcing your organization can experience increased efficiency and productivity in non-core business processes • Outsourcing can help you streamline your business operations • Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others • Outsourcing can make your organization more flexible to change • You can experience an increased control of your business with outsourcing • Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these • Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time • Offshoring can help your organization save on capital expenditures • By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work • By outsourcing, you can cater to the new and challenging demands of your customers • Outsourcing can help your organization to free up its cash flow • Sharing your business risks is possible with outsourcing • Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business • Outsourcing can help your organization to cut is operational costs to more than half If you want the organization to stay ahead of competition, concentrate on core competencies and make use of the latest technologies, then outsourcing can help the organization achieve all this and more. In outsourcing, the advantages of outsourcing are more than the disadvantages of outsourcing. The pros of outsourcing have driven more organization to step into offshoring and experience the benefits that it has to offer. The Disadvantages of Outsourcing At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it • While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing • When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization • Offshoring can create potential redundancies for your organization • In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider • The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work • Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company • By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced • In outsourcing, you may lose your control over the process that is outsourced • Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies.

You might also have to spend a lot of time and effort in getting the contract signed • With outsourcing, your organization might suffer from a lack of customer focus • There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others. The disadvantages of offshoring give organizations an opportunity to think about what they are stepping into. However the disadvantages of outsourcing are less than the advantages of offshore outsourcing. When outsourcing, you might not experience any of these disadvantages of offshoring, if you find a reliable outsourcing partner.

Before outsourcing take the interests of your customers and employees into consideration and then make an informed decision. Many employee development and performance improvement programs fail because they do not have the demonstratable support of the senior leadership team, are not integrated with other organizational initiatives, do not meet the motivational needs of the employees, and do not contribute to the organization’s future direction. Many organizations are now recognizing that human capital management can assist them in integrating their efforts to improve performance and to provide an environment and incentives consistent with them.


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