Human Capital Management

It used to be the case that capital simply referred to equipment that a company owned. Computers, copiers, and any other machinery used by the firm in its operations would be common examples of capital. Human capital management, often abbreviated HCM, recognizes that personnel also represent substantial capital. Though some employees may not like the notion of being compared to machinery, there are definite points where the moniker makes sense. Human capital, like physical equipment, can help a company function much more efficiently, and should be perceived as an investment which can depreciate if not maintained and treated well.

When you view your workforce this way, aspects of management such as recruiting and retention take on greater importance. Companies invest in training their employees not out of altruism, but because such investments can exhibit a substantial return on investment. An experienced employee is that much more valuable to a firm if he knows how the company operates and can perform his tasks faster than a newly hired employee.

One of the difficulties in human capital management is that it is often difficult to place a value on human capital because it is an intangible asset. Unlike a computer for which you pay a known amount and can estimate the rate at which it depreciates, it is slightly more complicated to calculate the value of human capital. A rough calculation would involve taking into account the amount of revenue that an employee generates, the costs of training that employee, his salary and other expenses, and an estimation of how long he will stay with the company.

Software to Assist Your Company with Human Capital Management

Software programs are available to facilitate hiring, training, and retention of employees. These packages often enable you to track the progress of each employee so that you can capitalize on each individual's strengths and keep him or her on a career track that is mutually beneficial. Software can also assist you in providing appropriate incentives, which may involve a mix of performance-based compensation and benefits. These can motivate employees and increase their productivity and efficiency.