Organizations seeking to assess and align their human capital with their business strategy rely on a range of metrics

 Such as recruitment, compensation, composition, turnover, culture engagement, etc. – as part of a strategic human resource planning (HRP) process. In recent times, investor groups with over $14 trillion in assets under management have been campaigning for a regulatory mandate that would provide similar insights to shareholders and investors as well.

In February this year, the House Financial Services Committee approved the Workforce Investment Disclosure Act requiring companies to share more granular metrics about a company’s human capital management practices, policies, and performance.

Why all this sudden interest in granular HR metrics when currently, businesses are only required to provide a headcount? The answer is as much about the rising investor interest in the correlation between human capital and business performance as it is about the strategic importance of human resource planning.

The Market Value of Human Capital
For a long time, financial performance was the main predictor of market value. Today, it is estimated that intangible assets, including human capital and culture, account for as much as 52% of a company’s market value, according to Ernst & Young.

Many Fortune 100 companies already provide voluntary disclosures regarding their approach to the management and governance of human capital. But an Ernst & Young’s review of these disclosures produced two key observations – 1). Most only highlight general efforts in the area of human capital management without presenting quantifiable performance metrics, and 2). the depth and clarity of disclosures do not adequately reflect the exact nature of human capital governance.

Going forward, it does look like a company’s approach to human capital management could become a touchstone for investors to assess future performance and value. Meanwhile, companies with progressive and proactive human resource management (HRM) strategies are already applying processes like human resource planning to ensure that their human capital composition, competencies, and capabilities are perfectly orchestrated to realize the business’s strategic future objectives.

But what is human resource planning exactly?

What Is Human Resource Planning?
HRP, or workforce planning, is a continuous process of systematic planning that enables organizations to achieve optimum use of their human capital. It is a proactive, executive, and descriptive approach to forecasting the future workforce needs of a business – assessing the gap between availability and requirements and formulating strategies to address the deficit.

There are four key characteristics of an effective human resource planning process.

HRP must be a cross-functional process, requiring HR leadership and top management to work together to clearly define current and future business objectives.
It has to be an ongoing process, rather than a one-time effort, to map the availability, suitability, and productivity of a company’s human resources and ensure ready access to the right people with the right skills at the right time.
The process needs to be flexible enough to address short-term staffing challenges and adapt to business dynamics as they evolve.
It has to ensure the best fit between employee skills/capabilities and role requirements so that organizational objectives are met.
The Benefits of Human Resource Planning
As evidenced by the growing investor interest in HR metrics, a company’s approach to human resource planning and management is intricately linked to its value. Rather than being a process that allows businesses to plan for the future, a well-designed and implemented human resource planning initiative can help companies continually adjust, adapt, and advance their HR strategies for optimal outcomes.

Human Resource Planning Benefits

A human resource planning process generates vital data that can be used to transform the entire HRM practice across all functions – from recruitment to employee experience and retention. HR leaders are now able to assess the current productivity and performance of the entire workforce and make decisions that will focus and optimize workforce effectiveness. Human resource planning provides them with the insights required to deliver learning and development programs specifically designed to address prevailing workforce needs. A better understanding of factors like employee satisfaction, engagement, and experience allow HR to define the best strategies required to manage attrition, reward, and retain high performers and attract the right external talent.

Digitalgelis – What Is Human Resource Management?

HRM is at a key inflection point in its evolution, according to a majority of global HR executives interviewed for KPMG’s Future of HR 2020 study. But what is human resource management, and can it adapt to contemporary business dynamics?

One of the most striking findings from KPMG’s survey of 1,300 HR leaders from across the globe was that 3 in 5 believe that the HR function will rapidly become irrelevant unless it is completely reinvented for the modern age. This includes designing employee experiences that respond to evolving demands and utilizing technology to understand the needs and motivations of the workforce. Another study, this time from Gartner, found that a mere 9% of chief human resources officers (CHROs) were confident that their organizations were ready for a future of work characterized by an increasingly digital business environment.

What is Human Resource Management?

The earliest use of the term “human resource” traces back to a book by American economist John R. Commons – The Distribution of Wealth – published in 1893, though its modern interpretation is attributed to a 1958 report by sociologist/economist E. Wight Bakke. However, it wasn’t until the last few decades of the 20th century that the transactional nature of personnel management evolved into a more strategic organizational competence, now defined as human resource management.

But what is human resource management in this modern sense? Well, HRM refers to a broad collection of principles, policies, functions, strategies, and technologies that help organizations build competitive advantage by augmenting the value of their human capital.

The strategic objectives of human resource management can be classified under four distinct heads.

• Societal objectives: Human resource management is responsible for ensuring compliance with statutory obligations and legal mandates, such as health and safety, equal opportunity, and equal pay, as well as fulfilling the ethical and social responsibilities of a business and its workforce.
• Organizational objectives: HRM is tasked with ensuring that an organization’s human capital is aligned with the long-term productivity and performance goals of the business.
• Functional objectives: HRM oversees all transactional, administrative, and strategic aspects of workforce management to ensure the efficiency and effectiveness of the HR function.
• Personal objectives: Human resource management will nurture and support the personal growth and career development goals of every employee.
  Ok, so we understand what HRM is for – but what is human resource management in practice? As we shall see in the next section, HRM combines a broad and diverse selection of specialized functions, skills, and responsibilities to achieve these high-level objectives.