Making HR Strategic: Integrated Human Capital Management Holds the Key

Leveraging Integrated Human Capital Processes to Optimize Organizational Success

A New Strategic Wave

There is a new wave of thinking about what it means to be strategic, and savvy human resources (HR) executives are leading forward-thinking organizations in integrating human capital management (HCM) to optimize organizational success.

Strategic goals can shift depending on the political climate, business demands, and the changing needs of an organization. However, being strategic means being able to make rapid and informed decisions and take the actions necessary that will enable the entire organization to be successful in the long run.

The current economic downturn has forced organizations to do more with less. Budgets have been cut and headcount reduced, while work loads and expectations have increased. Employees have been forced to do their jobs faster, better, and smarter.

However, if an organization loses an employee it can cost up to 150% of the employee’s annual salary to simply replace that individual, let alone the knowledge capital lost. This figure does not take into account the decrease in efficiency and effectiveness of other employees while a position is unfilled or while a new, inexperienced worker gets up to speed. Organizations are realizing that maintaining, nurturing, and retaining their human capital is a strategic requirement that cannot be overlooked.

A Strategy for Long Term Success

Employees hold the organizational knowledge and capabilities to sustain a business. To maintain steady productivity gains and added efficiencies, organizations must look deep into their most important assets – employees – and nurture this talent over the long run.

To achieve this, organizations must take a strategic view of HR data in order to determine performance goals and results, gap analysis, development priorities, provide accurate incentives and rewards for motivation, and identify high potentials and development priorities for succession. While the process of becoming efficient can be unique to each organization, staying efficient is based upon a few basic rules:

— Have the right talent in place and fully trained

—-> Correct skill set
—-> Appropriately trained
—-> Motivated
—-> Aware of how their performance and goals drive the entire organization’s success

— Nurture talent to limit attrition and prepare for future needs

—-> Defined career goals
—-> Personalized training paths
—-> Potential and gap tracking and analysis
—-> Workers compensated in line with performance
—-> Detailed succession plans

Integrated HR Information

The concepts are straight forward; hire good people, ensure they are properly trained, and provide motivation to retain the best employees. While these are seemingly simple concepts, implementing them successfully in a complex organization can be difficult. A key to success is having the right information easily accessible in order to make the right decisions.

Many organizations have tried to solve the HR information problem by automating individual processes, such as performance reviews, compensation, or learning management. However, while automating a single process can garner some improvements, it does little to solve more strategic problems.

Automating individual activities creates silos that isolate information from other users and processes. Creating these standalone databases of information is contrary to the fact that to gain a full view of an individual or group requires keen insight into data that spans different activities.

The full profile of an employee cannot be revealed through just a performance review; it can only be seen when all aspects of his or her employment are viewed. A full profile of an employee must include performance reviews, peer reviews, training history, certifications, awards, career path, compensation and rewards, objectives, hiring information, current job description, and any additional information that is important to the specific organization.

The most effective way to truly gain a valid view of employees and organizational efficiency is by creating a single structure that includes key information from all aspects of the HCM spectrum.

A single vendor solution that integrates all the data from multiple HR processes yields multiple benefits. It captures data from individual processes, such as performance reviews, and can relate that data to other processes, such as training needs or compensation. This enables organizations to understand how one process affects another. For example, organizations can compare the effect of a manager taking a leadership training course to improvements in that manager’s leadership skills based upon feedback from surveys given to his or her direct reports.

Supporting Integrated Processes

Employees have a lifecycle within an organization. Once hired, performance goals are defined and after a period of time, these goals are reviewed and an employee’s compensation could change. Employees could move to a new department or be promoted as they are trained and acquire new skills. All of these events are related and require information from one event to drive another. For example, a goal must be defined if it is going to be measured as part of a performance review, and compensation changes and promotions are, in large part, based upon the results of performance or feedback from peers and direct reports.

In many organizations, the HR department is burdened with the task of manually integrating all this information. In an organization of thousands of people, these tasks can take an entire HR department months to perform even simple processes such as a performance review for each employee. That does not take into account applying the results of those reviews to other processes such as updating each employee’s annual goals or scheduling individuals for training.

Each process has data that feeds it and information that it generates. In the HR area, there are many different processes including:

The following sections in "Making HR Strategic: Integrated Human Capital Management Holds the Key" outline the application requirements for a successful integrated HCM system, including information that is required for each HR process, what information is output from each process, and the source or destination of each type of information.