The Difference Between Human Resources & Human Capital

A lot of times we get the question"Why human capital consulting? Isn't it the same as human resources?". Human Resource Management (HRM) and Human Capital Management (HCM) are related but distinct approaches to managing an organization's workforce. Here's the key difference between them:

Focus and Philosophy:

Human Resources (HR): HR traditionally focuses on the administrative and transactional aspects of workforce management. It includes tasks like recruitment, payroll processing, benefits administration, compliance, and labor relations. HR often treats employees as resources, similar to other assets of the organization.

Human Capital Management (HCM): HCM, on the other hand, takes a more strategic and holistic approach to managing people. It views employees as valuable assets, or "human capital," and emphasizes their development and long-term contributions to the organization. HCM is concerned with maximizing the potential of each employee and aligning their skills and talents with the company's goals.

Functions:

HR: HR primarily deals with day-to-day operational tasks such as hiring, onboarding, compensation and benefits management, and compliance with labor laws. It ensures that the organization's workforce runs smoothly and efficiently.

HC: HC incorporates a broader range of functions, including talent management, performance management, learning and development, succession planning, and employee engagement. It aims to foster a culture of continuous improvement and invests in employees' growth and well-being.

Employee-Centric vs. Strategic:

HR: HR is often seen as more employee-centric, focused on meeting immediate needs and solving problems as they arise. While HR can play a strategic role, it's not always the primary driver of long-term organizational strategy.

HC: HC is strategic by nature. It aligns the workforce with the organization's goals and envisions how employees can contribute to the company's success over the long term. It emphasizes talent development, retention, and the creation of a competitive advantage through skilled and engaged employees.

Technology and Tools:

HR: HR typically uses software and tools to manage personnel data, payroll, and compliance, often referred to as Human Resource Management Systems (HRMS) or Human Resource Information Systems (HRIS).

HC: HC often incorporates more advanced and integrated technology, including Human Capital Management Systems (HCMS), that support talent management, performance analysis, and strategic workforce planning.

In summary, while Human Resources and Human Capital share some common functions and objectives, the key difference lies in their approach and philosophy. HR tends to be more transactional and administrative, focusing on the immediate needs of the organization, while HC takes a strategic, long-term view of managing human capital to drive organizational success. Many organizations today are moving towards a more HCM-oriented approach to better harness the value and potential of their workforce.