What is Strategic Human Capital Management (HCM)?

Strategic Human Capital Management (HCM)

Only a few years ago, companies were fighting to engage and retain employees amid the Great Resignation. These days, HR teams are dealing with a whole new set of challenges. Now, economic uncertainty, growing skills gaps, and “quiet quitting” are making headlines. 

While it’s always important to look for ways to optimize your workplace, this becomes even more crucial when budgets are tight and resources are scarce. That said, strategic human capital management requires one key thing: immediate access to accurate people data to be more strategic with workforce planning.

In this article, we’ll share how human capital management and workforce management can improve workplace efficiency. We'll explore the relationship between these two terms, why they work better together, and how they can assist in establishing long-term success for your company. 

What is human capital management (HCM)?  

Human capital management aims to optimize the most important resource of any company: its workforce. HCM uses HR and business practices to help companies maximize their employees' potential, whether through engagement, productivity, or cost reduction.

HCM is usable at every stage of the employee lifecycle, including: 

  • Acquiring and hiring top talent via screening applicants, interviewing candidates, and onboarding new hires
  • Managing employees with time and attendance or payroll and benefits administration
  • Optimizing your workforce through employee training, performance management, and reporting and analytics

These processes help businesses create workplaces that prioritize people, use their individual strengths, and set up employees for success. Most companies use one HCM solution to simplify processes and benefit from connected HR systems. Having all HR and people data in one place helps businesses be more strategic in workforce planning, engagement, and management. 

What is workforce management (WFM)?  

You can rarely talk about HCM without workforce management popping up. While similar, workforce management ensures a company’s current and future staffing needs are met to ensure business operations run smoothly. While HCM includes a larger scope of HR and people activities, WFM oversees three main areas:

  • Time and labor, or meeting employee scheduling and staffing needs
  • Absence management, or managing time-off requests and employee leave
  • Workforce health and safety, or ensuring workplace compliance

Workforce management is especially useful for businesses with many hourly workers, like healthcare, retail, banking, manufacturing, and transportation. It helps organizations decide how many employees they need now and in the future. It can also help companies identify skills gaps, so HR teams can hire skilled employees and avoid staff shortages. 

Why workforce management is a cornerstone of strategic human capital management 

While HCM and WFM are often used interchangeably, workforce management is a subset of HCM. Again, HCM is a larger umbrella term that uses a wider collection of HR and people processes—including workforce management’s time, labor, and absence processes—to achieve the same goal. 

Even though these two workplace practices are deeply intertwined, HCM solutions would historically only focus on the performance, development, and compensation of salaried workers and often fail to address workforce management and the pain points of companies with hourly talent. But this omission is a large oversight as workforce management is a core part of any business’ greater HCM strategy. 

Strategic human capital management combines traditional HR initiatives, like performance, development, and compensation, with workforce management to gain insight into employee schedules, time off, and workplace compliance.

In order to execute a true end-to-end HCM strategy, companies need to partner with an HCM provider that also prioritizes workforce management. That way your business doesn’t have to choose one or the other. It can reap the strategic benefits of having all your people data in one place, so your teams can make strategic, data-driven workforce decisions and drive better business outcomes.

When workforce management forms the backbone of your HCM practice, you gain insight into key issues, such as fatigue levels, flight risk factors, and workplace safety—all of which affect hourly workers as much as they do salaried employees. It’s about helping your people feel a sense of belonging, which makes them more effective, more productive, and more engaged throughout the employee lifecycle.

Benefits of a single-solution HCM and workforce management provider 

Here’s a closer look at how using a single solution for both HCM and workforce management can fuel your business’s growth:

1. Make data-driven people decisions 

Perhaps the biggest advantage of having a combined HCM and WFM solution is that it brings all of your HR data and processes together in one place, empowering you to make more strategic talent decisions. 

For example, an all-in-one solution gives businesses the ability to access and analyze employee data to uncover potential workplace issues and proactively address them. Using HR and scheduling data, a company can make note of employees who have long commutes, are over-scheduled, haven’t received raises in some time, are at risk of burning out, or who might be flight risks. 

Armed with this information, the business can take action to keep these employees engaged and feeling valued, whether that’s by letting them work from home a few days a week, awarding them a bonus, or pushing them to take some much-needed time off. 

If you have different HR systems, your HR team may not have this information readily available. This means they can't find and solve problems before they become bigger issues. With all your data in one centralized location, your business can find these insights and take action before they negatively impact employee experience, engagement, operating costs, and more. 

Using an all-in-one HCM solution to battle burnout

Another way a business can benefit from an HCM is by using consolidated people data to understand workplace engagement and performance and take immediate action to remedy any developing situations. 

For example, like most healthcare providers in the last few years, EmergeOrtho has had to balance providing its patients with unrivaled care while protecting employee work-life balance. With 45 outpatient offices statewide and hundreds of orthopedic specialists, physicians, and advanced practice providers to schedule each day, the company knew it needed a way to reliably track employee hours to prevent over-scheduling and burnout. 

After implementing a new HCM solution, EmergeOrtho had newfound visibility into employee schedules so the company could minimize overtime and better accommodate employee needs during a time of high turnover and stress. Not only did this help managers proactively track overtime, adjust schedules to better accommodate staff, and battle burnout, but it also ensured the company’s employees were well-suited to provide exceptional patient care

2. Empower employee self-service 

HR software is only effective if your employees actually use it. So you’ll want to choose a solution that prioritizes user experience and employee self-service

Employees should be able to easily track their available paid time off (PTO), submit time-off requests, review paychecks, check their schedule, swap shifts with a colleague, and clock in and out—all from their preferred device. The goal of any HCM software is to empower your employees, so choose a partner that puts the employee experience first and allows them to do what they need to do, wherever they may be—in the field, in the office, or at home. 

Helping employees self-serve on-the-go

Mental health services company Coast Mental Health employs a wide variety of roles to support its many programs and services, such as mental health workers, nurses, cooks, cleaners and building operators, as well as supporting roles at its head office. To support its diverse workforce, the company knew it needed an HCM solution that empowered employees to self-serve even when on the go. 

After working with UKG, the company now has a centralized system that gives its people easy access to see and edit their personal information, upload documents to their profiles, easily access their schedules and timecards, and request time off. Employees can access this online or through a mobile app, allowing them to access critical HR information wherever they may be. 

3. Simplify HR with integrated systems 

With an all-in-one HCM suite, every solution talks to each other. For example, employee time cards are sent automatically to payroll, ensuring timely and accurate pay, and employee time off auto-populates in your shift schedule so you don’t accidentally schedule them while they’re on vacation. An integrated HCM system shares your HR data across tools, helping you automate tasks, reduce manual errors, and build a complete view of your employees. 

4. Automate manual processes 

An all-in-one HCM solution reduces your administrative overhead, freeing up your time to focus on people strategy and your managers’ time to better lead their teams. Managers can perform tasks like time card or PTO approval and absence management in just a few clicks, while ensuring they have proper coverage for all shifts. Or course, automating these and other core HR processes can eliminate human error and ensure employees receive accurate and on-time paychecks every payday. 

Simplifying hiring and boosting diversity with automation

During a period of rapid growth, Mike Morse Law Firm realized its manual hiring processes were holding it back from hiring the diverse top talent it needed to support the company’s growing needs. Upon finding and implementing a new HCM solution, the law firm immediately set out to automate many of its recruiting and hiring practices, including using candidate-matching capabilities to source and track more diverse applicants, while automatically mitigating potential biases.

Since switching, the company has seen a 40% overall reduction in manual processes and attracted more diverse candidates than ever before. In fact, it experienced a diversity rate increase of 24% in only a year.

5. Ensure workplace safety and compliance 

With shift scheduling and absence management in one platform, your team can easily see when employees are available to work—and more importantly, when they’re not. This way, you can ensure your scheduling remains compliant with labor laws, union agreements, and leave regulations so you can avoid paying any fines or penalties. When you have your scheduling and time off data in one place, you can distribute shifts equally and ensure that employees aren’t working too much. 

Better together: Choosing UKG for your HCM and WFM strategy 

Unlocking the potential of your people and data starts with the right HCM solution. When you have all your HR, payroll, talent, time, and scheduling tools in one place, you get a full view of your workforce. With this information, you can make informed decisions for your business and employees.

Learn how UKG can help your company deliver better outcomes that inspire your people and elevate the workplace experience.

Download Now: The Shared Future for HCM and Workforce Management [Free eBook]