What Is Human Capital Management (HCM)?

Human capital management (HCM) is a growing term that is taking over HR and other corporate organizations, but what is it? This is your chance to learn what HCM is, how it can help your organization become stronger, and what to look for when selecting an HCM solution.

Human capital management (HCM) is the practice and solutions used to manage an organization’s workforce. This goes beyond the typical human resources (HR) responsibilities and focuses on trying to help employees improve their productivity, morale, and retention.

HCM responsibilities include:

• Recruiting
• Training
• Managing
• Optimizing an organization’s workforce

What's the difference between human capital management and workforce management?

While workforce management and human capital management (HCM) are both essential for handling employees, they serve distinct purposes.

Workforce management zeroes in on the day-to-day operational aspects, like creating schedules, tracking time and attendance, and ensuring sufficient staffing to meet immediate demands. HCM, on the other hand, takes a bigger-picture approach. It focuses on strategic initiatives such as employee growth, increasing engagement, and planning for the long-term needs of the workforce.

By aligning workforce planning strategies with overall business goals, human capital management aims to enhance organizational performance, ensuring that employees are not just managed, but actively supported to thrive and contribute to the company’s success.

How does HCM differ from traditional HR management?

Human capital management (HCM) and Human Resources Management (HRM) are similar, but they are not the same.

There is some overlap between both methods, like how both HCM and HRM support an organization to achieve business goals, but there are major differences in how they support.

HRM focuses on policies and practices. An HRM solution focuses on traditional administrative duties like hiring, onboarding, recruitment, and payroll.

HCM focuses on supporting the organization by utilizing a more strategic and elevated approach. Rather than just focusing on policies and procedures, HCM creates workforce planning strategies that create meaningful learning experiences for the employees, and focus on building a people-first work culture. While it can focus on some of the traditional HRM practices like payroll, time, and attendance, HCM is built on optimizing employees’ skills and capabilities.

HRM treats their tasks like a checklist. They are trying to finish what is required of them and move on to the next project, while HCM is focused on the bigger picture. HCM takes a moment to check in with the employees, and try to understand their experience, so it can best meet their needs and improve their satisfaction. HCM is meant to be integrated and is used to help improve the employee’s experience, engage with current talent, and optimize and develop the talent that exists within your organization.

Five benefits of implementing human capital management

Human capital management solutions dramatically improve your organization. Here are some of the biggest benefits an HCM solution can provide.

1. Make data-driven decisions

The best decisions are made when you have up-to-date, relevant data. This stops an organization from making decisions based on emotions or a gut feeling, but instead, they are able to make meaningful choices that are well founded and established in fact. HCM solutions make it easy to gather and analyze organizational data, especially about the workforce and their performance.

2. Match employee skills to positions

The best work gets done when everyone is working in a role that they are qualified, trained, and experienced in. It makes sense that you want a qualified accountant working in accounting, or an experienced sales representative working in sales, but it’s not always that easy. Human capital management helps identify, grow, and train skills in employees, allowing the organization to identify diamonds in the rough that have the potential to be impactful on the organization, but aren’t being utilized to their fullest extent.

3. Improve employee satisfaction

Employees are the central focus of your organization when you utilize HCM solutions. HCM supports employees with their developmental goals, encourages professional development, and focuses on creating a meaningful company culture. This helps employees feel more invested in their work, and have a greater buy-in and satisfaction.

4. Simplify recruitment

Finding the right talent is essential for your organization’s success. You need to be able to locate and attract qualified candidates, without it taking a significant investment of time and resources. HCM solutions simplify the recruitment process, ensuring your organization always has the best candidates for any open position.

5. Build and grow an impactful company culture

Company culture is an intangible aspect of your organization that plays a significant role in employee satisfaction and retention. Organizational culture refers to the everyday attitudes and practices that form the collective identity of your company. Human capital management focuses on building an employee-focused company culture. This helps workers feel recognized for the work they are doing and more bought into the company’s larger values and goals.

Features of a modern human capital management system

Human capital management systems can help streamline your organization, but it can be difficult to know which features you need, and which are extra bells and whistles that you’ll never use. Here are seven key features you should look for in your Human capital management solution.

Recruiting and onboarding

Your HCM solution should make it easy to manage the recruiting and onboarding process. This can include features like applicant tracking, automated candidate screening, and interview scheduling. An often overlooked feature that makes a significant impact on these processes is electronic signatures. This helps streamline the new hire paperwork and onboarding tasks.

Reporting and analysis

Collecting data is useless if you do not report and analyze it. Your HCM solution should be able to create up-to-date reports and provide meaningful insights to that data.

Collaboration and communication

A self-service portal that connects managers and employees is vital for human capital management. By having a reliable, internal resource that facilitates collaboration. Your HCM should be a reliable, stable location employees can always turn to.

Automation

Manually completing every HCM task would be a major investment of time and resources. An HCM solution should provide automation services allowing you to automate repetitive manual tasks, helping you save time and money.

Security and compliance

Compliance with payroll, HR, and tax regulations is an absolute must. Your HCM solution should provide complete coverage, ensuring you never have to face the consequences of being non-compliant

HR functionality

An HCM solution should still provide basic HR coverage and functionality. This should include coverage for payroll, benefits, learning and development, and incident reporting.

Technical support

If something goes wrong with your HCM solution or you need help, do you have access to a dedicated technical support team? Your HCM solution shouldn’t force you to troubleshoot and solve problems on your own, it should offer technical and customer support to help you get the most from it.

How to choose the right human capital management software

The best place to start when looking for the right human capital management software is identifying what your organization's needs are. By having a clear shopping list of solutions that you need, you can drastically narrow down the field by eliminating the solutions that don’t provide relevant coverage.

Once you have narrowed your options down, you can further narrow the market by looking into the future. Consider what your organization will need five, ten, and fifteen years from now. As you continue to grow and reach your goals, your HCM solution needs to grow with you.

 Finally, consider your specific industry needs. An HCM solution for a healthcare provider is going to have different needs compared to a non-profit organization. If you need further help creating a checklist to what you specifically need in your HCM solution, check out our buyer’s guide to payroll and HCM services.

Get started with IRIS HCM software

Human capital management software can revolutionize your organization by providing you with cutting edge professional tools that help save time and money, while also improving key functions and tasks within your organization. Contact us today to learn about how IRIS HCM can help your organization take the first step into its future.