Human Capital Management (HCM)

What Is Human Capital Management?

Human capital management (HCM) is the set of practices an organization uses for recruiting, managing, developing, and optimizing employees to increase their value to the company. Done right, human capital management results in:

• Hiring the right talent
• Having all needed skill sets in the company’s workforce
• Managing employees effectively
• Increasing productivity

What Practices Are Included in Human Capital Management?

Human capital management covers a wide variety of administrative and strategic practices and processes including:

• Workforce planning
• Compensation planning
• Recruiting and hiring
• Onboarding
• Training
• Time and attendance
• Payroll
• Performance management
• Workflow management
• Reporting and analytics
• Compliance
• Employee service and self-service
• Benefits administration
• Retirement services

What Is the Difference Between Human Capital Management and Human Resource Management?

The terms are often used interchangeably, but they have different meanings. Human resource management (HRM) primarily focuses on core administrative HR functions such as maintaining employee records and administering benefits. Human capital management is a broader term that includes HRM functions as well as strategic functions such as analytics and performance management.

Human capital management works to maximize the value and ROI of the people in an organization. Human resource management works to create and manage the systems and processes that are needed to acquire, train, and retain the organization’s workforce.

What Is HCM Software?

Human capital management software handles many of the functions and processes needed for effective workforce management, saving time and money. HCM software is sometimes called a human resource information system (HRIS) or human resource management system (HMRS).

Full-featured software streamlines and simplifies such things as:

• Recruiting
• Applicant tracking
• Onboarding
• Employee recordkeeping
• Workflows and approvals management
• Time tracking and attendance
• Payroll
• Performance management
• Employee self-service
• Reporting and analytics

There are many HCM software systems on the market. Their capabilities and advanced functions vary, so it’s important to carefully assess your organization’s current and future needs before selecting one.

Some organizations buy HCM software that is installed on their own hard drive or server, but most choose cloud-based HCM software as it provides a range of benefits, including access-anywhere convenience, flexible expansion capability, and automatic software updates.

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