Organizational Wellness

Engage Your Workforce With Effective Human Capital Management

Dec 26, 2022
Last Updated May 22, 2024

Human. Capital. 

“Human,” as in living, breathing people, with hopes, fears, families, triumphs, and everything that goes along with them. Humans, representing all of the facets of the world’s single truly-sapient species, capable of tracing our own histories and building better futures limited only by the power of our imaginations and the strength of our will. Humanity, a beautiful word giving definition not only to what we are but also to our greatest moral virtue, touching on the unlimited promise of all that we may become. 

Pair ‘human’ with ‘capital,’ and suddenly the creativity and effort of human beings becomes a raw material that is the backbone of every organization. That’s where an essential function of human resources — human capital management (HCM) — comes in.


What Is Human Capital Management?

On the surface, human capital management seems pretty straightforward — HCM is everything associated with, well, managing people. Also known as talent management, human capital management defines the practices that a company uses to conduct recruiting and talent acquisition while also reviewing, guiding, optimizing, and developing employees on an individual level to increase their value.

Every employee is an investment. According to SHRM, the average cost per hire is just under $4,700, and when you broaden your gaze to consider all of the costs of training, time, and equipment necessary to get those new hires up to speed and producing at the agreed-upon level, that number can get even bigger. 

Organizations need to be able to offset those costs and start bringing in revenue, and that means getting their people onboarded quickly and pointed in the right direction to continue to increase the return on the company’s investment (ROI).

Simply put, human capital management is the process of hiring the right people, managing workforces effectively, and optimizing productivity. The end goal, of course, is to maximize the value that each employee brings to the company and to themselves.

Human capital management is directly related to the people-management practices that support personal employee improvement, such as personnel administration and strategic organization visualization.

Human Capital Management vs. Human Resource Management

Wait a second; human capital management sounds a lot like human resource management. And isn’t capital synonymous with resource anyway? Yup; at least according to But that doesn’t mean that human capital management and human resource management are the same thing.

Then what’s the difference? It’s really a question of focus and scale. 

Human resource management (HRM) is all about the day-to-day operations. If you have an HR manager or an entire HR department within your organization then this is probably not a difficult concept to wrap your head around. HRM is a resource — ideally always available — to provide help to employees when needed. It likewise takes responsibility for the administrative functions associated with HR. Examples of HRM tasks and responsibilities would include ensuring compliance with labor laws, resolving workplace conflict, assisting with employee recruitment and onboarding, maintaining employee records, etc.

Human capital management is quite a bit more comprehensive, encompassing all of the functions and responsibilities traditionally attributed to HRM while also directing and overseeing the strategic operations relevant to people management. These functions include analytics and reporting and opportunities for employee learning and development. Of course, that’s only the beginning. 

What Is the Function of Human Capital Management?

With a clearer eye on the big picture, human capital management can move beyond the topical concerns and issues that face day-to-day business operations and start optimizing the performance, efficiency, and effectiveness of an entire workforce. 

Far from being just capital, the human employees become the central focus of strategic initiatives designed to more consistently attract top talent, more effectively onboard those new recruits, and more competently guide employees (both new and established) toward better development along their chosen career paths. As such, the core functions of HCM are generally categorized as follows:


People want to work, right? Short answer: Yes. Long answer: Yes, but on their terms. 

If the Great Resignation has taught us anything it’s that people want to find the right job instead of just any job. Recruitment, therefore, is about implementing strategies to help ensure that the right jobs are being filled by the right people. The processes involved in identifying, attracting, interviewing, selecting, hiring, and onboarding employees need to be fully refined and centric to the goals of the business. 

Given that employees who receive an exceptional onboarding experience are nearly 3 times as likely to say they have the best possible job, these processes also need to be tailored toward meeting the expectations of the people on the other side of the interview table.

Hiring for quality and talent while also meeting the needs of the interviewee can be a big undertaking. Knowing how to recognize and interview for quality of hire takes on even greater significance in human capital management, and must deliver certain elements at the most opportune times to bring top talent into the workplace. This has a lot to do with the efficiency and strategy of the structure of the recruiting process itself, as well as any additional employment benefits that can help spark enthusiasm in even the stoniest of candidates. 

Talent Management

Bringing in capable new talent is all well and good, but what about the talent that you already have on your payroll? Those who have committed themselves to your business have more that they’d like to be bringing to the table. If you don’t give them the opportunity to grow in your organization, they’ll find opportunities to grow away from it. Only 29% of organizations report that their employees have clear learning and development plans in place. This is a statistic that needs to change — starting in your own organization.

Talent management in HCM applies business objectives to help promote and optimize training and development opportunities within your organization. This increases the value of the employees you already have as it also aligns their roles and skills with the future needs of your business. 

Workforce Optimization

A big part of managing your human capital is managing your employees’ time and labor requirements. Budgets and schedules are a natural part of doing business, and even the best employees can create major problems if they’re not maintaining expenses or properly managing their time. 

Workforce optimization in human capital management places these factors under a microscope, providing reliable insight into how your business works. You can then apply these insights to create more comprehensive employee scheduling, forecast staffing needs, and ensure that the right skills are being applied to the right jobs and projects. And given that McKinsey reports that 58% of workers currently have the opportunity to work from home at least one day per week (and 87% would take that opportunity if it were presented), the need for effective workforce optimization and management is only going to continue growing. 

Strategy Alignment

Finally, human capital management exists to keep business goals and company vision top of mind — not only for executives and managers, but for every employee in your organization. By aligning everyone with the same, all-encompassing vision, HCM ensures that every action, process, and initiative moves the company and its people closer to success. After all, lone agents who play by their own rules are fantastic for hard-boiled detective movies, but not so much for teams who are trying to meet business goals. 

Benefits of Human Capital Management

The functions listed above can help break down and categorize the responsibilities of human capital management, but the truth is that there aren’t very many (or any) aspects of HR or people management that fall outside of the HCM mandate. An effective human capital management solution brings together all relevant processes — from payroll and time tracking to talent management and global HR — to improve and inform organizational decision-making while creating the best possible employee experience. 

This makes for some fairly impressive benefits:

  • Correctly applied, HCM touches upon and coordinates every aspect of your business relevant to your employees. Which, let’s face it, is probably every aspect of your business. By making strategy and mission a key driver in employee action, your organization will enjoy the success that comes from a unified and intentional workforce.
  • Take a look at your business right now. Is it the same business it was three years ago? What about your employees and workforce demographics? The reality is that things change. HCM empowers your business to keep up with these changes dynamically while still ensuring that the work is being done effectively and within time and budget constraints.
  • Your organization is only as capable as the people you hire. Human capital management plays key roles in talent acquisition, so you can operate securely in the knowledge that you have the right employees in the right positions to help your business achieve success.
  • There’s not much point in hiring the best people if you can’t hold onto them. 27% of workers say work does not allow them to take time for their wellbeing during the work day, so there are a lot of reasons for someone to pack up and start looking elsewhere. HCM ensures that employees have the resources, support, direction, and opportunities they need to feel valued and get the most out of their time with the company. 

Human capital management places your employees and the strategy that surrounds their responsibilities, activities, and initiatives at the head (or capital) of your business, making their success central and fundamental to yours. 

Want to learn about how to engage and optimize your workforce? Talk to a Wellbeing Specialist today, and give your people what they need to get excited about success.

Company healthcare costs drop by up to 35% with Wellhub! (* Based on proprietary research comparing healthcare costs of active Wellhub users to non-users.) Talk to a Wellbeing Specialist to see how we can help reduce your healthcare spending!




Wellhub Editorial Team

The Wellhub Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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