7 Human Capital Management Strategies

Human capital management (HCM) encompasses strategic approaches and practices that maximize the value of an organization’s workforce through targeted investments in employee development, well-being, and engagement. Strategies include critical finance and HR workflows such as payroll management and benefits administration (healthcare, time off, and social security).

Fundamental to human capital management is the belief that employees are more than costs to be managed—they are valuable as individuals, capable of driving innovation, productivity, and competitive advantage. Research indicates that top-performing companies view talent as a strategic investment rather than an expense. Businesses that excel at building skills, creating internal mobility, and maintaining organizational health help employees maximize their potential.

7 Human capital management strategies

Effective human capital management is crucial for organizations aiming to thrive, especially as workforces become increasingly global and diverse. Based on an analysis of 1,800 large companies across sectors in 15 countries, McKinsey’s Global Institute determined that a dual focus on people and performance gives companies the greatest competitive edge.

The following HCM strategies can help organizations optimize human capital—with a more engaged, productive, and resilient workforce—and drive sustainable growth.

1. Develop comprehensive workforce analytics

Employee data analysis is vital for predicting future workforce needs and identifying organizational skill gaps. This information helps companies proactively address potential staffing issues and ensure teams have the right talent in place to meet business objectives.

Workforce analytics should include tracking key performance indicators (KPIs) related to employee performance and engagement. Via KPIs, organizations can:

• Gain insights into productivity trends
• Identify high-performing individuals and teams
• Recognize areas where additional support or training is needed

A data-driven approach allows businesses to make more targeted interventions and more effectively manage resource allocation.

Still, measurement should go beyond mere worker activities and outputs. According to Deloitte’s 2024 report on global human capital trends, only 17% of respondents believe their organization effectively evaluates the value of employees. On a brighter note, 53% reported that their company is beginning to identify superior ways of measuring employee performance and value (beyond traditional productivity metrics).

Workforce analytics should also include payroll and benefits data monitoring to optimize compensation strategies and ensure competitiveness in the job market. This allows companies to make informed decisions about salary adjustments, bonus structures, and benefits packages that help attract and retain top talent.

2. Prioritize employee experience

Employee experience is a critical component of an effective human capital management strategy—an essential priority for attracting and retaining top global talent.

A comprehensive employee experience framework that clearly articulates the company’s shared purpose and values can be highly valuable in this regard. Such a framework can serve as a guiding principle for all employee interactions, fostering a sense of belonging and alignment with the organization’s mission. Research indicates that understanding and managing employee experience can increase employee commitment through improved job satisfaction and psychological well-being.

To improve employee experience, companies are increasingly turning to AI-powered platforms that help personalize the employee journey. These technologies can customize onboarding processes, learning and development opportunities, and even career progression paths based on individual preferences and skills. Organizations can also use journey mapping techniques (often through employee polls or pulse surveys) to measure sentiment at various touchpoints of the employee lifecycle.

A crucial aspect of prioritizing the employee experience is ensuring that fundamental processes—such as payroll and benefits administration—are streamlined and efficient. Employees expect timely and accurate compensation, so companies that consistently meet this expectation build trust and satisfaction. Especially for international companies, investing in a global HR solution can dramatically improve efficiency in this regard.

3. Implement continuous learning programs

Continuous learning programs are a crucial component of any HCM strategy. Organizations that foster a culture of continuous learning are better positioned when facing change, driving innovation, and maintaining a competitive edge.

A comprehensive and continuous learning and development (L&D) program should encompass a variety of formats to accommodate different learning styles and preferences. L&D offerings can include online courses, workshops, mentorship programs, or microlearning initiatives. Additionally, companies should consider training that helps employees understand and make the best use of their benefits.

The importance of ongoing learning for businesses is well-documented. The World Economic Forum predicted that between 2023 and 2028, 44% of global workers’ skills would be disrupted by evolving technology (an increase of nine percentage points from its previous five-year projection). By prioritizing continuous learning, organizations can ensure that their workforce remains adaptable, skilled, and aligned with evolving business needs.

4. Embrace diversity, equity, and inclusion (DEI)

Diversity, equity, and inclusion (DEI) have become a cornerstone of effective human capital management. Beyond the clear moral imperative, DEI is now recognized as a business necessity that drives innovation, enhances employee engagement, and improves organizational performance.

Technology and data-driven approaches can help organizations promote a culture of inclusivity. AI-powered tools are being employed to help reduce bias in hiring processes and performance reviews, ensuring a more equitable evaluation of candidates and employees. Companies are also analyzing workforce data to assess their organizational diversity, identify areas for improvement, and track progress over time.

According to a 2024 survey, employers with pay equity initiatives are 28% more likely than companies without initiatives to report improvements in attracting talent. Ensuring equitable access to benefits and perks across diverse employee groups is another crucial aspect of DEI initiatives. This involves regularly reviewing and adjusting compensation packages, professional development opportunities, and work-life balance policies to meet the needs of a diverse workforce.

5. Focus on employee well-being

When companies prioritize the health and happiness of their workforce, results can include enhanced productivity and reduced turnover rates. Data has shown that global employee health and well-being improvements could create between $3.7 trillion and $11.7 trillion in economic value.

One approach is to implement holistic wellness programs that address both physical and mental health. To complement these wellness efforts, companies can adopt flexible work arrangements to support work-life balance, acknowledging that employees have diverse needs and responsibilities outside of work. In fact, 25% of workers would be willing to sacrifice 15% of their annual salary for flexible working hours.

To further support employee well-being, organizations can implement tools and resources designed to help staff manage stress and maintain overall health. Companies should also recognize the importance of financial well-being by designing competitive benefits packages that support employee health and financial security.

6. Enhance remote and hybrid work models

The landscape of work (and thus HCM) has undergone a significant transformation in recent years, with remote and hybrid work models becoming increasingly prevalent. To adapt to this new reality, businesses need robust collaboration tools and project management systems. These technologies are crucial for productivity and fostering teamwork in distributed work settings.

Other important considerations include team development, communication, and employee engagement strategies. Traditional approaches may not translate effectively to remote or hybrid contexts, requiring innovative solutions to maintain strong team cohesion and individual motivation.

A key challenge in hybrid work models is ensuring equity between remote and in-office employees. Organizations must strive to create a level playing field regarding opportunities for career advancement, access to resources, and inclusion in decision-making processes. Additionally, payroll and benefits administration systems need to be adapted to accommodate the diverse needs of a geographically dispersed workforce, including considerations for different tax jurisdictions and varying work arrangements.

7. Partner with a global HR platform

In today’s interconnected world, partnering with a global HR platform is an essential strategy for human capital management. This approach enables companies to quickly onboard international talent without establishing foreign entities, significantly reducing the time and resources typically required for global expansion.

Companies can also use these partnerships to ensure compliance with local employment laws and regulations across various jurisdictions, mitigating legal risks and avoiding potential penalties.

Global HR platforms can help companies offer comprehensive benefits packages that are competitive in local markets. This is critical for attracting and retaining top global talent, as it demonstrates a commitment to employee well-being.

An effective platform also streamlines payroll processes and helps companies navigate the complexities of international benefits regulations. This centralized approach to managing global workforce operations can improve efficiency, reduce administrative burden, and enhance visibility into global labor costs. By simplifying these critical HR functions, companies can better focus on strategic initiatives and foster a more cohesive global workforce.

How to measure the success of HCM strategies

Effectively measuring the success of human capital management strategies will help organizations optimize their workforce and drive business growth. Here are key approaches to evaluate the impact of HCM initiatives:

Key performance indicators (KPIs) for human capital management

Tracking specific KPIs provides quantifiable insights into the effectiveness of HCM strategies:

• Employee turnover rates. Companies should monitor voluntary and involuntary turnover to gauge workforce stability and satisfaction. A decreasing turnover rate often indicates successful HCM practices.
• Employee engagement scores. It’s crucial for teams to regularly assess employee engagement through surveys that measure workforce motivation and commitment. Higher engagement scores typically correlate with improved productivity and retention.
• Time-to-productivity for new hires. Businesses should track how quickly new employees reach full productivity. A shorter time to productivity suggests effective onboarding and training processes.
• Training ROI and skill improvement metrics. Companies that evaluate the impact of learning and development initiatives can measure productivity gains, cost reductions, and skill advancements resulting from training programs.
• Payroll and benefits efficiency. Teams should monitor the accuracy and timeliness of payroll processing, as well as employee satisfaction with benefits packages.

Collecting feedback

Gathering qualitative insights complements quantitative data and provides a more comprehensive view of HCM effectiveness:

• Employee surveys. Businesses that conduct regular pulse surveys can capture real-time feedback on various aspects of the employee experience. When designing polls and surveys, teams should keep in mind that this employee data has been found to be less effective for detecting change over time or differences between groups.
• Exit interviews. Gathering insights from departing employees can help companies identify areas for improvement regarding retention strategies and workplace culture.
• Focus groups. Small group discussions allow teams to delve deeper into specific HCM topics and gather diverse perspectives.

Continuous improvement

To ensure HCM strategies remain effective and aligned with organizational goals:

• Teams should regularly analyze collected data and feedback to identify trends and areas for improvement.
• Changes should be implemented based on insights gained and their impact monitored over time.
• Companies must stay agile to adapt strategies in response to evolving workforce needs and business objectives.
• Businesses should continuously review and update payroll processes, benefits offerings, and perks to remain more competitive and better meet employee needs.

As organizations evolve their HCM strategies, more sophisticated measurement techniques become necessary to gauge effectiveness. Advanced approaches that provide a holistic view of how HCM initiatives impact various aspects of organizational performance and employee success include:

• Strategic alignment. This approach assesses how effectively the HCM strategy supports an organization’s priorities by evaluating the alignment between HCM initiatives and overall business objectives.
• Capabilities assessment. This method evaluates how well the HCM function helps employees build essential mindsets, skills, and expertise. It involves measuring the effectiveness of learning and development programs, mentoring initiatives, and other capability-building efforts.
• Organizational health. This approach measures the extent to which HCM initiatives strengthen the organization’s overall health and DNA. Factors that can be assessed include corporate culture, employee engagement, and organizational adaptability.
• Individual peak performance. This method assesses how well the HCM function helps employees achieve maximum impact while maintaining work-life balance. It involves evaluating performance management systems, career development opportunities, and wellness initiatives.
• HR Scorecards. HR Scorecards utilize KPIs focused on areas of critical performance to help “direct the business.” These tools provide a snapshot of overall HR performance against strategic goals at specific points in time.

By consistently measuring and refining HCM strategies using these approaches, organizations can create a more engaged, productive, and resilient workforce capable of driving sustainable business success.

Elevating HCM strategies with a global solution

Robust human capital management strategies are paramount for companies looking to attract, retain, and develop top talent globally.

Partnering with a global HR platform like Velocity Global can significantly enhance an organization’s HCM capabilities. With the right solution, companies can streamline international hiring processes, ensure compliance with local employment laws, and offer competitive benefits packages to attract and retain talent. Velocity Global also helps businesses navigate the complexities of payroll worldwide, as well as manage diverse benefit structures across different countries to implement attractive perks that resonate with a global workforce.

As businesses continue to expand globally, the ability to manage human capital effectively across borders becomes a key differentiator. Discover how our team can help.