Difference between Human Resources and Human Capital

April 18, 201910:03 am
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The terminology of human resources management (HRM) and human capital management (HCM) are often used interchangeably to describe HR technology solutions. However, are they the same? Although both HRM and HCM are dealing with individuals within organisations, there are differences between them in terms of historical evolution perspective.

What is HRM and HCM?

When you see the term of resource and capital, you will clearly see differences. According to Google dictionary, resource is a stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organisation in order to function effectively. Thus, you can conclude that human resource refers to individuals within organisation who manage company’s resource such as employees. According to Investopedia, they are the key in helping business deal with a fast-changing environment and greater demand for quality employees. Additionally, human resources management deals with payroll, tax and tax optimisation, working hour regulations, compensation, recruitment contracts, supervising training attendance sheet, and employment laws.

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On the other hand, capital has different meaning from resource. Google dictionary defines capital as wealth in form of money or other assets owned by a person or organisation contributed for a particular purpose such as starting a company or investment. Management Study Guide (MSG) refers capital as produced good or service which enables an individual/organisation to deliver high quality output. Capital, according to MSG, acts as catalyst to increase productivity in organizations. Thus, capital must be grown. For example, business cannot run well unless employee is being acknowledged more to ensure business productivity and performance. Additionally, Xavier Bariller mentioned that human capital in an organisation has different layers and perspective to solve different problems. Purpose of human capital management is to align and optimise individuals with business goals and needs to achieve superior performance. Hence, you can conclude that human capital management refers to managing employees to improve quality of life inside and outside organisation.

Role of human resource management in organisation

As mentioned earlier, human resources management deals with payroll and anything related to employment laws. Inc. encyclopaedia describes role of HRM, including job analysing and staffing, organisation and utilisation of workforce, measurement and appraisal of workforce performance, implementation of reward systems for employee, and maintenance of workforce.

Role of human capital management in organisation

Bariller said that human capital is not tangible but observable in terms of results. Human capital practice requires tools, methodologies, business acumen, openness, desire for helping others, reflective work on self, and more of leadership skills. Likewise, human capital management’s role is more to develop employee capability and knowledge. Yet, MSG included these roles in human capital management, including hiring the right talents, providing orientation to new employees, making new employees feel comfortable, training employee in order to constantly upgrade skills, retaining employees, making them feel self-sufficient, and preparing them for adverse conditions.

In conclusion, human capital management helps ensure overall business success by improving business resource, employees, while human resource management helps business in terms of employment regulations such as arranging employee’s perks and benefits. Human capital develops employee’s knowledge and skills, while human resource helps improve employee’s quality life in organization.

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