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.

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