Human resources and Human Capital are two disciplines that get often confused with one another. However, they differ from each other significantly. You may ask yourself “How?” or “Why?” and the reasons are simple but often ignored by the careless eye. In this article, Jason Hanold will share some key ideas that elucidate the main difference between Human Resources and Human Capital as fundamental concepts for any given organization.
Difference in the role they play
Human Resources is the department composed of professionals who are in charge of managing the transactional activities of an organization. Such as managing the company benefits, payroll, reports, and compliance operations. This department is in charge of merely operative tasks inside the organizations.
Human Capital, on the other hand, serves strategic functions. It is in charge of managing the performance of professionals inside the organization. Also, it works hard for professional developments and human resources planning. This area always has the mission of planning and measuring what happens with the human capital inside a company.
As companies move to an unorthodox business model, they thrive to have bigger Human Capital departments instead of focusing on having Human Resources department. The reason to this is that individuals are no longer considered replaceable resources but assets. They are no longer part of an economy who focuses on the physical production of items but in the intellectual production of content and ideas that may help organizations move to the next level.
A matter of Motivation
The Human Resources Departments of many companies worldwide are currently facing a crisis: keeping employees motivated. As the role of this department is to do all the administrative activities related to those working for the company, it has failed to understand that there are other needs that need to be satisfied in order to keep employees happy.
This is where the Human Capital department becomes vital for organizations. It is true this department won’t tell you how much money you should spend on the payroll. But it will for sure let you know where you have some problems and why your company is not connecting to its people. If the Human Resources department is not committed to keeping happy collaborators, your Human Capital department will, by all means, take action on the matter.
There are as many approaches to solving problems as individuals in an organization. The Human Capital department is in charge of understanding how the human brain works and how your collaborators feel about the company. People are the greatest asset of institutions. Especially nowadays, when the workforce is growing slowly in America and baby boomers are retiring from their old posts.
The understanding of people
As it is said by its name, they Human Resources department understands individuals as they were resources for the company. They are in other words meant to be consumed and are often expendable. Even when traditional companies had the best intentions, the failed in treating humans as they could be drawn or exhausted. This happened because there were other resources in the marked willing to be hired by the same company that had already consumed another resource.
Nowadays, there is no place for this trend. The workforce in the United States is growing slowly and young professionals have fewer intentions on working behind a desk or for a company. This is why the Human Capital department needs to work hard to understand people. People will help companies grow only if they believe they can also grow inside the company. The idea of Capital becomes vital because it lasts for longer than a resource and it allows you to make successful investments that will generate more capital.
Understanding humans as capital instead of resources is a plot twist that aims to increase the growth of companies with an unconventional business approach.
Related: What Is A Human Resource?
Both departments are necessary
Even when it has been said that the Human Capital department can help a company grow faster and stronger. It is crucial to keep in mind that having a Human Resources department is also important and often necessary for the day to day operation of a company.
The two disciples interconnect and contribute to the proper development of each. Companies should not dismiss any of the two departments. Nevertheless, they should define its approach towards collaborators since this will give them an identity easy to identify by potential collaborators and business partners.
Organizations need to understand that if they only focus on systems and processes, treating individuals as numbers, they will lose its workforce. But, if they don’t have an organized structure with a consistent payroll and defined benefits, they won’t be appealing enough for the type of professionals they want to hire.
In conclusion, Human Resources and Human Capital are both interconnected and should be managed by an integrated team who knows how to recruit and retain happy collaborators.