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An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

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Human Capital Management (HCM)

Human Capital Management (HCM) is the comprehensive set of an organization’s practices for recruiting, managing, developing, and optimizing employees (as an intangible asset) in order to maximize their business value.

Let’s get into this concept a little deeper by answering a few frequently asked questions.

What Is HCM (Human Capital Management)?

Human Capital Management, or HCM, is the effective acquisition, employment, and development of a company’s employees through strategic and tactical practices, processes, and applications in order to maximize their economic value.

To be most effective, the set of Human Capital Management practices, processes, and applications should be focused on the organizational need to provide specific competencies.

Strategic and tactical competencies may include:

Administrative Support

  • Personnel Administration

  • Benefits Administration

  • Payroll Administration

  • Rules and Procedures Administration

  • Employee Self-Service Portal

  • Employee Information Management

  • Employee Service Center

  • Employee Self-Service

Strategic and Tactical Support

  • Organization Visualization

  • Workforce Planning and Contingent Workforce Management

  • Recruitment and Hiring

  • Onboarding

  • Compensation Planning

  • Competency Management

  • Performance Management

  • Time and Expense Management

  • Workflow

  • Education and Training

  • Reporting and Analytics

Why Is Human Capital Management Important?

Human Capital Management is important because employees, the individuals who spend much time each day working and contributing to the success of an organization, are a valuable resource that can either make or break an organization. Thus, Human Capital Management is essential for acquiring and retaining high-performing employees.

The responsibility of human resource professionals is to create and implement ways for employees to be hired, oriented, trained, motivated, and engaged. Human Capital Management plays an essential role in helping the organization’s human resources department increase the overall productivity and happiness of employees. In turn, productive and happy employees work harder and care more about the success of the organization.

What Are the Problems of Human Capital Management?

A few of the potential problems of Human Capital Management are poor performance management, non-strategic workforce planning, weak usage of workforce analytics, mismanagement of organizational change, and the high cost of unsolved challenges.

  • Problem #1: Poor Performance Management

HCM is not very effective when managing performance if the system isn’t driven by an overall purpose and if the opportunity isn’t taken to fuse together both strategic and tactical approaches.

  • Problem #2: Non-Strategic Workforce Planning

Sometimes, HCM is too focused on tracking headcount, turnover, and time-to-fill rather than ensuring the organization is best prepared to anticipate challenges and quickly adapting to them.

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  • Problem #3: Weak Usage of Workforce Analytics

Although many HR professionals agree that strong workforce analytics are important to their organization, they also admit to not using it effectively enough with meaningful metrics such as Quality of Movement and Quality of Attrition.

  • Problem #4: Mismanagement of Organizational Change

HCM can function reactively, rather than proactively, when organizational change isn’t anticipated. When falling behind or trying to keep pace with sudden changes, the chance for HCM mismanagement is high.

  • Problem #5: High Cost of Unsolved Challenges

Without recognizing challenges early, HCM will be prone to gaps between its current leadership and human capital capabilities, and the leadership and capabilities required to reach future organizational goals.

What Are Some Human Capital Management Functions?

Some of the Human Capital Management functions are to hire, orient, train, and retain.

  • Hire: Talent acquisition is a crucial responsibility that must be taken seriously in order to have a well-functioning organization.

  • Orient: Through the efforts of HCM, new employees must be onboarded efficiently and introduced into the company culture quickly.

  • Train: HCM must give employees enough motivation to advance their knowledge and skills for organizational contribution.

  • Retain: Keeping employees satisfied in their job position, as well as with the company itself, is an important function of HCM.

What Is HCM Software?

HCM software is the most effective way to integrate all of an organization’s Human Capital Management applications into a single user-friendly platform. HCM software may be installed locally or provided via an online subscription service.

Some of the features and functions that may be offered by HCM software are:

  • Recruiting and applicant tracking

  • Onboarding forms

  • Employee profiles, performance reviews, and history

  • Integration with payroll, tax processing, and benefits administration systems

  • Employee self-service

  • Events dashboard

  • Report writing

  • Accessible 24/7 from anywhere

  • Secure data encryption

Using HCM, or Human Capital Management is a great way for companies to maximize their HR efficiency and streamline the recruiting, management, and development of employees. Taking a strategic approach will help you function more effectively in the HR department.

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