Ch. 10 - Human Capital Management

Human Capital

The set of skills, competencies, knowledge, and attributes employees bring to a company and develop through experience.

Recruit-to-Retire Process

1. Recruit candidates.

2. Hire employees.

3. Assign roles and positions.

4. Manage compensation and benefits.

5. Track time and attendance.

6. Manage employee performance and development.

7. Plan careers and succession.

8. Process retirement or termination.

Employee performance management cycle

1. Clarify expectations.

2. Set short-term and long-term objectives.

3. Provide continuous feedback.

4. Review results.

5. Reward or develop based on performance.

Outsourcing HCM key risks

1. Lower-quality HR services.

2. Data breaches or fraud.

3. Loss of internal control over employee-related functions.

4. Dependency on third-party compliance and security.

Human Capital Management (HCM)

Practices used to recruit, manage, develop, and optimize employee value.

Recruit-to-Retire Process

The employee lifecycle from recruitment through retirement, managed by HCM modules.

Recruitment Management Module

Used to attract candidates and convert talented individuals into successful hires.

Personnel Administration Module

Captures employee master data such as demographics, skills, roles, assignments, promotions, and terminations.

Compensation Module

Aligns compensation programs with business objectives and motivates workforce.

Compensation

Monetary value for work per company policies; includes fixed pay, life-event pay, and variable pay.

Job Pricing

Process of determining what an employee should be paid.

Time and Attendance Module

Tracks hours worked, start/end times, sick days, personal time off; internal control against "buddy punching" using smart time clocks and geofencing.

Payroll Module

Processes periodic payroll calculations, taxes, benefits, deductions; manages direct deposit; must be separate from checking for internal control.

Required Inputs for Payroll

Employee master data, hours worked, benefits, and deductions.

Benefits Module

Manages employee benefits such as medical insurance, retirement plans, HSA, and flexible spending accounts.

Applicable Large Employer (ALE)

Organization with 50+ full-time workers; must provide benefits under U.S. law.

Succession Planning and Development Module

Targets high-performing employees for key roles and supports overall employee development.

Succession Planning

Process of identifying and developing talent to replace key positions when vacant.

Bench Strength

Measures readiness of individuals to step into critical roles; part of succession planning.

Talent Pipeline

Pool of individuals ready to fill linchpin positions; part of succession planning.

Learning Management Module

Provides employee training using on-demand, role-based, and passive/active learning methods.

Employee Performance Management Module

Ongoing communication process between supervisor and employee to align goals and improve performance.

Performance Management Activities

Clarifying expectations, setting objectives, providing feedback, and reviewing results.

Employee Performance Management Functionality

Establish performance goals, evaluate through appraisals, reward or address performance, create development plans.

Career Planning Module

Enables employees and managers to set upward mobility goals and career plans.

Talent Profile

Contains employee skills, competencies, education, credentials, achievements; updated through Career Planning module.

Career Planning vs. Succession Planning

Career planning is employee-driven for mobility goals; succession planning is company-driven for key role replacement.

HCM Analytics

Application of statistics, modeling, and employee factor analysis to improve business outcomes; also known as people analytics, talent analytics, or workforce analytics.

Descriptive Analytics

Historical analysis explaining why something happened; type of HCM Analytics.

Predictive Analytics

Uses statistical models to forecast future outcomes; type of HCM Analytics.

Prescriptive Analytics

Provides recommendations based on predictions; type of HCM Analytics.

Employee Self-Service (ESS)

Allows employees to handle tasks like benefits enrollment and data updates, reducing HR staff burden and improving communication.

Manager Self-Service

Empowers managers to make tactical and strategic decisions in areas such as compensation, staffing, and budgeting.

Outsourcing HCM Functions

Contracting HR activities to third-party service providers (professional employer organizations or PEOs).

Professional Employer Organization (PEO)

Third-party service provider that assumes management of HR administrative responsibilities and risks; establishes a co-employment relationship.

Reasons for Outsourcing HCM

Reduce costs, streamline HR processes, improve efficiency, access specialized expertise.

Top Outsourced HR Function

Payroll.

HCM Outsourcing Risks and Fraud

Includes lower-quality service, risk of ghost employees, commission fraud, and falsified work hours; strong internal controls are necessary.

Ghost Employees

Fraud where fake employees are added to payroll, often due to lack of segregation between Personnel Administration and Payroll modules.

Commission Schemes

Fraud where inflated commissions are paid through fabricated or exaggerated sales invoices.

Falsifying Hours

Fraud where employees alter reported hours in Time and Attendance modules to boost pay.