Human capital management is starting to grow on me

Is HCM actually a more ‘people-centric’ management strategy?
By Brian Kreissl
|Canadian HR Reporter|Last Updated: 09/15/2014

Back in 2011, I wrote about how I didn’t like the term “human capital management” (HCM). While I’m still not overly keen on it, the concept of HCM is starting to grow on me (in spite of the fact it may now be declining in popularity — go figure).

HCM is viewed as a comprehensive business management strategy that is integrated with every aspect of an organization and takes a more people-centred and strategic approach to business than human resources management (HRM).

HCM is generally considered to be a more strategic way of managing employees, with a greater emphasis on measurement, efficiency and the creation of value for an organization.

This is achieved at least partially by viewing people as organizational assets to be invested in, supported and nurtured.

It is also frequently used in the context of human capital metrics, which are often used to provide justification for personnel initiatives and expenditures, and in benchmarking an organization against its peers, as well as against itself over time.

HCM views people and personnel expenditures as investments in human capital rather than costs. Thus, HCM sees
employees as capital assets of the organization, much like plants and equipment.

While this may sound rather cold and impersonal to some people, in many respects, it is just the opposite, since it actually relates to the frequently repeated mantra “Our people are our greatest assets.”

Arguments against
human capital management

Back when the term “human resources management” was first popularized, many supporters of the old “personnel” paradigm argued, “I’m a person, not a resource.”

The idea was that HRM failed to take into account the fact that “human resources” are people, not resources to be exploited.

Similarly, many proponents of the HRM paradigm now see HCM as a derogatory term that depicts employees not only as resources but resources that are expendable, if necessary, in order to achieve business results.

Opponents of the HCM philosophy feel the term treats employees as business assets as
opposed to people. In addition, some argue HCM sounds too trendy or slick or it simply sounds like consultant-speak.

Regardless of what individual commentators feel about the term, HCM has gained in popularity in some circles within the HR community (admittedly, however, it may be waning and it is still more popular among consultants, software vendors and HR outsourcing providers than it is among individual practitioners in more traditional HR roles).

Arguments for
human capital management

However, some commentators believe the exact opposite, arguing that HCM is actually a more people-centric way of managing employees, and it is HRM that is more focused on compliance than commitment.

With HCM, the idea is that people invest in themselves as human capital, and if an employer fails to take care of its employees, they are likely to move on or at least become demotivated and highly disengaged.

So, while HCM takes the concept of strategic HRM one step further in integrating an organization’s people strategy with its overall corporate strategy, in some respects, it is perhaps more focused on the human side of personnel management than traditional HRM.

This may help at least partially explain why so many human resources and organizational leadership titles now include the word “people” in them (such as chief people officer or director of people and culture).

Organizations are recognizing it is possible to be more strategic while also having a greater concern for people and their happiness and well-being. Generally speaking, happy people make for more highly engaged workers (although it is important to recognize that highly engaged employees aren’t always happier or more satisfied with their work).

In turn, enhanced employee engagement makes it easier for organizations to achieve their strategic goals and objectives, and the HR (or HCM) function is able to better align its people strategy with the organization’s overall strategy and its vision, mission and values.

While more than three years ago I wrote that it might take me five years to start accepting the idea of human capital management, it doesn’t bother me quite so much these days (although I believe, paradoxically, we aren’t hearing it nearly as often).

I suppose part of that relates to some convincing explanations I’ve read recently about the term and what it really means.

Brian Kreissl is the product development manager for Carswell’s human resources, OH&S, payroll and records retention products and solutions. This column was prepared with the assistance of Yaseen Hemeda. For more information, visit www.carswell.com.

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