What is Human Capital Management (HCM)? How it is different from Human Resource Management (HRM)?

Difference between human capital management & HRM By Priya Chetty on May 23, 2012  

In general human capital management and human resource management (HRM) possess many similarities when compared. Human capital management and HRM deals with the HR department of an organization. It is the foremost solitary body responsible for carrying the organizational processes in business environments. Both these terms carry out functions that are related to issues such as:

• Recruitment.
• Training.
• Employment.
• Orientation.
• Payroll.
• Performance analysis.

Human capital management as a strategy

Both the terms are also responsible for several other functions which are related to individuals working in a group.  As employees working for group are considered as significant asset of organization many efforts. It must be framed by the HR department in order to satisfy the individuals and obtain the quality work from the group. Human capital management is a software program which is the core element of any organization’s HRM system. Difference between human capital management and HRM is their definition. Human capital management provides an ambiguous response and associates with elements such as HRM, personal management and organization management. Human capital management is also related to the strategy of developing employees and other operational objectives. In some instances Human capital management is also referred as a tactical approach included with essential practices, systems and process. It is most likely used by many firms for managing their assets and development.

Traditional HR functions Vs human capital management

 HR functions

Human capital management

Human resource function performs work according to the law and company directives. Human capital management is related to all employees’ issues and other elements such as employment, utilization, compensation and development. Uses simple bench marking techniques. Uses complicated evaluation techniques. Host as default body to all the process in group. Host only default outcome processes. Only expose integration of HRM. Only executes interaction of human capital management. Can driven regularly by HR. Can only be driven under some special case of organization performance. Never defines its true objectives. Defines its true objective with perfect reputation. Hr function often delivers a major solution with perfect end. Can able to deliver solution for minor instances.

Table 1: Traditional HR functions Vs human capital management. Source: (Higgins, 2010).

These are the essential differences between HR functions and human capital management. From the above discussion it can be stated that both the function hold their significant impact in the company operations to carry out the actual process in business environment.