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The Difference Between HCM and WFM Explained

A chart with HCM at the center, supported by payroll, HR, and benefits.

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The terms human capital management (HCM) and workforce management (WFM) are often used interchangeably, but there is a subtle difference between the two. HCM refers to all activities and processes related to managing an organization’s workforce, while WFM is a subset of HCM that focuses specifically on the strategic and efficient management of that workforce. While both are important for ensuring that an organization’s workforce is effectively managed, HCM encompasses a broader range of activities and processes than WFM. As such, HCM is the more comprehensive term.

In this post, we first fully define HCM and WFM. Then, we discuss why each is important. Finally, we point out challenges and what to watch out for. This post also addresses why some HR professionals prefer one term over the other.

What is human capital management (HCM)?

Simply put, human capital management (HCM) is the process of managing an organization’s workforce. This includes activities like recruiting and hiring new employees, onboarding them, training them, and ensuring that they are productive and contributing to the org’s goals. HCM also includes processes like performance management, compensation and benefits, and employee relations.

The goal of HCM is to ensure that an organization’s workforce is effective and efficient. By managing the workforce effectively, organizations can achieve their goals and objectives.

What is workforce management (WFM)?

Workforce management (WFM) is a subset of HCM. WFM focuses specifically on the strategic and efficient management of an organization’s workforce. This includes activities like workforce planning, scheduling, and time and attendance tracking.

The goal of WFM is to ensure that the workforce is used in the most effective way possible. By managing the workforce efficiently, businesses can reduce costs and improve productivity.

The main difference between HCM and WFM

The main difference between the two is that HCM is a broader term that encompasses all activities and processes related to managing an organization’s workforce. At the same time, WFM is a subset of HCM that focuses specifically on the strategic and efficient management of that workforce.

While both HCM and WFM are important for ensuring that an organization’s workforce is effectively managed, HCM is the more comprehensive term.

Which term should you use, HCM or WFM?

There is no definitive answer to this question. Some organizations prefer to use the term human capital management because it encompasses all activities and processes related to managing an organization’s workforce. Other organizations prefer to use the term workforce management because it specifically focuses on the strategic and efficient management of that workforce. Ultimately, the decision of which term to use is up to each organization.

Do note that human resources professionals may find the term human capital unappealing because it emphasizes the view of employees as commodities. The term workforce management may be more appealing to HR professionals because it focuses on managing the workforce effectively. However, they understand either term.

Why are HCM and WFM important?

They’re important because they help employers manage their workforce effectively. By doing so, businesses can achieve their goals and objectives. One way HCM and WFM helps is by reducing costs and increasing productivity. For others, see the section below.

How can HCM and WFM benefit an organization?

As mentioned above, HCM and WFM can benefit an organization by helping it manage its workforce effectively. Some specific ways organizations use HCM and WFM principles include:

  • Workforce planning: HCM and WFM can help organizations plan for their workforce needs. This includes forecasting future workforce requirements and developing plans to meet those needs.
  • Scheduling: They can help organizations schedule their workforce efficiently. This includes creating schedules that balance the needs of the organization with the availability of employees.
  • Time and attendance tracking: They can help organizations track employee time and attendance. This data can be used to improve workforce productivity.

What are some challenges with HCM and WFM?

There are several challenges that can arise when implementing HCM and WFM principles. These challenges include:

  • Employee resistance: Change is hard. Employees may resist changes to their work schedules or duties. Thus, it’s important for managers to show employees how the changes will benefit them (and the business). With TimeForge, for example, it’s very easy to convince employees of the benefits of being able to check their schedules and timecards from the mobile app. Employees appreciate the convenience.
  • Implementation costs: HCM and WFM systems can be expensive to implement, especially if they are separate from the business’ scheduling and timekeeping systems. The more systems a business has, the more it can expect to spend. By integrating systems, or using an all-in-one, businesses can reduce the need for manual data entry in multiple systems. However, some older systems may require months to integrate, and custom integrations can be quite expensive.
  • Data accuracy: The data used for decision-making must be accurate. This can be a challenge if data is not collected properly or is not updated regularly.

What are some common HCM and WFM software solutions?

There are a variety of HCM and WFM software solutions available. Some common solutions include:

  • Workforce planning software: This type of software helps businesses plan for their future workforce needs.
  • Scheduling software: This type of software helps businesses create schedules that balance the needs of the organization with the availability of employees.
  • Time and attendance tracking software: This type of software helps businesses track employee time and attendance.
  • Human resources management software: This type of software helps businesses manage employee data and performance.

Achieving success with the right tools

HCM and WFM are important concepts that all managers should be aware of. There is no definitive answer as to which term to use when discussing HCM and WFM. Some orgs prefer the term human capital management while others prefer the term workforce management. Ultimately, the decision of which term to use is up to the individual organization.

There are a variety of software solutions available to help businesses implement HCM and WFM principles. Workforce planning software, scheduling software, time and attendance tracking software, and HR software are all common solutions. By understanding the benefits of HCM and WFM, organizations can use these principles to improve their productivity and reduce costs.

TimeForge is an all-in-one labor management software suite that includes scheduling, timekeeping, and human resources. Our retail-hardened timeclocks and mobile apps work seamlessly with the system. And because TimeForge is already integrated with over 60 payroll and POS solutions, implementation is fast and easy.

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