What is human capital managent (HCM)?

Attract, recruit, train, develop, manage and retain the best employees to achieve your business goals

Young man on job interview with female HR manager.

What is human capital management?

Human capital management (HCM) is a set of practices and tools used to attract, recruit, train, develop, manage and retain employees to achieve business goals. Organizations that depend on employees to achieve their objectives allocate resources to develop the core skills their staff needs to deliver results. Human capital management helps to identify gaps in employees’ capabilities and focus recruitment efforts towards meeting those needs.

Utilizing HCM practices can help create a strong organizational culture that promotes employee development and commitment to company goals. Employees have more control over their careers and are encouraged to dedicate their skills and talent to the employer for the long term.


Components of human capital management

Human capital management focuses on adding value to an organization's employees so they can deliver the best results. It covers human resources functions, compensation and other key areas vital to the vision and mission of a company. HCM provides a process for optimizing the performance and efficiency of a company's staff — delivering an overall strategy to guide talent attraction, recruitment, onboarding and training, benefits administration and reporting.

What are the components of HCM?

Talent management

Talent management nurtures employees to develop new skills and enhance their work performance. It begins when a candidate first interacts with a company and never really ends.

Recruitment and hiring

One of the most important aspects of human capital management is to attract and hire talent that helps the organization achieve its goals. It provides the tools the human resources department needs to position the organization as an ideal workplace for employees and streamline the recruitment process.

Onboarding and training

Managing human capital requires the effective onboarding of new employees. It introduces them to the company culture, job requirements and expectations and creates an environment that helps them fit into their roles. Another function of HCM is to train employees to deliver their best performance for the organization.

Benefits administration

HCM can help you simplify the complex task of managing your workforce benefits and make planning and decision-making easier for your employees. Set up your benefit plans once, driving enrollment and deductions throughout the system.

Time, attendance and payroll

Managing schedules, hours worked and time off is critical for payroll accuracy and compliance. The right HCM process can make it easier to track and manage on-the-job hours, leave applications and security requirements, and automate your payroll.

Employee service and self-service

HCM can offer self-service application and tracking systems for time and attendance, service delivery including HR help desks, intranet portals, employee self-service and manager self-service.

Reporting and analytics

Human capital management offers a database of actionable insights to help organizations add value to their employees. Data from performance reviews, employee benefits claims, skills, turnover rate and other statistics can help them adjust their practices to improve the work environment and achieve objectives.


Benefits of human capital management

The greatest benefit of human capital management is that it allows organizations to get the most value from their employees. HCM simplifies human resource duties and offers several other benefits, including matching the right employee to the right job, increasing workforce productivity, reducing costs and increasing ROI, and boosting employee development.

How does HCM benefit an organization?

Hire the right people for the right role

Organizations can match employees with positions where they can use their skills and talents. HCM provides processes that can identify the individual strengths and competencies of employees and match them to the best role.

Increase workforce productivity and efficiency

By investing in training that develops specific capabilities the organization needs to accomplish its goals, human capital management helps boost productivity. It also improves efficiency because the system places employees in roles where they can perform at their best.

Streamline HR functions

HCM can accelerate human resource processes by consolidating disparate HR systems, leveraging analytics for more intelligent workforce decisions, and automating manual processes globally and locally.

Reduce costs and increase ROI

An efficient human capital management system can enhance performance management to simplify processes, reduce costs, boost revenue and increase your return on investment (ROI).

Strengthen employee development and career planning

Another function of human capital management is to provide adequate training to help employees deliver their best performance and plan their future. It identifies capability gaps through training, surveys, performance reviews and other sources of feedback.


What is HCM software?

HCM (human capital management) software, sometimes called an HRIS (human resources information system), or an HRMS (human resources management system), is a technology application that can help employers manage and nurture their employees. The software may bring talent planning, management and analytics together in a single system.
HCM software deals with companywide HR processes, aimed at increasing human capital ROI. An HRIS focuses on data and processes for individual staff members rather than an entire workforce, while an HRMS can provide a comprehensive suite of HR software features. This suite can include a full HRIS along with HCM capabilities, time management and payroll — with the option of integrating all HR and HCM processes in the HRMS.


Benefits of HCM software

HCM software provides powerful organizational capabilities and other tools that improve the organization’s efficiency. Implementing a robust HCM solution can help you streamline HR tasks, access real-time data, avoid compliance penalties, improve security and enhance reporting.

What are the main benefits of using HCM software?

Integrated systems for HR functions

The right software allows a business to streamline tasks, improve overall efficiency, provide on-demand access to HR-related information, increase employee benefits and reduce human errors on critical recordkeeping.

Data-driven decision-making

HCM software can integrate across functions and provide real-time access to data. It uses the cloud to offer efficiency and mobility – allowing you to access the right data analysis to be used in decision-making.

Improved compliance

It is important to comply with compliance regulations to avoid penalties and large fines. HCM compliance software automates the workflows, checklists, reporting, filing and documentation required to help your business remain in compliance.

Data security and privacy

HCM solutions can improve your business's security by reducing the amount of paperwork and related security risks. These systems can include tight security protocols with access rights carefully customized to your organization's needs.

Enhanced reporting

With an integrated solution, you can track employee information and create reports that provide actionable information for decision-making. Reports can often be exported in multiple file type options.


Related solutions

Talent management services

Inspire your workforce with innovative technologies and a people-centric approach to talent management


Workday consulting services

Apply the power of cloud and AI technologies to your Workday implementation to transform finance and HR.


Workforce planning solutions

Acquire and retain the right talent at the right time with powerful workforce analytics and HR planning tools designed to drive efficiency.


SuccessFactor consulting services

Improve your employee experience and operational effectiveness to help transform human resources using SAP SuccessFactors.


HR transformation services

Reinvent your HR function with an employee-centric design, innovative technologies and a dynamic operating model.



Next steps

Learn about talent management and how organizations can improve their talent acquisition, talent development and HR processes to deliver intentional experiences and foster a culture of continuous learning.