human capital management (HCM) definition

This definition is part of our Essential Guide: Talent management system essential guide
Contributor(s): David Essex

Human capital management (HCM) is an approach to employee staffing that perceives people as assets (human capital) whose current value can be measured and whose future value can be enhanced through investment.

An organization that supports HCM provides employees with clearly defined and consistently communicated performance expectations. Managers are responsible for rating, rewarding and holding employees accountable for achieving specific business goals, creating innovation and supporting continuous improvement.

In the back office, HCM is either a component of an enterprise resource planning (ERP) system or a separate suite that is typically integrated with the ERP. In recent years, the term HCM system has begun to displace human resource management system (HRMS) and HR system as an umbrella term for integrated software for both employee records and talent management processes. The records component provides managers with the information they need to make decisions that are based on data. Talent management can include dedicated modules for recruitment, performance management, learning, and compensation management, and other applications related to attracting, developing and retaining employees.

Like HRMS, HCM software streamlines and automates many of the day-to-day record-keeping processes and provides a framework for HR staff to manage benefits administration and payroll, map out succession planning and document such things as personnel actions and compliance with industry and/or government regulations. While now nearly synonymous with HRMS, HCM systems usually go beyond these basic HR functions by adding integrated talent-management features.

This was first published in April 2015

Next Steps

Read expert Mary E. Shacklett's in-depth explanation of the three categories of HCM tools and how they can benefit your organization. Then read her HR software purchasing considerations advice to help determine what your organization requires from an HR tool and learn how to choose the best HR software tool to suit your organization's needs.

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