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Human Capital Management

What is Human Capital Management?

Human capital management (HCM) is a set of practices related to people resource management. These practices are focused on the organizational need to provide specific competencies and are implemented in three categories: workforce acquisition, workforce management, and workforce optimization.

An HCM solution is an integrated system that automates Human Resources (HR) processes and provides employee self-service (ESS) capabilities.

What are the elements of an Human Capital Management?

The applications that help to enable human capital management include:

Core administrative support:

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

Strategic HCM support:

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

Other HCM:

  • Reporting and analytics (workforce analytics)
  • Workflow

What is the Importance of HCM?

Human Capital Management is essential for hiring, managing, training and retaining talented and high performing employees.

Human Capital management plays an important role in the recruitment process. It ensures that human resource professionals hire individuals who really deserve to be in the organization. Recruiting the right talent is of utmost importance. An individual who is not fit for a particular role will not be able to contribute much in the long run.

Talent acquisition is one of the most crucial responsibilities of human resource professionals, often neglected in most organizations. Do not hire someone just because you need to fill a vacant position or your superiors have asked you to do so. Analyze the background of an individual thoroughly. Try to find out why someone really wants to join your organization? Remember money should not be the only criterion why someone wants to change and join a new organization. An individual who has been assigned the role of acquiring new talents should not forget to check an applicant’s past experience, interests, professional qualifications and reasons for changing the previous job. If you really like someone, try to do some reference checks as well. Do discuss with the applicant before calling up his previous organization or boss, else it might land him/her in trouble.

Human Capital management plays an important role in orienting a new employee to the system. Boring and meaningless induction programs lead to confusions and an employee eventually loses interest in the organization. Do not load someone with unnecessary information, the very first day he steps into the organization. Make him feel comfortable. Ask him/her not to bring lunch from home. Order lunch from outside and ask all his team members to have lunch together. Such small initiatives go a long way in breaking the ice among team members.

It is essential for employees to upgrade their knowledge with time to cope up with the changing situations. Human Capital Management helps in training the employees and making them indispensable resources for the organization. Motivate employees to take up special courses or online programs which would help them in their job. Employees who do not brush up on their skills from time to time find it difficult to survive in the long run. 

What are the benefits of an HCM?

HCM systems reduce labor costs, increase efficiencies, and optimize processes. Here are the 10 ways in which an HCM solution can improve the life of your business:

One Unified Platform

Give managers single-source access to real-time employee data. Reports show that integrated systems reduce compliance risks, produce accurate time and attendance data, improve employee productivity and engagement, and create valuable data analytics and reporting for exceptionally informed business decisions.


Finding the most qualified talent in a competitive job market can be challenging. Having a robust recruiting system can assist with these challenges. HCM solutions help managers hire, source, track, and evaluate the best candidates with the following components: job posting, applicant and résumé data management, interview tracking, background screening, applicant communication, and streamlined conversion of application information into employee files.

Human Resources

Wouldn’t it be nice to be in fire prevention mode instead of firefighting mode all the time and be able to focus more on the people than the paperwork? The right HR management technology can help you do just that by reducing paperwork, producing accurate results, and automating things like onboarding/off-boarding, incident and discipline tracking, asset management, and, yes, the dreaded “C” word...COMPLIANCE. Additional critical elements include the management of all employee data and the ability to host all company-related documents such as employee handbooks, procedures, and safety guidelines.

Benefits Administration

Employee benefits are typically the second-largest business expense after payroll and are often viewed as a form of compensation. HCM systems offer businesses a solid solution that includes: benefit plan overviews, defined eligibility, open enrollment communications, and the ability for employees to make life event enrollments/changes.


Accuracy is critical in payroll. A sophisticated HCM system offers a built-in, robust, geospatial tax engine automating look-up of multi-state and local applicable taxes. Standard statements and reports also become available in real-time without conducting pre-pay processes, while payroll managers retain the ability to create custom reports simply and quickly. Employees can also view pay statements securely from their electronic devices through ESS.

Time and Labor Management

Utilizing a cutting-edge, automated time and attendance system streamlines processes associated with payroll. TLM offers employee scheduling, accrual tracking, job costing, efficient management of time off requests, and many more features. These systems help businesses eliminate time theft, paper time cards, and human error.


Does your organization need more features than those included in a basic TLM scheduler? If so, an enhanced scheduling module encompasses all of the TLM features and functions and adds budget and workload definition, open shift visibility, scheduling to skill and proficiency, color coding for rapid visual recognition, and the ability to schedule change alerts.


With an integrated solution, you can track all employee information and create reports that provide actionable information for decision making. Reports can often be exported in multiple file type options. On-demand, customizable dashboards also provide instant and real-time workforce data. Since reporting is also a critical function when it comes to compliance, HCM solutions will create reports for things like ACA, payroll, and tax filings as well as for EEO and FMLA.

Improved Security

HCM solutions can improve your business's security by reducing the amount of paperwork and related security risks. These systems include - or should include - very tight security protocols with access rights carefully customized to your organization's needs.

Measurable ROI

Investment in HR software can lead to substantial cost savings. If you choose software that specifically meets your business's needs, you will be able to reduce costs to deliver HR services because many functions will be completed by the software and others will take a lot less time. Reduced costs will also come from increased manager/employee accountability through self-service, reduced data entry errors and duplication, and improved insight through reporting and analytics. These solutions can also help avoid costly pay and accrual errors and better manage staffing to reduce unplanned overtime. 

What is the difference between Human Capital Management vs Human Resource Management?

HCM is the more all-encompassing term, describing functions that are part of the strategic management of human capital in an organization from talent and applicant tracking to time and attendance and analytics. It also includes budgeting, performance management, and onboarding as well as.

HRM systems encompass the elements known historically in human resources information systems focusing on the core payroll (originally and oftentimes called HRIS or Human Resources Information Systems.) Additional technology systems used to manage HR functions are included under this umbrella such as benefits administration, employee self-service, and management reporting.

Get a complete idea of the basics of Human Capital Management in our HCM Guide.

Ai in Human Capital Management

AI in HCM can be defined as the application of smart technologies such as artificial intelligence, machine learning, natural language processing (NLP), and deep learning to automate routine HR tasks, deliver personalized experiences, and gain actionable insights from HR data. Click here to learn more.

Much like the industrial revolution that transformed manufacturing, technologies like artificial intelligence (AI), machine learning (ML), and deep learning are transforming the way we live, work and communicate. These systems that constantly consume information to improve the accuracy and efficacy of human tasks hold great potential when paired with human innovation.

As the focal area of HR shifts from administrative tasks to improve workforce productivity, AI in talent management can help organizations streamline processes, improve functional efficiency, and make more informed people decisions that directly impact the bottom line. So, let’s look at some of the basic concepts in AI in HCM and explore the key use cases.