What does human capital management mean, and what is it used for?

'It is the set of capabilities, knowledge, skills and personality attributes that favor the realization of work to produce economic value, (...) acquired by a worker through education, expertise and experience' (Source: Wikipedia). This set of investments for education and training of a population (employees of a company), is a growth rate considered the most important in economic development, according to contemporary and evolved examples.

The growing concerns about human capital has led to the breakdown of many paradigms, among them that the viability of the projects is determined solely by its financial results, disregarding aspects of organizational learning. There is further evidence indicating that various practices of human capital can lead to improved financial performance of organizations. Human knowledge is an unlimited resource, and currently has a role of importance in organizations through the development of skills, expertise and creativity of its employees. However, it is necessary the constant professional development.

Hello Amal

Thanks for asking the question.

Actually, economics is the mother of all business studies, and when we study human resource, we are studying a part of economics. The term capital in economics means wealth or inventory invested in a business. There are4 kinds of investments that can be made to business operations in order to produce goods or services ..1.Infrastructure-Land & Equipment2.Labor - workers3.Financial Capital- Money4. Business leadership - ideas and Management to run the business. Human Resource Management refers to management science pertaining to point #2 and4 collectively. 

However the word Human Capital refers to all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals involved in a business. These resources are the total capacity of the people in the business that represents a form of wealth which can be directed to accomplish the goals of the business or a group or a nation or state thereof.

Hope you are satisfied with the answer, please fee free to ask for clarifications

Faizan Baig

Hi, Amal

HUMAN   CAPITAL

The term “HUMAN CAPITAL "Is widely used in HR to describe people at work and their collective knowledge , skills , abilities and capacity to develop and innovate.

Human capital reporting aims to provide quantitative , as well as qualitative , data on range of measures such as labor turnover or employee engagement level  to help identify which sort of HR or management interventions will drive business performance .

It is new commonly accepted that the value of organisations is drawn from a mixture of tangible assets in the form of equipment , money, land or other physical objects together with intangibles in the form of brand , reputation , knowledge and , of course people – critically important in an increasingly knowledge – based economy .

However, the evaluation of HUMAN CAPITAL remains difficult for most organisations .There is number of reasons for this:

·         The contribution of people is difficult to isolate from other factors such as economic situation, market forces and customer or social trends.

·         The value of people is often expressed in qualitative rather than quantitative terms that make it difficult to represent in traditional accountancy models.

·         HR data has traditionally been collected for administrative rather than evaluation process.  

·         HR people do not always have the skills or resources to interpret or explain data to evaluate the contribution of people to business performance.

·         Senior leaders or stakeholders do not recognize HUMAN CAPITAL as a performance measure and therefore do not demand HUMAN CAPITAL information. These difficulties have been further compounded by the varying definition of HUMAN CAPITAL development over the years.

Intellectual capital, human capital is one of three elements that make up intellectual capital. Intellectual capital encompasses:

• Human capital – the knowledge, skills, abilities and capacity to develop and innovate possessed by people in an organisation.
• Social capital –the structures , networks and procedures that enable those people to acquire and develop intellectual capital , represented by the stocks and flows of knowledge derived by relationships within and outside the organisation .
• Organisational capital – the institutionalised knowledge possessed by an organisation, which is stored in databases and manuals, including the HR policies and processes and used to manage people.

 HUMAN  CAPITAL  MANAGEMENT

While some commentators argue that there is little difference between the concept of  HUMAN CAPITAL and that of  HUMAN RESOURCE , perhaps the key distinction is the focus of HUMAN CAPITAL on the value of employees and how this may be measured , rather than on HUMAN RESOURCE function itself .

Experts think that there is a great deal of evidence that contribution of people and faith of their capabilities is the largest drive of organisational performance. Systematically collecting, analyzing and communicating information on the value of this contribution is vital and will assist in the design and implementation of HR policies and practice to maximize the impact of business performance.Thank you and best regards

Dr. Abdulrahman Alhurr

Hi Amal, hope this will help you some ... 

Human capital management (HCM) is an approach to employee staffing that perceives people as assets (human capital) whose current value can be measured and whose future value can be enhanced through investment.

An organization that supports HCM provides employees with clearly defined and consistently communicated performance expectations. Managers are responsible for rating, rewarding, and holding employees accountable for achieving specific business goals, creating innovation and supporting continuous improvement.

In the back office, HCM is the part of enterprise resource planning (ERP) that deals with employee records. The records provide managers with the information they need to make decisions that are based on data. HCM software streamlines and automates many of the day-to-day record-keeping processes and provides a framework for HR staff to manage benefits administration and payroll, create map out succession planning and document such things as personnel actions and compliance with industry and/or government regulations.