What is Human Capital Management?

Human Capital Management (HCM) is both a philosophy and a strategic approach used by organizations to get the best out of our their most valuable asset - people. As such it’s useful to review both sides of the coin to get a full understanding of why having such an approach is important.

From the philosophy perspective, human capital management is based upon the idea that humans, as employees or prospective employees, are a form of capital or asset that can be used to create revenue through their skills, talents and creativity. Much like Talent Management and other contemporary fields, it challenges older approaches by viewing employees as multifaceted assets which require attention and development as opposed to simply a labor force that should be exploited for maximum profit. Agreeing to this more humanistic approach leads organizations to take certain actions in relation to employees and it is these set of practices that we are referring to when considering Human Capital Management.

Human Capital Management Practices:

Although, the specific methods a business may undertake will largely depend on industry and size, we can categorize the practices of Human Capital Management into 3 general areas: Acquisition, Optimization and Management. Each of these topics relates to a specific activities business undertake to maintain high performing and engaged employees:

1. Talent Acquisition - Attracting, recruiting and on boarding high quality employee with great potential.
2. Talent Optimization - Developing and coaching employees to maximize individual performance.
3. Talent Management - Tracking and auditing performance and intervening as appropriate.

Given the metric and data-driven approach inherent in Human Capital Management, it follows that software solutions are a popular among small and large business alike. HCM applications allow both the automation of repetitive tasks and advanced reporting capabilities from an administrator viewpoint as well as ease of use and centralization of information for employees.

Common features offered as part of HCM tools include:

• Employee self-service • Organization chart • Workforce planning • Performance management • Recruitment • Onboarding • Custom Workflows • Succession Planning • Reporting and Analytics • Company news and dashboards

Difference between Human Capital Management and Human Resources Management

Just as the difference between Human Capital Management and Human Resources Management is not always clear, the line between HCM tools and HRIS tools continues to be blurred as industry experts have been singling a move into employee experience as the next steppingstone of employee relations. The aim of both practices and accompanying tools is largely the same - to develop and manage high performing employee throughout the employee life cycle. This can be accomplished via both strategic and operational means and requires alignment between Human Resources and senior management. The end goal, whether employees are considered “capital” or “resources” is a workforce that is capable, trained, and supported enough to do their best work.

For a more in-depth read on the history of the HRIS and it’s progress towards an Employee Experience Platform, be sure to read our white paper: Human Resources Information Systems in 2019. For more information on performance management software in general and the benefits of adopting one, check out our blog: ‘Don't Think Performance Management Software Is "Worth It"? Think Again’ or our ultimate list for HRIS systems list.