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What’s the difference between HCM, HxM, and Talent Management?

Paul Rae - Founder Chairman - Jigsaw Cloud
by Paul Rae

A trained and motivated workforce is a source of competitive advantage. This makes human resources the most important asset in any business, with engaged employees always on the lookout for your best interests which explains why the most successful organisations recognise the important role that human capital management plays.  

Executives use several human resources terms for the different kinds of HR strategies, programs, and software that they use. Three of the most common terms that get used interchangeably are HCM, HxM, and talent management. But do they all mean the same thing and are we using the terms correctly?

Keep reading to learn the meanings of HCM, HxM and talent management and the key differences between them.

What is Human Capital Management?

HCM stands for human capital management and ‘human capital’ refers to an organisation’s people or staff. The term Human Capital includes the knowledge and skills of your employees and other related factors such as motivation/enthusiasm, loyalty, and commitment. 

Human Capital Management (HCM) refers to the strategic management of people using all available resources to draw the best out of your team. When done well, HCM helps your organisation to hire and keep the right talent.

HCM involves the use of sophisticated software and business intelligence throughout an employee’s life cycle. So, it provides tools and strategies that help your organisation navigate the complete process of recruiting, hiring, managing, and offboarding employees. Your organisation’s success almost totally depends on how well-honed your human capital is to meet its strategic objectives.

Nowadays, human capital management is a broad area of expertise that must be handled delicately to ensure that organisational goals are achieved as efficiently as possible. HCM in large organisations must be detailed yet accurate. This is why many companies fully rely on enterprise software like SAP to manage their human capital.

Human Capital Management Tools

The right HCM tools create a work environment that encourages employees to go above and beyond for your company. They help you achieve goals such as developing new products, hitting sales goals, growing market share, and reducing costs. Many organisations have found that investing in HCM software pays back in increased productivity, better business processes, and higher profitability.

SAP HCM has a strong emphasis on collecting business intelligence and the use of analytical and performance management tools. The technology accommodates automated time and attendance reporting as well as an applicant tracking system. The software also helps your HR department with payroll and benefits administration.

People analytics also becomes much easier as your HR team can use the software to collect and analyse employee data. This allows your organisation to make data-driven decisions about the right people to hire, promote and retain. The software can also help you predict your recruitment needs to run a leaner organisation.  

The administrative and strategic practices that fall under HCM include the following:

  • Workforce planning
  • Compensation planning
  • Recruitment
  • Onboarding
  • Training
  • Time and attendance
  • Payroll
  • Performance management
  • Offboarding
  • Workflow management
  • Reporting and analytics
  • Compliance
  • Employee self-service functions

This may also include benefits administration and retirement services.

Human Experience Management

Most modern organisations and HR leaders use workforce management software for their people management functions. 

As we’ve already discussed, Human Capital Management (HCM) deals broadly with the efficient and effective management of the workforce, encompassing all the processes and strategies your HR department can use to ensure that your human capital performs at its best. HCM enables your organisation to follow fact-based, data-driven and measurable HR strategies and processes.

Human Experience Management (HxM) on the other hand leans towards tailoring employee expectations and workplace experiences to synergize with your organisation’s goals. This creates a win-win engagement for your employees as well as your company.

Finally, Talent Management in HCM narrows down to the daily activities an organization undertakes to maximize employee abilities to achieve the organization’s vision. HCM, HxM and Talent Management all focus on the entire employee life cycle, from recruitment to offboarding. More on talent management further down.

How Human Experience Management Works

As highlighted earlier, proper human capital management ensures that your human capital is performing at optimal levels. But how exactly can you improve the performance of your team? This is where Human Experience Management (HxM) comes in. 

To assess and optimise your workforce performance, you must first understand the needs and motivations of your human capital. Your organisation must also see to it that human capital needs and expectations are realised within the work environment. All this can be done using HxM software. HxM is about the experiences of your employees and for some a more modern take on HCM. 

Through direct engagement and feedback systems, SAP HxM software tracks your employees’ experience in the workplace. The software aims to respond to their concerns urgently and appropriately. The end goal of HxM is a wonderful experience for your employees and maximum productivity for your organisation.

One of the ways HxM does this is through various surveys that are conducted at different stages of an employee’s life cycle. From recruitment to exit, any feedback gained from such surveys is detailed. Actions are taken based on understanding the employee’s needs.

A key factor in Human Experience Management is employee benefits and compensation. Well-rewarded employees are more likely to be motivated and driven. 

Talent Management

Now that we have defined HCM vs HxM you may be wondering where Talent Management comes in. Talent management is the people-focused aspect of HCM. It’s the tactical level of day-to-day HR activities that must be followed to ensure that human capital is optimised. 

Talent management software helps your organisation to audit your talents and improve your human capital. The best software also helps you identify and develop the right talent that matches your organisation’s strategic interests. HR managers are always concerned with how to recruit, retain, promote and develop their most talented employees. 

Practically, talent management involves actions such as recruiting the right candidate and ensuring that they are seamlessly onboarded into the organisation. Once in, the organisation’s talent management system will take the form of performance management and compensation or reward planning. Employees also need to grow their skills and knowledge, so you need a training platform to manage this.

Talent Management System

A great talent management system helps your company to identify skills gaps and come up with ways to fill them. Because of their people management element, talent management activities can be extremely complicated. For instance, many companies fail at recruiting the right people because of a biased hiring team.

To succeed at this function, HR managers require fact-based, data-driven, and unbiased solutions. The right software can help your HR team improve their recruitment and performance management. This way, your company will find and keep the best talent in the industry. 

SAP has software called SuccessFactors that deals primarily with talent management functions. It helps the HR department to keep tabs on succession planning, ongoing talent reviews, talent development, and offboarding/cross boarding.

HCM vs HxM and Talent Management

So, what are the differences and similarities between HCM, HxM, and Talent Management? HCM broadly deals with all matters relating to the organisation and its workforce management strategies and processes. Meanwhile, HxM focuses on employee experiences to ensure they are feeling fulfilled in their workplace and are in a state of high motivation for ultimate productivity

So HCM could be said to be organisationally focused whereas HxM is the “employee-side” of the bargain in the HCM strategy. Within HCM is a talent management function that focuses on recruiting, developing and keeping the right talent for your organisation. Both HCM and HxM work together to create an HR function that meets all regulatory and organisational goals while creating an engaged workforce with a win-win mindset. 

Learning the difference between human capital management, HxM and talent management

Every organisation heavily relies on its employees to achieve its goals and visions. For this reason, HR managers are tasked with finding ways to keep employees engaged and committed to company goals.

We recommend that HR leaders use an HR management system that encompasses the use of HCM, HxM and Talent management. Integrated HR systems provide managers with the information they need to make sound, fact-based decisions.

These analytics can also provide the foundation for developing and implementing HR strategies that secure a competitive advantage for your organisation. If you’re looking for assistance with transforming your HR practices, book a demo of SAP SuccessFactors with us today

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