Human capital management (HCM) is a term that covers many aspects. Many often think of human resources when they hear this term. When you think about it, companies need employees to survive. But just having employees is not enough; there needs to be some direction in how employees can contribute to the success of the company (Management Study Guide, 2018). That is where human capital management comes into play. According to Gartner (2018), “human capital management is a set of practices related to people resource management. These practices are focused on the organizational need to provide specific competencies and are implemented in three categories: workforce acquisition, workforce management and workforce optimization” (para1). Another definition includes that “human capital management is defined as the process of acquiring, training, managing, retaining employees for them to contribute effectively in the processes of the organization” (Management Study Guide, 2018, para 6).
If we were to break down HCM there are five categories that all play a role. According to Management Study Guide, these categories are as follows:
Leadership Practices, which entails communication, inclusiveness, supervision and leadership.
Employee Engagement, which includes key responsibility areas, commitment, time and evaluation.
Knowledge Accessibility, which involves information availability, team work and information sharing.
Workforce Optimization, which focuses on work processes, working conditions, accountability, hiring and performance management.
Learning Capacity in which the focus is on innovation, training and career development.
The Importance of Human Capital Management
The greatest resource to any company would be the employees that help turn visions and missions into a reality. As Jim Collins shared in his bestseller “Good to Great” in an analogy of a bus being the company and the value in getting the right people on the bus and the wrong people off. This ties directly into the importance of human capital management as it is essential that companies have the right people in the right positions to help the company be productive and successful. If there are people within the company that are not supporting the goals of the company or perhaps are not in the right position for their skills, then there needs to be either a shift in moving them to a different position, training them further or removing them from the company in an effort to keep the company moving in the right direction. Overall the goals of human capital management come down to these six areas: “hiring the right talent, orientating employees to the company, making new employees feel comfortable, training employees in order to constantly upgrade their skills, retaining employees and making employees self sufficient and prepare them for adverse conditions” (Management Study Guide, 2018, para 7).
Here are two interesting videos on human capital management:
The Importance of Human Capital (Links to an external site.) – https://www.youtube.com/watch?v=VUEftPaQLic
What is human capital? What does human capital mean? Human capital meaning, definition and explanation (Links to an external site.) – https://www.youtube.com/watch?v=hNdxYIDeiKw
Collins, J. (2001). Good to great. New York, NY: Harper Collins.
Gartner. (2018). Human Capital Management (HCM). Retrieved from https://www.gartner.com/it-glossary/hcm-human-capital-management
Kreisher M. (2014, April 4). The importance of human capital (Links to an external site.) [Video file]. Retrieved from https://www.youtube.com/watch?v=VUEftPaQLic
Management Study Guide. (2018). Importance of human capital management (Links to an external site.). Retrieved from https://www.managementstudyguide.com/human-capital-management-importance.htm
Management Study Guide. (2018). Human capital management drivers (Links to an external site.). Retrieved from https://www.managementstudyguide.com/human-capital-management-drivers.htm
Management Study Guide. (2018). Human capital management – meaning and important concepts (Links to an external site.). Retrieved from https://www.managementstudyguide.com/human-capital-management.htm
The Audiopedia. (2016, Aug. 13). What is human capital? What does human capital mean? Human capital meaning, definition and explanation (Links to an external site.) [Video file]. Retrieved from https://www.youtube.com/watch?v=hNdxYIDeiKw
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