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October 08, 2023

What is human capital management (HCM)?

It's said that people, talent, are the most important asset in any company. Therefore, good human resources management and policies are essential, whether to attract and recruit talent, retain it or, if necessary, to part ways with it, for whatever reason.

All the tasks that fall under the purview of the Human Resources department are contained in the applications we know as human capital management (HCM). In other words, as Gartner points out, the set of practices related to managing human resources.

These practices focus on the organisational need to provide specific skills, and apply in three categories: personnel hiring, personnel management and personnel optimisation. The applications that help make HCM possible are as follows

Basic administrative support:

  • Personnel administration
  • Administration of benefits
  • Payroll
  • Employee portal/self-service
  • Service centre

HCM strategic support:

  • Workforce planning
  • Skills management
  • Performance management
  • Remuneration planning and strategy
  • Time and expense management
  • Learning (education and training)
  • Recruitment (recruitment and hiring)
  • Onboarding
  • Managing temporary personnel
  • Recognition of the organisation

Other HCM:

  • Reports and analysis (personnel analysis)
  • Workflow

HCM functions

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

Basic HR, including payroll, benefits, employee onboarding, compliance management and maintenance of employee data.

Talent management, the hiring process, employee development and retention. Talent management suites consist of different but integrated modules for hiring, performance management, compensation management, learning and succession planning.

Workforce management, the set of functions to assign employees with the necessary skills to certain regions, departments or projects. Includes time and attendance management, staff planning, workforce planning and budget preparation.

The provision of services, which includes HR assistance services, intranet portals, employee self-service and manager self-service.

Together with these components, HCM applications often incorporate some important technologies, such as analysis and collaboration. The first of these is a critical element, since it can provide a better analysis of job performance or the reasons behind high turnover

As for the collaboration tools, they allow for more seamless, two-way communication between the employee and HR, often without requiring the people involved in resolving a question or issue to interact face to face. This can help increase employee satisfaction and contribute to greater productivity in a work department.

Advantages of having HCM

Higher employee performance levels, higher levels of satisfaction, reduced staff turnover and quitting, a positive effect on the company culture and more successful employee referral programmes are some of the benefits that companies can obtain when they use an HCM application, the general purpose of which is to help employees do what they do better.

In addition, HCM applications help companies use the latest data, improve business processes and focus on hiring and retaining the right people in order to optimise a healthy and committed workforce.

This software allows a company to streamline tasks, improve overall efficiency, provide HR-related information on-demand,

increase employee benefits, reduce human errors in maintaining critical records, and obtain the appropriate data analysis for leadership to use for important decision-making.

It is a key tool for improving the diversity and inclusion policies of companies, since they usually offer advanced reporting capabilities that company executives can use to access data on the demographics of employees in departments, teams, applicants and management. This information can help a company identify diversity deficiencies so it can address them.

And last but not least, a good HCM system will also be compatible with mobile environments, such that employees can do some of their administrative paperwork (such as checking salaries, attendance records or holiday requests) directly from their terminals.

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