What is Human Capital Management (HCM)?
Human capital management (HCM) refers to the practices and processes that companies use to recruit, manage, develop, and optimize their employees. By doing so, they increase the value that each employee brings to the company, leading to improved outcomes.
Practices Included in Human Capital Management
HCM covers a wide variety of administrative and strategic practices and processes, including:
- Planning for workforce needs
- Planning for employee compensation
- Recruiting and hiring of new employees
- Process of welcoming and integrating new hires
- Providing training and development opportunities for employees
- Tracking employee work hours and attendance
- Managing employee payroll and compensation
- Assessing employee performance and providing feedback
- Managing the flow of work and tasks within the organization
- Collecting and analyzing data to inform decision making
- Ensuring compliance with laws and regulations
- Providing services and resources for employees to manage their own information
- Administering employee benefits programs
- Managing retirement benefit plans.
Human Resource Management (HRM) vs. Human Capital Management (HCM)
While the two terms may be used interchangeably, they have different meanings. HRM primarily focuses on core administrative HR functions such as benefits administration and employee records management. In contrast, HCM is a more comprehensive term that encompasses HRM functions and strategic functions like performance management and analytics.
Human capital management aims to maximize the value and ROI of employees for an organization, while human resource management works to create and manage the systems and processes required to acquire, train, and retain the organization’s workforce.
What Is HCM Software?
HCM software is a tool that manages many of the necessary functions and processes for effective workforce management. HCM software is sometimes referred to as a human resource information system (HRIS) or human resource management system (HRMS).
Which HCM should I choose?
There are many HCM software systems available in the market. Their features and capabilities vary, so it’s essential to assess your organization’s present and future needs when choosing one.
While some companies opt for locally-installed HCM software, most choose cloud-based HCM software. This decision provides several advantages such as access-anywhere convenience, flexible expansion capability, and automatic software updates.