What Is HCM

Human capital management (HCM) is a vital process that involves hiring the right people, effectively managing workforces, and optimizing productivity. It has evolved from a purely administrative function to a critical enabler of business value. In this article, we will explore the elements of human capital management, its benefits, challenges, and how technology can help organizations in this area.

What is HCM?

What are the elements of human capital management?

Human capital management consists of various administrative and strategic applications, including:

  • Recruitment
  • Onboarding
  • Payroll
  • Time and attendance
  • Benefits and retirement services
  • Talent management
  • Training
  • Reporting and analytics
  • Compliance

Benefits of human capital management

Human capital management can significantly improve workforce productivity and help HR managers in hiring, engaging, and retaining employees. By integrating HR services, organizations can eliminate costly redundancies and synchronize data into a trusted source of decision-making.

Human capital management (HCM) challenges

Human capital management can help businesses overcome various challenges, such as:

  • Talent strategy: Engaging employees throughout the employee lifecycle and aligning their performance with business goals.
  • User experience: Implementing intuitive and easy-to-use technology to increase workforce productivity and improve morale.
  • Big data: Utilizing data for optimized schedules, competitive compensation packages, and better decision-making.
  • Administrative burdens: Implementing tools and resources that save time and allow organizations to focus on business strategy.
  • Systems integration: Integrated systems that save time, resources, and money while maintaining visibility across borders.
  • Compliance: Maintaining compliance with changing regulations through sound data and proactive approaches.
  • Data security and privacy: Implementing gold-standard protections and response measures to ensure data security.

Why human capital management (HCM) is important

Human capital management strategy is critical for success as it impacts every functional area and employee within an organization. Evolving market forces, such as changing workforce demographics, remote work environments, and increasing compliance regulations, make HCM increasingly important.

How human capital management technology can help your organization

HCM technology provides an opportunity to optimize workforce strategies and improve business operations. It can help organizations in the following ways:

  • Make data-driven decisions: Predictive analytics and forecasting enable better decisions about compensation packages, work schedules, and more.
  • Encourage business growth: Cloud-based solutions that are adaptable and expandable allow for the management of more employees, transactions, and data.
  • Increase profitability: Automated workflows reduce direct labor costs and administrative expenses.
  • Optimize talent strategies: Technology can enhance how organizations attract and retain talent through chatbot-assisted applicant screenings, multimedia-based training, and mobile self-service options.
  • Secure data: Implement multi-layered protection and public-facing security alerts to prevent data breaches and fraud.
  • Improve regulatory compliance: Stay current with changing regulations through global and local monitoring capabilities.

Human capital management

What is human capital management software?

HCM software is an aggregate of multiple HR systems that use mobile and cloud-based technology to process data, run reports, and create a smooth end-user experience. There are generally two types of service models – best of breed and unified.

With a best of breed approach, organizations purchase applications from different vendors, offering greater functionality but increased complexity. A unified solution involves working with a single vendor for all HCM needs, providing simplicity but potentially less robust features.

How to choose a human capital management system

Choosing the right HCM partner requires a focused, organized, and strategic buying process. Here are some steps to consider:

  1. Build a requirements checklist outlining the business goals dependent on HCM.
  2. Create a plan of action with project scope, necessary resources, budget, and team leaders.
  3. Keep internal stakeholders informed and engaged throughout the project.
  4. Familiarize yourself with your organization’s approval process for transformative projects and outsourced solutions.
  5. Secure stakeholder approval by presenting the solution and highlighting the business, financial, and end-user benefits.


How do you build human capital?

Building human capital involves investing in your workforce through hiring talented individuals, regularly monitoring their performance, enhancing their skills with training and education, and retaining them through competitive pay, benefits, and incentives.

What’s the difference between HCM and HRMS?

While similar in many aspects, the difference between human capital management and human resources management systems lies in the size and breadth of their service packages. HRMS usually provide core HR functions for small to mid-sized businesses, while HCM offers comprehensive applications across the entire employee lifecycle and can accommodate enterprise-level organizations. HCM also typically includes detailed analytics and reporting.

Does HCM include payroll?

Most fully-integrated HCM solutions automate payroll, saving time and reducing data entry errors. Some solutions also accommodate flexible pay options, including early access to wages, pay cards, and a choice of pay frequency.

What are the functions of human capital management?

HCM covers essential HR functions such as payroll, time and attendance, and benefits administration. Additionally, it includes aspects of workforce management, such as employee training, engagement and retention, and compliance.

What are the objectives of human capital management?

The objectives of HCM are to enable strategic growth, empower employees, and connect people and workflows to support daily operations. Some solutions provide personalized experiences based on function, location, team, and individual.

For more information on human capital management, visit Top Q&A.

Note: This article provides practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal advice or other professional services.


Human capital management plays a crucial role in modern organizations, helping to optimize productivity, engage employees, and drive business growth. By leveraging technology and strategic approaches, organizations can effectively manage their workforce and stay ahead in today’s competitive landscape. If you want to learn more about human capital management, visit Top Q&A for comprehensive insights and expert advice.

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