What Is Human Capital Management and Why Is It Important?

Human capital management involves recognizing and developing employees’ talents and giving them additional responsibility and opportunity. It is a complex process that relies on the concept of human capital as an intangible asset. Human capital management helps an organization identify its best resources and match them to appropriate jobs. This allows companies to make the most of staff training and improve job satisfaction. The system also helps build a healthy organizational culture, promotes honest feedback, and will enable employees to develop professionally. It gives employees a higher sense of control over their careers and encourages them to dedicate their talents to a company long-term. 

In short, it is a vital set of practices and methods companies use in the employee life cycle. It streamlines all aspects of acquiring, developing, and retaining your workforce. It includes candidate tracking, onboarding and benefits administration, payroll, time attendance, training management, and payroll. However, there is a lot more than what it actually is. Here are some of the importance of the human capital management system.

Talent development

Human Capital Management, or HMC, enables companies with systems and strategies to perform professional development programs to improve employee performance. Improving their skills and capabilities, not only benefits themselves but also the company. It enables an organization to get stronger from within, reducing costly turnover rates and promoting employee retention. Having systems and milestones for tracking performance can help companies navigate employees’ success in their work and to know if they need support. 


HCM also involves improving practical tactics for hiring, recruiting, interviewing, and firing employees. The best hiring process is key to a well-maintained and functional company. Determining if every candidate is the right fit is very crucial. Hiring candidates that do not meet the qualification could mean severe difficulties for the organization and the employee.

The hiring process must understand a candidate’s work history, interests, professional goals, and abilities to construct a complete plan for that employee’s direction within the organization.

Better organizational structure

Companies are rethinking their structure to invest more in human capital. Potential employees demand more autonomy and decision-making power. To accommodate this, businesses focus on restructuring organizational structures.

Many organizations believe that giving employees more control over their work and making decisions holds them accountable and gives them a sense of purpose.

Improvement in culture and values

Organizations now treat employees like customers due to their valuable insights about salaries, business opinions, and management techniques that can help the company. In today’s society, employees look for personal growth, impact, and faith in an organization. It can be overwhelming handling all that, which is why finding a balanced system that works for the company is vital. 

Need help improving your Human Capital Management system?

Health Compass Consulting can help with that. They offer a science-based approach to talent development and acquisition that can provide a competitive edge to achieve your company’s mission. Visit www.healthcompassconsulting.com and get a free consultation today. You can also email them at solutions@healthcompassconsulting.com or call their hotline, 800-709-0515, for immediate inquiries.