Understanding the Difference Between HCM and HRM

The world of HR is filled with terminology and HRM stands for Human Resources Management while HCM stands for Human Capital Management. They both have a common human resources goal but HRM provides core HR needs for small and mid-sized businesses, whereas HCM usually covers a broader range of functions across the entire employee lifecycle.

How are HRM and HCM different? 

The two differ more in scope than in responsibilities. HRM deals mostly with short-term and mid-term needs, whereas HCM often deals with overall strategic decision-making.

Some of the overall activities it may assist with are compliance in increasingly regulated industries, managing more contract-based workers, and reviewing the dynamics of team-based work structures. HCM often encompasses all of what HRM does but incorporates additional duties for the organization-wide, long-term, strategic decision making.

A single HCM system tends to be more comprehensive and might include application tracking, managing candidates, timekeeping, payroll, benefits, reimbursements, analytics and more in one centralized platform. Pricing is higher for these systems, which are typically aimed at larger organizations, like national or global companies.

Typically, smaller businesses need the type of day-to-day management that comes with HRM solutions. The HR department may be overworked with the need to manage, pay, benefits, timekeeping etc. An HRM system that can automate and streamline many of these duties can free up the time of human resource professionals to identify shortcomings in existing systems and offer advice on strategic decisions.

Outsourcing human resources has become much more common today and Smart HR Inc is currently seeking experienced HR professionals to join its team in providing innovative and quality HR services to clients.

How are HRM and HCM similar?

Both HRM and HCM systems use modern automation tools to streamline workflows and assist in decision-making. Work that’s labor-intensive such as managing payroll or tracking timekeeping is partially or fully automated with some level of human review helps to keep systems on target. Business compliance may be automatically reviewed so notifications are issued when it is breached so it can be fixed before an audit.

Both are often designed to allow individual employees and contractors to log in to a system for self-service. They may clock in and out, manage their benefits, request leave, and perform other tasks which can save money and time.

Integration of modern artificial intelligence (AI) systems allows different aspects of human resources to be handled automatically. AI can be used to review and filter job applications.

How does an organization choose between HRM and HCM? 

As the line between HRM and HCM is often blurred, organizations may be confused about which system is right for them. This will depend on the size and scope of an organization and which type of problems it experiences.

HRM systems are usually used in small to medium-sized businesses, while HCM systems are usually used in large organizations with thousands of employees and typically offer more advanced analytics, monitoring and reporting.

If an organization experiences delays in paying people, inconsistencies in timekeeping etc., it is probably in need of an HRM system. If it has difficulties with large-scale management and analysis of employees and strategic decision-making, an HCM system is likely to be more appropriate.

As businesses grow, they often outgrow their current systems. Talented HR specialists need to help them navigate transitions, such as a transition from an HRM platform to a more comprehensive HCM one. It takes a full analysis of current systems, workflows, budgets, and pain points to choose the right HR solution to suit their particular needs.