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Human resources versus human capital management

While initially skeptical, the concept of HCM has actually grown on me

By Brian Kreissl

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 the 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 an organization’s people, with a greater emphasis on measurement, efficiency and the creation of value for the 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 plant 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 that “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 account of 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 that the term treats employees as business assets as opposed to people. In addition, some argue that HCM sounds too “trendy” or “slick,” or that it simply sounds like “consultant-speak.”

Regardless of what individual commentators feel about the term, however, HCM has gained in popularity in some circles within the HR community (admittedly, however, it may be on the wane and 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 that it is HRM which is more focused on compliance than commitment. With HCM, the idea is that people invest in themselves as human capital, and that 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 to at least partially explain why so many HR and organizational leadership titles now include the word “people” in them (e.g., chief people officer, director, people and culture, etc.).

Organizations are recognizing that 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 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 I wrote over three years ago 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.

This blog post was prepared with the assistance of Yaseen Hemeda.

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Brian Kreissl

Brian Kreissl is the product development manager for Thomson Reuters Legal Canada's human resources, OH&S, payroll and records retention products and solutions.
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  • RE: Why I hate HR
    Tuesday, July 22, 2014 5:03:00 PM by Brian Kreissl
    I agree up to a point (not about hating HR, but about our penchant for creating new buzzwords and catch phrases and insisting they mean something totally different from the earlier term). While there are only very subtle differences, HRM and HCM are essentially the same thing.

    Please don't shoot the messanger. I didn't coin the phrase. I'm only explaining how I am much less hostile towards the use of HCM than I was a few years back, and how I can see how at least some people are able to argue there's a subtle difference between the two. I also concede that the term seems to be a little less popular than it was a few years back, and it's much less popular among true HR practitioners than consultants or vendors trying to sell some service or solution. I still don't particularly like the term, but I don't hate it nearly as much as I used to.

    I also posted the link to this blog post on Facebook (via my Twitter feed), and here's what one of my friends had to say about it:

    "Welcome to the dark side, Brian! Another point in favour of HCM is the way it changes the attitude and behaviour of the employees as well. Employees understand that it is a business function and stop treating the department like it is just there to cater to their whims and needs at the drop of a dime."