Human Capital Management (HCM)

What is the meaning of Human Capital Management (HCM)?

Human Capital Management (HCM) refers to a collective set of practices that an organization implements for recruiting, training, developing, managing, and retaining employees. The goal of HCM is to optimize the employees’ contributions to an organization. To understand human capital management better, let’s focus on the words “human capital.” HCM recognizes employees as the core of the organization. A company can have a great office, top-of-the-line technology, and a competitive product. However, none of that matters if it has no workforce. People are what makes an organization start, run, scale, and succeed. 

Why is Human Capital Management (HCM) important? 

Because HCM focuses on people and helping them become contributors to success, the practice of HCM is vital in an organization. It can lead to hiring the right people, employee engagement, management, retaining top talent, and increasing overall work productivity.

What are the different components of Human Capital Management (HCM)?

HCM is composed of a blend of administrative and strategic processes. These are: 

Administrative Support

• Personnel administration
• Benefits administration
• Payroll
• Time and attendance
• Employee service and self-service

Strategic support: 

• Recruiting and hiring
• Onboarding
• Training
• Performance management
• Workforce planning
• Workflow management
• Compliance
• Reporting and analytics

Is Human Capital Management (HCM) the same as Human Resource Management (HRM)?

Although many use HCM and HRM interchangeably, they are not the same. The difference lies in their meaning. Human Resource Management (HRM) focuses on core administrative HR functions like benefits administration, records maintenance, payroll, attendance monitoring, and other administrative tasks. On the other hand, human capital management (HCM) has a broader scope that covers the employee lifecycle. HCM covers HRM functions plus other strategic processes like performance management, workflow management, training, and other functions. 

Another way of looking at their comparison is their purpose. The goal of HRM is to create and manage steps, systems, and processes that are needed to hire, train, develop, and help employees perform their job duties. For HCM, the goal is to maximize the value, contributions, and ROI of each employee to the success of the organization.

What do you mean by HCM Software? 

Human Capital Management software or simply HCM software refers to a technological application or system that helps HR teams manage the various functions and processes in workforce management. 

HCM software is also called human resource information system or HRIS. It helps HR teams by streamlining the process, saving time, effort, and money. It can help in the following areas: 

• Hiring
• Applicant tracking
• Onboarding
• Employee recordkeeping
• Workflows and approvals management
• Attendance monitoring
• Payroll
• Employee self-service
• Reporting and analytics

Businesses can select from a wide variety of HCM software. Because each company’s needs vary, there can be different HCM software suitable for each organization.