Human Capital Planning & Management
Our Human Capital Planning Strategy begins with a Strategic Human Resources Management (SHRM) Model embodying five integrated human capital management systems:
Our framework with our unique consulting methodology assists with design, implementation, and management of Human Capital Programs for sustainability, maximum shareholder value and to minimize the cost employee turnover to increase return on human capital investment.
HCM – The Challenge All Businesses Face
HCM is the set of practices related to personnel resource management that includes the five integrated human capital management systems. These systems should be aligned and focused on the organizational imperatives needed to provide specific competencies and which are implemented in three categories: workforce acquisition, workforce management, and workforce optimization. One of the most important issues businesses face is ensuring that the organization utilizes best practices. In all industries, HCM issues are universal and impossible to avoid. HCM entails employee recruitment and selection, Training & Development, Motivation, Compensation, Retention, Employment law compliance, and employee relations management. Because of the comprehensive nature of HCM, many large companies outsource certain HCM functions and rely on consultants for support. In companies large and small the total human capital costs, or total cost of workforce (TCOW) averages 70% of operating expenses.
In fact, although a company’s total cost of Workforce (TCOW) may vary, they are generally the single largest organizational expense. TCOW components include salaries, performance incentives, wages, cash or equity compensation, and benefits for all employees, including temporary or contract workers. One goal of our Human Capital planning practice is to help businesses quantify TCOW so its components can be applied to a human capital model to be analyzed with the same rigor applied to a traditional financial model. Human capital analysis focuses on building and using TCOW financial statement, providing tools to better measure, and manage the complexity of workforce driven costs. Our Model analyzes and effectively captures all financial aspects of the human capital plan.
TCOW Analysis Parameters
- Calculating TCOW for the organization, SBU’s Segments, Functions, and SSDs;
- Comparing TCOW across industries and bench marking against high-performing companies;
- Obtaining specific TCOW for each position relating to market competitiveness, and
- Obtaining accurate assessments of full-time equivalent (FTE) headcount and workforce costs.
- After analyzing TCOW we develop a strategic HRM model considering the Five critical HRM functions that align HRM with business objectives which determine organizational success.
Strategic HRM Alignment – The Human Factor
When designing a human capital plan, an HRM Model must be strategically aligned with business objectives for maximizing organizational and managerial effectiveness. Employee recruitment, training & development, compensation, motivation, talent management, and change management are all critical in managing human capital.
Businesses are constantly plagued by the question of how to attract, afford and retain the best talent, while accounting for attrition, turnover, and competition. Some businesses dispense better benefits and compensation but face significant attrition and employee turnover that negatively affects the profitability of the firm. Strategically aligning the firm’s HRM model with business objectives is of prime importance because if it is not strategically aligned, it will not support the firm’s business model, and competitive advantage, and sustainability.
Training & Development and change management is vitally important to effective HRM leadership. Without a capacity to train new employees quickly and efficiently, businesses can’t grow, or maintain market competitiveness due to the inability of the business to adapt to market changes quickly.
Employee Recruitment and Selection
Employee Recruitment and Selection is one of the most difficult components of the human capital plan. It involves federal and state laws regarding compensation, discrimination, labor practices, the Fair Labor Standards act, as well as EEOC laws & Regulations. Not only is regulatory compliance a consideration when recruiting, selecting, compensating, and managing employees, there must be an objective and verifiable effort to ensure that (1) a tight connection exists between the employee selected and the firm’s organizational objectives, departmental objectives, and employee role, and (2) both firm and departmental objectives are written to produce excellence or market leading outcomes depending on the nature of the business.Recruitment plans have to be very specific when writing the role objectives such that they require particular skills or competencies to achieve, rather than general objectives. We help clarify organizational objectives, departmental objective, and role objectives for all positions. Our recruitment model ensures that for each role objective, tasks are listed, and for each task, we clarify the “tools,” “competencies,” and “assessments” for each position to ensure an exact match.
For the selection and testing of potential employees, we use assessment methodologies that are scientifically validated, depend on the nature of the task and its objectives, and lists as many relevant tasks as necessary to be accurate. We provide supporting information, and give a sample set of representative items to assess whether the candidate is likely to perform well in the position, (for example using structured interviews, etc) in the “details” section of the hiring plan. We are careful to list only those assessments that are defensible for the position. For employee selection tests, we evaluate and assign particular tests to specific employment needs, and help determine the validity and reliability as they pertain to employment selection tests. We also distinguish between the validity of certain employment selection tests based upon the evidence, and discuss, from the viewpoint of an applicant, how certain employment selection tests may be viewed negatively when applicants are not selected for jobs. We also analyze the relationship between personality and work performance. Another assessment we utilize is cultural fit. Culture fit is the glue that holds an organization together. It is a key trait to look for when recruiting. The result of poor culture fit due to turnover can cost an organization between 50-60% of the person’s annual salary, according to the Society for Human Resource Management (SHRM)
Organizational Development and Change Management
Change Management (CM) Planning is imperative in designing a business that can quickly to adapt to market demands and maintain competitive advantage. The significance of CM cannot be understated since enterprises that fail to adapt fast enough cannot remain profitable. Our change management models are embedded in the human capital plan and allows consistent ability to change based on market demands quickly. Many companies are resistant and slow to abandon practices, products, and services that no longer contribute to profits, but are nevertheless held in esteem because “they put us on the map!” Our HR Consulting Model will guide in planning, organizing, and managing resources to bring about the successful implementation of the optimal Human Capital Plan tailored specifically for your unique enterprise. We provide best practices for strategic alignment for all components of the Human Capital Plan, including compensation based strategies to recruit, motivate, reward and retain employees.
Compensation and Benefits Planning
Compensation planning is one of the most important components of the human capital plan. Without market competitive compensation, all other components of the human capital plan will fail. We help with the complete planning cycle to establish tax sheltered and tax exempt Employee Benefits Plans for the health, welfare, and motivation of your your company’s most valuable asset….Human Capital! Our Employee Benefits Plans are designed to reduce the cost of benefits funding through partially self funded underwriting techniques. Our plans include medical, prescription, vision and dental plans, income protection, supplemental income protection. The plans are tax advantaged for participants as are health, dependent care, and flexible spending accounts. We also design retirement benefit plans, as well as Fringe Benefits.
Accident and health plans, and group-term life insurance coverage up to $50,000 may be excluded from the employee’s gross income and, therefore, are not subject to federal income tax in the United States. Millennium can design plans to function as tax shelters including flexible spending accounts, 401(k and 403(b)plans. Fringe benefits are also part of the costs of retaining employees in addition to salary. These benefit rates are typically calculated using fixed percentages that vary depending on the employee’s classification and often change from year to year. Normally, employer provided benefits are tax-deductible to the employer and non-taxable to the employee. The exception to the general rule includes certain executive benefits (e.g. golden handshake and golden parachute plans).
We design cafeteria plans that offer a menu and level of benefits for employees to choose from. In most instances, these plans are funded by both employees and employers. The portion paid by the employees are deducted from their gross pay before federal and state taxes are applied, resulting in lower income tax for employees. Some benefits would still be subject to the FICA tax, such as 401(k) and 403(b) contributions; however, health premiums, some life premiums, and contributions to flexible spending accounts are exempt from FICA.
Our Human Capital Planning service includes establishing and ensuring alignment and accountability of all plan components. For managing specific short and long term projects, we offer recruitment for contract positions, manage on-boarding, payroll, employee benefits, taxation, and training & development. Count on us to provide complete human capital management services, including design, implementation, and management.
Ensure that your enterprise embrace best practices in Human Capital Management for effective market leadership. We provide technical implementation for all planning initiatives in compliance with Best Practices and PMBOK standards.