What Is Human Capital Management?
Human capital management (HCM) is the set of practices an organization uses for recruiting, managing, developing, and optimizing employees to increase their value to the company. Done right, human capital management results in:
- Hiring the right talent
- Having all the necessary skill sets in the company’s workforce
- Managing employees effectively
- Increasing productivity
What Practices Are Included in Human Capital Management?
HCM covers various administrative and strategic practices and processes that include:
- Workforce planning
- Compensation planning
- Recruiting and hiring
- Onboarding
- Training
- Time and attendance
- Payroll
- Performance management
- Workflow management
- HR data and reporting
- Compliance
- Employee service and self-service
- Benefits administration
- Retirement services
HCM Best Practices
The four pillars of HCM best practices, with examples, are:
- Alignment: If your company goals focus on differentiation, your HCM strategy should center on hiring the most innovative product developers with a proven track record.
- Automation: Invest in the right technology to automate processes for planning, payroll, workflows, reporting, and analytics to increase accuracy and productivity.
- Communication: Build a culture of trust by proactively and openly communicating with employees, especially during times of transition.
- Personalization: Check in with each employee to ensure they’re engaged and progressing in their career.
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Human Capital Management vs. Human Resource Management
These terms are often used interchangeably, but they have different meanings. Human resource management (HRM) primarily focuses on core administrative HR functions such as maintaining employee records and administering benefits. On the other hand, HCM is a broader term that includes HRM functions and strategic functions such as analytics and performance management.
HCM aims to maximize the value and ROI of the people in an organization. HRM creates and manages the systems and processes needed to recruit, train, and retain employees.
What Is HCM Software?
Human capital management software (HCM software) handles many functions and processes needed for effective workforce management, saving time and money. HCM software is sometimes called a human resource information system (HRIS) or human resource management system (HMRS).
Full-featured software streamlines and simplifies such things as:
- Recruiting
- Applicant tracking
- Onboarding
- Employee recordkeeping
- Workflows and approvals management
- Time tracking and attendance
- Payroll
- Performance management
- Employee self-service
- Reporting and analytics
How to Choose the Right HCM Software
There are many HCM software systems on the market. Their capabilities and advanced functions vary, so it’s important to carefully assess your organization’s current and future needs before selecting one.
Some organizations buy HCM software that’s installed on their hard drive or server, but most choose cloud-based HCM software. The benefits of the cloud include convenient access from anywhere, flexible expansion capability, and automatic software updates.
To protect your organization, choose software that can keep pace with the ever-changing regulatory and statutory requirements at all jurisdictional levels. This is especially critical for multinational corporations. Also, ensure the system provides real-time and predictive analytics for benchmarking, modeling, and forecasting and that the vendor’s service model meets your long-term requirements.
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