human capital management

The Strategic Importance Of Human Capital Management In 2022

When you hire a new employee, do you see them as an expense or an investment? The answer to this question is a key factor in determining how you manage your human capital.

Human capital management (HCM) is the process of managing the people who work for your company. It includes activities such as recruiting, hiring, and training and developing employees. HCM is a critical part of any business and is becoming even more important in the age of the knowledge worker.

In this article, we will discuss the strategic importance of human capital management and how it can help your business grow and succeed. We will also look at some of the challenges that companies face in managing their employees and how HCM can help overcome these challenges.

Let’s dive in!

What is Human Capital Management?

If you are a business owner or manager, you’ve likely heard of human resource management. Human capital management is HRM’s non-identical twin; it’s the process of viewing your people as capital assets and managing them accordingly.

Just as you would manage other assets in your company — such as cash, inventory, or property — you need to manage your people in order to get the most out of them. This includes activities such as recruiting and hiring the best talent, orienting and training employees, developing performance goals and objectives, and compensating employees fairly.

Human capital management is a critical part of any organization, as it directly affects the bottom line. You pay your employees, but is their productivity and motivation worth more than their salary? By managing your employees effectively, you can improve organizational performance and increase profits.

an employee asking for help with human capital management

What does human capital management involve?

As we mentioned previously, HCM is the process of managing an organization’s most important asset — its people. It includes activities such as recruiting, hiring, onboarding, training and development, appraising and compensating employees, and managing employee records.

HCM is a critical function for any organization because it impacts nearly every other area of the business. There are a number of elements that make up an effective HCM strategy, but the most important are:

  • Recruiting and hiring the right people
  • Training and development to help employees reach their full potential
  • Creating a positive work environment that encourages productivity and creativity
  • Rewarding employees for their contributions in a fair and equitable way
  • Managing employee turnover to ensure continuity and stability

Human capital management ensures that businesses don’t grow stagnant; they are constantly looking into the future and assessing each employee in terms of maximizing their potential.

What’s the strategic importance of implementing HCM in 2022?

The last few years have seen businesses scramble to re-assess the value of their human capital in the face of automation and digitization. Automation has led to a reduction in the number of jobs in many industries, while digital tools have allowed organizations to work with a smaller workforce.

In this new environment, businesses are increasingly realizing that it’s not just the number of employees that matters, but the quality of those employees. This is where human capital management (HCM) comes in.

HCM is a process by which organizations can identify and develop their most valuable employees, making sure they have the skills and training needed to contribute to the company’s success. In 2022, it is essential for businesses to have an effective HCM strategy in order to compete and survive.

Let’s go through a few reasons why.

discussing human capital management

1. The war for talent is heating up.

In today’s economy, businesses are facing a shortage of qualified workers. This means that companies need to be more selective about who they hire, and they need to make sure their employees are the best possible fit for the job.

An effective HCM strategy can help businesses identify high-quality employees and make sure they are properly trained and equipped to do their job.

2. Automation is changing the workforce.

As automation becomes more widespread, the workforce is changing. Jobs that were once done by human beings are now being done by machines, and this trend is only going to continue.

This means that businesses need to focus on developing skills that are not easily replaced by automation. Skills like creativity, critical thinking, and communication are becoming more important than ever before. An effective HCM strategy can help businesses identify and nurture these skills in their employees.

3. The economy is changing.

The global economy is in a state of flux, and it’s unclear what the future holds. One thing that is certain, however, is that businesses will need to be adaptable if they want to survive.

An effective HCM strategy can help businesses adapt by giving them the ability to quickly and easily adjust their workforce to meet the needs of the market.

How does HCM work in practice?

If human capital management is a critical success factor for your organization, it is important to ensure that the process works in practice. The goal of human capital management is to identify and develop the best talent possible and put them in positions where they can have the most positive impact on organizational performance.

human capital management meeting

There are a number of ways to accomplish this goal, but the most common approach is to use a combination of recruiting, assessment, and development tools. Let’s go through each of these steps in more detail.


The first step in human capital management is recruiting the best talent possible. This isn’t just about finding people who can do the work; it’s about viewing each candidate as a potential long-term investment in the organization.

When approaching recruitment with this mindset, it’s important to cast a wide net and consider all potential sources of talent. This might include online job boards, social media, employee referrals, or even headhunters.

Then, when vetting potential candidates, try to answer the following questions:

  • Do their goals align with the organization’s?
  • Are they able to step out of their comfort zone and grow into new roles?
  • Do they have the skills and experience needed to be successful in the role, as well as gain new knowledge and skills over time?

These questions help you to identify not just the best candidates for the current role, but also those who have the potential to grow and contribute to the organization over time.


Human capital management also involves assessing the skills and potential of each employee. In order to build an efficient and effective workforce, it’s important to have a clear understanding of each employee’s strengths and weaknesses so that you can fill gaps and create development plans.

There are a number of assessment tools that can be used, such as interviews, skill tests, or personality assessments. However, the most important part is to use these tools consistently and track employee progress over time.

This way, you can identify any areas where employees need additional support and develop targeted training and development programs.


This is arguably the most important part of human capital management, as it’s what helps to ensure that employees are able to reach their full potential. Development plans should be tailored to the individual employee and should focus on building skills and knowledge that are relevant to the organization.

training a new employee

While development can seem like a costly investment, it’s important to remember that an organization’s human capital is its most important asset. By investing in your employees, you are not only helping them to reach their full potential, but also ensuring that the organization is able to achieve its strategic goals.

Development can take many forms, such as on-the-job training, online courses, or even job rotations. The most important thing is to find a way to help employees learn and grow so that they can be successful in their roles now and in the future.

The best way to develop your team

When it comes to skills development, there are different schools of thought. Some believe in developing skills in-house, while others think it is more advantageous to bring in experts from the outside. What is the best way to develop your team?

It depends on the organization’s strategic goals and objectives. If an organization wants to focus on developing a particular skill set, it is best to do so in-house. However, if the goal is to develop a well-rounded team with a variety of skills, it might be more advantageous to bring in experts from the outside.

Another idea is to pair in-house staff with mentors from the outside (or inside, if the skill set is in-house). This can be a great way to develop both the individual and the team. The mentor can help the individual grow and learn, while the individual can bring new ideas and perspectives to the team.

However an organization chooses to develop its team, it is important to keep the strategic goals and objectives in mind. Without a clear plan, skills development can be ineffective and wasteful.

human capital management planning

Final thoughts on human capital management

In order for an organization to be successful, it is important to have a strong team in place. Human capital management is essential for developing and managing that team.

By focusing on the strategic goals and objectives of the organization, human capital management can help ensure that the team is equipped with the skills necessary to achieve success!