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Human Capital Management (HCM)

Written by

Tiffany Clark

Reviewed by

VidCruiter Editorial Team

Last Modified

Apr 17, 2024
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Human Capital Management (HCM)


The work-worker-workplace relationship has dynamics that demand companies to look closely at the processes of their people to stay competitive. Human capital management (HCM) is a term used by organizations to cover talent acquisition, talent management, and talent optimization. HCM covers these three stages throughout the life cycle of an employee. 


The three core human capital management aspects are:


  • Talent acquisition: Begins with recruitment and continues through the candidate journey and hiring process

  • Talent management: Oversees payroll, time and attendance, culture connect, and performance management

  • Talent optimization: Includes competency mapping, career-pathing, learning and development, and succession planning


HCM is comprised of both strategic and administrative functions and includes workflows that allow managers and human resource teams to better grow, support, manage, and develop talent. 


The term human capital management is sometimes used interchangeably with human capital management software. 




To build and effectively manage human capital, companies can do the following:


  1. Hire the most qualified candidates for open positions. 

  2. Regularly monitor the performance of employees, and watch for optimization opportunities that will benefit the employee and the company. 

  3. Use continuing education and ongoing training to enhance the skills of employees at all levels of the organization. 

  4. Retain valuable employees with competitive pay, benefits, and incentives.


Related Terms

Human Capital

is the set of experience, knowledge, health, and skills that an individual or group of people accumulate during their lifetime(s) that enables them to realize their full potential and be productive members of society. The term was first used by economists Gary Becker and Jacob Mincer in the 1950s and 1960s.

Human Resource Management (HRM)

refers to the necessary administration of human resources functions for managing employees. These functions can include processing payroll, maintaining employee records, and benefits administration. HRM is a term often used interchangeably with HCM, but HCM extends beyond the HR component to include strategic initiatives designed to optimize and support talent.

Human Capital Management (HCM) Software

takes care of many of the functions and processes needed to effectively manage a workforce. HCM software is focused on human capital, which is the seat of knowledge, experience, and skills employees have accumulated over the course of their lifetimes.

Human Resource Information Systems (HRIS)

are primarily used to manage existing employees, but some HRISs also have applicant tracking and recruiting tools.

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