Definition

human capital management (HCM)

This definition is part of our Essential Guide: Talent management system essential guide
Contributor(s): David Essex

Human capital management (HCM) is the comprehensive set of practices for recruiting, managing, developing and optimizing the human resources of an organization.

The phrase connotes an approach to human resource management (HRM) that views employees as assets that can be invested in and managed to maximize their business value.

Software

HCM has come to be nearly synonymous with the human resources (HR) function in organizations. In HR technology, the comprehensive software systems for managing HR processes differ little from HCM suites. For example, the functions of most human resource information systems (HRIS) are often the same as HCM systems. However, some observers use HCM in a narrow sense to denote just the labor-scheduling and time-tracking functions of HR.

HCM suites are sold either as components of enterprise resource planning (ERP) systems or as separate products that are typically integrated with ERP. In recent years, on-premises HCM has been superseded by software as a service (SaaS) as the preferred deployment option.

Functions

The functions of HCM software are generally organized into the following categories:

HCM suites also typically have technologies that cut across functional areas, notably analytics, social media, collaboration and employee engagement. Many also allow mobile access to HR data and applications, especially the self-service features.

HCM components and functions

Analytics is usually the critical element in strategic human capital management, which seeks to more closely align HCM with the financial success of the company. Sometimes the analytics tools are localized to a particular HCM function. For example, workforce analytics can help optimize decisions made in the workforce planning module, while social media and collaboration tools can facilitate the frequent feedback and communication required for continuous performance management.

This was last updated in September 2017

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