Human Capital Management (HCM)

Human Capital Management is a set of practices and tools the HR department uses for an organization's betterment. It streamlines engagement of employees, uplifts the staff retention rate, and maximizes business value. HCM follows the traditional and administrative functions of HRs, such as talent management, shift scheduling, attendance, payroll, benefits administration, and more.

HCM Guide

What is Human Capital Management (HCM)?

Human Capital Management (HCM) refers to the set of HR functions undertaken by an organization to enhance its employee management efforts. An effective human capital management strategy provides the company with talented staff who stay with the business for longer and actively participate in the business undertaking as they remain engaged with their organization, enhancing HR service delivery and HR processes.

History of HCM

Companies started using the term ‘Human Capital Management’ (HCM) in the last 10 to 15 years. Before that, it was commonly referred to as ‘personnel administration’ or ‘personnel management’.


The HCM software consists of all activities related to employees that lead to fulfilling the organizational goals. The first ‘personnel management’ began in the National Cash Register Company.


In the early 1900s, human resource management mainly took care of the technical aspects of hiring, evaluating, training, compensating employees, etc. Later, in the 1970s, a vast revolution occurred in the human capital management (HCM) software due to globalization, deregulation, and rapid technology upgradation. In the competitive marketing field, HRM software became more engaging with business strategy, workforce planning, employee lifecycle streamlining the workforce and promoting organizational effectiveness.


The subsequent revolution appeared in 2000. Companies started to use the internet and moved to a 24/7 servicing architecture. They started implementing e-commerce services more than traditional ones. Information technologies started improvising the HRM software. Features like online training, auto-scheduling, online payroll and benefits administration records management were integrated into the HCM. HR professionals and HR teams started planning business strategies and conducting routine tasks through human capital management technology.

What is HRIS?

Key Components of Human Capital Management

Managing every aspect of employment in the organization is challenging for HR leaders and practitioners in modern companies. An efficient Human Resources Management System is essential for such enterprises, which can handle all elements of organizational HR, from strategic issues such as employee succession planning and development to managing the company claims and benefits. 

The essential components of HCM software are:

1. Accurate Planning

HCM software automates the company’s workforce planning and evaluates its needs to fulfil current and future staffing needs. For accurate planning, HCM solutions collate the company data and even provide predictive analytics for more intelligent workforce decisions.

2. Recruiting & Hiring

HCM streamlines the hiring and onboarding process too. HRs can reach out the suitable candidates easily through HCM. Several modern HCM solutions allow users to create and directly post jobs on social media, standard job portals, and forums.

3. Swift Onboarding & Offboarding

HCM helps integrate new employees into the organization through hiring orientations, mentorship, and training. It provides several modern features, such as AR and VR-based onboarding, interactive onboarding sessions, and more. Similarly, it takes off all documentation related to offboarding, ensuring a quicker offboarding process. The software can check for numerous asset recoveries and notify the related departments.

4. Training

HCM streamlines the entire workforce training procedure. With a robust HCM, employees can be provided self-learning avenues to ensure enhanced interactivity with the training module. It can also help in undertaking quizzes and certifying the staff based on their successful training completion.

5. Time & Attendance

With HCM software, employees can track work hours through punch cards or facial recognition. With the integration of advanced biometrics, time and attendance become foolproof and accurate. Using the geo-tracking feature can also help the supervisor manually track individual employees.

6. Payroll

HCM software enables activities such as calculating employee hours, keeping track of employee financial documentation and transactions, and measuring deductions. It helps develop precise employee records for calculating their salaries and their on-time disbursal every salary cycle.

7. Performance Management

The performance management feature of Hr software streamlines the time-constrained task of regularly keeping track of employee performance. It helps provide the staff with direct feedback and helps develop and track their KRAs.

What is a Cloud HCM Solution?

A cloud-based HCM software utilizes mobile cloud-based architecture to manage the entire employee lifecycle through research and process data, generate reports, boost productivity, and create a smooth end-user experience. This software includes various processes that streamline HR functions and business processes for HR managers, along with the benefits provided by cloud technologies.


Some additional features of the Cloud HCM suite are:

1. Automation

Cloud HCM systems provide features like programmatic management of resources, automated capacity management, and auto-integration so that organizations need not worry about efficient employee data storage.

2. Security

Protecting employee data, applications, and other services in the cloud environment is a crucial feature of a Cloud HCM solution. Various high-end cloud management tools offer machine-learning capabilities like threat intelligence, detection, and more. It also helps streamline security monitoring and related processes.

3. Cost-effectiveness

Cloud HCM provides features like cost-effective management, auto-reporting and forecasting that helps in precise budget allocation. One can understand which costs are essential and which are unnecessary based on the data collated by the system.

4. 24/7 Remote Availability

Cloud-based HCM systems can be accessed from anywhere since the software remains live on the cloud around the clock. It helps the employees and HRs access the system for any information.

Benefits of using Human Capital Management Software

In the modern digital world, deploying a human capital management system is essential for the HR departments of start-ups and enterprises. A future-ready human resource management system attracts suitable candidates, streamlines employee onboarding, and helps improve employee retention.

Below are some of the additional benefits of an HCM System:

▸ Improved Hiring & Onboarding

With the right employee management system, HRs can conduct hassle-free hiring since it can provide a complete database of candidates with relevant job-specific skills and experience.

▸ Better Return on Investment

With the Human Capital Management system, organisations experience better ROI after hiring and compensating employees fairly, ensuring they perform their primary duties, leading to better business output.

▸ Increased Retention Rate

In any organisation, employee satisfaction is one of the critical elements of increasing the company’s productivity. But it is often challenging to satisfy the employee and increase the retention rate. An HCM software combined with good HR practices leads to engaged employees and improved job satisfaction.

▸ Closure of Talent Gaps

The Human Capital Management system helps adjust the criteria in recruitment process to fulfil the role requirements. Hiring suitable candidates for relevant positions leads to achieving the organisation’s goals and effective talent management.

▸ Improved Human Resources Management

Having the best HCM software means organisations can benefit from devising the right human resources for the workplace. It manages the entire human resources department system and guides HRs to hire the best talent to achieve the organisational goals.

How to choose a Human Capital Management System?

Choosing the ideal HCM system becomes easier once you identify the steps required in selecting it. Some of the most relevant ones are:

▸ Analyse HCM Requirements

One needs to have an itemized list of software requirements for the HCM before approaching a vendor. The HCM software will be used daily by the Human Resource team and hence, it is essential to ensure that the system is as user-friendly as possible.

▸ Find the Right Vendor

Organizations planning for a new HCM platform can choose from an ever-growing number of established and newer vendors. When deploying the human capital management system, the vendor can help the organization by customizing their software with features suitable for their workplace.

▸ Identify the Future HCM requirements

Building a requirement checklist identifying future requirements, outlining upcoming business goals is essential before implementing the right HCM software. It will help you evaluate which HCM solutions fit best your current and future requirements.

▸ Deploy Workforce Management Software

An effective implementation plan assists you in the HCM strategy set-up, maintaining management strategies, executing sponsorship, keeping track of employee records, data conversion, third-party integration, and employee experience and communication.

▸ Feedback-based Changes

What is your employee experience with the HCM? Does it meet your business expectation, or do you need to add any features or changes per your requirement? Evaluating the HCM software performance is one of the key tasks on your to-do list.

Future of HCM

The future of HCM will be mobile and cloud-based. Future HCM solutions will be based on the cloud architecture, as evident by the cloud platform’s rising popularity. Cloud HCM suites vastly improves the accessibility and security of the HCM platform. Hence, future HCM will be based on cloud architecture. It will also be customizable as per the standards of the region and industry to which it caters.


The future of HCM will also include connectors like APIs to integrate the software with other commonly used enterprise software. Such integrations will be easy to use since the HR or administrator can easily enable or disable the same from the user interface, making for a seamless system. Along with the SaaS model, the HCM will also be available in the iPaaS delivery model for enhanced flexibility, ensuring maximum cost-effectiveness.


HCM is the expansive version of HRM. HCM includes everything related to employee management, while a Human Resource Management System provides only the core HR functions.

HCM is an extended version of an Human Resources Information System. While HRIS deals with specific HR activities, HCM is the central strategy allowing for such activities.

Objectives of HCM:

  • Talent Management

  • Employee Life Cycle Management

  • Performance Management

  • WOrkforce Optimization

  • Attendance & Leaves

  • Payroll & Compliance

  • Resource Management

  • Employee Engagement

Importance of HCM:

  • Improved Employee Engagement

  • Enhanced Talent Acquisition

  • Increased Communication

  • Better Training Management

  • Improved Data Security

  • Streamline HR Processes

  • Maintain HR Compliance

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