What is Human Capital Management?

Human capital management (HCM) refers to activities that convert traditional HR functions into opportunities that increase the organization's efficiency, interest, and revenue. HCM involves managing the employee life cycle, including:

The proper application of HCM usually includes comprehensive analytics and reporting.

What is Human Capital?

"Human capital" refers to the employees of an organization and their skills, knowledge, and abilities that contribute to the organization's success. Human capital is a valuable asset that can be developed and managed to achieve business goals.

What is the Goal of Human Capital Management?

According to Forbes, the goal of HCM is to "maximize human capital through proper management and ample investments." By investing in employees, organizations can grow, hire the right people, and prevent high turnover rates. Improving human capital can increase innovation, well-being, productivity, and economic growth.

How Does HCM Differ From Traditional HR?

Traditional Human Resources and HCM differ in their objectives and scope of activities. While HR focuses on developing and managing systems and processes that enable employees to perform their jobs effectively, HCM focuses on maximizing employee value.

In short: Traditional HR is primarily administrative and transactional (think compliance, benefits administration, and payroll), while HCM is strategic and aims to convert traditional HR functions into talent management opportunities that lead to increased efficiency, interest, and revenue for the organization.

How Does Human Capital Management Enhance Business Performance?

According to a McKinsey report, companies that "prioritize developing their employees and manage to deliver top-tier profitability at the same time" are more consistent than their sector peers and better at retaining talent.

Investing in existing staff is also essential to maximize the potential of employees. Improving human capital can increase innovation, productivity, and economic growth.

What HCM Tasks Can Be Automated?

HCM software can automate labor-intensive work, such as payroll and timekeeping, for better efficiency. Many programs offer tracking systems for time and attendance, HR help desks, intranet portals, and employee self-service tools. HCM software can use technologies like artificial intelligence to consolidate disparate HR systems, improve the employee experience, and provide detailed analytics and reporting to help organizations add value to their employees.

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