Ceri Thomas explains the thinking behind human capital management and how it can be applied as a strategic tool for improving the bottom line of the business
Human Capital Management (HCM) is an approach to people management that focuses on the factors that really predict and have an effect on the long-term success of the business. It treats the management of people as a high-level strategic issue, rather than an operational matter ‘to be left to the HR people’. And consistent with that, it aims to systematically analyse, measure and evaluate how people policies and practices add value to the enterprise.
A recent report on HCM, Accounting for People offers a useful insight into the whys and wherefores of HCM. Submitted to the DTI late last year by a taskforce led by Denise Kingsmill, it concludes that a ‘one-solution-fits-all’ HCM strategy won’t work.
The fact is that priorities vary between organisations. Some will relate to building and retaining IT skills, others will hinge on customer service, in others there may be a straightforward and consistent emphasis on regular attendance, alertness and safety awareness.
So where should a company begin?
- Initially the company should focus on what makes it special, why it is successful as a business and what employees do to support and drive this. It should understand the connection between people policies and business success.
- HCM is about people as variable and mobile assets. They are also investors and stakeholders in the success of the company. Their level of commitment and trust is as important as that of outside investors.
- Staff ‘buy’ or ‘sell’ in their own company every day through their levels of commitment and engagement. Well-designed staff survey tools can both track and predict these personal investment decisions.
- Commitment and trust comes from what the company and its managers do and how they behave, not from fine words about ‘people are our greatest asset’. So managers have a responsibility to walk-the-talk about company values and the link between motivation and business advantage.
- Tools such as 360-degree feedback point both to the development opportunities and the need for personal change, and can play a key role in HCM strategies.
- The company’s values and strategies need to be communicated in other ways too, especially so that individuals can see the balance between short-term and long-term aims, and between financial results today versus developing the business for tomorrow. Here, devices such as the business excellence model pioneered by the European Foundation for Quality Management, the balanced scorecard, and other strategic performance management frameworks should be considered, and frequently appear in HCM case studies.
- Organisations should invest time explaining and reinforcing the HCM strategy – where the organisation is now and where it aims to be in the future, with stakeholders and investors. Accounting for People recommends the adoption of operating and financial reviews, which a growing number of firms are using to describe the performance of the company in the round. It is an ideal opportunity to explain a company’s HCM strategy and performance.
- Companies should also reflect on the extent to which HR has succeeded in influencing the investment community. Often the answer is ‘not enough’, either within firms or in the economy at large.
- Companies should think about the skills, experiences, tools and techniques that will be needed for HCM to make a real impact. This may often mean taking a long hard look at existing HR resources, as well as beyond the HR department itself.
- Some of the most highly-motivated and influential practitioners in the HR community have often come from (and return to) the companies’ main lines of business, whether from sales, marketing, production or customer service. Their experiences there often equips them with an in-built sense of what motivates people and what skills and tools line managers need to get the best out of their teams.