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What is HCM? How do you know if you need HCM?

In a very real sense, employees are the only way any company can truly make money. They are the most valuable assets at management’s disposal. So just as executives see fit to invest in physical and digital infrastructure for day-to-day operations, maintaining human infrastructure is equally critical to positive cash flow.

Human capital management (HCM) can help achieve this goal. So let’s explore what it is and how it works.

What is human capital management (HCM)?

As mentioned earlier, HCM stands for “Human Capital Management,” which is basically a combination of a philosophy, a game plan, and a strategy. It unifies HR, talent management, workforce management, and everything else that keeps people working at a company—and it operates on the idea that every task directly impacts the organization’s bottom line.

HCM is also a special software solution like CRM. HCM software can help you put this philosophy into practice, giving you the tools to better manage every area as you set and achieve your goals.

How does human capital management work?

Think of HCM as managing the employment life cycle.

HCM can be easily compared to a sales funnel, sales cycle, or customer journey. Sales and marketing teams strive to identify the right customer personas, find ways to attract buyers who fit those personas, give them compelling reasons to commit, and then try to solidify brand loyalty and grow the network through positive experiences. In the simplest sense, their collective goal is to turn strangers into customers who support and share the brand.

This is the idea behind HCM, for internal teams only. HR professionals identify skills gaps in the organization, work to acquire necessary talent, help manage and support the existing workforce, and assist existing team members and leadership.

What are the elements of human capital management?

IBM says: “The focus of human capital management is to add value to an organization’s people so that they can deliver optimal results [and provide] Processes that optimize a company’s employee performance and effectiveness, providing an overall strategy that guides talent attraction, recruiting, onboarding and training, benefits administration and reporting. “

They go on to list seven different functional areas that successful HCM practices (and by extension HCM software solutions) cover:

  1. Talent management.
  2. Recruiting and hiring.
  3. Onboarding and training.
  4. Benefits Administration.
  5. Time, attendance and wages.
  6. Employee self-service.
  7. Reporting and analysis.

In essence, the purpose of HCM is to provide a more purposeful and strategic approach to how companies work with their internal employees, ideally increasing employee satisfaction, increasing productivity, and improving profit and loss (P&L) statements.

Benefits of Human Capital Management (HCM)

When implemented properly, HCM can help teams:

  • Put the right people in the right positions.
  • Attract capable talent and streamline onboarding.
  • Improve employee satisfaction.
  • Reduce turnover.
  • Minimize HR-related overhead.
  • Address issues related to workplace culture, discrimination, and more.

Again, these are obviously the goals and objectives of any professional or team involved in such a process, HCM or not. The difference here mainly lies in how HCM integrates everything into a framework and establishes clear links between them and to the overall performance of the company.

Human Capital Management (HCM) Challenges

Unfortunately, HCM faces the very challenges it was designed to solve. How to attract and retain talent? How to win employee loyalty?

Recruitment and attrition

The issue of finding employees and retaining them is as central to the conversation as ever. In fact, in the post-pandemic “Great Quit” job market, finding the right employees and giving them reasons to stay is harder (and more critical) than ever.

population differences

Many of the difficulties in recruiting and attrition are related to this. The workforce is more diverse than ever before, including age, race, background, and more. From technical skills to DEI concerns, there are a lot of things that need to be balanced so that employees are comfortable doing their best work.

training issues

Of course, differences among employees also add to the complexities associated with training. Skills gaps, adoption of new software or processes, ongoing education and training – all require intuitive and valuable training for efficient and effortless learning.

workplace toxicity

People invest a lot of time and energy in their jobs, and they need to feel safe and respected in order to perform well. As a society, we are also more aware of different human needs and how to meet them. Now, keeping employees on the roster requires displaying some basic human decency and being aware of new developments in health and psychological diversity.

dispersed workforce

Remote work is not “new” per se, but it has not been featured before in this volume. Some entire companies now operate without any central office, and for larger organizations it’s not uncommon for team members to log in from a dozen different countries or time zones. Just managing payroll can be difficult, but it’s important to make sure everyone in the company is supported and compensated appropriately.

Do I need Human Capital Management (HCM)?

Ask yourself the following questions:

  • Are you struggling to find reliable, capable employees?
  • Does your organization have a higher turnover rate than others in your industry?
  • Do you want to reduce the overhead incurred by your existing HR practices?
  • Have the HR professionals on your team been able to take more time off than you remember?
  • Do you get a lot of complaints from employees (or worse, negative company reviews on Glassdoor, etc.)?
  • Do you want to make it easier to generate income across the board?

If the answer to any of these questions is “yes,” then you will benefit from an HCM practice.

How to get started with HCM

1. Review your current settings

Review your current processes, benefits, training and policies. Identify any gaps or opportunities for adjustment that you identify. Could you cut back on some lower-value areas and free up cash for other improvements?

This is also a good time to gather employee input through anonymous feedback submissions, surveys, or all-staff discussions. You can ask your managers to speak privately with their direct reports and pass along helpful feedback to HR or senior managers. You can then use this information to understand how to create the best workplace for current and future employees.

2. Make a plan

Use any information you gather to create a plan. What are your priorities? How much room do you have left in your budget? How much bandwidth does HR need to implement change?

Discuss with your HR team or key stakeholders what you can manage and how to address them effectively. You might create a schedule for various deployments, or you might prefer to make a large number of changes at once.

3. Make changes

Put your plan into action. As changes occur, you may need to make more adjustments and adjust existing plans to ensure everything runs smoothly. Be prepared to address issues and use them to further improve the new process.

Messaging is also important to keep employees informed and comfortable. As you all go through change together, be transparent about what’s happening and welcome feedback.

4. Be patient

Handle this issue like any other major deployment.

Changing policies, practices or processes will always encounter obstacles and hurdles. The voyage ahead will be difficult, especially when changes impact people and their workflows. Even if you are fishing in troubled waters, you still have to persevere. Persistence is your friend: keep working hard and with good intentions to keep your new system up and running, and consistency and accuracy will improve over time.

How to choose a human capital management system solution

You need to first establish a baseline of your organization’s specific needs and use case details. We have a checklist to get you started, but keep in mind that there may be some items that are unique to your business.

Use this benchmark to review the top HCM software to see which one best suits your needs. Make this list as short as possible by carefully evaluating it, and looking at expert reviews and customer reviews to better understand the strengths and weaknesses of each review. If you can, attend any demo or sign up for a free trial of the software to get a better understanding of it and how it can work for your specific business.

With enough research and consideration, you should find a solution that suits your needs.

If you want top-notch power over employee management, recruiting, and onboarding, our favorite HCM software is Ripplell. It features customizable reporting and workflows, automated payroll and tax compliance, and attentive customer service.


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