What is a Human Capital Strategy?
What is a human capital strategy, why do you need it, and how should you formulate it? Discover why a good HR strategy is key to your success.
Human capital strategy includes structured hiring and development processes.
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Summary
- Human capital strategy outlines resources needed to achieve business goals - Based on workforce planning and supported by talent management systems, it defines the specific human resources and skills your organization needs to execute its business strategy successfully
- Succession planning prevents dependence on single individuals - Life is unpredictable, so no business should be crippled by the loss or absence of certain key staff - your human capital strategy must address this vulnerability immediately
- Retaining staff saves money and provides continuity - Employees who know the business well eliminate new hire learning curves, and engaged employees who find their jobs rewarding produce better results because they care about where the business is headed
- Training must align with strategy, not be random - Training for the sake of training is a dead-end street - your human capital strategy guides where to invest development dollars to benefit both employees and business. Need help with HR planning?
Having a sound business strategy matters, but who is responsible for carrying it out in order to fulfill an organization’s goals? HR processes come up in about 58 of our customer conversations at Tallyfy, and this question trips up even seasoned executives. A large regional bank we spoke with estimated that employees waste approximately 30% of their time on handoffs, tracking, and email within routine processes. Their HR team struggled to balance workloads across 150 to 200 users while ensuring policy compliance and document version control.
A human capital strategy is a strategy that outlines the human resources and skills needed to allow an organization to achieve its goals. It’s based on workforce planning and is supported by talent management systems.
Worksquare founder Vanessa Bartram values her employees and the culture that she has created, acknowledging the competitive advantage it gives her firm: ‘Corporate culture and employee attitude breeds success and client satisfaction.’
— Renata Hron Gomez (Forbes)
Without a team of people with the necessary skills to execute your business strategy, achieving your goals won’t ever be more than a pipe dream. So, what should this team look like? Since your business is unique, the team you need will differ from anyone else, but without giving your human capital strategy sufficient thought, your carefully laid plans will fail.
Plan ahead
No business should be dependent on the efforts of one person, even if that person is a key staff member or manager. Life is unpredictable, and there’s no knowing what tomorrow will bring.
That’s why succession planning also forms an important part of your human capital strategy. If your business is likely to be crippled by the loss or absence of certain key staff (including you), your human capital strategy needs urgent attention.
Then there’s also the matter of general HR planning. Your human resource strategy closely follows your business strategy, so it provides a framework for the present and plans ahead for milestones in your business development.
And of course, there is normal attrition, when people move on and you wind up with a vacancy to fill. How will you choose the right person?
Recruit and retain
If you have a new business, you are in an unmatched position to determine your human capital strategy. You should complete this process before you hire a single staff member.
And once you have assembled a group of people who have what it takes, your next question is how to keep them working for your organization.
Existing organizations, however, cannot rest on their laurels. Does your current team have the wherewithal to realize your business goals? If not, what will you do?
You could recruit new people, but if you have staff with high potential who are a good fit for your business culture, training may be a better solution. After all, they already know all the inner workings of the company.
Retaining staff is important for continuity, and it saves you the cost of new employee learning curves. Keeping staff members who know the business well saves you money.
Retaining staff means boosting employee engagement so that your employees find their jobs rewarding and meaningful. If your employees find personal satisfaction when they work for you, you will not just get to keep staff.
You will find them striving harder and producing better results because they care about the business and where it’s headed. But as you can imagine, reaching this point requires a clear plan of action and has its costs.
Your human capital strategy sets your HR investment priorities
Just paying salaries and wages already requires a substantial budget, but if your people are not growing, your business will not grow. The more versatile and skilled your employees are, the less vulnerable your business is to the loss of the occasional staff member.
In addition, employees are motivated by opportunities for personal growth, and motivated employees do better work, are more reliable, more likely to stick with your company, and have the capacity to improve your profits as a result.
“Training for the sake of training” is a dead-end street, but a surprisingly large number of organizations make this mistake. In our experience, targeted training tied to specific business outcomes delivers far better results. We worked with a genomics laboratory that had annual compliance training covering 10 distinct areas, from fire safety to research misconduct. Previously, HR had no visibility into who completed what. After implementing trackable workflows, they could see exactly which employees had acknowledged each policy and chase outstanding items before audit deadlines. With your human capital strategy to guide you, it will be easier to see where your business should be investing its training and employee development bucks in a way that will benefit, not only your employees but your business too.
How to formulate a human capital strategy
- Identify the goals your human capital is to be aligned with
Because the human capital strategy springs from the overall business strategy, the first step in formulating it is to take an overall look at the vision, mission, and values of the company. Now that you have formulated or revisited these and have ensured that they really reflect what you want to achieve, it’s time to start looking at the processes and people that will make it happen.
- What are the processes or tasks that directly or indirectly contribute to business goals?
Begin with the processes, and if you are re-engineering business systems, try to start with a blank slate. How do the processes you have identified within your business work towards your business goals? Which are core processes and which are vital support processes without which the core processes will be unable to function? Are these processes as efficient as they could be?
- What key performance areas and indicators would be used to measure performance?
Now that you know the “what,” it’s time to look at the “how.” What would key performance indicators show that each department, and each person in each department or process area, is working towards your business strategy? At this stage of the process, you should not be thinking about existing employees and their skill-sets, but remain focused on the tasks themselves. What would be the ideal case scenario? What skills and traits should employees performing each role have?
- Who will fill the posts effectively?
You now have a profile indicating what type of person would fit into each role, and you are ready to either begin recruiting or assigning existing staff to positions. If you are working with existing employees, you may find that there are skills gaps. This isn’t reason for despair. It’s an opportunity to start devising the recruitment strategies or individual career path plans that will help you to reach your business goals through your human resources.
All strategies begin with a current situation and plot a course towards the desired situation with milestones to measure progress along the way. A human capital strategy is no different. Set SMART goals, track progress and take corrective action periodically.
Ready-to-use HR workflow templates
How Tallyfy contributes to your human capital strategy
You cannot consider human resources in isolation. People are appointed to perform processes, and the way you design and implement processes will be the primary pointer towards the type of people you should be employing to get them done.
Mapping out processes can be complex and time-consuming, but with Tallyfy, designing, redesigning or tweaking processes is much easier. That’s the key.
Remember those key performance indicators we talked about earlier? They form the basis of how you will measure progress, and communicating these criteria is essential. Again, Tallyfy allows you to indicate what is expected.
Tallyfy also helps with performance tracking and measurement, providing hard evidence of how various functions in your business are working and fitting in with parallel processes.
This, in turn, feeds back to your human capital strategy, allowing you to determine whether functional groups probably need additional interventions. For example, it will point towards areas where you may have understaffed, or where the process may need revisiting.
In short, you can see what is running smoothly and what is not, allowing you to investigate and resolve performance issues much more effectively.
Informing your human capital strategy is just one of the many reasons to choose Tallyfy, but what all the reasons all have in common is the pursuit of ultimate efficiency and continuous improvement that allows your business to reach new heights.
About the Author
Amit is the CEO of Tallyfy. He is a workflow expert and specializes in process automation and the next generation of business process management in the post-flowchart age. He has decades of consulting experience in task and workflow automation, continuous improvement (all the flavors) and AI-driven workflows for small and large companies. Amit did a Computer Science degree at the University of Bath and moved from the UK to St. Louis, MO in 2014. He loves watching American robins and their nesting behaviors!
Follow Amit on his website, LinkedIn, Facebook, Reddit, X (Twitter) or YouTube.
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