Human Capital Management (HCM)

What Is Human Capital Management (HCM)?

Human capital management (or HCM for short) refers to the practices that an organization has related to people resource management.

Human capital management is vital for hiring employees, training them, and ultimately retaining them.

These are generally broken down into 3 distinct categories:

Several processes and systems fall under the umbrella of human capital management.

Core Administrative Support

  • Personnel administration
  • Payroll
  • Service center
  • Benefits administration
  • Portal/employee self-service

Strategic HCM Support

  • Organization visualization
  • Workforce planning
  • Learning (education and training)
  • Recruitment (hiring and recruitment)
  • Time and expense management
  • Contingent workforce management
  • Compensation planning and strategy
  • Competency management
  • Onboarding
  • Performance management

Why Is Human Capital Management Important?

Human capital management is important for increasing the efficiency of employees in any given organization. When employees contribute more to the organization’s systems, it allows for improved productivity across the organization.

How Can You Improve Human Capital Management?

There are many ways in which you can improve human capital management. Here are some of the most common ways in which businesses improve HCM.

Building employee profiles – you need to know who your employees are. By building profiles, you create more cohesion between the employees themselves and the management.

Performance reviews – while many employees dread the thought of performance reviews, they are crucial to the business and go a long way to improving human capital management. Many organizations tend to focus on the weaknesses of employees in their performance reviews. Don’t fall into this trap – teaching employees to leverage their strengths improves the business’s productivity.

Make sure your human capital management aligns with your overall business strategy. This alignment is crucial for creating an effective HCM program.

What Are the Common Pitfalls of Human Capital Management?

Getting caught up in the past – businesses and markets evolve constantly. Make sure that your HCM doesn’t become stagnant – let go of those outdated methods.

Poor data – data becomes messy over time. You need to ensure that your data is as clean and up to date as possible.


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