9 Benefits of Human Capital Management

The evolution of human resources from a functional bit player in business operations to a strategic collaborator for nurturing a vibrant and valuable workforce rests upon the fundamentals of human capital management (HCM). HCM provides a framework for thinking about HR. It’s a comprehensive, ongoing program that makes sure a business not only attracts and retains the right talent but also fosters an environment where employees can thrive and contribute meaningfully at every stage of their career.

Software plays an important role in bringing HCM’s vision for talent strategy to fruition. It automates routine HR processes, such as payroll processing and benefits administration, and provides a centralized hub for employee data and advanced analytics to help businesses identify skills gaps and realize how workforce choices impact their finances. Read on to understand the benefits businesses of all types stand to gain through the use of HCM systems and practices.

What Is Human Capital Management (HCM)?

HCM is a set of practices and processes companies use to acquire, develop, and optimize their workforce. It ensures that businesses pick the right people for each job, while also considering the overall talent needs of the company. HCM allows companies to get the most out of employees by supporting their development at every stage—from hiring and training to career development.

The ultimate benefit of HCM is that it continually nurtures a workforce that is prepared to help the business meet its most important strategic goals. Additionally, HCM focuses on driving operational excellence in HR. The reasons are twofold: First, the operational streamlining afforded by HCM software helps manage administrative costs and improve efficiency so HR gains the bandwidth to focus more on strategy and data analysis. Second, improved HR mechanisms boost employee engagement and satisfaction as employees are onboarded, trained, and developed.

Key Takeaways

• HCM is a set of practices and processes that provides a framework from which HR managers can align business needs with workforce realities.
• HCM software streamlines crucial HR services and consolidates employee and workforce data to provide businesses with important insights into trends and talent gaps.
• Among its benefits, HCM software strengthens recruitment, fortifies performance reviews, and enhances retention.

HCM Software Explained

HCM software is a comprehensive digital platform that automates crucial HR services, including payroll, time tracking, benefits administration, recruitment, onboarding, and performance management. Beyond these traditional HR functions, HCM software supports HR professionals with the following strategic activities:

• Talent strategy and workforce planning: HCM software consolidates and analyzes workforce data, thereby helping HR staff and executives quickly identify skills gaps and forecast workforce requirements. The software offers a big-picture view founded on such metrics as total active employees, compensation levels, turnover rates, job openings, and employee performance levels.
• Performance management: HCM systems are a huge enabler of strong performance management, acting as a central platform from which managers and HR teams can easily administer employee reviews. The software also facilitates collaboration with employees on goal setting, and it tracks individual and team performance against companywide benchmarks.
• Learning and development: Using HCM software, businesses can orchestrate learning and development programs that make sure employees are building the necessary skills for both their current positions and future opportunities.
• Employee engagement: HCM technology provides the technical scaffolding needed to improve employee engagement. With its self-service capabilities, the software acts as a hub where employees and managers can access documentation and policies and make requests or changes. It can also be used as a vehicle for communicating with employees to collaborate on goals and collect feedback.
• Executive decision support: Business executives often tap into HCM software to tie workforce statistics to financial performance, using key performance indicators (KPIs) like cost per hire, revenue per employee, employee lifetime value, cost of turnover, and training program ROI.

HCM software is widely implemented throughout a range of industries, though the focus of its users may shift, depending on the vertical—for example, HCM efforts in healthcare may emphasize tracking credentials and licensure, compliance with healthcare regulation, and juggling complex scheduling. No matter the industry, the business impacts of HCM software are clear. According to one recent study, companies that employ HCM practices enabled by these platforms are 1.8X more likely to report better financial reports than companies that don’t.

9 Benefits of Human Capital Management Software

Businesses that use HCM software to optimize their workforce planning stand to reap significant benefits from the technology. By automating routine HR tasks and centralizing employee data, HCM software helps HR teams manage their time and costs and supports them in more strategic initiatives. The following are nine key business gains companies can realize through a successful implementation of HCM technology.

1. Strengthen Talent Recruitment

   With approximately 77% of companies today reporting difficulty recruiting skilled full-time workers, talent recruitment is one of the most important benefits afforded by HCM software and processes. HCM software bolsters recruitment strategies by automating and standardizing the way the company tracks applicants, screens resumes, and schedules interviews, which reduces the time it takes to fill open positions. The software also helps businesses provide clear communication and transparency throughout the hiring and onboarding process to encourage new hires to stick around.

   Additionally, the centralization of candidate data on an HCM platform gives recruiters big-picture visibility into candidate and recruiting trends, as well as identifying potential skills gaps in the company’s talent pools. This helps recruiting teams balance immediate needs with long-term talent requirements to ensure continued resilience.

2. Enhance Retention Rates and Employee Engagement

   Employee retention and engagement go hand in hand, and HCM software plays a major role in allowing businesses to improve on both fronts. The automated performance management and recognition tools that are part of these platforms assist management in making sure workers feel appreciated and motivated. In the meantime, self-service portals make it easy for employees to check on their benefits, explore career growth opportunities, and take charge of their career goals. HCM software can identify potential gaps in employee engagement, and it allows managers to address problems before employees feel compelled to leave the company. For example, HCM software can run employee satisfaction surveys or collect employee feedback that may prove valuable in helping the company better meet employees’ needs.

3. Increase Payroll Accuracy

   Accurate and timely payment are table stakes for keeping employees happy and loyal. However, many businesses struggle to get this right. According to recent studies, companies worldwide experience 8.4 issues per 1,000 pay slips generated. The biggest cause of these problems are data input mistakes, which account for 63% of payroll errors. HCM platforms centralize all employee data and payroll processing in a single system that automates calculations of wages, taxes, and benefits to drastically cut down on manual data entry errors. Additionally, the software gives HR teams real-time data access to help with reviewing and verifying payroll details before payments are processed, adding an additional backstop for accuracy.

4. Streamline and Automate Operations

   According to a recent survey of HR professionals, roughly three out of four admit that the majority of their work still tends to be dominated by administrative and process-focused tasks. HCM software can help these pros tip the balance of their duties more heavily toward strategic work, as the technology automates such routine tasks as payroll processing, benefits administration, resume screening, and performance tracking. This helps HR operations achieve huge efficiency gains in many of its crucial functions. In fact, one study shows that 85% of HR pros that use automation say it saves them time or increases their efficiency.

5. Empower Strong Performance Reviews

   An HCM platform provides HR teams, employees, and management stakeholders with a centralized hub from which to run and track performance reviews. The software standardizes performance metrics and automates the review process, which allows the business to move beyond the inconsistencies of manual paperwork and sporadic feedback. Managers are prodded with automated reminders and provided with ready-made workflows to ensure that they conduct their reviews on schedule and with minimal hassle. The system offers employees transparency into the results and also gives them visibility into their progress against goals between reviews, thereby fostering a culture focused on continuous improvement and accountability.

6. Identify Skills Gaps

   As a consolidated repository of workforce and employee data, HCM software makes it easier to gain a clear picture of current workforce capabilities and where the most critical skills gaps lie. HCM software enhanced with AI can provide a sweeping, yet detailed skills inventory for cataloging workforce talent and analyzing strengths and gaps. It can also track trends over time. Many of these platforms offer prepopulated skills libraries, but they’re also customizable to allow HR pros to build out categories that align with the unique nature of their industry and business. This can prove to be a powerful tool for workforce planning and data-driven talent development.

7. Enable Career Development

   The performance management functionality of HCM software facilitates collaboration between employees and managers for setting career goals and performance objectives. Centralized data, meanwhile, lets HR teams and managers identify employee development opportunities that align with both individual career goals and company needs for particular skills and talents. Finally, HCM software is often integrated with learning management systems to make it easier for employees to gain important new skills and training.

8. Create a Better Customer Experience

   Employee engagement, satisfaction, and performance all have a direct correlation with customer satisfaction. The improvements afforded by HCM software—and HCM best practices, in general—will ultimately facilitate a better customer experience, because engaged, happy employees are more likely to please customers. In fact, a recent study by Gallup shows that business units with highly engaged employees scored 10% better in customer ratings and 18% better in sales than those without that attribute.

9. Reduce Administrative Costs

   The automation of routine tasks provided by HCM software not only increases the efficiency and productivity of HR professionals, it also drastically reduces administrative costs as it does so. Manual processes pertaining to payroll, benefits enrollment, time tracking, and compliance are extremely time-consuming and rack up hours for HR teams. Additionally, these manual tasks introduce a significant risk of human errors that can cost the company in the form of necessary rework labor, regulatory and legal fines, and more. Eliminating the scut work cuts down significantly on all of these associated costs. In the same vein, HCM software reduces the number of costly administrative burdens placed on managers and employees when it comes to ongoing tasks, such as scheduling vacations, coming up with complex schedules for shift work, and tracking performance. Perhaps even more impactful is that HCM speeds up important administrative work concerning data collection and analysis of KPIs, which facilitates provision of important insights for HR leaders and business decision-makers.

An HCM Solution That Grows With Your Business

Whether your human capital is managed by a single guru or a team of HR professionals, NetSuite SuitePeople human resource management software adapts to meet your HCM needs, for today and in the future. SuitePeople provides a flexible collection of employee records management, payroll automation, workforce management, and performance management features that come together in a single, cloud-based solution. The comprehensive integration of features cuts down on manual data reconciliation and siloed third-party tools, giving HR leaders real-time visibility into, and control over, all things related to the workforce. This includes tools that automate shift scheduling, wage calculation, and payroll processing, as well as management-facing tools that facilitate continuous feedback, goal tracking, and recognition. The software’s self-service capabilities, meanwhile, make it simple for employees and managers to handle routine tasks without HR intervention.

A true differentiator for NetSuite SuitePeople is its seamless integration of HR, payroll, and financial data. This empowers HR teams to collaborate with business stakeholders to identify skills gaps and plan a financially sound path to fill them.

HCM software delivers sweeping benefits to businesses, extending far beyond the HR department. By automating manual HR administration, implementing robust employee and management self-service features, and providing actionable insights to the business, companies can level-up their workforce management practices. HCM solutions enable HR teams to run more responsive and targeted recruitment and foster meaningful employee engagement. These tools also provide HR organizations with analytics that help the business develop and execute long-term talent strategies that build resilience and adaptability.

Human Capital Management Benefits FAQs

What is the value in human capital management?

The major value of human capital management is that it transforms human resources from a tactical function focused on payroll and paperwork into a strategic enabler for building a workforce that can help a business better meet its goals.

Why is HCM software important?

Human capital management (HCM) software is an important tool for cutting down on manual work and consolidating workforce insights that help a business make informed decisions about how it recruits and retains talented people. It’s also a critical tool for running effective performance management and elevating employee engagement.

Why do companies invest in HCM software?

Companies invest in human capital management (HCM) software to help them cost-effectively build a valuable workforce that’s packed with the talent the organization needs to meet its most important goals.