Human Capital Management vs. Human Resource Management

Human Capital Management vs. Human Resource Management 5806 3871 Balance Point Team

Human Capital Management vs Human Resource ManagementBusiness trends come and go — and with these shifts in ideas come shifts in terminology as well. What was once known as “personnel” became “human resources,” and now it seems another shift is taking place.

For many people, the idea of “human resource management” has given way to “human capital management.” What’s the difference, and why does it matter?

Human Resources vs. Human Capital

While it might seem like just a name change, there are actually several different ideas at work. According to Quora, one school of thought that supports the change recognizes that referring to workers as “resources” implies that they are a finite source of work or energy that can be exploited, used up and then passed over in favor of newer resources.

Obviously, the use of this term doesn’t mean that’s how workers are viewed at all, and yet, for many, this association is enough to consider the term “human resources” as an outdated idiom that needs to be retired.

Human capital, on the other hand, often means something different. Where resources are limited, capital is not. At least, not necessarily. And capital implies wealth, which can lead a business to recognize the value of its workforce.

In addition, capital is often used to create more capital — wealth begets wealth, so to speak. So, for many, viewing your employees as human capital rather than human resources implies an ongoing relationship with valuable assets who are committed to bringing growth and prosperity to your company.

Of course, not everyone feels this way. HRReporter, for example, recognizes that many feel the term “capital” to be just as derogatory, implying that workers are still resources, but are now expendable resources that can be spent in the pursuit of company wealth — just like you would spend your own capital to make wealth down the road.

In the end, does it matter? More than you would think. The terms we use are much more than convenient labels; they are the attitude and image we project to those around us, both in the business and outside of it.

By choosing to adopt certain terms or forego others, we are making a conscious decision to announce our values to our employees, clients and anyone else who cares to listen. For reasons like this, knowing who you are as a manager, and knowing how you view those who work for you, is crucial to your overall success.

What Every Growing Business Needs to Know

The term human capital management (or HCM) is much more than human resources jargon. It is an essential set of practices and processes organizations utilize to manage the employee life cycle.

Learn how you can use it to help leverage your business with our free resource. Get your free copy here. 

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