The Evolution of Human Capital Management: From Traditional HR to Strategic People Operations

As we continue our focus on human capital management (HCM), a brief look at how we’ve reached this point is in order.

The term “human capital” is more than 60 years old, and a book called Human Capital by Gary Becker was published in 1964, but widespread adoption of HCM as an organizational strategy is more recent. In its modern context, HCM is essentially a series of practices built around the idea that an organization’s people are assets, and that investment in those assets should support the strategy and overall mission of the business.

Traditional HR

Human resources (HR) practices have typically focused on administrative tasks and compliance in personnel management. Often these tasks were heavy on manual processes and light on automation and, safe to say, viewed as a necessary evil – the cost of doing business – by many organizations.

HCM takes many of those same tasks and processes and views them through a lens of how they might be adapted to further a company’s objectives; in short, turning those necessary evils into strategies to propel an organization forward. HR and its requisite tasks no longer happen in a silo but become vital components of organizational strategy.

The Shift to HCM

Among the primary drivers of the shift from traditional HR to HCM has been the post-pandemic employment environment. More specifically, organizations have seen the need for new strategies to deal with the remote or hybrid work environment and the huge challenges in attracting and retaining top talent in the current employee engagement crisis.

An HCM-focused strategy addresses these issues by first assessing the alignment of current talent with organizational objectives to better define recruiting needs. Technology takes on a new and larger role in streamlining and focusing the processes of recruiting, hiring and onboarding.

HCM also zeroes in on employee retention, leveraging technology to improve opportunities for training and upskilling, and bringing improvements to performance management and appraisal as well. In an ideal HCM environment, employees understand how their roles contribute to corporate objectives, feel heard, and have opportunities to improve and advance.

HR Metrics to People Analytics

Traditional HR has always reflected certain metrics. Depending on the organization, HR might track retention rates, training expenses or job satisfaction statistics.

HCM works towards a more comprehensive people analytics approach. While the areas being measured might be the same, HCM takes the “what” of traditional HR data points and transforms them into the “why” of how they do or do not support an organization’s objectives. The end goal is not just to know, for example, how many employees completed a training objective, but how to use that data to ultimately improve employee experience and productivity.

Put another way, people analytics uses the data of traditional HR reporting to develop actionable steps that further an organization’s mission.

HCM and Organizational Culture

The traditional HR approach rarely intersects with organizational culture. The focus on tasks and compliance typically lives in its own silo with little thought given to whether it supports or detracts from the culture a company is striving to achieve.

HCM is very much about the alignment of human capital with organizational values. HCM initiatives might simply focus on creating a more positive employee experience and work environment.

The Challenges of HCM

As we’ve seen, a primary component of HCM strategy is to leverage data in new ways to support a company’s mission. New ways of using data bring new privacy and cybersecurity concerns, which must be addressed in the planning of any new strategy.

And with all the focus on supporting and upskilling team members, remember that the HR team might need to be first in line. They will be asked to do things in new ways, with new tools that may present technical challenges. Adequate training and support are a must, as are continuous efforts to remind them of the reasons for the changes. The HR team above all others must understand the “why” of a shift to HCM and how it will ultimately support their work with improvements in hiring, retaining and compliance.