What is HCM and How is It Raising the Bar in Human Resource Management?

Quick Summary: This complete guide on Human Capital Management (HCM) provides all the information, including definition, benefits, reasons to choose HCM and more. Get answers to all your questions about HCM and find out this is a helpful practice for your organization.

For every successful organization, a productive workforce is the backbone. Therefore, companies spend billions on attracting, recruiting, training, developing, and engaging employees.

There is one department that takes all the responsibility, from finding the right employees to retaining them, which is the HR department.

Traditionally, the human resource department was focused only on the administrative functions. But now their role is expanding with much focus on building a contributive workforce with the right environment and processes.

Now organizations are adopting the Human Capital Management (HCM) strategy focused on recruiting the best employees for various roles, providing them with training, and managing employee performance. Organizations can invest in a human capital management system to implement this strategy.

HCM is beyond the rudimentary HR functions, it creates an employee lifecycle where an organization gets the right workforce that contributes to business growth. HCM uses modern IT tools and applications that automate processes and improve employee efficiency.

A simple definition of HCM would be the set of all activities followed throughout the employee lifecycle. As per Statista, the HCM applications market is expected to touch the mark of $37.9 million by 2025 .

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Let’s understand what human capital management is and how it’s making a difference.

What is HCM?

Human Capital Management or HCM entails various practices and tools that allow organizations to attract, recruit, train, develop, and retain employees in a way that maximizes the ROI. It is an effective approach to fostering human resources, which is productive and geared to achieve business goals.

In simple words, it’s a new way of employee management. The HCM process follows the human resource approach of HR management. So, it sees employees as valuable resources rather than costs to an organization. HCM goes beyond HR functions and creates an opportunity that increases efficiency and revenue for an organization.

HCM is often compared with HRIS and HRMS, but HCM is an umbrella term that covers all the aspects of workforce management and HR functions. Go through the complete guide to HRIS to understand the differences.

Since the workforce is seen as an asset from HCM point of view, it attempts to improve its value with strategic management and investment. The HCM strategy encompasses everything from communicating the vision, mission, and values of the organization to offering programs for professional development.

Automation plays a crucial role in HCM and there are various software and tools used in this process. Indeed, organizations use a robust human capital management system to optimize the process to bring the best results.

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What is the Importance of HCM for Your Organization?

Now that you know HCM meaning, we can look at its significance for an organization. There are lots of benefits of human capital management as it offers a new mindset to managing the most important resources of an organization – employees.

Here are the benefits of picking the human capital management strategy for your organization.

Hire the Right Talent

HCM strategy is more effective for hiring the right talent for your organization because it focuses on recruiting the best employee rather than filling up the positions with the required skills. It provides the roles and responsibilities to every employee based on their competencies and strengths.

Make HR Functions Organized

Another advantage of HCM solutions for your organization is the consolidation of different HR systems that streamlines and speeds up your HR activities. Coping with various HR functions can be challenging and time-consuming when done manually, but using HR management software and tools makes this a seamless process. The software provides automation and analytics for better management.

High ROI and Low Costs

You can deploy an efficient human capital management system to improve performance and simplify processes that will reduce costs and maximize ROI. HCM solutions remove extra activities through automation that saves time and cost. You can follow the HCM best practices to reduce costs.

Efficiency and Productivity

The human capital management strategy emphasizes providing training to develop the required skills among employees that improve their productivity. Apart from this, it also improves the efficiency of the workforce by placing individuals in roles that are the best fit for them.

What is Human Capital Management (HCM) Software?

Modern HR activities take place through several software and tools that accelerate and simplify the whole human resource management process. No matter what activity it is, like hiring, employee management, communicating policies, managing attendance, or anything else, you name it and HCM tools make everything a piece of cake.

What does HCM software do? Human capital management software is a comprehensive solution with multiple functions and benefits. It offers functionalities from recruiting to offboarding employees. It provides all features like payroll management, staffing, administrative functions, talent management, etc.

HMS software provides the benefits of the following systems.

HRIS (Human Resource Information System)

An HRIS is a software that keeps the records of employees along with the HR policies and procedures. It is a common interface between the employee and the HR department to exchange information. HRIS is a complete software system to manage, maintain, and process employee information.

The use of HRIS streamlines interactions between an organization and an employee and keeps the data in a well-organized format as well. You can opt for HRIS software development to create a robust system to record your employee data securely and intelligently.

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ATS (Applicant Tracking System)

Hiring an employee is a hectic and time-taking process. Every organization looks for the right people to fill in their job profiles. The HR professionals have to perform several tasks to find the right candidates, from screening the resumes to interviewing. It can take a lot of time when there is a huge number of applicants.

Applicant Tracking System (ATS) is a kind of software suite that simplifies the process of finding the right candidates for a job. It collects and sorts the resumes based on different parameters. It can automatically select resumes with certain keywords.

Recruitment Management System

RMS or Recruitment Management System is a software suite that automates and manages the recruitment and staffing process of an organization. RMS makes the recruiting process fast and seamless by reducing common tasks like scheduling interviews. With an efficient recruitment management system, staffing will become a quick and easy process for your organization.

HRMS (Human Resource Management System)

As HR functions have become more complex and broader, organizations need to integrate advanced software that provides extended automation. HRMS incorporates several other aspects that common HRIS fails to meet. Therefore, HRMS is a comprehensive software with additional features and tools.

HRMS also removes barriers to managing remote employees and makes the HR process quite convenient and fast. You can use HRMS software for remote working to equally manage the employees remotely as you manage the in-house workforce.

This provides a paperless and automated approach to most of the activities performed by HR professionals. In addition to the functions that HRIS offers, an HRMS incorporates a payroll system and tools for efficient labor management.

The ease of accurate employee record keeping and reporting has led to increasing investment in HRMS software development. You can either build a custom HRMS or choose an off-the-shelf system based on your requirements.

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Payroll Management System

A payroll management system keeps financial records, manages employees' wages, and fulfills their obligation to legal authorities. As a vital part of an organization, payroll management needs to be quick and hassle-free. Thanks to the payroll management system, managing employee wages and legal compliance becomes stress-free.

A robust payroll management system takes the pain of wages, managing records, and fulfilling legalities by accessing various features from a single interface.

So, these are different systems that an organization needs to automate and perform various human resource functions efficiently. HCM software incorporates all of the functionalities to give you a simple and unified system for managing diverse information.

Advanced Technologies for Human Capital Management System

Technology is getting more advanced, and we now have Software solutions that are far more efficient and flexible than legacy software. Thanks to many new technologies, the HCM system has become better in terms of services and reach. The following are the advanced technologies that can be used with HCM.

Cloud

HCM in the cloud can centralize different systems and leverage the speed, security, and accessibility that the cloud offers. Moving to the cloud will offer many advantages to your organization, like scalability, increased efficiency, better insights, enhanced employee experience, and lower costs of management. There are many cloud HCM providers like Oracle.

AI

New advanced technologies are making the HCM process easier for employees and human resource teams, intelligent, and automatic. Artificial Intelligence (AI) has a very crucial role in this regard. AI, along with Machine Learning, is becoming very useful to analyze data and simplify processes in HCM.

Chatbots are a good example of AI-based technologies that have become popular in many sectors and customer support is at the center of this trend. Your organization can leverage the power of chatbots to make the hiring process easier and quicker. Chatbots can engage with candidates through texts and voice conversation because of NLP (Natural Language Processing). So, candidates can find answers to their queries and follow the interview process.

The Moving Parts of HCM Solutions

HCM encompasses organizational strategies and IT technologies. There are different elements of HCM. Let’s describe the elements of human capital management solutions.

• Workforce Management: It involves HR functions that are related to labor, timing, performance tracking, and attendance management.
• Talent Management: This activity entails hiring resources, onboarding, rewards for performance, and career development.
• Workforce Rewards: These involve payroll management, compensation, employee welfare benefits, etc.
• HR: A set of administrative functions such as managing jobs and positions, HR compliances, reporting, etc.

How Does HCM Software Help Your Organization?

The use of HCM systems for your organization helps in many ways besides automation and elimination of redundant processes. You can leverage HCM technology to efficiently manage the employee lifecycle and reduce costs by having only sufficient staff. The following are some ways HCM technology helps your organization.

• Improve Profitability: It reduces labor costs by automating many manual activities.
• Accelerate Business Growth: HCM technology is flexible and scalable to manage more data, transactions, and employees.
• Data-driven Action: The technology can help to collect useful data to make better decisions about the workforce and organization.
• Optimize Strategies: Technology-driven recruitment, training, and employee management will help you attract and retain the best talent.
• Data Security: Multi-layered security and administration of the information with different levels of access will help you secure the data.

Human Capital Management vs Human Resource Management

The human capital management strategy or simply HCM provides many advantages over human resource management (HRM). Even though HCM and human resource management overlap in many aspects, there are differences based on what they focus on.

Human resource management provides processes and systems that help employees fulfill their assigned roles. On the other hand, human capital management is focused on building an ecosystem where employees can thrive and add value to an organization.

Your organization can follow HCM practices to have a productive and skillful workforce rather than task-driven employees.

Let’s Summarize HCMHope you now understand what HCM is and why it is important for an organization today. It provides a new outlook on your human resources management practice. The definition of human capital management encompasses all the aspects of the employee lifecycle and how to improve it. A lengthy and difficult project calls for a dedicated team. Then a staff augmentation model is the best when it comes down to filling the gaps in professionals' expertise in your teams, and an extended team model will help you with all of it.You can use the HCM solution for a better strategy for human resource acquisition, management, and development. If you want to develop an HCM system, Radixweb can be the right partner for you. We are experienced in HCM software development. You can contact us to discuss your requirements and let us build a robust solution for you to meet all your expectations.