Human capital management (HCM) covers every people process in a company—from hiring to firing and much more. In this article, we dive into what HCM is, how tech can simplify and enhance it, and the best HCM tools on the market today.
Over the last decade, human resources (HR) has grown from a support function to an important strategic role—and rightfully so. With employee engagement levels declining and a talent shortage in the market, it’s more important than ever to hire, grow, and retain the right people.
This is what human capital management (HCM) is all about. It includes a set of practices that help companies make the most of their biggest asset: their people.
In this article, we dive deeper into understanding what HCM is and how the right HCM software can simplify HR practices. We also look at the 3 best HCM systems so you can make the right choice for your company.
If you don’t have the time to read through our research, jump down to our quick comparison table.
Our Top Picks
Best all-in-one human capital management systemLearn more
Good for a global workforce
Good for large, complex businesses
What Is Human Capital Management?
Human capital management is the process of managing and developing a company’s human resources. The end objective of HCM is to maximize workers’ contributions to company goals.
On the one hand, HCM looks at logistical HR processes like payroll, compliance, and document management. But it also includes strategic HR functions such as hiring, training, performance management, and more.
Key elements of HCM
You can get a good understanding of what HCM is by looking at the key processes and practices it covers. These include:
- Recruiting and onboarding
- Employee case and query management
- Employee relations, policies, and procedures
- Compensation and benefits administration
- Training and development
- Performance management
- Talent management and succession planning
- Culture and feedback management
- Reporting and analytics
The challenges of human capital management
HCM is critical to attracting and retaining talent, increasing productivity, and creating a safe and positive working environment. But it comes with its challenges. Some of these are outlined below.
Processes can be manual and time-consuming
Research shows that HR managers spend about 73% of their time on manual and time-consuming tasks.
They need to be organized and ensure that all documents and records are secure, compliant, and up to date. Verifying and running payroll is often tedious work, too. It typically involves checking timecards, creating payroll reports, and working with payroll partners. On top of this, HR professionals need to answer employee queries, manage reference requests, review worker requests, and so much more.
This leaves them with little time to focus on their people strategy—i.e., attracting, engaging, and retaining top talent.
HR teams can burn out
A Bloomberg report showed that there are approximately 1.4 HR professionals for every 100 employees in the US, and Indeed has noted this ratio as “the standard rule.” With so much to do and so many employees to cover, HR managers are prone to stress, fatigue, and burnout.
Managing a distributed workforce can be tricky
Managers often find it challenging to foster a sense of community and belonging within teams that are scattered across locations and/or working at different times. Moreover, it’s tricky to monitor how productively they’re working and show recognition for their work when they’re in a different location to company leaders.
HCM software simplifies and streamlines HR processes and tasks, saving you a ton of time and effort. Most options also have mobile apps that workers can use on the go—making it easier for managers to keep their workforce engaged.
But what is HCM software and what are the best HCM tools?
What Are Human Capital Management Tools?
HCM software is designed to simplify a company’s HCM practices. There are several types of HCM tools available, including software for applicant tracking, payroll, document management, and more. Companies can use these separately or opt for a human capital management system that offers many of these features in one platform.
HCM tools use technology to automate manual tasks such as hiring, payroll, record-keeping, and more. These solutions also often have features for training, communication, surveys, performance management, and so on. In this way, they support HR professionals with administrative tasks but also with their strategic role of increasing engagement and employee retention.
Most HCM systems are cloud-based and some even have mobile apps, making them accessible at any time and from anywhere.
What To Look For in Human Capital Management Tools
The best HCM tools can save time and effort for workers, managers, and HR professionals. Here are some of the most important features to consider when weighing up your options.
- Document management and record-keeping: Look for a secure, centralized center to store employee files and records. Great software lets you set expiry dates on documents to ensure they’re always reviewed, updated, and compliant with regulations.
- Automated timesheets and payroll integrations: Good HCM tools will auto-generate accurate timesheets from employees’ logged hours. You can then use these to run payroll—sometimes even using the platform’s payroll integrations. This takes the headache out of processing payroll.
- Learning and development tools: Look for apps that let you create and assign custom training courses to new hires and current workers. Apps like Connecteam even offer mobile learning so workers can complete their modules from anywhere.
- Employee milestone trackers: Great HCM tools give you insight into each employee’s journey. They should show you workers’ performance reviews, promotions, pay raises, and training courses. Connecteam, for instance, has an employee timeline feature that shows these milestones and more.
- Recognition and reward features: These allow you to thank and reward workers for their contributions. Employees feel valued for their hard work, which helps drive a culture of excellence at your organization.
- Benefits management: You can offer benefits such as time off, flexibility, and more from a single platform to keep workers motivated and loyal to the company.
- Surveys and polls: These help you gather feedback on culture, working practices, or anything else you might want your workers’ opinions on. You can use these insights to create a better employee experience.
- In-app chat and newsfeed: Use a work chat for one-to-one or group messaging, or send company-wide updates using a newsfeed. This is a great way to stay connected with your employees, even if they’re spread across different locations or working at different times.
The 3 Best Human Capital Management Tools for 2023
Connecteam — Best all-in-one human capital management system
Connecteam tops our list as the best all-in-one HCM system. Its streamlined, easy-to-use platform simplifies payroll, keeps records organized, helps you boost employee engagement, and more. Plus, the mobile app makes it easy to manage your staff from anywhere, at any time.
Let’s dive deeper into Connecteam’s key HCM features.
Smart document management tools keep you organized and compliant
With Connecteam, you can store all employee documents and records neatly in one central location with no limit on storage or file size. This keeps paperwork organized and prevents duplicate or missing files.
Workers can access resources such as the employee handbook, company policies, and more from the knowledge center. They can also upload their own documents, saving you the hassle.
Further, Connecteam stores data securely in a private cloud, and you can set access permissions so sensitive information is never in the wrong hands. Plus, documents such as I-9s, W-4s, and more can have set expiry dates to ensure that they’re regularly reviewed and updated, helping you stay compliant.
Make error-free payments with automated timesheets and payroll integrations
Connecteam’s time clock accurately tracks employees’ hours, including absences and breaks. The software uses this time data to generate timesheets that are accurate to the second.
The time clock’s built-in GPS location tracking feature also lets you track employees’ real-time location when they’re working. You can use this to verify timesheet entries and prevent costly payroll errors.
Connecteam directly integrates with payroll software like Gusto and QuickBooks Online for hassle-free payments. You can also download timesheets to use with a payroll provider of your choice.
Stay connected with your employees through an internal work chat and newsfeed
Connecteam has its own in-app chat that can be used for individual and group messaging. You can answer employee queries about company policies, employment references, and more. Push notifications ensure messages don’t get missed, and conversations are stored securely in the cloud so workers can go back to them at any time.
Additionally, Connecteam’s newsfeed feature lets you share company-wide updates and announcements in one go. Turn comments on or off for each post, schedule updates to go live on the feed, and add flair to posts with images, GIFs, videos, and more.
Features for effortless benefits administration and management
Connecteam makes benefits administration and management simple and effective. You can offer your team paid time off (PTO), including vacation leave, personal days, and more. Workers can request time off and you can approve or deny requests directly from the app. You and your workers can also see how many days off they have remaining at any time. Connecteam automatically adds leave time to employees’ schedules so everyone’s on the same page.
One great benefit to offer employees is flexibility in their schedules, and doing so is a breeze with Connecteam’s drag-and-drop scheduling tool. Employees can indicate their availability and preferences for shifts, and you can create schedules based on this information. Or, workers can pick from open shifts—with or without your approval. Smart alerts notify team members of any changes to the schedule so shifts are never missed.
Finally, the knowledge center is a great space to securely store your benefits policies, including information on health insurance and retirement plans, and other company documents. This way, employees have all the information they need at their fingertips.
Support learning and development with training and milestone tracking
With Connecteam’s training tools, you can create and assign training and onboarding courses. You can customize the content and formatting, and add quizzes to make learning engaging and effective. Connecteam also lets you track training progress in real time. Plus, you can send notifications to remind employees to complete their training courses.
In addition, Connecteam’s employee timeline tool lets you view each worker’s journey at your company in one location. The timeline shows performance reviews, promotion and pay raise dates, and upcoming or completed training courses. You can also view workers’ licenses and certifications—including expiry dates—to ensure that they’re always certified to do their job.
Recognition and reward features to make employees feel valued and appreciated
Connecteam’s built-in chat is a great platform to send messages of appreciation to your workers in 1-to-1 or group settings. You can also recognize workers with shout-outs on the newsfeed to reinforce the importance of good work for everyone.
Going a step further, you can send recognition badges directly to employees, and personalize them with bright graphics and thank-you messages celebrating a job well done.
Connecteam also lets you reward employees with digital tokens that can be redeemed for gift cards. This extra incentive can go a long way in boosting motivation.
Make meaningful changes to your people strategy with surveys and polls
Customizable surveys help you gather feedback from employees on your company’s culture, working practices, and more. Use one of Conneteam’s survey templates or create your own using yes/no, open-ended, and multiple-choice questions alongside ratings. Surveys can also be anonymous, encouraging more honest responses.
Meanwhile, Connecteam’s live polls feature enables you to collect employee votes in real time to make quick and impactful decisions.
Manage HCM practices efficiently with custom reporting, events, and more
Connecteam lets you see custom reports on attendance, time, training, surveys, and more. You can use these insights to run processes efficiently and improve the employee experience.
Additionally, with the event management feature, you can plan and manage events easily. Connecteam lets you send invites, gather RSVPs, and share information about in-person or virtual events.
On top of its powerful HCM features, Connecteam offers an employee directory, task management tools, customizable forms and checklists, and more.
Completely free for small businesses
Small businesses with fewer than 10 employees can use Connecteam completely free, forever. Larger businesses can choose from one of the paid plans, starting as low as $29 per month for up to 30 users.
You can also sign up for a free trial to explore all of Connecteam’s features before upgrading.
Connecteam also offers a free for life plan – Get Started Now!
Secure, cloud-based knowledge center
Accurate payroll reporting
Customizable training courses
Powerful timeline to track employee milestones
Tailored recognition and rewards
Insightful surveys and polls
Push notifications and smart alerts
Mobile app that can be accessed any time, from anywhere
User-friendly design and layout
All-in-one work management solution at affordable prices
More third-party integrations in development
Free-for-life plan availablePremium plans start at $29/month for 30 users
14-day free trial, no credit card requiredStart your free trial
Workday — Good for a global workforce
Workday is a cloud-based human capital management system with tools for time tracking and payroll management. It also has features for employee skills management. Managers can gather feedback from employees and study industry data on engagement, retention, and more. In addition, Workday offers talent management, compensation and benefits planning, and employee expense management.
Managers need to contact Workday directly for a quote, but the solution is known to be more expensive than some other competitors. It also doesn’t offer a free trial or free plan.Learn more about Workday
- Payroll management
- Compensation and benefits planning
- Skills and talents management
- Expense reporting
- Provides industry benchmarks for employee engagement
- Has a messaging platform
- Expensive compared to other solutions
- Built-in payroll supports only USA, UK, France, and Canada
Contact vendor for price Trial: No Free Plan: No
Oracle Cloud HCM — Good for large, complex businesses
Oracle HCM is a cloud-based HR management platform that provides companies with features for recruiting, compensation, and payroll management. It also supports performance management and learning management.
Managers can use Oracle HCM’s reporting and analytics tools for real-time data on different HR processes. It offers self-service tools for employees to access documents, onboard, enroll in benefits, and so on. However, it doesn’t have its own instant messaging chat.
Oracle HCM has a mobile app. It also integrates with Oracle’s enterprise resource planning (ERP) and customer relationship management (CRM) solutions. Managers need to contact Oracle for a quote, but prices tend to be more expensive than some other solutions.Learn more about Oracle Cloud HCM
- Talent acquisition tools
- Payroll management
- Employee self-service portal
- Reporting and analytics
- Mobile app
- Integrates with other Oracle platforms such as ERP and CRM
- Expensive compared to other platforms
- No built-in work chat for internal communications
Pricing is not publicly available Trial: No Free Plan: No
Compare the best Human Capital Management Tools
Starts at just $29/month for the first 30 users
Contact vendor for price
Pricing is not publicly available
Free Up to 10 users
The Benefits of Human Capital Management Tools
Save time and effort
HCM software simplifies all HCM practices using technology and self-service tools. Employees can upload and access important documents themselves. They can request time off, pick from open shifts, and track their working hours easily from their desktop or mobile apps. This saves a lot of time and effort compared to doing these tasks manually.
Decreased costs, increased compliance
Most HCM platforms generate automatic timesheets from employees’ time entries. These accurate timesheets help reduce costly payroll errors. Likewise, platforms with smart document management help keep you compliant, preventing you from being hit with legal and regulatory fines.
Maximize employee engagement and commitment to company goals
HCM tools also boost employee engagement with features for training and career development. Custom courses, certificates, and licenses can be assigned to employees on the app so they always have something to work toward. Recognition and reward tools keep them incentivized to stay productive.
In addition, internal communication tools like a work chat and newsfeed create a sense of belonging and connectedness in your company.
Refine your people strategy using employee feedback
Surveys help you gather employees’ views on company culture and practices. Insights can be used effectively to refine your HR strategy and attract, engage, and retain talent.
With polls, you can collect real-time votes on company decisions. This keeps workers involved and included in what’s happening in the company no matter where they’re working from.
What are the objectives of human capital management?
HCM includes a set of processes to maximize productivity and run smooth HR operations. Some of its key objectives include attracting, engaging, and retaining top talent. It also aims to get employees aligned with company goals and improve their connectedness with the organization’s mission.
What is the difference between human capital management (HCM) systems and human resource management systems (HRMS)?
Both HCM and HRMS streamline administrative HR tasks such as payroll and file management. HCM, however, is a more comprehensive solution. It also supports the strategic side of HR, such as training and performance management. Connecteam includes all the features provided by HCM and HRMS in one unified platform.
What is human capital management software and which is the best one?
HCM software simplifies and streamlines administrative and strategic HR processes. Connecteam is the best all-in-one workforce management solution on the market. Its tools support document management, payroll, internal communications, training, performance, and more. Its mobile app can be accessed by workers, managers, and HR teams whenever and wherever.
The Bottom Line on Human Capital Management and HCM Tools
Human capital management is the process of hiring, developing, and retaining the right talent in a company. It includes managing compensation, benefits, training, and more. A good HCM strategy is essential to maintaining a productive and skilled workforce but comes with its challenges. HR processes are often manual, time-consuming, and tricky to manage, especially when workers are spread out in the field.
HCM tools simplify administrative HR tasks and support strategic people goals. They offer tools for document management, learning, recognition, employee feedback, and more.
Connecteam offers all this plus everything else your business needs to succeed—making it the best all-in-one HCM and work management solution out there.