Thursday, April 17, 2014

Human Capital vs. Human Resource

People are the most valuable business asset, but the weakest link between strategy and execution.

Today's organizations have a big disconnect between talent management strategies and business strategies - when business parties involved in human capital and resources management understand the connection and are able to create those links concretely, not abstractly or theoretically - then they become successful and share that strategic value add of transformation with the organizational leaders. But first things first, what’s the difference between Human Capital and Human Resource?

Human Capital is the "big umbrella" concept which could include all people, processes, systems related to employees. Human capital is the knowledge, skills and abilities that add value to an organization. Without value then, how can your people truly be considered a part of "capital" (which relates to financial assets). 

Human Resources are the function within the company responsible for managing Human Capital, Talent ManagementThe group and their processes within HR that are responsible for talent acquisition (staffing), talent development (T&D), retention, and succession planning.

Human Resource vs. Human Capital vs. Talent ManagementHuman resources have two definitions: one is the function within an organization responsible for administering to people and the other is the actual resource of people. Human capital is the skills, knowledge, and experience gained in an organization by people that represents a value investment or resource to that organization. Talent management is the practice of identifying, acquiring, developing, deploying, and retaining well-qualified people throughout an organization and manage business culture as well. It’s an organization's commitment to effectively managing the flow of talent to achieve an organization’s goals. (Activities include: planning, identifying, developing, deploying and retaining)

Some say, HR should give the human capital a tangible "face" in order to setup a connection to the business strategy. By clarifying these concepts, businesses can manage their most valuable asset –people and talent management life cycle more holistically and systematically, also strengthen the weakest link-people between business strategy and execution.


The human capital theory is even used to explain differences in entrepreneurship.
Human capital research

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