What is Human Capital Management ?

Recent challenges such as globalization, a knowledge-based economy, and technological evolution, have promoted several countries and organizations to hunt new ways that to take care of competitive advantage. In response, the prevailing sense is that the success depends in massive half on the people with higher levels of individual ability. In the end, the people have become valuable assets and may be recognized among a framework of human capital.

Human Capital was originated by Schultz (1961). He defined this concept as

‘Consider all human abilities to be either innate or

acquired. Attributes… which are valuable and can be augmented by appropriate

investment will be human capital.’

Schultz (1961)

And few years later more detailed definition put forward by Bontis et al (1999) as follows

‘Human capital represents the human factor in the organization; the combined intelligence,

skills and expertise that gives the organization its distinctive character. The

human elements of the organization are those that are capable of learning, changing,

innovating and providing the creative thrust which if properly motivated can ensure the

long-term survival of the organization.’

Bontis et al (1999) as

Human capital management (HCM) is bothered with getting, analysing and
reporting on information that informs the direction of value-adding people -management, strategic investment and operational choices at corporate level and at the extent of front-line management. The defining characteristic of HCM is that this use of metrics to guide an approach to managing those who 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.

According to Mayo (2001) the main difference between HCM and HRM is that HCM treats people as assets of the organization while HRM treats people as costs.

people are value adders, not overheads’ while in HRM ‘people

are (treated as) a significant cost and should be managed accordingly’.

Kearns (2005b)

How ever HRM employees are treated as costs is not supported by the descriptions of Beer et al(1984). They emphasized the need of a longer-term perspective in managing people and consideration of people as potential assets rather than merely a variable cost’.

But according to Director of the Centre for Applied HR Research

at Oxford Brookes University ‘You can’t simply treat people as

assets, because that depersonalizes them and leads to the danger that they are viewed in purely financial terms, which does little for all-important engagement.’ Orcle (2005)

However, there's a lot of to each HRM and HCM than merely treating individuals as assets. each of them additionally focuses on the importance of adopting an integrated and strategic approach to managing individuals, that is that the concern of all the stakeholders in an organization, not simply the individuals management function as mentioned below

·       Draws attention to the importance of ‘management through measurement’ as Kearns (2005) suggested

·       reinforces the need to be strategic

·       provides guidance on what to measure and how to measure

·       underlines the importance of using the measurements to prove that superior people management is delivering superior results and to point the direction in which HR strategy has to go.

Conclusion: The HCM concept does not replaces HRM concept it rather complements and reinforces it. And HCM can be vital in managing people in a organization to get competitive advantage.

References

Armstrong, M. (2006). A Handbook of Human Resource Management Practice. 30-35.

Pdfs.semanticscholar.org. (2019). [online] Available at: https://pdfs.semanticscholar.org/2f37/bf4af375da23338e42dd85b4227a801fe20d.pdf [Accessed 3 Jul. 2019].