Human capital management (HCM) is the strategies that take human resources management (HRM) and use them to inspire productivity and optimisation.
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.
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 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.
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.
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.
Sometimes called HRMS or HRIS, HCM software helps HCM processes needed for effective human management.
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.
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.
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.
HR processes and data can be consolidated under one HRMS for automation and acceleration for intelligent decisions and self-service portals.
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