What Does Human Capital Management Mean?

If you work in the HR space you’ve likely heard the term human capital management or even tossed it around yourself. But the term can also feel a bit like jargon — what does it actually mean? By definition, human capital management is the practice of recruiting, hiring, developing, and managing your people in order to maximize productivity and business outcomes.

So let’s break down the different components of this definition and identify what it looks like to implement and execute a great human capital management strategy.

Components of effective human capital management

As noted above, human capital management encompasses any process, policy, or technology you use to recruit, hire, manage, and retain your employees. A great strategy will optimize all of these aspects with a human-first approach so that you drive the best possible results for your organization — whether that’s sales, customer satisfaction, or patient outcomes. Here’s a closer look at each of these components.

Recruiting

A great recruiting strategy will focus on quality-of-hire. Yes, you always want to have a good volume of applicants and candidates in your pipeline but if none of those people are the right fit for the role, your organization’s productivity and outcomes will take a hit. 

So when building a recruiting strategy you want to focus on the channels that will maximize the quality of your applicants. According to a recent Hireology study, the top sources of quality hires include employee referral programs, job boards, and in-person recruiting via job fairs or relationships with local schools. While it may be tempting to allocate the majority of your budget to job boards, it’s important to make sure you have a good mix of these three (or others if you find success elsewhere) to ensure that you’re setting your team up for success.

Hiring

The key to effective and successful hiring is cutting down time-to-hire. Of course you want to make sure you’re always moving forward with the right candidates, but you want to set yourself up to do it fast. Why? Because today top candidates still have plenty of options for work, and chances are they’ll take the first offer presented to them. So you need to position yourself to act fast on the very best candidates that come through your pipeline.

To hire fast you need clear hiring process steps combined with the right technology. Outline exactly what your team should do next for any candidate that comes through the door and how fast each step should take. From there, enable them to act fast by providing them with the right tools. The best hiring software will include everything your team needs to vet candidates, communicate with talent, schedule interviews, and more — all within one intuitive platform. 

Onboarding

You’ve recruited quality candidates and moved them through a fast and efficient hiring process. Now it’s time for onboarding. This is a critical component of a great human capital management strategy because it sets the stage for your new hire’s experience at your organization. Studies show the better the onboarding experience, the more likely an employee is to be productive and stick around long-term.

Great onboarding starts before an employee’s first day. Give them the option to read and sign all necessary documentation, select any benefits, and access the company handbook or other pertinent information. That way, by day one the administrative work is out of the way so you can train them and get them integrated into your team faster. During the first week, the onboarding process should include necessary training, orientation to tools and processes, introductions to relevant team members, and a general warm welcome.

Managing and developing

Another key component of great human capital management is the practice of developing your talent. While you may be confident you hired the very best person for the job, you still want to do everything you can to help that person hone their skills, gain new experiences, and generally remain happy and productive on your team. 

One of the most effective management techniques a hiring manager can use to accomplish this actually starts during onboarding: the 30-60-90 day plan. A 30-60-90 day plan is a brief (2-3 page) document that summarizes the specific, measurable, and actionable outcomes that a new hire will commit to achieving at 30, 60, and 90 days on the job. It gives the new hire very clear goals to work toward so they feel they know what is expected of them and where to focus their time and efforts. And it gives the hiring manager a chance to set those expectations, while also defining a rubric to use for feedback and coaching moving forward.