The Major Functional Areas in Human Capital Management

Human Resource Planning:

In the human resource planning function, the number and type of employees needed to accomplish organizational goals are determined. Research is an important part of this function because planning requires the collection and analysis of information in order to forecast human resources supplies and to predict future human resources needs.

The basic human resource planning strategy is staffing and employee development. 

Job Analysis:

Job analysis is the process of describing the nature of a job and specifying the human requirements, such as skills, and experience needed to perform it. The end product of the job analysis process is the job description. A job description spells out work duties and activities of employees.

Job descriptions are a vital source of information to employees, managers, and personnel people because job content has a great influence on personnel programmes and practices.


Staffing emphasizes the recruitment and selection of the human resources for an organization. Human resources planning and recruiting precede the actual selection of people for positions in an organization. Recruiting is the personnel function that attracts qualified applicants to fill job vacancies. In the selection function, the most qualified applicants are selected for hiring from among those attracted to the organization by the recruiting function. On selection, human resource functionaries are involved in developing and administering methods that enable managers to decide which applicants to select and which to reject for the given jobs.


Orientation is the first step toward, helping a new employee adjust himself to the new job and the employer. It is a method to acquaint new employees with particular aspects of their new job, including pay and benefit programmes, working hours, and company rules and expectations. 

Training and Development:

The training and development function gives employees the skills and knowledge to perform their jobs effectively. In addition to providing training for new or inexperienced employees, organizations often provide training programmes for experienced employees whose jobs are undergoing change. Large organizations often have development programmes which prepare employees for higher level responsibilities within the organization. 

Training and development programmes provide useful means of assuring that employees are capable of performing their jobs at acceptable levels.

Performance Appraisal:

Performance appraisal function monitors employee performance to ensure that it is at acceptable levels. Human resource professionals are usually responsible for developing and administering performance appraisal systems, although the actual appraisal of employee performance is the responsibility of supervisors and managers.

Besides providing a basis for pay, promotion, and disciplinary action, performance appraisal information is essential for employee development since knowledge of results (feedback) is
necessary to motivate and guide. 

Career Planning:

Career planning has developed partly as a result of the desire of many employees to grow in their jobs and to advance in their career. Career planning activities include assessing an individual employee’s potential for growth and advancement in the organisation.


Human resource personnel provide a rational method for determining how much employees should be paid for performing certain jobs. Pay is obviously related to the maintenance of human resources. Since compensation is a major cost to many organizations, it is a major consideration in human resource planning. Compensation affects staffing in that people are generally
attracted to organizations offering a higher level of pay in exchange for the work performed. It is related to employee development in that it provides an important incentive in motivating employees to higher levels of job performance and to higher paying jobs in the organization. 


Benefits are another form of compensation to employees other than direct pay for work performed. As such, the human resource function of administering employee benefits shares many characteristics of the compensation function. Benefits include both the legally required items and those offered at employer’s discretion. The cost of benefits has risen to such a point that they have become a major consideration in human resources planning. However, benefits are primarily related to the maintenance area, since they provide for many basic employee needs. 

Performance Management: 

Performance Management is regarded as a systematic process by which the overall performance of an organization can be improved by improving the performance of individuals within a team framework. It is a means of promoting superior performance by communicating expectations, defining roles within a required competence framework and establishing achievable

Employee Engagement:

Employee engagement is a workplace approach designed to ensure that employees are committed to their organization’s goals and values, motivated to contribute to organizational success, and are able at the same time to enhance their own sense of well-being. An “engaged employee” is one who is fully absorbed by and enthusiastic about the work of the organisation and so takes positive action to further its reputation and interests.

Talent Management:

Talent Management is a set of integrated organizational HR processes designed to attract, develop, motivate, and retain productive, engaged employees. The goal of talent management is to create a high-performance, sustainable organization that meets its strategic and operational goals and objectives. 

Succession Planning: 

Succession planning is a process for identifying and developing internal people with the potential to fill key business leadership positions in the company. Succession planning increases
the availability of experienced and capable employees that are prepared to assume these roles as they become available.

360-Degree Feedback:

360-Degree Feedback is feedback that comes from members of an employee’s immediate work circle. Most often, 360-degree feedback will include direct feedback from an employee’s subordinates, peers (colleagues), and supervisors, as well as a self-evaluation. It can also include, in some cases, feedback from external sources, such as customers and suppliers or other interested stakeholders.

Contents of Human Capital Policy: 

The employees of a company are the biggest asset it has and by keeping that asset strong, the company has the best chance of success. A company that pays little attention to its employees will end up with a team of employees who are unmotivated and unproductive. Human capital management can be the difference between a company with a winning team of
employees all pulling together toward a shared goal, and a demoralized group who are providing little overall value.

Human capital management provides a strategic and long term approach to managing staff at a company. It differs from traditional HR practices as it is concerned less with administrative tasks and procedures and focuses more on getting the most out of staff for a happy and productive team. Employees are treated as assets or human capital. There is a large and growing body of evidence that demonstrates a positive linkage between the development of human capital and organizational performance. The emphasis on human capital in organizations reflects the view that market value depends less on tangible resources, but rather on intangible ones, particularly human resources. Recruiting and retaining the best employees, however, is only part of the equation. The organization also has to leverage the skills and capabilities of its employees by encouraging individual and organizational learning and creating a supportive environment where knowledge can be created, shared and applied. 

The Human Capital Policy invariably includes various factors such as Competency Development, Learning and Development, Training, Evaluating Performance, Ensuring Job Enrichment and Job Enlargement, Motivating the engaged Human Capital, Aligning Employee’s goals with Organizational goals, Extending appropriate Compensation and Incentives and so on. 


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