What is Human Capital Management?

What is human capital management?

Human Capital Management (HCM) is a term for the methods and processes that HR uses to recruit, manage and develop the employees in an organisation. The concept stems from the idea that employees are the most important resource the organization has, and that the valuable expertise and experience they possess is crucial for the organization to achieve its business goals.

The terms Human Capital Management and Human Resource Management (HRM) are often used to describe the same processes, but originally there were some differences. HCM was a broader term and encompassed more than just core functions – it could include employee surveys and analytical methods, among other things – whereas HRM was limited to basic HR tasks such as onboarding and offboarding. Today, however, these terms are intertwined more and more and are used interchangeably.

Human Capital Management, if used correctly, can contribute to creating a strong organizational culture that promotes employee development and well-being. By focusing on the development of the company's own talents and competences, the individual employee gains greater control over his own career. Which, in most cases, will positively affect the employees' motivation and belonging to the company, and not least contribute to the overall results in the organization.