Human Capital Management - One Size Does Not Fit All

When you were young, your mother undoubtedly told you that you were special and unique… just like everybody else. Human capital management (HCM) is just like that; it’s the same for every company but different. In other words, its aim is to accomplish similar types of corporate goals like decreased payroll, higher employee morale and increased productivity. Still, while the aims may be the same, the policies and procedures meant to accomplish them vary from company to company.

The Fundamental HR Conundrum

For the vast number of companies, payroll is the number one cost and employees are the most valuable asset. Properly managing this “Human Capital” is, therefore, of the utmost importance. Human Capital Management or Human Resource Management, as it is still known in many quarters, combines two of the most ineluctable items on the planet, paperwork and human nature.

In essence, Human Capital managers are asked to wear two hats; the faceless bureaucrat who completes forms in a timely and unassuming manner and the empathetic and understanding counselor who can solve any HR problem. For this reason, HR managers must be both constant and malleable. Constant in their dedication to the accurate and through completion of all appropriate paperwork but flexible enough to understand the vagaries of human emotions.

Automation, Checklists and Responsibility

Computer software and Internet access have become the lifesavers of the Human Capital manager. Real time updates allow them to monitor such processes as payroll, training, deployment and termination. They can monitor and manage every aspect of the HR equation. This practice works well for processes that are understood and have few unusual circumstances.

For more complicated situations, Human Capital Management relies on a set of prospered policies and procedures to guide location or office managers. There is an implicit trust that the managers will remember and execute these procedures properly. Unfortunately, the real world does not always allow special exigencies especially when they pertain to termination or harassment claims.

In its defense, whether deserved or not, Human Capital Management does usually lay the blame for a misstep at someone’s feet. Understandably, this is not the explicit goal but there is no real alternative other than to hold people responsible for performing the functions of their job. Human capital management thus becomes a process of providing the right tools and resources for the managers to enable them to efficiently and properly perform their duties.


In general terms, almost every private sector company has the same stated purpose; to maximize profits, ROI, shareholder value or some other financial metric that indicates that the company is successful. The differences between companies manifest themselves in how companies choose to accomplish those goals. In other words, the aims are the same but methods will be different.

This fact is often most evident in how companies manage their human capital. Different companies will have different needs when it comes to their HR administration. While customization will be needed for every company, a more fundamental question must be answered before deciding on the best approach to human capital management within your company.

Software vs. the Human Touch

It is seemingly irrelevant whether a company is large or small when it comes to their preferences for an automated software solution or a more personable, third party solution. Large companies with thousands of employees need a centralized and readily accessible database of employee information and an
HRIS can provide this ability on a 24/7 basis.

Perhaps surprisingly, an HRIS is just as valuable to a small business owner. Since he is probably the de facto HR expert and his time is more profitably spent on other company business, a well-designed HRIS can provide significant guidance in HR matters and significantly lower the number of questions that the owner must answer.

A Professional Employer Organization can also relieve a company of many of the traditional human capital management tasks. By design, it strictly adheres to the policies and procedures established by the company for dealing with any situation. It does not, however, rely solely on the good intentions of location or office managers. Instead, the best PEO
can implement company policies without further need for input from the executive suite or from the owner. Once apprised of a particular situation, they can essentially dictate to the manager how the process should be handled.

For a large company, this process provides uniformity across departments, locations and geographic areas. For smaller companies, a PEO can eliminate the need for a dedicated and often times, underutilized, HR staff while still providing excellent human capital management resources.

Both approaches have their proponents but each affords significant benefits to a company. An HRIS can be the more affordable option but it also requires more support staff and more oversight. In the final analysis, both provide excellent value and should be evaluated not only on their inherent strengths but on how well they fit the culture of your company.


The benefits to superior human capital management are many. They span the gamut from hiring to firing and everything in between and are evident in every department at every employee level. Here are some of the more significant:

  • Better New Hires

Finding and retaining the right employees is the essence of human capital management. Every other aspect of the process builds on this initial step. As such, the selection of new hires from applicants is paramount and much attention should be given to the selection process. Pre-hire tests, prescreening, and interviews are essential ingredients in the process and should not be overlooked or dismissed.

  • Faster, More Complete “Onboarding”

An HRIS or PEO can essentially guarantee that all paperwork and company procedures are followed before an employee is actually allowed to “work.” Proper onboarding or new hire orientation can make all the difference between a befuddled new employee who drains resources and a confident one that contributes to the effort.

  • Increased Compliance

It is imperative for a successful resolution that the proper paperwork be filled out and archived for every employee. Government agencies conduct audits and legal representatives make discovery demands that must be met in a timely manner. Both an HRIS and a PEO can significantly aid in this task.

  • Proper Training at the Proper Time

In many cases, training is overlooked in the interests of expediency. A “warm body” is needed to fill a vacancy and once that goal is accomplished the employee is left to languish in an under-trained and underutilized situation. The problem is only compounded when other employees must pick up the slack for the new employee. Eventually, everyone suffers. It is a lose-lose situation. Instead, ensuring the proper training at the proper time yields increased productivity, higher morale and lower employee turnover.

  • Fewer Harassment and Bias Claims

One of the more important aspects to human capital management is dealing with disgruntled employees. Whether the claim is unjustified termination, sexual harassment or any of the other reasons that people give for feeling maltreated, managing the situation in an unbiased manner is of paramount importance. The utilization of a strict set of policies guided by an HRIS or implemented by a third party PEO is one of the surest routes to a fair and impartial decision.

While an HRIS can provide some cover for a manager who must undertake a difficult decision, a PEO also provides a buffer between management and employees in difficult situations. In particular, terminations are a trying time for managers and for the remaining staff.
PEOs provide an objective and non-emotional platform where employees can obtain information and report grievances. As there are no personal ties between the PEO staff and the company, decisions will be seen as impartial and unbiased.

  • Increased Bottom Line

The benefits of a superior human capital management system will manifest itself in very real terms. Lower UEI premiums, lower training costs and fewer legal bills are just some of the more evident savings. On a less tangible level, employees will be happier and thus more productive, they will make your customers happier and more willing to buy and they will require less support and thus less staff. In every industry and for every size of company, better human capital management has been the fastest, most sure way to an increased bottom line.

The Future

No one knows the future but if death and taxes are inevitable so is increased government intrusion into your business. Count on them to increase the paperwork demands, make more audit requests and to more strictly scrutinize your business decisions regarding your employees. The most prudent course of action is to be prepared. Documents must be properly completed, archived and readily available.

About the Author
Carolyn Sokol is a founder of which helps match small businesses with the right
PEO company for their unique business needs. Her background is in marketing and communications, employee education and training, development of policies and procedures and the ongoing delivery of outstanding customer service.

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