The Top 10 Challenges of Human Capital Management and How to Troubleshoot Them

For many businesses, managing a workforce is more challenging than ever. The evergreen struggles—staying compliant, finding and keeping talent, building strong teams, paying people accurately—haven’t gone away. In fact, some (compliance, for example) have only grown more complex.

On top of that, employers are navigating fast-changing markets and leading multigenerational, multicultural teams. Today’s workforce insists on earning more than just a paycheck: Employees expect work-life balance, wellness support, career development, flexible work arrangements, and a sense of empowerment. Meanwhile, technology continues to evolve at warp speed.

The good news? Overcoming those challenges is more achievable than ever, thanks to next-generation software and a strategic approach known as human capital management (HCM). By embracing both solutions, companies can thrive in the present and be ready for what comes next.

What Is Human Capital Management (HCM)?

Human capital management is a strategic, next-generation approach to workforce management. It flips the traditional view of employees from being considered as costs to be controlled to instead seeing them as the company’s most valuable assets.

Under HCM, HR’s role shifts from simply managing people to developing them, investing in their growth and providing the structure and support they need to fulfill their greatest value.

That said, HCM isn’t about development for development’s sake; it’s about aligning talent with the business goal—for both present and the future. To do that, HCM combines core HR support, such as payroll processing, with forward-looking capabilities, such as forecasting, workforce planning, and data analytics. This work is enabled by advanced technology, also known as HCM software, which often builds on traditional HR systems with tools powered by AI and machine learning.

Key Takeaways

• Managing a workforce is more challenging than ever, but embracing an HCM approach—and the right technology—can help companies meet those challenges head-on.
• HCM positions HR as a strategic partner, equipping teams to solve challenges proactively, rather than managing them reactively.
• HCM’s core purpose of helping each employee reach their full potential directly supports efforts to recruit, retain, and engage top talent.
• From skill gaps to burnout, HCM can help troubleshoot workforce challenges through targeted development, smart planning, and more effective people management.
• With an HCM system, HR can gain access to the data it needs to make more-informed decisions, faster and with confidence.

Why Is Human Capital Management Important?

In a landscape defined by rapid change, talent shortages, and constant pressure to innovate, HCM is beneficial because it provides the structure and strategy to both empower employees and position the workforce as a lasting competitive advantage. It ensures that companies aren’t just filling jobs—they’re aligning people’s skills, goals, and potential with the long-term direction of the business in ways that make employees feel valued and supported.

Beyond talent management, HCM is a catalyst for smarter decision-making and sustainable performance. It helps leaders respond to workforce challenges with clarity and precision—whether that means closing skill gaps, improving retention, or building leadership pipelines. By leveraging data, streamlining processes, and supporting employee growth, HCM connects the day-to-day work of HR to the broader success of the business.

In short, strong human capital management builds strong organizations.

How to Troubleshoot the 10 Top HCM Challenges

Effective people management isn’t plug-and-play, but it also isn’t the impossible dream. Using a strategic approach and sophisticated tools, HCM can take on the 10 biggest workforce challenges, presented below, and actually move the needle:

1. Attracting and Retaining Top Talent

According to ManpowerGroup’s 2025 survey on the global shortage of talent, 74% of employers say they struggle to find the skilled talent they need. And retaining that talent isn’t easy either: Gallup reports that half the workforce is either watching for or actively seeking new jobs.

Several forces are shaping the tight labor market and affecting talent management:

• Shifting workforce demographics (baby boomer retirements, for example)
• The rise of remote work
• Increased scrutiny of employers’ reputation through platforms, such as Glassdoor
• Rapid technology evolution, requiring new skill sets
• Accelerated hiring timelines, shrinking the window in which to secure top talent

If left unaddressed, these dynamics drive up costs, impair morale, drain productivity, and stifle innovation—all impacting profitability.

To attract and retain top talent:

• Prioritize culture: Money matters, but culture is often the deal-breaker. Gallup found that 4X as many people left their jobs over poor corporate culture or work-life balance than for better pay and benefits. Common red flags include lack of transparency, disrespect, minimal recognition, and poor communication. HCM can help shape a healthier culture and showcase it to candidates through, for example, a respectful, timely hiring process.
• Keep salaries competitive: A pay package that’s below market average or a weak benefits package can discourage job seekers and push current employees to look elsewhere.
• Broaden your reach: Use social media and other nontraditional platforms to connect with a wider candidate pool.
• Use technology: Hosting virtual job fairs or video interviews can make it easier to engage with more candidates.
• Build and live your employer brand: Promote a clear, authentic brand across channels but make sure it matches employees’ actual experiences.
• Use data to spot flight risks: HCM platforms can flag engagement issues and other signals that employees may be considering a move.

2. Managing a Multigenerational Workforce

Today’s workforce spans five different generations—an unprecedented dynamic that presents unique challenges for HCM. Different age groups have different values, work habits, and communication styles. For example, baby boomers may favor face-to-face conversations, while millennials or Generation Z might prefer instant messaging or texts.

These differences can make it harder to promote the teamwork that’s vital to getting employees to make their greatest possible contributions. HCM leaders often must design multiple versions of the same idea to meet diverse expectations and support a unified employee experience.

To manage a multigenerational workforce:

• Embrace flexibility: Design work arrangements that give all employees more control over when and how they work.
• Diversify training delivery: Offer learning opportunities in several formats (print, mobile, video, and so on) to appeal to different preferences and learning styles.
• Foster mutual respect: Build a culture that values generational diversity and encourages inclusive collaboration.
• Encourage cross-generational mentoring: Create opportunities to transfer knowledge and deepen understanding across age groups.
• Avoid assumptions: Above all, be aware that employees are individuals—not generational stereotypes. Let data and feedback guide engagement strategies, not age-based assumptions.

3. Keeping Employees Engaged and Preventing Burnout

Engaged employees are emotionally invested in their work, motivated to make extra effort, and committed to the company’s success. But engagement is fragile. When employees don’t see how their work matters, feel disconnected from company goals, or feel overworked, they disengage—a problem so widespread it’s earned a name: quiet quitting.

Disengagement threatens the entire ethos of HCM: investing in people to unlock their potential. Disengagement signals that investment is being lost.

To improve engagement:

• Communicate purpose early: Craft strong job descriptions that help employees understand how their work contributes to company goals.
• Build purpose into every stage: Reinforce meaning through onboarding and training.
• Recognize contributions: Make recognition (formal and informal) visible, consistent, and scalable.
• Keep communication flowing: Regularly share milestones, progress, and performance feedback.
• Support wellness: Offer benefits that include mental health care coverage and wellness programs.
• Measure in real time: Conduct pulse surveys, invite feedback and comments from employees, and leverage analytics to monitor engagement.

Burnout—when employees can’t replenish the energy they expend—is a major cause of disengagement. It can take hold early (for example, during rushed or overwhelming onboarding) or develop over time, due to unrealistic demands or a lack of work-life balance.

To reduce burnout:

• Design flexible work models: Use scheduling tools to minimize overtime and support a balanced schedule.
• Set fair performance expectations: Focus on outcomes, not hours logged.
• Improve onboarding: Pace training so new hires can absorb information without being overloaded.
• Discourage an “always on” culture: Respect boundaries around time off and after-hours communication.
• Normalize asking for help: Promote a culture in which seeking support is seen as a strength, not a weakness.

4. Fostering Employee Growth Opportunities

The economy changes, business changes, technology changes. So should employee skills. Yet, in many organizations, development stalls—not out of neglect, but because urgency, busyness, and outdated systems take precedence. This run of inertia is antithetical to HCM’s mission: namely, ensuring that employees are equipped to contribute at their highest level, both today and next year.

To build a culture of continuous growth and development:

• Make learning purposeful and personalized: Replace random, module-based training with programs clearly tied to career paths. Employees should know why they’re training and what’s required of them to advance.
• Offer flexible, on-demand learning: Replace one-size-fits-all classroom training with dynamic, on-demand learning, whether it’s provided online, via smartphone, or embedded in the tools employees already use.
• Close skill gaps intentionally: Identify current and future skill needs, then design training to satisfy them.
• Replace annual reviews with regular feedback: Use check-ins, goal-setting, and progress recognition to support continuous growth.
• Support leadership development: Identify high-potential employees and offer clear pathways to grow into leadership roles.
• Recruit for a learning mindset: Screen for candidates who value lifelong learning and growth. Highlight learning as a core part of your brand to attract learning-focused talent.

5. Integrating Data into Decision-Making

HR roles have often been unfairly dismissed as being “touchy-feely”—not strategic, not measurable, and not requiring specialized expertise. That perception has lingered, partly because HR hasn’t always had access to the kind of data other departments use to drive their decisions. Answering a CEO’s question about turnover, for example, once meant manually combing spreadsheets, payroll records, and org charts. Getting that data by department or role made things harder. And projecting future labor costs? Virtually impossible to figure out manually.

HCM software changes that. Let’s revisit turnover: In an HCM system, turnover is calculated automatically using real-time data—it can be filtered by department, location, tenure, role, or time period and correlated to engagement scores, exit reasons, or manager performance. Dashboards make that data easy to access and act on. Instead of vague answers, HR can now say, “Last quarter, turnover in the Phoenix office rose 9%. Exit surveys point to compensation as the main reason. Let’s review our pay structure in that market.”

To integrate data into decision-making:

• Provide visibility into workforce trends: Track metrics, such as the time it takes to fill an opening, skill gaps, and engagement, to spot issues early, understand root causes, and measure impact over time.
• Deliver predictive insights: Use AI and machine learning to forecast attrition risk, workforce needs, and future skill needs.
• Centralize lifecycle data: Connect recruiting, onboarding, learning, performance, and compensation in a single system, eliminating data silos.
• Support continuous improvement: Monitoring engagement, completion rates, and post-training performance can help refine and improve the training process.

6. Managing Employee Skill Gaps

Companies constantly face concerns that employee skills won’t keep pace with evolving business needs. This skill gap creates several challenges: It can stall internal mobility, lead companies to search outside for talent they might otherwise promote from within, and limit productivity and innovation. And, if HR can’t be sure employees have the necessary skills today, they certainly can’t ensure that they’ll have the skills needed tomorrow.

Historically, HR relied on performance reviews to identify gaps—a method that was often outdated, subjective, inconsistent, and difficult to scale across an entire workforce.

To manage skills gaps more proactively:

• Catalog employee skills: Go beyond manager evaluations to include technical and soft skills, certifications, licenses, languages, training, and experience—all tracked in one place.
• Compare current capabilities to future needs: Align skill profiles with role requirements, departmental goals, and long-term business strategy.
• Create personalized learning paths: Recommend training, certifications, mentoring, and stretch assignments that are based on each employee’s specific gaps.
• Link skills to performance and growth: Tie development to individual goals, career progress, and succession planning.
• Use real-time data for continuous refinement: Monitor which employees are closing their skill gaps (and which aren’t) to refine the training being offered and calculate ROI on skill development investments.

7. Organizing Leadership Training and Development

When it comes to developing future leaders, HR often runs into the same barriers that stymie employee development. One common obstacle is reliance on anecdotal input—promotions based on watercooler buzz or perceived charisma, rather than potential. Another, perhaps more damaging, is the assumption that leaders naturally rise to the top without support. Even if that were true, depending on passive emergence is a risky and inconsistent way to plan for the company’s future.

To develop leaders more intentionally:

• Make leadership development strategic: Embed it into the broader talent strategy, not as a one-off initiative.
• Use data to identify potential: Base decisions on performance, engagement, and growth indicators.
• Focus on essential leadership skills: Include training in active listening, communication, conflict resolution, emotional intelligence, empathy, and cultural competency.
• Support growth with coaching and mentorship: Augment learning with real-world experiences and peer support.

8. Mediating Remote Work, Hybrid Work, and Return-to-Office Mandates

Remote work has become a permanent—yet often tense—negotiation between management and employees. Many leaders argue that physically being in the office is necessary for collaboration, innovation, and trust. Employees, on the other hand, cite flexibility, reduced stress, and higher productivity as reasons to prefer remote or hybrid working conditions.

What’s usually left out of these arguments is a deeper question: How are employees viewed? If they’re seen as expenses to be tightly managed, it makes sense to want them in the office. But if they’re seen as assets worth investing in, then supporting flexible working conditions is a natural extension of that mindset.

To support successful remote and hybrid work:

• Invest in remote work tools: Equip teams with time tracking, collaboration, and learning management platforms.
• Establish communication norms: Set expectations for daily check-ins, video meetings, and team rhythms.
• Track performance digitally: Use HCM tools to establish goals, monitor progress, and keep employees tuned to company objectives.
• Promote equity and inclusion: Ensure that remote employees have equal access to opportunities and information.
• Support well-being: Offer virtual wellness activities, ergonomic assessments for home offices, and regular check-ins to monitor morale.
• Train managers for hybrid leadership: Teach skills for remote communication, project oversight, and team building.
• Build secure IT infrastructure: Provide safe, reliable access to corporate networks and cloud-based resources.

9. Complying with Regulations

Compliance touches virtually every facet of employment from scheduling and safety to interview questions and benefits. Even seemingly small errors can trigger hefty fines, lawsuits, labor board investigations, and damaged reputations. It’s a minefield that every organization must navigate.

To reduce compliance risks and stay audit-ready:

• Automate core processes: Use HCM tools to automate payroll, tax filing, and benefits administration to minimize potential for human error.
• Build compliance into scheduling: Create schedules and work assignments that factor in overtime laws, safety training, and other compliance constraints.
• Conduct internal audits: Review HR processes, policies, and procedures to identify obstacles before they escalate.
• Train HR teams continually: Keep staff current on labor laws, industry-specific regulations, and best practices.
• Secure sensitive data: Implement access controls and cybersecurity protocols to meet data protection requirements.

10. Adopting New and Emerging Technologies

Whether it’s a new smartphone app, a desktop operating system overhaul, or the integration of AI, technology is always changing. And, as the pace of change escalates, employees can struggle to keep up. When technology is underused, used improperly, or not used at all, the results are predictable: drops in productivity, compliance issues, and communication breakdowns—and, eventually, declining morale and engagement.

To support smooth technology adoption and digital readiness:

• Hire for digital fluency: Identify tech-savvy candidates and match them to appropriate roles.
• Provide tailored training: Offer upskilling and reskilling programs in such areas as data analysis, cybersecurity, or digital collaboration tools.
• Embed change management into processes: Encourage ongoing learning and prepare teams for transitions.
• Offer system-specific training and support: Help employees feel confident in using technology by tracking engagement and providing help resources or user communities.
• Gather employee feedback: Track employee satisfaction, identify adoption barriers, and adjust rollout strategies, as needed.
• Develop change champions: Identify employees who can positively influence others to advance change, and support them with change management training.

Improved Employee Experience With NetSuite SuitePeople

NetSuite SuitePeople Human Resources Management System (HRMS) supports a more positive, streamlined employee experience by reducing friction, increasing transparency, and reinforcing a culture of recognition.

From day one, new hires benefit from integrated workflows—such as automatic equipment provisioning and custom onboarding checklists—that help them feel prepared and welcomed. Once onboarded, employees can use the Employee Center to manage tasks, such as updating personal information, viewing time off balances, monitoring progress toward goals, and accessing pay and expense documents. SuitePeople also fosters a positive workplace culture through peer recognition capabilities that allow employees to highlight others’ contributions and achievements.

Built on the principle that employees are assets worth investing in, not numbers, SuitePeople can help organizations create a work environment where people feel informed, empowered, and valued.

Human capital management is more than software: It’s a strategy that empowers organizations to overcome workforce challenges and enable employees to reach their full potential. From attracting top talent to fostering engagement and adapting to new technologies, an HCM mindset can help businesses meet the demands of today’s workforce—and tomorrow’s.

HCM Challenges FAQs

What is the biggest challenge in human capital management?

Although the specifics of human capital management (HCM) vary from one company to another, every HCM function’s greatest challenge is to keep its people strategy aligned with its business strategy. HCM must simultaneously attract top talent, adapt to change, anticipate the future, keep employees engaged, and use the right data at the right time to make the right decisions to support current and future business goals.

What does a human capital officer do?

A human capital officer develops and executes strategies that ensure the organization will realize the greatest possible value from its employees. The officer’s goal is to put people with the right skills into the right roles at the right time, so as to drive organizational success. Specific responsibilities may include strategic workforce planning, performance management, employee development, talent acquisition and retention, compliance and risk management, culture, and engagement.

What is job design in human capital management?

Job design in human capital management is the process of structuring roles, responsibilities, and tasks in a way that supports both organizational goals and employee satisfaction. In this context, effective job design defines not only the tasks and skills required for a role but also considers workflow, autonomy, opportunities for decision-making, and the degree of variety and purpose in the work.