Human Capital Management vs Human Resource Management: What’s the Difference?

You may already know that Human Resource Management, or HRM, refers to the core administrative HR functions such as arranging employee benefits and establishing employee policies and practices. But how exactly does this differ from the term Human Capital Management, or HCM? And is Human Capital Management just some trendy new buzzword that’ll disappear by next year?

Far from it. There’s one key difference between Human Resource Management and Human Capital Management, and that is that the latter is a far more holistic approach.

Human Capital Management takes a broader view to employee management in the expansive sense of the business; optimising the skills, capabilities, relationships and insights of the people within an organisation. HRM might focus on the employee lifecycle from onboarding to exiting the business, while HCM might focus on developing employees’ confidence and improving productivity across the board.

The two are different, but interlinked, and here’s the relationship: Human Resource Management fits within Human Capital Management as just one facet of the broad concept. For instance Human Capital Management may focus on overarching workforce strategies while Human Resource Management may administer the tactical requirements to operationalise the workforce strategies.

What does successful Human Capital Management look like?

If you’re acing your Human Capital Management, this can have benefits for almost every aspect of the business:

• Hiring great people who are the right fit
• Having an employee skill set that suits your objectives
• Managing and supporting employees effectively
• Encouraging high employee engagement
• Professionally developing employees’ skills, capabilities and confidence
• Optimising productivity and efficiency overall.

Fundamental to successful HCM is truly understanding the true value of your employees as they interrelate with your business. Human Capital Management sees employees as capital rather than a cost; something you invest in in order to find and build success.

How to broaden your view from HRM to HCM

If you have a sneaking suspicion that you could be putting more into your workforce and getting greater return as a result, then the best way to rectify this is with a HR strategy session. This tailored process will help to align your employee management with your business goals in one clear roadmap, giving you clarity on how best to support, encourage, equip, train and motivate your employees.

If you’re keen to invest in your staff as capital rather than a cost, consider HR outsourcing service in Brisbane with the expert team at performHR.