What is Human Capital Management?

human capital management

Businesses should consider employees as an investment rather than a cost. This is where human capital management (HCM) proves to be worthwhile. It is inevitable for hiring, training, managing, and retaining proficient and high-performing employees. With HCM, businesses can effectively manage their greatest resource, i.e., workforce.

HCM is defined as a collection of activities that transform traditional HR functions into a pool of opportunities contributing to enhanced efficiency and revenue for the organisation. It is dedicated to maximising the human capital’s value through effective management and plentiful investments.

Using HCM practices, a business can create a robust organisational culture that fosters employee development and dedication to fulfilling organisational goals. Pursuing a certificate course in management can help you understand vital aspects of HCM.

The need for human capital management will increase in the upcoming years. This can be justified by the fact that the global human capital management market is proposed to grow from USD 28.86 billion in 2023 to USD 53.61 billion by 2030.

Let’s walk you through the key aspects related to human capital management.

Components of HCM:

i. Talent management

It fosters employees to learn new skills and improve their work performance. It comes into the picture when a candidate first communicates with a company.

ii. Recruitment and hiring

Recruitment and hiring are some of the most significant facets of human capital management. They help attract and hire talent so that the organisation fulfils its objectives. It equips the human resources department with the tools required to make the organisation an ideal workplace for employees. Also, it streamlines the recruitment process.

iii. Onboarding and training

The management of human capital demands the successful onboarding of new employees. This component of HCM introduces new employees to the company’s culture and job description. Moreover, it sets up an environment that helps them fit into their job roles. With this component of HCM, businesses can train their employees to let them deliver their best performance.

iv. Reporting and analytics

This component provides a database of insights to help organisations evaluate their employees’ performance and help them enhance their values.

v. Time, attendance, and payroll

This component helps the HCM process to easily track and manage working hours, security requirements, leave applications, and automate your payroll.

Why should you use Human Capital Management?

The following points clarify why a business must use Human Capital Management.

Enhances workforce management:
HCM ensures alignment between an organisation’s objectives, structure, and business strategy. It assists talent departments in determining workforce needs in the context of development, training, and compensation to decrease turnover.

Improves the recruitment process:
HCM encourages businesses to find the best talent using social media, intelligent software, and employee referral programs. It helps hiring managers manage a pool of applicants and analyse each candidate’s status during the recruitment process. By implementing a comprehensive onboarding process and training program, HCM lets businesses provide a strong start to new employees.

Streamlines administration:
HCM can simplify the complex task of managing workforce benefits. It simplifies the planning and decision-making processes for employees.

How does HCM benefit an organisation?

Hire the appropriate candidate for the job role
HCM helps organisations match employees with job positions based on their skills and work experience.

Increases Return on Investment (ROI)
ROI is essential to consider when hiring and rewarding employees. HCM helps motivate employees to perform better and thus improve their outputs, which ultimately benefits the organisation. Investing in training develops the capabilities the organisations require to fulfil their goals.

When you complete a certified CEO program, you can become familiar with ways to boost ROI.

Foster employee development and career planning
HCM pinpoints capability gaps through surveys, training, performance reviews, and several other sources of feedback. The corresponding outcomes help an organisation comprehensively analyse the employees’ capabilities and performance. Consequently, organisations can provide precise and adequate training to help employees provide their finest performance and plan their future.


HCM is a dynamic approach that optimises an organisation’s highly valuable asset, i.e., its workforce. After understanding the principles of HCM, an organisation can better train its workforce to meet its objectives. Also, by implementing HCM, an organisation can build a workplace culture that constantly values and invests in its workforce.

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