What is the difference between human capital management

and human resource management?

Human capital management

Human capital management or (HCM) is concerned with obtaining,

analyzing and reporting on data that informs the direction of value-added

people management, strategic investment and operational decisions at

corporate level and at the level of front line management. The defining

characteristics of human capital management are the use of

measurements to guide an approach to managing people that regards

them as assets and emphasizes that competitive advantage is achieved

by strategic investments in those assets through employee engagement

and retention, talent management and learning and development

programmes.

“Managing human capital is now high on the corporate agenda.

Businesses are looking to their people to drive up enterprise value and

create sustained commercial advantage. People are the key to business

success: whatever the particular strategy, if people aren’t managed

effectively, business performance will suffer.” Said by Michael Jolly, Chief

Executive, Penna Consulting. HCM is the strategy for success in today’s

people-centered economy. It starts and ends with the observation that

people are the richest source of competitive advantage and provides a

methodology for managing people to give of their best at work. With HCM,

business leaders gain a clear view of this critical asset, with the ability to

target investment for optimum results - today and into the future.

Human resource management

Human resource management (HRM) is the strategic and coherent

approach to the management of an organization's most valued assets -

the people working there who individually and collectively contribute to

the achievement of the objectives of the business. Human Resource can

be simply understood as human potential which with infinite capabilities

and capacity with the possibility of beneficial engagement. Potential

however, it must be noted does not have to be productive and that an

opportunity has to be seized to translate potential into real value. Human

Resource is a question of physicality.

“HRM goes beyond day-to-day maintenance to the creation, evaluation

and strategic alignment of people management processes. HCM takes

HRM to the next stage and gives HR professionals the opportunity to

identify and focus on real value creation activities.” Said by Sue Wotruba,

Penna Consulting.

HRM tends to treat people as resources which can be expended and

used up in the pursuit of business goals. It’s a perspective that has helped
make organizations much more effective and efficient, but it tends to

produce compliance rather than commitment from employees. HCM

recognizes that people are investors of their own human capital, and that

they will only keep this capital invested if they’re well looked after and

their investment produces a suitable return.

HCM isn't different to HRM because of the processes it includes, but

the strategic and people centered approach it brings to each of these

processes. In other words, like Personnel deals with the transactional

elements of managing people. It is a functional and process-driven

discipline. HRM adds a wider focus on how these functions can support the

business. But HCM is nothing less than a comprehensive business

management strategy that touches and aligns all employees and every

part of their organization.