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.
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 In recent years, on-premises HCM has been superseded by software as a service (SaaS) as the preferred deployment option.
The functions of HCM software are generally organized into the following categories:
- Core HR, including payroll, benefits administration, onboarding, compliance management and maintenance of employee data.
- Talent management, the collective term for the process of recruiting, developing and retaining employees. Talent management suites consist of distinct yet integrated modules for recruitment, performance management, compensation management, learning and succession planning.
- Workforce management, the set of functions for deploying employees with the necessary skills to particular regions, departments or projects. It includes time and attendance management, workforce planning, labor scheduling and budgeting.
- Service delivery, including HR help desks, intranet portals, employee self-service and manager self-service.
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.
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.