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What is Human Capital Management (HCM)?

What is Human Capital Management (HCM)?

As the way we work continues to evolve, so too does the way we need to manage our workforce. Human Capital Management (HCM) refers to the process of workforce management. HCM software has been used to help businesses get the most out of their workforce. This post will answer the question of what human capital management is while also discussing the benefits HCM can have for your business.

What is HCM?

Human Capital Management (HCM) is a term that refers to the process of managing an organization's workforce. This includes activities such as recruiting new employees, onboarding them, training them, and managing their performance. To manage an organization's human capital effectively, businesses can implement a Human Capital Management software solution.

What are the elements of Human Capital Management?

There are many Human Capital Management jobs out there due to how many elements there are within Human Capital Management. Several of these elements include:


The process of sourcing and hiring new employees is one of the key elements of Human Capital Management. This involves using a variety of methods to source potential candidates, such as posting job listings, leveraging recruiting agencies, or promoting roles on social media platforms.


Once a new employee has been hired, it’s important to onboard them properly. This includes providing them with information about their role and the company, helping them get up to speed with company policies and procedures, and collecting onboarding documents.


For employees to be effective in their roles, it’s important to provide them with the necessary training. This can include on-the-job training, online courses, or even attending workshops or conferences.

Managing performance

It’s essential to regularly review an employee's performance and provide feedback so they can continue to improve their work output. This may involve setting goals and targets, providing coaching and mentoring, or issuing warnings or sanctions if needed.


A key part of retaining employees is offering competitive benefits and retirement packages. This may include things like healthcare insurance, pension plans, paid vacation days, or tuition reimbursement programs.


Managing pay is a similar but distinct element to benefits. This includes issuing payments on time, calculating taxes and deductions, and keeping track of employee hours worked.

Employee relations

Maintaining positive employee relations is essential for keeping morale high and preventing turnover. This can be achieved through a variety of methods, such as regular communication, social events, or providing support during difficult times.


It’s important to ensure that all employees are compliant with company policies and procedures, as well as any applicable laws and regulations. This may involve conducting audits or investigations, issuing warnings or sanctions, or providing training on compliance-related topics.

Time and attendance

Tracking employee time and attendance is important for a few reasons, such as managing payroll or identifying areas where employees may be slacking off. This can be done through manual methods, such as timecards or sign-in sheets, or by using an automated time and attendance system.

What is the difference between Human Capital Management and Human Resource Management?

While many make the mistake of using these two terms as synonyms, the reality is that there are distinctions between the two. 

Human Resource Management, or HRM, is a term that refers to the process of managing an organization's employees. This includes activities such as recruitment, selection, training, and performance management.

Human Capital Management, on the other hand, refers to the process of managing an organization's workforce over the entire employee lifecycle. This includes activities such as recruiting new employees, onboarding them, training them, and managing their performance.

Why is HCM important?

HCM provides an all-encompassing approach that can benefit your business in several ways. Firstly, it helps businesses to attract and retain the best people. By implementing an HCM solution, businesses can identify and hire the most talented individuals who fit with their organizational culture.

Secondly, HCM can help businesses improve employee productivity. By providing employees with the necessary training and tools, businesses can ensure they are able to perform to their full potential.

Finally, HCM can help businesses to reduce costs associated with employee turnover.

As a strategy, HCM brings all these ideas together in a highly integrated manner. A human capital management strategy will keep things organized and efficient and ultimate save time and money. 

What is HCM software?

The workplace has never been as dynamic or fast-paced as it is today, and organizations are under increasing pressure to do more with less. Human Capital Management software helps businesses manage their workforce more effectively and efficiently.

HCM software solutions are designed to automate and streamline the process of managing an organization's human capital. This includes activities such as recruiting, onboarding, training, and performance management. By automating these processes, businesses can save time and resources that can be better spent on other areas of the business.


The recruiting process is the beginning of the employee lifecycle, and it’s critical that businesses get it right. HCM software can automate the process of recruiting by helping businesses identify and hire the most qualified individuals who fit their organizational culture.

HCM software can also automate the process of applicant tracking. This includes tracking applicants through the entire recruitment process from the initial application to the offer stage. This helps businesses to keep track of all applicants and make better decisions about who to hire.


Onboarding is the process of welcoming new employees into an organization and providing them with the necessary training and tools to be productive. HCM software can automate the onboarding process by creating custom onboarding plans for each employee.

This includes collecting documents like I-9s, assigning tasks, and sending welcome packets. By automating these tasks, businesses can ensure that new employees are properly onboarded and ready to start working as soon as possible.


Businesses need to provide employees with the necessary training to be productive. HCM software can automate the training process by creating custom training plans for each employee.

This includes sending reminder emails, tracking employee progress, and generating reports on employee performance. By automating these tasks, businesses can ensure that employees are properly trained and able to work productively from day one.

Performance management

Performance management is a key component of Human Capital Management. HCM software can automate the performance management process by creating custom performance reviews for each employee.

This includes setting goals, tracking progress, and generating reports on employee performance. By automating these tasks, businesses can ensure employees are meeting their performance goals and are able to improve their performance over time.

Benefits of HCM solutions

The best human capital management software has a plethora of benefits. Here are just some of the benefits your business could reap by implementing HCM software:

Make data-driven solutions

You no longer need to rely on gut instinct when making decisions about your workforce. HCM software provides you with the data and analytics you need to make informed decisions about your employees. This data can be used to improve the performance of your workforce and make better decisions about things like training and development.

Reduce time and resources spent on HR

By automating the process of managing your workforce, HCM software can save you a significant amount of time and resources, allowing you to focus on other areas of your business.

Improved employee engagement

When employees are properly managed and developed, they’re more engaged with their work. This leads to improved performance and productivity.

Reduce employee turnover

When employees are properly managed and developed, they are less likely to leave the organization. This helps to reduce the costs associated with employee turnover.

Increase profitability

By eliminating waste and improving the performance of your workforce, HCM software can help you increase your profitability.

Improved customer satisfaction

Happy employees lead to improved customer satisfaction. When your employees are properly managed and developed, they are more likely to be satisfied with their work and provide better service to your customers. 

Challenges of HCM

While there are many benefits to implementing an HCM solution, there are also some challenges that businesses need to be aware of.

Data security

HCM solutions store a lot of sensitive employee data including personal information, financial information, and health records. Businesses must choose an HCM solution that is built on a secure platform and has strong data security measures in place.

Data accuracy

HCM solutions need to be able to accurately track employee data. This includes things like job titles, salary history, performance reviews, and training records. If the data in an HCM solution is inaccurate, it can lead to problems with decision-making, compliance, and employee morale.

User adoption

HCM solutions can be complex, and it can be difficult for employees to use all the features. Businesses must choose an HCM solution that’s easy to use and has a robust training and support infrastructure in place.

Human Capital Management in the cloud

There has been a wholesale shift towards cloud-based software and HCM solutions are no exception. Cloud-based HCM solutions offer a number of benefits when compared to traditional on-premise solutions. Some of the main benefits of cloud-based HCM solutions include:

Reduced costs

Cloud-based HCM solutions are typically more cost-effective than traditional on-premise solutions. This is because businesses don’t need to invest in the hardware and software required to run the solution.

Increased flexibility

Cloud-based HCM solutions offer businesses increased flexibility as they can be accessed from anywhere with an internet connection. This is particularly beneficial for businesses with employees who work remotely or in different locations.


Cloud-based HCM solutions are highly scalable and can be easily adjusted to meet the changing needs of businesses. This contrasts with traditional on-premise solutions which can be difficult and expensive to scale.

Improved security

Cloud-based HCM solutions offer businesses improved security as they are typically hosted by experienced providers who have invested heavily in security infrastructure.

The history of HCM

In the 1950s, the concept of Human Capital Management first began to emerge. As the nature of work began to evolve, so too did the way we thought about employees. Thanks to advancements in computing and automation, employees were no longer viewed as cogs in a machine or steps in an assembly line.

These advancements gave way to the rise of a new class of worker: the knowledge worker. Unlike their predecessors, these employees would provide a whole new level of value to a business as they were able to create, innovate, and think critically.

It was this change in the workforce that led to the development of Human Capital Management to manage and motivate these new employees. In its simplest form, HCM can be defined as a process that helps businesses to get the most out of their employees. 

Fast forward to today and there are many different careers that come out of Human Capital Management. Whether it's in Human Capital Management consulting or in HCM strategy, there are many opportunities to have a long career in this field. 

The future of HCM

Human Capital Management has evolved a great deal since its 20th-century roots. As the workplace changes, so too do the need to evolve the way this new workforce is managed. Here are some of the ways we can expect HCM to evolve in the future:


To truly engage modern workers, HR needs to take a mobile-first approach. This means that HCM solutions need to be accessible on the go via mobile devices. 

Predictive analytics

The use of data and analytics will become increasingly important in the world of HCM. By using predictive analytics, businesses will be able to identify issues and trends before they become problems. This will allow HR leaders to take a proactive approach to employee management and avoid potential crises.

Artificial intelligence

The use of artificial intelligence (AI) is also likely to increase in the world of HCM. AI can be used for a variety of tasks such as identifying training and development needs, predicting employee turnover, and automating HR processes. But AI will also be important on a more rudimentary level. Things like chatbots will become ever more popular to service a much faster-paced work environment. In a world where we're always 'on,' it's important to have solutions that can keep up.


Finally, businesses need to recognize that the digital world largely exists on social platforms. Embracing this change can allow for better engagement between workers and the company while also allowing easier lines of communication between employees too.


Human Capital Management is all about getting the most out of your employees. Businesses that implement a clear HCM strategy can expect to see several benefits such as improved employee engagement, increased productivity, and reduced turnover. Just remember that, like the workforce itself, HCM always needs to evolve to ensure that it's relevant and effective.

To find out more about how you can implement HCM in your business, Contact one of our hiring specialists today.

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