What is Human Capital Management?

HCM Human capital managementEmployees are the lifeblood of the organisation, your organisation can’t survive if you don’t have them or they are not contributing to its success. That’s why once an organisation reaches a certain size they recruit a HR professional or HR team.

Years ago when you mentioned Human Resources the image of the role that was conjured up was predominantly administrative – ensuring people got paid, benefits were selected, and performance reviews were completed. But the role of HR evolved, it became more dynamic and a more ‘hands on’ role, for example, helping managers with conflict resolution, dealing with employee training or reporting and providing insight into employee analytics.

And it continues to evolve; it is becoming more strategic, with forward-thinking organisations seeing HR and people management as a business strategy rather than just a tick box. As a result, many organisations are now starting to refer to HR as “Human Capital Management”.


The power of Human Capital Management

Human Capital Management (HCM) represents the entire range of practices and processes for managing people in an organisation, but it also reflects the more strategic, leadership-oriented nature of the department. According to Gartner,  HCM is a “set of practices related to people resource management,” specifically in the categories of workforce acquisition, management and optimization. In addition to the administrative support HR provides, HCM also includes strategic support such as:

  • Workforce planning and workforce pipelines
  • Compensation planning and strategy
  • Professional development (education and training)
  • Recruitment and on-boarding
  • Competency and performance management
  • Employee engagement
  • Reporting and analytics

HCM is also about treating your employees as an investment and creating an environment where both you and your employees can thrive.


A personalised approach

With this in mind, HCM then becomes about more than recruiting and inducting new employees. HR professionals need to consider how they can keep their employees happy, engaged and loyal. It’s about the entire employee life cycle.

mind over matterKey to HCM is recognising employees as individuals and taking a personalised approach. This means taking into account their personalities and preferences when it comes to motivating and communicating with them. The popular Myers-Briggs Type Indictor is a good place to start, but HR professionals also need to be aware of the different individuals that make up their workforce.

Managers and HR need to get to know their employees on and individual basis and find out what motivates them, what their career aspirations are and how they like to be communicated with.

The multiple generations within your workforce will also have an effect on your HCM. Managers may need to adjust their approach to deal with the differing needs and desires of the generations, and HR professionals need to take account of the generational groups when it comes to employee engagement strategies.

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Invest in the right programmes

HR learning from MarketingOne of the reasons many companies are transitioning towards HCM is the advances in technology. HR software and tools allow HR professionals to build automated processes so they can then spend their time meeting and getting to know their workforce.

Employee benefits portals mean HR professionals are no longer spending their time doing benefits admin, as employees can update their benefits at any time during the year to reflect their changing circumstances.

Social recognition programmes take away the burden of recognition from managers alone by enabling employees to give kudos to their co-workers on the spot rather than fill in recognition nominations that need to be reviewed and actioned.

Communication systems make it easier to touch base with employees in a way that suits them, whether it’s by instant messaging for the younger, more tech-savvy, generations or by email for older generations. And HR portals allow HR teams to track employee development to ensure that the organisation is helping employees achieve their career aspirations.


Human Capital Management is a challenge, but organisations and HR professionals need to adapt to the changing times by taking on a more strategic role, and using technology to better understand their employees on an individual basis in order to engage with them.


John Sylvester

John is responsible for the motivation division of p&mm ltd and a Director on the board of the IPM. Specialising in developing, implementing and directing many large scale staff motivation, recognition and employee communications programmes.
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