What is human capital management (HCM)?
Human capital management (HCM) puts people first, transforming traditional HR tasks into strategic actions. It helps businesses attract, support, and grow their most valuable asset: their employees.
Human capital management exists to maximise the value of an organization’s workforce, rather than merely controlling the cost. For decades, HCM teams have focused on attracting, developing, and retaining the best talent. Today, however, HCM is anything but business as usual – it’s at the centre of a hurricane of disruption and change.
From the overnight shift to remote work during the pandemic to the acceleration of AI, the ground is shifting beneath HR teams’ feet. Workplace litigation costs and compliance challenges are at an all-time high. HCM leaders today have their hands full filling technical gaps in the face of labour shortages while meeting evolving employee expectations and leadership needs. Human capital management – and the solutions and technologies that support it – plays a key role in helping leaders navigate this uncertainty and pave the way for long-term strategic success.
Human capital management meaning and definition
HCM stands for human capital management. It is a set of practises and technologies used to manage and optimise an organization’s workforce. Unlike traditional HR, which focuses mainly on administrative tasks like payroll and compliance, HCM emphasises workforce potential and aligning HR strategy with business objectives. It also covers strategic workforce management, including talent acquisition, performance management, and employee development. Human capital management helps businesses boost productivity and create a more engaged, motivated team where people are recognised for their valuable contributions to business success.
Top 5 benefits of human capital management
Good HCM plays an important role in the success and resilience of any company, including the following benefits:
A more productive, engaged workforce
Personalised development programmes, performance feedback, and recognition are essential to keeping employees invested and engaged.
Improved talent retention and planning
Predictive analytics and AI-powered insights help you to spot skill gaps, support career growth, and implement retention strategies that work.
Cost savings through efficient processes
Automated HR tasks reduce the burden of repetitive and work and the mistakes that can ensue. This lowers the cost of errors and admin overhead.
More confident HR decisions
HR leaders can use real-time, data-driven insights to help them make faster more informed decisions, leading to better performance management and business outcomes.
Enhanced business resilience
With stronger leaders and a skilled, future-ready workforce, you’re more equipped to stay competitive and adapt to changing market demands.
What is HCM software?
Human capital management software provides the technology and tools needed to manage an organization’s workforce end to end, from recruitment to retirement. It incorporates the functionality of the following two systems – and expands on it:
- Human resource information systems (HRIS): This software is built to manage employee records and data with accuracy and speed. HRIS typically includes an employee database, basic reporting, some payroll and benefits management, and compliance tracking.
- Human resource management systems (HRMS): This includes all the functionality described above and augments it with additional features such as performance management.
Although it’s sometimes used interchangeably with HRMS, HCM software is broader still. It includes not only core HR functions but also some even more strategic tools such as talent, learning, and workforce planning.
And the best modern HCM solutions are powered by advanced technologies like AI and robotic process automation (RPA) to unlock new levels of efficiency and potential.