What is the Difference Between Human Resources and Human Capital?

The terms human resources and human capital are related but have distinct differences in their approach to managing an organization's workforce. The main differences between human resources and human capital are as follows:

1. Perspective: Human resources view employees as a potential that can be extracted from a large pool of resources, while human capital refers to the skills and knowledge that have already been acquired and put to use, implying a more valuable and limited pool of resources.
2. Focus: Human resource management (HRM) is about hiring the right people, managing workforces effectively, and optimizing productivity. It typically includes features such as recruiting, onboarding, training, compensation, and labor law compliance. Human capital management (HCM), on the other hand, encompasses all activities related to recruiting, hiring, developing, rewarding, and managing employees, with a focus on professional development and maximizing the economic value of the workforce.
3. Approach: HRM is more administrative and focuses on creating a streamlined recruiting process, using learning management systems to track employee training, and fostering a supportive workplace culture. HCM emphasizes the strategy and approach to managing employees, with practices, systems, and processes designed to help the organization optimize its human capital.
4. Investment: In HRM, employee training is seen as a cost, while in HCM, training is considered a professional development investment that ensures employees develop competitive skills they can use to provide economic value to the company.

In summary, human resources focus on the administration and management of an organization's workforce, while human capital emphasizes the strategic approach to maximizing the value and potential of employees. Both concepts are essential for an organization's success, and integrating HRM and HCM can help businesses navigate challenges such as evolving workforce demographics, growing numbers of contract-based workers, increasingly complex regulations, and team-based work structures.

Comparative Table: Human Resources vs Human Capital

The main difference between human resources and human capital lies in their focus and perspective. Here is a table highlighting the key differences between the two concepts:

In summary, human resources focus on managing and supporting employees, while human capital emphasizes the value and potential of employees' skills, knowledge, and experience.