Discover the differences between Workforce Management and Human Capital Management, and learn how they deliver business value.
What is Workforce Management (WFM)?
Workforce management encompasses various activities, processes, and tools that, when used together, aim to help increase an organization’s efficiency. It might sound complicated, but it essentially involves effectively managing a company’s human resources. This includes forecasting labor demand, creating appropriate work schedules, tracking attendance, and managing leaves – all in compliance with laws and regulations. Learn more about what is workforce management (WFM).
Why is Workforce Management Important?
Workforce management is important because it:
- Boosts Efficiency and Productivity: By optimizing employment levels and ensuring proper task allocation, you can manage workloads more effectively and avoid situations of overstaffing or understaffing.
- Ensures Compliance with Regulations: A well-implemented and configured WFM system helps to ensure compliance with regulations concerning working hours, breaks, overtime, and leave entitlements.
- Increases Employee Satisfaction Level: Fair and transparent planning that accommodates employee preferences where possible, and efficiently managing leave requests, leads to higher employee satisfaction, lower turnover, and improved team morale.
- Facilitates Forecasting and Planning: WFM tools allow for forecasting future staffing needs based on historical HR data, current trends, and predictive analysis, facilitating more effective workforce planning and budgeting.
- Enhances Adaptability: Effective workforce management provides the organization with the flexibility to respond to unexpected changes in demand or staffing. Real-time analysis capabilities help managers make informed, data-driven decisions.
- Improves Performance Management: Organizations can easily identify areas for improvement, implement corrective programs, and reward top performers, as they have access to detailed analyses of employee data and information on the status of established KPIs.
What is Human Capital Management (HCM)?
Human Capital Management (HCM) is a comprehensive approach to managing an organization’s employees, recognizing employees as the company’s capital. What does this actually mean? It means that the company employs development and management strategies that strengthen this capital and invests in it to gain the appropriate business value.
HCM encompasses recruitment, talent management, learning processes, performance management, compensation and benefits management, workforce planning, succession planning, and employee retention strategies. Learn more about what is Human Capital Management (HCM).
Why is Human Capital Management Important?
Human Capital Management is important because it:
- Ensures Strategic Management of Employees: Human Capital Management aligns human resource policies and practices with overall strategic goals, enabling organizations to more effectively achieve these goals.
- Attracts and Retains Talent: HCM strategies create an environment where employees can identify with the organizational culture, develop their careers, and receive competitive compensation. This helps to attract, develop, and retain the best talent in the company.
- Improves Productivity: By clearly setting goals, regularly assessing performance, and providing feedback, HCM allows for optimizing employee productivity and aligning individual goals with organizational goals.
- Supports Learning and Development of Employee Skills: HCM activities related to bridging skill gaps, providing professional development for employees, introducing innovative learning methods, etc., build a competent and versatile workforce for the company, capable of adapting to changes and taking on new challenges.
- Enables Data-Driven Decision-Making: HCM uses accurate data analysis to identify trends and predict future staffing needs, which facilitates strategic decision-making for management.
- Ensures Compliance and Facilitates Risk Management: HCM solutions facilitate compliance with regulations, significantly reducing the risk of legal problems related to unethical or illegal actions within the company.
- Builds Engagement and Positively Affects Employee Satisfaction: Human Capital Management activities focus on the needs and well-being of employees, which improves engagement and job satisfaction, reduces high turnover, and builds a positive company image.
Human Resources VS HCM and WFM
Key Differences Between Human Resource Management, Human Capital Management and Workforce Management
Human Resource Management (HRM), Human Capital Management (HCM), and Workforce Management (WFM) are all components of organizational management, each focusing on different aspects of managing employees and organizational resources. Here’s a quick overview of each term and their key differences:
Human Resource Management (HRM)
Focus: It encompasses a broad range of functions including recruiting, hiring, training, performance management, employee relations, compensation, and benefits administration.
Goal: The main goal of Human Resource Management is to maximize employee performance to meet the employer’s strategic objectives.
Scope: Human Resource Management deals with people management within the organization and focuses on policies and systems that affect all employees. We can say that it’s the traditional approach to managing people in an organization.
Human Capital Management (HCM)
Focus: Human Capital Management views employees as assets (capital) whose current value can be measured and whose future value can be enhanced through investment. It integrates HRM functions but with a greater emphasis on strategic management.
Goal: The goal of Human Capital Management is to develop and manage the organization’s workforce to achieve the best possible return on investment in human capital.
Scope: Human Capital Management covers the talent acquisition, overall management, and optimization of the workforce, including talent management, workforce planning, learning and development, and succession planning. Let’s say that it’s a more modern approach than HRM.
Workforce Management (WFM)
Focus: Workforce Management is more operationally focused and deals with the day-to-day management of company’s employees. It involves ensuring the right number of employees with the right skills are in the right place at the right time to meet the organization’s immediate operational needs.
Goal: The main goal of Workforce Management is to optimize the productivity and efficiency of the workforce while considering labor costs, compliance, and employee satisfaction.
Scope: Workforce Management includes employee scheduling, time tracking and attendance tracking, time-off requests management, and forecasting labor demand.
Deciding on the Right Term: Human Resource Management, Human Capital Management, or Workforce Management?
Different HR systems are designed for various types of organizations, and as usual, the choice between them depends on the specific needs of the organization.
📌 Human Resource Management is suitable for organizations looking for a broad, traditional approach to managing all aspects of their workforce.
📌 Human Capital Management system would be ideal for organizations that view their employees as strategic assets and are focused on long-term investments in their workforce to drive growth and competitiveness.
📌 Workforce Management systems are best for organizations that need to optimize operational efficiency on a day-to-day basis, focusing on the practical aspects of managing work schedules, labor costs, and compliance issues.
In practice, many organizations may find that a combination of these approaches is necessary to address their comprehensive workforce management needs effectively. The integration of these functions can help organizations align their workforce strategy with their overall business strategy, ensuring that they manage and maximize the value of their human resources.
How Can HCM and WFM Benefit Your Company?
Let’s explore the benefits that both solutions can offer your company:
Human Capital Management (HCM):
✅ HCM systems streamline your recruitment process, simplifying the attraction, hiring, and onboarding of new employees. Automation in tracking candidates and evaluating them saves time and reduces labor costs and ensures an efficient recruitment process.
✅ These platforms facilitate the onboarding process for new hires, enabling quick integration and access to employee training. Moreover, they allow for the tracking of employees’ skills and competencies, supporting continuous training and development.
✅ HCM includes automated performance monitoring systems that enable regular and objective assessments, providing feedback and assisting employees in setting and achieving their goals. Analytical data helps identify high-performing units and pinpoint areas for improvement.
✅ Tools within HCM solutions for collecting employee feedback and conducting engagement surveys enable organizations to measure and enhance workplace satisfaction. Implementing recognition and reward programs can further elevate team morale and motivation.
✅ By analyzing data on employee satisfaction and other factors, the HCM system aids in identifying and addressing the causes of employee turnover. Insights from the platform support the development of effective employee retention strategies.
Workforce Management (WFM):
✅ WFM tools aid in creating efficient employee schedules by considering accurate demand forecasts, employee availability, and skills. This results in more effective forecasting of future workforce requirements, prevents overstaffing or understaffing, and helps to lower labor costs.
✅ Automated time-tracking systems accurately capture employees’ working hours, eliminating errors and deterring time theft. Integration with payroll systems ensures efficient processing of payments, including overtime.
✅ WFM ensures compliance with labor laws, regulations, and industry standards through automated monitoring and reporting. This is crucial, especially in industries requiring specific competencies, such as healthcare, ensuring that your workforce maintains necessary qualifications and certifications.
✅ Enhanced visibility into employee activities through WFM allows for better resource allocation and workload balancing. Quickly identifying process and workflow inefficiencies leads to improved overall productivity.
✅ WFM supports labor cost control by optimizing schedules, managing overtime, and minimizing unnecessary expenditures. Real-time data on resource utilization facilitates effective budget planning.
Both HCM and WFM can significantly improve productivity in your company and aid in better resource management. Before investing in any system, it is crucial to clearly define your main priorities and key performance indicators. Consider what is most important to you: improving workforce management, focusing on the employee experience, or seeking a solution that integrates seamlessly with existing systems?
What Are the Challenges of HCM and WFM?
It’s never as straightforward as the management selecting a solution and the employees giving it enthusiastic applause. Typically, various problems and challenges arise, either related to system integration, service, or team alignment. Here are a few challenges that it’s better to address and work on before making the final software provider selection:
Resistance to Change
In reality, people don’t like change. Switching to an unfamiliar system just like that? No way! The solution to this issue will be to precede system implementation with thorough pre-boarding and training, which highlights benefits for employees, such as greater accuracy in calculating overtime or faster approval of leave requests. It’s also crucial to clearly emphasize that the new system helps you stay compliant with labor laws and union agreements. Preparing a team to manage the new technology, acting as ambassadors for the new solution in both the Human Resources department and other operational areas of the company, is an important aspect as well.
Data Security and Privacy Issues
Implementing WFM or HCM software requires careful preparation to properly manage sensitive employee records, ensuring there’s no fear of data being stolen or publicly disclosed. Compliance with regulations is key to avoiding legal consequences. It’s also essential to consider the need for system updates with changes in laws and determine whether these updates are free or come at a cost, as this significantly impacts investment budgets.
Integration Complexity
Ensuring compatibility, data synchronization, and a unified user experience can pose technical challenges. Therefore, choosing an experienced provider with good reviews can be crucial. The number of available integrations (both paid and free) will also play a significant role in the quality of working with the system.
Costs
Initial and ongoing operating costs of integrating an HCM system or WFM solution can be substantial. Therefore, a crucial step is a careful assessment and allocation of resources to cover software costs, training, and infrastructure.
Customization and Flexibility
Finding a balance between the need to customize the system to specific organizational needs and ensuring smooth integration of WFM HCM solution functions, can be challenging. In this case, it’s worthwhile to seek the opinions of other users and confirm how the implementation process goes, how long it takes, and how data migration occurs, etc. This can help the company better prepare for a challenging transitional period.
Addressing these challenges will require a strategic approach, sensible planning, and maintaining transparency in communication between relevant departments of the company. Above all, it will require increased grassroots efforts, involving all employees, so that experiences from the implementation of the new system quickly become pleasant memories rather than a nightmare from the past summer.
HCM VS Workforce Management Software: How to Choose The Best Solution?
Sure, it might sound like a repetitive refrain of a song, but choosing between HCM software and Workforce Management software requires a clear understanding of your organization’s needs. Without it, don’t even start looking! Then, you’ll check which features suit you best, then you’ll check the details about the provider, and finally, puff! There it is, your reliable assistant in management.
- HCM software, your comprehensive package designed to manage all aspects of an employee’s lifecycle within an organization, from recruitment to retirement. HCM solutions typically include modules for recruitment, onboarding, performance management, learning and development, succession planning, compensation management, and HR analytics.
- Workforce Management software, which will help you focus more on the operational aspects of managing your organization’s workforce, includes tracking work time and attendance, scheduling, absence management, employment forecasting, and compliance management. WFM systems are often crucial in industries with hourly paid workers, where scheduling, compliance with labor laws, and time-tracking are important.
Both HCM and WFM systems are designed to manage and optimize human resource processes, but they will support you in different aspects of human resources management, and you must remember that!
So How Do You Choose The Best Solution?
Contact our expert and schedule a short conversation. We will assess whether we can help you solve your management problems.
