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Meaning & Definition

Human Capital Management (HCM)

Human capital management (HCM) is the act of systematically recruiting, managing and developing a workforce. An HCM mindset views employees as company assets to be invested in so that their organizational value can be maximized. The important responsibility of HCM often falls on a company's human resources department, as they generally play a crucial role in who's hired, how efficiently talent is managed, and how seriously employee development is taken.

Frequently Asked Questions (FAQ's)

  1. What Is HCM Software?

    HCM software is a software that helps manage employees in an organisation it covers modules from HRMS and it is a broader category of HR software and covers extra features including onboarding, recruitment, talent management and performance management and people analytics to manage the workforce efficiently.

  2. What is the objective of human capital management?

    The key objective of human capital management is to train its employees so that they become efficient resources for the organisation. In human capital management, organisations treat their employees as resources that are important to the success productivity of the organisation.The acquiring, developing their skill base, managing of the individuals on key responsibility areas not only make them an indispensable resource in the future but also ensure their hundred percent contribution but also ensure team coordination, loyalty towards the organisation.

  3. What is the difference between human resource management and human capital management?

    The difference between human resource management and human capital depends on their terminology where human resources treat employees as resources of the organisation who fits a specific job role and are hired specifically for working on the same. Human resource management deals with employee payroll, attendance and training etc. While Human capital management treats employees as capital that is hired for the purpose or generating more capital they treat employees as capital that are hired to increase the productivity and output of the organisation. Human capital management deals with business goals, vision and mission, change management for better performance and leadership.

  4. What are the elements of human capital management?

    Five elements of human capital management are:

    • Skills, Qualifications of the employee.
    • Work Experience in the specified or role.
    • Social and Communication Skills with peers and customers.
    • Habits and behaviour in taking responsibility, meeting deadlines etc.
    • How employees develop as a brand image for themselves and for the company.
  5. What are the important tools required for the development of human capital?

    The tools for creating an environment for the employee to grow and an opportunity to learn and apply innovative ideas are training to develop new skills and better prepared for the job, facilitation, coaching the employee and consulting with them.

  6. What are the problems of human capital management?

    Some of the problem are:

    • Organisations are focused in achieving their goals rather than training their employees to be able to handle difficult situations and challenges.
    • HCM fails to anticipate sudden changes in the business environment and lags behind in overcoming these challenges.
    • HCM is effective when the organisation is unable to merge their strategic goals with the planned ones.
    • HCM fails to retain their top talents when employees fail to find any opportunity for growth and development.
  7. What are some human capital management functions?

    • Hire the best talent for the job.
    • Onboarding must be done quickly and efficiently with introducing the employee to company culture.
    • Train the employees, advance their skill and make them adapt to company products and services.
    • Retain the employees by keeping them happy in their role and position.
  8. What is the difference between HRIS and HCM?

    HRIS – Human Resource Information System is one of the basic out of all three, but very effective in carrying out HR processes such as data tracking, self-service for employees, analyzing data for better understanding and training for employee improvement, and managing benefits and compensations.

    HCM – An Human Capital Management covers every module present inside the human resource information system and also offers some extra features such as onboarding which helps in streamlining the entire process of onboarding employees from clearing their interviews to assigning them to a team and Talent management module.

  9. Benefits of human capital management (HCM) software ?

    The benefits of HCM software are:

    • Automating payroll, minimising payroll errors and eradicating payroll errors.
    • Streamlined the HR related process such as leave approval, attendance management and task.
    • Help recruit best talent by managing the recruiting and onboarding process, training and management of employee performance.
    • Help employees access large amounts of important data and information regarding the organisation policy.
    • With HR analytics HCM help help predict and plan for the changes in the business environment.
  10. Tips for improving human capital management at your company

    Here are some few tips to help you improve your human capital management:

    • HR professionals should focus more on employee engagement rather than hiring new employees and ignoring them afterwards. They should focus on employee recognition, growth and development and treat everyone as equal.
    • HR professionals should focus on investing in tech like hr software where they can automate the HR process and get rid of huge paperwork.
    • Owners should focus on communicating with the employees all the time instead of communicating during the performance meeting and discuss what's going on, are they having any problem and open up with them.
    • Human capital management should focus on aligning human capital goals with the organisation goals.

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