Human Capital Management (HCM)

What is human capital management?

Human capital management (HCM) is a corporate management concept focused on helping a business get the most from its workforce. It provides a framework and toolkit for how an organization recruits, manages, and develops its people in a way that boosts their individual value to the company. Done right, human capital management can:

• Help you hire the right talent
• Provide you with all the necessary skillsets in the company’s workforce
• Help you manage employees effectively
• Increase productivity.

What practices are included in human capital management?

HCM is broad and covers traditional, administrative areas of HR but is more focused on the strategic practices and processes of maximizing employee value through analytics, skills development, performance management and others. Some typical practices include:

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

HCM best practices

The four pillars of HCM best practices, with examples, are:

• Alignment:  If your company goals focus on differentiation, your HCM strategy should center on hiring the most innovative product developers with a proven track record.
• Automation:  Invest in the right technology to automate processes for planning, payroll, workflows, reporting, and analytics to increase accuracy and productivity.
• Communication:  Build a culture of trust by proactively and openly communicating with employees, especially during times of transition.
• Personalization:  Check in with each employee to ensure they’re engaged and progressing in their career.

Human capital management vs. human resource management

At the top level, human resource management (HRM) is administrative, while human capital management (HCM) is strategic.

Human resource management (HRM) is about the execution—performing core HR functions such as maintaining employee records and administering benefits. It creates and manages the systems and processes needed to recruit, train, and retain employees on the ground, day-to-day.

Human capital management (HCM) has a wider scope. Though it overlaps with traditional HR work, it’s more focused on the bigger strategic picture of achieving business goals via recruiting, developing, and retaining the right talent. It aims to maximize the value and ROI of the people in an organization. It can do this by using analytics and performance management to ensure people are achieving good productivity levels.

What Is HCM Software?

HCM software is sometimes called a human resource information system (HRIS) or human resource management system (HMRS).

Human capital management software (HCM software) handles many functions and processes needed for effective workforce management, saving time and money.

Full-featured software streamlines and simplifies HR areas like:

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

How to Choose the Right HCM Software

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’s installed on their hard drive or server, but most choose cloud-based solutions. The benefits of cloud-based HCM software include convenient access from anywhere, flexible expansion capability, and automatic updates. Human capital management functions are often found in HR software, despite the distinction.

To protect your organization, choose software that can keep pace with the ever-changing regulatory and statutory requirements at all jurisdictional levels. This is especially critical for multinational corporations. Also, ensure the system provides real-time and predictive analytics for benchmarking, modeling, and forecasting and that the vendor’s service model meets your long-term requirements.