What’s the Difference Between HR and HCM Technology?

In war, the victor’s write the history textbook.

In marketing, those with the bigger marketing budgets define the industry terms.

Human Capital Management (HCM) is indeed something new that businesses need, and HR Tech companies are expanding their technologies to help businesses put HCM strategies into practice.

But the average mid-market business owner doesn’t know what HCM is, and technology companies don’t have time to educate them. Therefore, in marketing the term HCM often comes with a parenthetical message (Hey, we’re still talking about payroll, and time-tracking, and all the daily HR stuff you are familiar with). Because of this, HCM technology gets put in a box of “HR Streamlining technology” or “a full workforce management suite.” But those are severely deficient definitions.

More than just a suite that simplifies daily HR and personnel management, true HCM technology helps organizations begin the journey of applying the science of HCM in their organizations.

That might sound boring, but not if you are looking for a better way to compete in the market. Early adopters of HCM strategies are realizing how the decision science can help increase differentiation, retain and attract employees, and align their workforce to grow the business.

HCM: A New Decision Science

HCM is still a relatively new decision science. Where Finance (the decision science that drives smart financial investments) and Marketing (the decision science that drives smart selling practices) are commonplace in every organization, the decision science of how to make focused investments in talent (HCM) hasn’t yet become mainstream.

Non-standard terminology adds to the confusion: Talent Management, Human Capital Management, Competency Management Systems, Talent Development, Talentism. Industry thought leaders can throw a number of different terms into the conversation, but they’re all discussing the same question—how do businesses make focused investments in their people to have an optimal impact on business performance?

The HCM Decision Science in Action

Of course, without an HCM strategy, businesses still make decisions on talent investments. But, without a decision science to govern good from bad investments employers can waste a lot of time and money in the process (not to mention irritate their employees and erode their work environment).

Consider this example:

When unemployment is low, there’s often a drought of ready-talent that is able to deliver immediate value on hiring. Businesses that aren’t used to this will often hire less-experienced people without ever adjusting their performance expectations. Too often this ends in disaster, with the team frustrated by the new employee’s lack of performance, or the new hire quitting after being setup for failure.

For organization’s applying the HCM sciences to this situation, they would have a clear understanding of where the new-hire’s experience and skills gaps were going to need targeted training and development. Supervisors would know the development track, managers would know when the new-hire could stand on his or her own, and performance management programs would be in place to guide the new hire along the way.

To boot, they would know the time and financial investment to get the new employee up to speed, and learn how their total cost-to-hire (Recruiting, training, managerial invesment) for a given position is impacted by fluctuations in unemployment rates.

So, What’s the Difference Between HR and HCM Technology?

In short, HR and HCM technologies will certainly have some overlap. A pure HR technology is going to simplify and streamline daily HR tasks, which is awesome! But an HCM technology will do the same, and give you tools to begin putting the HCM science into practice.  

Some of those tools might assist with recruiting, succession planning, performance management, training management, competency management, and position management.

Still wanting to know more about what HCM looks like in practice? Read our post: What is Human Capital Management? Learn from an Example.