Radically Human: Redefining HCM

HCM is evolving with the times.

As defined by Gartner, Human Capital Management (HCM) is a set of practices focused on the organizational need to provide specific competencies in three categories: workforce acquisition, workforce management and workforce optimization. The discipline has changed significantly over the course of the last decade, driven in large part by advances in technology and the changing expectations of the workforce.

The first phase of HCM was about the automation of payroll, benefits administration, recruiting and onboarding, and other HR processes, with the goal of consolidating everything into a more comprehensive digital database. While this was certainly necessary and useful, HCM 1.0 simply replicated paper-based systems without fundamentally changing them.  

This was soon replaced by HCM 2.0, which integrated enterprise resource planning and other talent management features, in an attempt to streamline processes and improve efficiency across the organization. HCM 2.0 also started to build upon the popularity of social media to include new types of communication tools and gamification features.

Now, people are talking about next-generation HCM 3.0, which is moving software platforms into the cloud, and opening up a new realm of real-time analytics. The market has been flooded with a host of new software platforms and applications that utilize AI and machine learning to measure employee productivity, offering metrics on the way employees spend each moment of every day. Many of these tools, either intentionally or not, place individuals and teams into competition with one another, operating from the underlying belief that if employees demonstrate greater productivity, it will translate into better business outcomes.

The economics of talent

According to SHRM, many of the changes we’ve seen in HCM over the last decade are due to a reversal of supply and demand of talent in the workplace:

“Ten years ago, companies surveyed by the SHRM Foundation said their top future challenges were succession planning and providing leaders with the skills needed to be successful. Today, employers say the increasing competition for skilled workers is a top concern. As a result, the workplace is much more employee-focused and individualized. That’s pushing employers to, among other things, provide flexible schedules to people with family obligations or give tuition help to entry-level workers so that they can get a new job — somewhere else.”

Josh Bersin, of Bersin by Deloitte, believes that employees can be viewed as “appreciating assets” that produce increasing value to the organization over time. This explains why losing them is so expensive. According to Bersin, the cost of losing an employee can range from tens of thousands of dollars to 1.5–2.0x the employee’s annual salary.

Jack Altman, CEO of Lattice, has created a simple formula: The cost of employee turnover is equal to the number of regrettable departures multiplied by the average cost of those departures. As an example, he offers, “If you are a 150 person company with 11% annual turnover, and you spend $25K per person on hiring, $10K on training and development, and lose $50K of productivity opportunity cost on average when refilling a role, then your annual cost of turnover would be about $1.57M. Reducing this by just 20%, for example, would immediately yield over $300K in value. And that says nothing of the emotional headache and cultural drain felt from losing great people.”

So, in order to be effective, HCM 3.0 needs to help organizations retain great talent and truly engage employees. This will require designing processes and utilizing tools that match the current needs of the workforce, rather than merely mirroring how things have always been done, and measuring their efficacy. 

One effective way to do this is to eliminate the annual performance review in favor of ongoing, continuous feedback. According to SHRM, 85% of millennials would feel more confident in their current positions if they had more frequent performance conversations with their managers.

Is it time to retire the term “HCM”?

Perhaps HCM is missing the point. After all, employees are people, not capital. Relentless measurement may help to produce bar charts and graphs, but measurement alone will not increase engagement and, in turn, business outcomes. If we want people to make a commitment to their employers and give them their best, we need to find a way to make work more human.

Let’s face it, what gets measured doesn’t always get done. Real productivity comes from having a sense of purpose at work. If you think back to a time when you felt most engaged at work, it likely did not result from fear of being perceived as unproductive, nor did it come from a deep desire to upstage your co-workers. In many cases, the key motivational factor for employees is having a shared sense of purpose with their organization, a feeling of empowerment to do great work, and a sense of confidence that their work will be recognized and valued by other human beings they care about.

The most effective way to cultivate a sense of purpose is to begin with employees themselves, by asking them for their thoughts and opinions. People need to be able to personalize their roles and contributions, based on their own unique core values. A one-size-fits-all approach to engagement cannot possibly work for everyone.

Research shows that engaged employees produce better outcomes, and businesses with a high level of engagement report up to 4x higher levels of success. According to a recent meta-analysis conducted by Gallup, business or work units that score in the top quartile of their organization for employee engagement nearly double the odds of success, in comparison with those in the bottom quartile. These business units have up to a 41% reduction in absenteeism, a 20% increase in productivity, up to 65% less turnover, 48% fewer safety incidents, and 41% fewer quality incidents. Highly engaged business units also achieve significantly higher customer loyalty ratings and a 20% increase in sales.

Relating to employees as human beings is the only way to cultivate true employee engagement and more successfully drive performance at the individual level and for the organization. Rather than focusing on HCM 3.0, it’s time to embrace a new model of human-centered organizational advancement, one that enables employees to keep themselves motivated to achieve highly personalized goals. Under this new model, successful management will employ radically human technology that supports people-to-people connections, elevates the voice of employees, and enables insight-directed action at both an individual and organizational level.

Do you want to get the most out of everyone who works for you? Waggl can help by providing an easy and efficient way to make work more human.  If you are interested in learning more, please get in touch with us today.