Human Capital Management (HCM) is a term used to describe the methods and processes that an HR department uses to recruit, manage, and develop employees within an organisation. The concept originates from the idea that employees are the most valuable asset an organisation has, and the valuable expertise they hold is crucial for the organisation to achieve its goals.
The terms HCM and Human Resource Management (HRM) are often used interchangeably to refer to the same processes, but originally, there were some differences. HCM was a broader concept that encompassed more than just core functions—it could involve surveys among employees and methods for analysis—while HRM was limited to basic HR tasks such as onboarding and offboarding. However, today these terms have largely merged and are used interchangeably.
When applied correctly, the methods in HCM can help create a strong organisational culture that supports employee development. By providing opportunities and encouragement to use their talents and skills, individual employees gain greater control over their own careers. In most cases, this positively impacts motivation and sense of belonging, and, not least, contributes to the overall results of the organisation.
Workforce planning: this process involves forecasting and planning the organisation's future workforce needs, identifying necessary skills and competencies, and determining the optimal size and structure of the workforce.
Recruitment: this process involves finding and recruiting individuals with the necessary skills and qualifications who also fit into the organisation's culture. It includes activities such as job analysis, candidate screening, interviews, and job offers.
Onboarding: once candidates are hired, this process focuses on providing them with a smooth start in the organisation. It includes activities such as orientation programs, document completion, introduction to company policies and culture, and initial training..
Continuous performance management: this process is about setting performance expectations, providing feedback, evaluating performance, and recognising and rewarding employee achievements. It includes activities such as goal setting, performance evaluations, and development discussions.
Skills development: this process focuses on improving employees' skills, knowledge, and abilities. It includes activities such as training programs, workshops, and e-learning to support individual and team development.
Engaging and retaining employees: this process aims to create a positive work environment, promote employee satisfaction, and retain top talent. It includes activities such as employee surveys, feedback mechanisms, and initiatives to promote work-life balance and employee well-being.
HR-analytics: in this process, data and analysis are used to measure and analyse various aspects of personnel management. It involves tracking key HR metrics, analysing workforce trends, and making data-driven decisions to optimise HR strategies and processes..
These processes are interconnected and form a comprehensive framework for effective management of an organisation's employees. When executed correctly, they can contribute to engagement and well-being and help ensure that everyone works as efficiently as possible toward the same goals.
An HCM system can also provide a range of positive effects throughout the organisation. Firstly, it streamlines and automates administrative tasks, saving you time and reducing the number of errors. Secondly, the system serves as a centralised platform for managing employee data, promoting effective communication, collaboration, and data-driven decision-making. Additionally, an HR system helps ensure compliance with laws and regulations and ensures that HR processes are accurate, transparent, and confidential.