HCM, or Human Capital Management, is one of the most important tools used by modern HR professionals. It's fair to say that HCM represents a true revolution in the administrative functions of HR departments, such as recruitment, training, and employee document management. HCM significantly boosts the efficiency and productivity of HR staff by automating and accelerating many tedious tasks, while also facilitating employee motivation and engagement.

Table of Contents:

What is HCM?

HCM, or Human Capital Management, refers to a business strategy that focuses on investing in a company's most crucial asset: its employees. It involves properly organizing the HR department's work to ensure that HR activities effectively and noticeably increase the efficiency, motivation, and engagement of employees.

At the same time, HCM aims to optimize HR professionals' work, significantly increasing their productivity. Therefore, the same term is used to describe software that supports HR processes such as recruitment, onboarding, work time management, and many others – tomHRM being one example. Depending on the context, a Human Capital Management system can thus refer to personnel management methods, but also to a suite of applications and other technologies that facilitate the implementation of an HCM business strategy.

HCM vs. HRM – Are They the Same?

We mentioned that the acronym HCM is also used in reference to HR software like tomHRM. So, are HCM and HRM the same? Yes and no. Yes, because these terms are often used interchangeably. No, because, according to textbook definitions, there's a distinct difference between HCM and HRM.

An HRM system is a suite of applications designed to automate HR processes and facilitate their management, making them faster and easier. HCM, on the other hand, also encompasses traditional employee management methods, which include all actions taken by HR – critically, with the goal of increasing employee engagement and generally enhancing the quality of human capital. Therefore, HRM refers specifically to the software, while HCM is a comprehensive business strategy that involves leveraging HRM applications.

Advantages of HCM – Key Benefits of a Human Capital Management System

Well-planned HCM initiatives bring a range of benefits to a company. The most significant advantages of this business strategy include:

increasing overall employee satisfaction,
effectively building a positive company image as an employer and business partner,
boosting employee engagement by ensuring proper work-life balance and a friendly work environment,
attracting the most qualified candidates to the company,
retaining key talent within the company by investing in their development, which employees value,
reducing recruitment costs through automation of repetitive tasks and lower turnover rates,
the ability to predict impending turnover using accurate analytics,
proper budgeting for projects, training, and other cost-generating activities,
making more informed business decisions by utilizing advanced technology that facilitates analytics,
accurately and efficiently responding to employee needs by correctly identifying their expectations.

Human Capital Management System in Practice – Processes

HCM encompasses all activities undertaken by HR professionals that are in any way related to investing in human capital. This includes, among other things, increasing employee motivation, improving engagement, reducing turnover, attracting new talent, and retaining current employees; and so on.

The human capital management system therefore comprises at least eight groups of processes: employer branding, recruitment, on/offboarding, training, time and attendance management, employee satisfaction surveys, one-on-one meetings, and performance reviews. We will briefly discuss each of them, outlining examples of activities involved and suggesting where HRM software can be helpful.

Employer Branding

Employer branding, which is about building the company's image as an attractive, reliable, and trustworthy employer, is crucial for effective talent management. Truly effective employer branding initiatives can not only increase the number of high-quality CVs received during recruitment but can even lead to a situation where qualified candidates proactively seek employment – even without the company actively looking for employees. They also ensure that current employees want to stay with the organization and commit their future to it. Moreover, they can even become walking advertisements for the employer, recommending them to friends looking for work.

Examples of employer branding:

Company representation at job fairs, career days, and industry events.
Creating visually attractive, clear, and personalized recruitment ads – the ATS system in tomHRM allows you to manage ad colors, add the company logo, or create a company career page tailored to the ad.
Drafting announcements in a way that is understandable, original, and attracts talent from the target group.
Actively managing company social media.
Supporting employees' passions, for example, through regular company mountain trips or by forming an internal football team.
Offering interesting development opportunities through both internal and external training courses and workshops.
Regularly organizing team-building trips, events, and company outings tailored to employees' interests.
Providing original benefits that meet the real needs of employees.
Regularly conducting employee satisfaction surveys – the employee survey module in tomHRM facilitates creating, sharing, and verifying the results of candidate experience, satisfaction, offboarding, and many other surveys.
Providing an engaging employee intranet – tomHRM's intranet is an excellent way to build a company community and engage employees.

Recruitment

From an HCM perspective, employer branding, as mentioned earlier, is an important element of well-planned recruitment. A large part of the actions that will help recruiters reach the best candidates and reduce the frequency of needing to recruit are precisely employer branding activities. When describing them, we mentioned the importance of clear, aesthetic, and visually attractive ads, presence at job fairs and other important events, managing social media – and more. However, it is worth adding a few additional, equally important points:

Prompt responses to CVs – the most qualified candidates will not wait long for a response from a company. Therefore, quick reaction and efficient preliminary candidate screening are very important elements of effective and efficient recruitment. Recruitment forms available in the tomHRM ATS system work great here, as they allow for 'sifting' the most promising candidates by filtering responses.
Support for remote recruitment tools – modern recruitment requires modern solutions. Offering initial recruitment meetings via video calls saves time for both recruiters and candidates, and also makes it easier to find well-qualified remote employees.
Creating a clear CV database – good work organization always results in financial savings. The tomHRM ATS system allows for building a CV database where individuals involved in the recruitment process can leave comments on candidate profiles. Moreover, all information is gathered in one place, searching for specific people takes mere seconds, and sharing CVs with managers requires just a few clicks.
Automatic report generation – tomHRM also offers the ability to view clear, accurate reports and statistics, based on which you can easily assess the effectiveness of individual candidate sourcing channels, recruitment duration, or budget needs for specific activities.

Onboarding / Offboarding

Employee onboarding is one of the most important and engaging HCM processes. Properly integrating a new person into the company greatly influences how they perceive the organization and how engaged they become in their work, and also increases the likelihood of employee loyalty.

Statistics compiled by Click Boarding, a company specializing in onboarding, show that 69% of individuals who experience a good onboarding process plan to stay with the organization for 3 years. They also indicate that companies that dedicate adequate attention to the employee onboarding process enjoy 50% higher new hire productivity compared to companies that do not prioritize onboarding.

Equally important is offboarding, the process of an employee parting ways with the organization. Properly communicating information about termination or non-renewal of a contract—or, conversely, responding well to a resignation submitted by a departing individual—significantly impacts how they remember the company. This last impression can completely overshadow all the employee's previous experiences with the organization, both good and bad. It is also influenced by how the employer organizes the former employee's last day of work, how much attention is given to them, and so on.

Examples of on/ offboarding activities consistent with an HCM business strategy:

Informing the team about personnel changes.
Efficiently collecting new employee data and providing the contract – all documents and content important for the new employee can be most easily provided with the help of the onboarding module in the tomHRM system.
Efficiently granting required access.
Assigning a company buddy to the new employee.
Giving the new employee a tour of the company.
Preparing an ergonomic workstation.
Providing a welcome pack/farewell gift.
Properly pacing knowledge transfer and regularly assigning tasks to the new employee – onboarding in tomHRM allows, among other things, automatic task assignment to all individuals involved in the onboarding process.
Preparing comprehensive training materials.
Providing continuous support to the employee during the onboarding months.
Regularly providing clear feedback.
Organizing 1-on-1 meetings – which you can easily add to the employee's calendar in the tomHRM system.
Ensuring comfortable conditions for the employee during the separation conversation.
Transparently communicating information.
Conducting an exit interview.
Ensuring the transfer of duties from the former employee to another person.

Work Time Management

Time is money – a cliché as true as it is overused. The proper organization of employees' work time undoubtedly has a huge impact on the smooth operation of the company, and thus on its efficiency and the ultimate quality of services/products offered. Therefore, an HR specialist must pay great attention to planning work schedules and vacation plans, as well as overseeing current presences, absences, and the time employees dedicate to individual tasks or projects.

Using HRM software for time tracking and leave management is a fundamental component of any human capital management system. It significantly simplifies tasks such as clocking in and out, submitting leave requests, and calculating time spent on specific projects for employees. With the tomHRM system, an employee can simply click to start, pause, or stop a clock-in/out timer, and all information is instantly and automatically entered into the electronic attendance register and schedule. And this is just one of many features that streamline such administrative processes, boosting employee satisfaction and significantly reducing the workload for HR staff and direct managers.

Examples of modern tools, actions, and solutions related to time tracking and leave management:

Electronic stopwatch for selected projects and tasks.
Electronic clock-in/out timer.
Defining cost rates and overall project budgets and entering them into the electronic system.
Automating the creation of schedules and attendance registers.
Approving work hours with a few clicks in the system.
Automatically importing vacation plans into the electronic schedule.
Managing leave requests with a few clicks in the system.
Activating automatic alerts for tardiness, absences, and other time-related irregularities.
Generating time tracking reports with a few clicks in the system.
Individual meetings

1:1 Meetings

Regularly organizing individual meetings is a crucial element for retaining talent within a company. 1-on-1 meetings are not only an excellent opportunity to discuss progress and an employee's strengths and weaknesses, but also the simplest method for strengthening their relationship with their manager, and consequently, their commitment to the company. They are also an ideal time to deliver performance reviews, understand an employee's plans and needs (e.g., regarding their career goals), and uncover potential team issues, dissatisfaction with compensation, or simply gather an employee's feedback about the company.

For 1-on-1 meetings to align with the HCM philosophy, it's important to keep the following in mind when planning them:

Creating a clear meeting agenda,
sharing the agenda with the employee you want to meet with,
using a friendly meeting title,
thoroughly checking the employee's availability at the given time – the 1-on-1 meeting module in tomHRM allows for automatic availability checks, which undoubtedly saves time and minimizes the risk of error

and creating clear notes from the meeting.

Employee Performance Reviews

Another crucial element of human capital management, including talent retention and fostering their further development – we're talking, of course, about regular meetings for employee evaluations. This is a process that can be called large-scale feedback, as it summarizes an employee's work and attitude over a long period. Quarterly and annual reviews are very popular. It is certainly worth implementing them in your company, as these summary meetings significantly impact team effectiveness. Through employee evaluations, employees become more aware of what the employer expects from them and to what extent they have met these requirements so far. This, in turn, motivates employees – provided, of course, that the feedback is delivered appropriately.

Key HCM actions worth taking when designing employee performance reviews:

Thoroughly track the individual progress of each employee – the employee performance review and goals modules in tomHRM significantly facilitate monitoring progress in tasks/projects achieved by an individual, as well as determining their results, e.g., from previous knowledge tests. They enable, among other things, the generation of automatic reports compiling the most important information on the achievement of goals set for the employee.
Determine the employee's impact on team development and the proper functioning of the company.
Identify areas for development.
Organize 180, 270, and 360-degree surveys – the HRM system streamlines survey creation and automates their distribution and result summarization.
Verify the training needs of individual employees – the training management module in tomHRM allows assigning employees who should participate to planned training sessions and efficiently creating attendance lists. Information about participation or absence is automatically saved in the employee's system profile, allowing for the retrieval of necessary information in just a few minutes.

In tomHRM, you can discover for free how an HRM system simplifies the implementation of HCM principles. Simply create a free trial account to gain 3-day access to all modules of interest, including ATS, employee onboarding, and training management.

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Human Capital Management