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What is human capital management (HCM)?

Human capital management (HCM) is the strategies that take human resources management (HRM) and use them to inspire productivity and optimisation.

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Human capital management (HCM) is a series of strategies that take standard human resources management (HRM) practices—payroll, administration, maintaining records, performance management, training etc.—and use them to inspire productivity, hire the best talent for the organisation and optimise employee talent to holistically invest in employees as assets.

  • Human resources (HR): Traditional administrative functions for managing employees, including payroll, performance management, onboarding and recruitment.
  • Talent management: Examines the management of employee talent through the talent lifecycle. Activities include performance management, career development, alterations in chain of management, and candidate recruitment.
  • Workforce rewards: Benefits and compensation, both monetary and nonmonetary.
  • Workforce management: Absence and labour management of employees.
  • Human resource management system (HRMS): Technology and systems used during HCM processes.
  • Human resource information system (HRIS): Virtually synonymous with HRMS.

HCM may seem relatively new, but the concept can be traced back to Sir William Petty in 1696, who proposed factoring in the cost of human life to anything from labour to war. Similar themes of investing in people can be found through history in the writings of Adam Smith, John Stuart Mill, Jean Baptiste Say and others who wrote on capital and labour. The term “human capital” first appeared in 1961 from Schultz: “Consider all human abilities to be either innate or acquired. Attributes... which are valuable and can be augmented by appropriate investment will be human capital.”

HCM of today is built on this foundation of investing in people and talent management above simple administration from a standard HR role.

HCM in the cloud

HCM software is rapidly moving toward cloud computing and software-as-a-service (SaaS) models. Models based in the cloud can lower IT costs of overhead, accelerate deployment and updates, create more fixed operating costs and increase agility with simple upgrade options.

The future of HCM

We’re in the golden age of HCM—and the future is promising. New technologies change and innovate strategies every day and create new opportunities for growth. Teams are becoming more agile, streamlined, and connected across the globe. SaaS technologies and cloud computing in HCM are only increasing, and the future may include further implementation of artificial intelligence (AI), including chat bots, mobile-friendly adaptations, collaboration among peers and infinitely faster data mining.

HRM refers to the administrative side of human resources, including maintaining records and overseeing benefits. HCM takes HRM tasks and, in conjunction with talent and asset management, works to incorporate strategy to increase performance and focus on the abilities and skills of employees. HRM is process-based; HCM is strategically based.

HCM oversees employees from the beginning of talent recruitment through the entirety of the talent cycle.

Performance and talent management

  • Performance management: Strategically aligning goals on both a business and an individual employee level.
  • Competency management: Identifying the competencies needed for an employee to achieve goals and an excellent performance, then applying training and development to best optimise the competencies while aligning with business strategies.
  • Workflow management: Aligning tasks and business processes to create a sequence of tasks in order to achieve a larger goal.
  • Contingent workforce management: Managing anybody outside of the standard office location or who is not given the benefits of full-time employees.
Human experience & human capital management

HR and people analytics

People analytics is observing and applying methods based on patterns in workforce data for decision making processes, improved performance and employee engagement. An HR department takes the principle of people analytics and applies it to an organisation to create goals and better processes around the people of the organisation.

At its core, people analytics is meant to inform better business decisions for a successful bottom line while focusing on a better experience for employees. HR gathers the metrics to form an understanding of how employees are impacting an organisation and its operations in order to build a more holistic business model and create a better environment for employees by empowering them. A good way to empower employees is through training and positioning for success while also creating an environment that allows them to grow.

Talent acquisition

  • Workforce planning: Proactively managing a line of succession and future hierarchies within the business present and future talent recruitment. Planning attractive benefits, including work-life balance, that can nurture new and existing talent.
  • Recruiting and hiring: Identifying and attracting the right talent through proactive planning of current and future roles, then streamline the process from interviewing to orientation to keep the talent confident.

People management

  • Onboarding: Creating a swift onboarding process that provides talent with the necessary information and sets the right goals as they transition into standard workplace functions.
  • Training: Ensuring that new and existing employees have an understanding of processes and expectations, then providing the opportunity to grow skills and knowledge base with available or potential resources.
  • Employee service and self-service: Providing resources that allow employees to access benefits and other HR programmes, including a help desk programme that requires more specific or sensitive needs.

Attendance and leave management

  • Time and attendance: Overseeing employee time utilisation and attendance behaviours, including holiday or sick time.

Payroll, compensation and benefits

  • Compensation planning: Analysis and planning of compensation, including monetary and non-monetary.
  • Time and expense management: Time spent by employees on or off the clock and the related expenses of that time.
  • Payroll: Ensure that payroll is processed, administered and accurate while accounting for compliance with relevant laws.
  • Benefits administration: Accounting for current trends in workplace benefits, then delivering those benefits in accordance with business needs.
  • Retirement services: Analysing and providing different retirement plans, including any company match of retirement funds.

Sometimes called HRMS or HRIS, HCM software helps HCM processes needed for effective human management.

  • Recruiting: Effectively creating job requisitions, searching for potential applicants, and sorting through existing applications.
  • Applicant Tracking: Using data collection to account for the number and types of applicants during the talent search process.
  • Onboarding: Adding new talent into existing HCM software to account for information like pay, position and department. Using automated systems to train new employees on company policies, benefits and expectations.
  • Employee Recordkeeping: Avoiding physical record buildup by keeping all relevant employee information in a software system that makes sorting, searching and storing more streamlined.
  • Workflows and approvals management: Accounting for workplace workflows and approvals for new or altered workflows.
  • Time tracking and attendance: Clock in/clock out systems for employees and management to track time, information about salary and hours per week, and tracking time off requests.
  • Payroll: Automated administration of paycheques that accounts for accuracy, timeliness and compliance.
  • Performance management: Accounting for any notes of commendation or concerns about a certain employee, and tracking any patterns in performance.
  • Employee self-service: A portal for employees to access information, benefits and HR programmes without assistance.
  • Reporting and analytics: Gathering data about performance, payroll, workflows and anything related to HCM solutions and performing an automated analysis within the software, then generating different types of reports.

Attract and retain talent

Increase the job posting to hiring speed using software that can quickly and efficiently recruit and source the right candidates. You can also provide training and learning programmes, excellent work-life balance and forms of motivation that can bring out the best in employee performance.

Optimise Workforce Management and Spending

Identify a balance between monetary and nonmonetary compensation. You’ll also be able to track time, schedules and expenses that are related to workforce time management.

Respond with Agility to Change

Track business strategies and analyse a way to align it with people strategies while anticipating attrition and quick organisational changes. HR processes can also be tailored based on instant and individual needs.

Streamline HR Operations

HR processes and data can be consolidated under one HRMS for automation and acceleration for intelligent decisions and self-service portals.

Global HR

  • Employee Lifecycle: Overseeing employees from hire to retire, including full-time and part-time.
  • Strategic HR: Accounting for employee information to better manage employee documentation, create structures and use predictive analytics to analyse future performance.
  • HR service delivery: Provide self-service systems that can help employees and managers manage HR needs without direct contact with the HR department, save for special cases.
  • Employee Engagement: Provide motivation by championing volunteer opportunities, competitions, personal tools and individual wellness.
  • Compliance and fraud detection: Incident reporting that can improve all-around employee health and safety while also providing security and fraud detection for your data.

Talent management

  • Talent acquisition: Recruiting the best talent using innovative technologies and an experience that is centred around the candidate during the process.
  • Performance management: Developing consistent checkpoints to facilitate individual and business goals for the best performance.
  • Career development: Helping employees identify and develop areas of career advancement, including relevant goals and milestones.
  • Talent review and succession management: Taking the time to plan for future roles and other types of organisational trends that may be needed in leadership and other roles.
  • Learning: Identifying the current and future demands of the workplace to develop the skills of employees while leveraging existing skills and knowledge in the workplace.

Workforce management

  • Compensation: The identification and implementation of compensation plans across the organisation.
  • Total Compensation: A more thorough insight compensation to all levels of employees.
  • Pay-for-performance: Offering other compensation based on performance ratings and metrics.

Workforce rewards

  • Compensation: Analysing compensation plans for modelling, budgeting and implementation of benefits.
  • Benefits: Providing benefits that are in line with unique and evolving business practices.
  • Payroll: Accuracy in processing and delivering pay in compliance with necessary tax and regulatory standards.

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