9 Human Capital Management Strategies to Improve Your Business

As HR roles have evolved over the years, workforce management is no longer just about fielding complaints, training new hires, or data management. For many years, HR has also been seen as a financial burden to an organization. However modern HR demands a more strategic role that aligns the needs of the workforce with organizational goals and financial targets.

But how do you turn something as wide-ranging as HR and workforce management into a coherent resource that benefits both the employees and the organization? The answer requires viewing human capital as a deep investment in human beings.

With modern human capital management (HCM) technology, HR leaders no longer need to rely solely on intuition to develop these strategies. With more data at your fingertips, you can gain greater visibility into your organization, make data-driven decisions, and execute new initiatives at scale.

So, where do we start? Let’s take a closer look at how to implement an effective HCM plan and 9 actionable strategies you can employ to enhance both organizational performance and employee satisfaction.

What Is Human Capital Management?

Human capital may sound like a strange concept. The terminology can easily be misperceived as a strategy that "uses" employees purely as a resource. However, this is far from the truth.

A better perspective is that your workforce is an investment. In fact, in most enterprises, it is the #1 investment. Strategic HCM recognizes and maximizes the value of your employees.

This doesn’t replace the need for human intuition and empathy in HR. Instead, strategic HCM leverages technology to amplify those traits. Rather than simply hoping an idea will work, strategic HCM uses data-driven insight to make more effective decisions that are most likely to benefit the entire organization.

Strategic Human Capital Management

Strategic HCM encompasses areas such as:

• Recruiting and Onboarding: Attracting and integrating new talent efficiently and effectively.
• Payroll and Benefits: Managing compensation and benefits to ensure fairness and competitiveness.
• Performance Management: Assessing and enhancing employee performance to meet organizational goals.
• Talent Development: Investing in employee growth and development to foster loyalty and productivity.

This holistic approach ensures that every aspect of an employee’s lifecycle is managed strategically to align with the organization’s objectives — creating a mutually beneficial relationship between employer and employee.

HCROI

For any action you take in an organization, return on investment (ROI) is a key metric. But how do you measure the ROI of something as vast and complex as your workforce?

Human Capital Return on Investment (HCROI) measures the ROI of a given HR initiative. It allows you to visualize how your HCM strategies impact your organization through your workforce.

For example, you may believe that paying employees more or investing in a new HCM platform can yield significant returns in terms of productivity, employee satisfaction, and retention. But demonstrating those returns is another task entirely. HCROI shows the value to the whole organization, which is essential when developing your HCM strategy.

Imagine a company implementing a new performance management system that includes regular feedback and personalized development plans. Over time, employees feel more engaged and valued, leading to a noticeable increase in productivity and a reduction in turnover rates. By tracking these metrics, the company can quantify the realized ROI in the new system, demonstrating the tangible benefits of their efforts.

Why Are Human Capital Management Strategies Important?

HCM strategies are crucial for maximizing the value of your workforce and ensuring the overall success of your organization. Here are some key reasons why:

• Better Returns on Your Most Important Investment - People are the power behind your business. Your workforce is what drives your business forward. To maximize your investment, you need to handle your workforce more intelligently. Unfortunately, many businesses don’t plan for this, resulting in lost potential and efficiency.
• Better Organization and Efficiency - Streamlined processes and better management of documents and positions reduce confusion and ensure smooth operations. A more organized approach leads to better operational efficiency, which means less time wasted on administrative tasks.
• Lower Costs - These strategies will help you save time by automating repetitive tasks and streamlining processes. In turn, this reduces unnecessary labor and administrative costs. Plus, a good HCM platform will provide you with more insight into profitable strategies, allowing you to cut investments with low ROI and improve the financial health of your organization.
• Better Engagement - By making the most of your employees' skills and abilities, you also strengthen their connection to your organization's larger mission. Employees who are well-managed and engaged feel more connected to the company’s goals often resulting in higher productivity and retention. This, in turn, reduces turnover rates and associated costs.

The impact of strategic HCM reaches far beyond employee satisfaction — it creates tangible effects that improve the health of the whole organization.

9 Human Capital Management Strategies To Improve Operations

Implementing effective HCM strategies is essential for optimizing workforce management and improving overall organizational performance. Here are nine strategies to help you to optimize your workforce, improve efficiency, and drive better financial outcomes.

Use Great HCM Software

Modern HR teams can’t get by on simple tools or spreadsheets anymore. To remain competitive and fully utilize your workforce, you need robust software designed to help you implement human capital management strategies at scale.

HCM software is a type of comprehensive solution for managing multiple HR functions through a single platform. When selecting an HCM solution, look for the following features:

• Agility and Flexibility: The software should adapt to your organization’s changing needs, allowing for easy updates and configurations.
• Enhanced Employee Experience: A user-friendly interface and comprehensive self-service options can significantly improve employee satisfaction and engagement.
• Scalability: Ensure the software can grow with your organization, handling increased data and more complex workflows as your company expands.
• Integration: Seamless integration with other enterprise systems is crucial for maintaining consistent data flow and operational efficiency.

HCM software like Criterion brings all these functionalities together, offering a powerful tool for HR leaders to manage their workforce strategically. Our platform puts people at the center of your operations by tackling the three core areas of workforce management: HR, payroll, and talent engagement. By centralizing these functions, Criterion helps you streamline your processes and improve overall efficiency.

Implement a Position Management Strategy

Position management is a strategy for keeping track of your organization’s labor needs. It involves creating a structured overview of all positions within the company, assigning duties, requirements, qualifications, teams, and even pay/benefits packages to predefined roles. This way, every position is clearly defined, even when not currently filled.

Effective position management makes hiring, labor allocation, and project management more efficient. It also allows you to project career frameworks for employees, giving them a vision for their future at your company, which can increase retention. Overall, it improves organization and efficiency, making it easier to keep track of your workforce at scale while updating position details as needed.

Streamline Recruiting, Onboarding, and Training

Recruiting, onboarding, and training are distinct parts of hiring new employees. But what if you could integrate them into one simple process?

The first few days for a new hire can leave a lasting impression, and the first 90 days are critical for retention. Along with absorbing your company culture, they may struggle to adjust to the new position and workflow. A smooth transition will set up your new hires to succeed, and improve your overall retention. Moving your new hires through all of the onboarding steps automatically through a standard workflow can make this transition seamless. Automated HCM software can help your organization make efficient hiring decisions, connect new hires to their correct cost centers, and produce the comprehensive documents required at orientation.

At the same time, a human touch is essential here. Providing mentors or introducing new hires to a “buddy” who can accompany them throughout the whole process may minimize confusion and contribute to a healthy and welcoming company culture.

TIP: Training should also be easily accessible, even after onboarding, enabling employees to improve their skills and advance over time at a self-directed pace.

Automate Communication and Task Workflows

Many companies are bogged down by inefficient task workflows that rely heavily on manual communication. An employee may need to manually email their manager once a project reaches a certain stage. Maybe they must manually specify each recipient when sending a message, instead of just selecting the team. Maybe your HR leader needs to manually send documents for each new employee to sign.

Performing tasks manually can lead to errors, missed deadlines, and communication breakdown. It’s also wildly inefficient. Automating workflows for document signings, work reviews, and project deadlines can significantly reduce errors and labor time, and improves communication throughout your company.

With Criterion, you can automate many administrative tasks through high-visibility notifications, custom workflows, and more, ensuring that no important steps are missed and communication remains clear and efficient.

Automate Payroll and Benefits Packages for Compliance

Processing payroll for even a moderate-sized workforce can be complex and time-consuming, especially when considering deductions for taxes, benefits, variable wages, union dues, and multi-state laws. Manual processing only increases the potential for costly errors and compliance issues.

Using a robust payroll platform that handles complexity automatically is one of the best HCM strategies you can employ. The right payroll software can reduce the risk of miscalculations, make payroll more efficient, and ensure compliance with state and local laws.

Criterion’s payroll module allows you to create custom pay and benefits packages and administer them easily by role, streamlining onboarding and payroll processing through a unified system.

Create Engagement Programs for Employees

Rewards and recognition are often undervalued and underused in organizations. However, implementing incentive programs or predefined reward structures can reinforce high-caliber performance and improve both engagement and morale. At the same time, ad-hoc rewards (while beneficial) can be complicated when it comes to taxes.

Criterion’s custom benefits packages and workflows can also be applied to rewards and recognition programs. For instance, you can create a reward structure for a specific class of employees, certain departments or positions, or certain tenures. You can also send monetary rewards like bonuses and categorize them as discretionary or non-discretionary with one click.

Managers can configure notifications to remind them when their reports reach certain milestones like birthdays or work anniversaries. When they receive this notification, they can then send a tangible reward enhancing overall engagement and retention.

Once you implement these plans, you can also send out surveys to employees on the same platform. You can then analyze those qualitative results against quantitative performance trends with custom reports to better understand employee engagement levels.

Implement Self-Service Functionality

Empower your employees to access what they need with self-service functionality in your HCM. In traditional organizational structures, employees often need to submit a ticket to HR to access things like W-2s and paystubs. This can be annoying to the employee and labor-intensive for your HR team.

By allowing employees to access personal documents on their own (without managerial or HR intervention), you save time on admin tasks and boost engagement. Allowing employees to update their own tax information and personal data (like addresses and phone numbers) can have immediate benefits. Of course, with the right HCM software, you can control the resources employees can access and even schedule manual reviews of new changes.

Criterion offers a host of self-service options, and many of our customers have reported saving several hours per week with this powerful feature.

Create a Document Control System

Modern organizations handle vast amounts of information, including employee and financial data, legal paperwork, and standard operating procedures. Maintaining the quality of documents is critical, and some data should only be accessed by certain users.

But applying granular permissions and quality control measures can be difficult without a robust system. The best HCM software empowers your organization to create templates for recurring document formats, establish processes for reviewing and disposing of documents, and keep all documents organized and secure while controlling user access.

Implementing a document control system helps maintain and safeguard organizational data, improving efficiency, productivity, and legal compliance. When an employee needs to access or create a specific document, the process can automate much of the heavy admin work of changing permissions or manual review.

Integrate Your HCM Software With Other Tools

For an HCM strategy to be truly effective, it must be fully connected to every part of your organization. After all, all the strategies we’ve talked about so far are designed to put your workforce at the center of your operations and may require action or information from other departments.

The best practice is to integrate your HCM software with the tools you use each and every day across departments (project management, ERP, etc.). This allows you to connect key HR and payroll data to finance, project management, and other enterprise resources, so you can:

• Correlate data to generate custom reports.
• Improve visibility into how your workforce impacts each area of your business.
• Streamline workflows and automate processes such as labor cost allocation and project management.
• Minimize errors by ensuring all of your data is up to date — with no manual syncing or updating other platforms.

Criterion offers a truly open API that connects all your platforms to a unified database, ensuring seamless integration and enhanced operational efficiency. This flexibility allows you to build your ideal tech stack, without worrying about compatibility or manual syncing.

How To Develop a Human Capital Management Strategy

Creating an effective HCM strategy is essential for aligning your workforce with your organization’s goals and driving overall business growth. The right strategy will help your organization integrate HCM practices into your overall mission, and enable you to continuously evaluate and refine your approach to maximize the value of your human capital.

Here’s how you can develop a robust HCM strategy:

1. Gather Data About Your Workforce

The first step involves setting up metrics to track what’s happening at both the employee and organizational levels. In addition to HCROI, some essential metrics include:

• Standard Time Tracking: Monitor the hours employees work to ensure accurate payroll and productivity analysis.
• Turnover Rate: Calculate how often employees leave your company, providing insight into employee satisfaction and retention.
• Cost Per Hire (CPH): Determine the financial investment required to recruit and onboard new employees.
• Average Tenure: Track how long employees stay with your company, which can indicate job satisfaction and internal career growth opportunities.
• Employee Engagement: Measure how connected your employees feel to your organization’s purpose.

In addition to these basic metrics, consider tracking cost metrics, profit reports, and other financial indicators.

2. Analyze Initiatives for Effectiveness and Profitability

Once you have gathered the data, you’ll need to analyze it to gain a clear picture of your organization’s current state. This analysis should connect your existing processes to measurable benefits and overall profitability. Evaluate which initiatives are working and contributing to your goals, and which need improvement. Determine which strategies are enhancing your organization’s performance and the practices that might be holding you back.

3. Create Strategic Goals

Based on your analysis, identify specific areas for improvement, and set time-based goals to measure progress. Define what success looks like for each goal and ensure you have measurable criteria to track your work against.

For example, to reduce turnover, set a target percentage decrease for that metric and a timeline for achieving it. Strategic goals should be realistic, measurable, and aligned with the overall mission and vision of your organization.

4. Develop Specific Processes To Achieve Those Goals

With your strategic goals in place, you’ll want to select the appropriate HCM strategies and tools that will help you reach your objectives. Analyze different strategies, assess their potential impact, and create a detailed implementation plan.

For instance, if improving employee engagement is your goal, you can implement regular performance reviews, establish a recognition program, and work toward a streamlined recruiting, training, and onboarding process.

Document your process in a comprehensive plan that serves as a central reference point for your HCM strategy. This plan should outline your goals, the strategies you’ll use to achieve them, and the specific steps involved in the implementation. Regularly review and update this plan to ensure it remains relevant and effective as your organization evolves.

By gathering data, analyzing effectiveness, setting strategic goals, and developing targeted processes, you can create a powerful HCM strategy that drives organizational success at every level.

Drive Your HCM Strategy with Criterion

To leverage the power of your workforce, you need software designed to support your HCM strategies at scale. Criterion HCM is the perfect solution for any organization looking to empower its employees to contribute to larger business goals.

With HR, payroll, and talent engagement modules connected on a single unified database, Criterion empowers you to put HCM at the center of your operations. You can automate complex payroll rules, manage all human capital data, and nurture employees from onboarding to retirement, all within a single platform.

Plus, Criterion’s open API unlocks even more capabilities by allowing seamless integration with any third-party software. This flexibility ensures you can tailor the system to the unique needs of your organization. It also means you can generate custom reports about virtually any field in the system.

Ready to take your human capital management strategy seriously? Book a demo and discover how Criterion HCM can benefit your organization at every level.