When it comes to managing the human assets of a company, there’s a new game afoot. If you’re not familiar with Human Capital Optimization – how businesses are making their employees more effective – learning about it can give your company the tactical advantage in today’s complex world. Indeed, here are five rather important things to know when you consider the move.
Human Capital Optimization
In recent years, companies have begun to replace Human Resources Management Systems (HRMS) with a new concept called Human Capital Optimization (HCO). This is a term that refers to a combined process that incorporates employee records with talent management. Employee records have not changed. Employee records still consist of the information that employers need about an employee or potential employee when looking to make hiring/retention decisions based on data. The talent management component of HCO, however, is new. HCO has several sub-components: recruitment, performance management, learning modules, compensation management, and other modules that relate to recruiting, training, and retaining employees.
The Federal Government began using Human Capital Optimization management practices following the President’s memo regarding employee hiring and management reform in May 11, 2010.
The Goal of Human Capital Optimization
The goal of this new integrated hiring and retention process is to improve labor productivity, increase assets, and improve the company’s competitive margin against its competitors. To accomplish these goals, a HCO system restructures its processes, implements organizational changes to increase employee satisfaction and encourage loyalty to the company, and engages in talent management.
Talent management matches the skills of each employee to the skills needed in every job in the company in order for the company to make the right selection and for the company to become sustainable over the long-term.
Five Steps to Accomplish Human Capital Optimization
The following five steps are the keys to a successful venture into Human Capital Optimization.
- Who?: The right employee
- What?: The right job
- When?: The right time
- Where?: The right location
- Why?: The right price.
So, what does that mean in practical terms? There are several avenues your company may choose to pursue. It may mean reducing the number of outsourced workers or eliminating unproductive workers. It may mean the company must reorganize or downsize. It may also mean avoiding vacant positions (voluntary or otherwise) which lead to loss of time and money.
What goes into the optimization process
You must understand that to put optimization into practice requires complete acceptance by your company’s managers. They must commit to securing the company’s goals and enforcing accountability of their employees.
The decision-making process consists of three components, as shown in the following example:
Choose a target that fits the organization’s mission/strategy:
– Maximize worker distribution
Recognize the decision variables:
– allocate # of a certain type of employees to a particular location
Plug-in constraint variables:
– cost, supply, demand, time or season, specific job site location.
– Use only very clean and accurate data to create a conceptual model.
– Ideally, the data should have historical depth and relevance to the target.
The next step in the process turns your conceptual model into an analytical model which relies on mathematics to analyze the data. Good analytical modeling requires you to balance realism with what you find works. Remember, too, that you must continually update your analytical model and validate the results.
Software for Human Capital Optimization
It is difficult for many organizations to analyze the data that underlies good decision-making in Human Capital Optimization. Luckily, there’s help available. Specially designed software can help employers by providing germane, comprehensive information based on predictive analysis of employee data. Employers can use such information to drive strategic planning and tactical hiring/retention decisions.
To talk more about this, please contact us for a free needs analysis, and see if optimizing your human resources is something that fits in with your strategies.