Human Capital Vs Human Resources – Key Differences 

To run a successful business, you require an efficient workforce. It is important to properly manage and utilize your resources to remain competitive in your field. When it comes to workforce management, two terms that are indispensable from the landscape include; human capital and human resource. As we examine these two concepts in this article, we will examine their important differences, as well as human capital vs human resources. 

They may appear synonyms to each other as both are about human skills and abilities, but they hold entirely different meanings. 

What is Human Capital? 

Human capital is the worth that a worker contributes to a business through their expertise, abilities, experience, and ability. This is how much an employee contributes to the business.  

Workers apply their skills and knowledge to benefit the business. The ability of people to perform their tasks effectively is what matters most and can be translated into employee performance appraisals. 

All humans are not equal, but they can be trained to be better and excel in their fields. Various organizations invest in human capital to optimize the full potential of their workers.  

Training your employees and polishing their skills can help expand their knowledge base. Many methods can be used to accomplish this, such as educational programs, growth sessions, dedicated coaching, and personalized mentoring. 

Doing so helps companies increase the overall productivity and performance of employees. It also reduces the cost of hiring additional employees with specific skills. An organization must invest in its human capital to achieve the highest economic value of its business.  

ALSO READ: Best Employee Management Software for Companies of every Size 

What is Human Resources? 

Human resources, HR, is a specific department in a business or organization which is responsible for managing its staff. The main responsibilities of Human resources include entertaining job applications, interviewing, recruiting, hiring, training new workers, and many more.  

They also manage employee benefit schemes. The department is accountable for ensuring that the company complies with labor laws and regulations. HR is crucial to a company’s growth in this capitalist economy and ever-changing market.   

According to the Grand View Research report, the global HR market is poised to grow at a 12.8% CAGR until 2030. The HR department plays a substantial role in efficiently managing and organizing a company’s staff. They create a positive work atmosphere and motivate employees. By offering recreational activities to the staff and optimizing their full potential, HR can be the ultimate game-changer for most companies.  

The department also resolves worker issues and ensures a healthy, productive work atmosphere! 

ALSO READ: How Performance Evaluation Can Create Human-Centric Work Culture 

Human Capital Vs Human Resources 

You’ll see how these two concepts are related when you learn more about them. What distinguishes human capital from human resources, though? Let’s examine the distinctions in more detail: 

1. Current and Potential Skills  

Both human resources and human capital are concepts introduced for achieving maximum productivity and profits. However, the critical difference is that human resources focus on an employee’s potential skills or talent. In contrast, human capital focuses on an employee’s current skills and experience.  

Human capital already has the expertise which one has acquired by already investing. While HR works on the growth of the employees, can be optimized by training, coaching, mentoring, etc. 

2. Investment 

Another important difference is where the company is investing. If the company is investing in programs for educating and training employees, then it is boosting its human capital.  

But if a company is investing in its human resources, then it will spend on administrative operations and hiring processes.  

3. Measurement Criteria 

The methods of measuring human capital and human resources are different. In simple language, human resources are measured in quantity, and human capital is measured in its quality.  

As discussed above, human capital is intangible, and we can not quantify it. However, one can always put a number to the strength of human resources in a company.  

4. Approach 

Human capital focuses on the long-term advantages that an employee will bring to the company or organization. In contrast, human resources are concerned with completing the job and other daily tasks and duties. However, over time human resources can be converted into human capital. 

Human Capital Vs Human Resources: Management 

Terms like human capital management (HCM) and human resource management (HRM) are often used interchangeably, but they are not the same. They do overlap in some manners but are distinct in their objectives.  

• HRM is associated with the management of human resources or the staff of a company. Many companies use human resource management to effectively manage their processes and systems so that workers can perform their duties more efficiently.  

• HCM has emerged recently, whereas the human resources concept has been in the landscape for over a hundred years. The human capital approach sees humans as an asset with values that can help a business grow significantly.  

• Educated, trained, and experienced employees are no less than valuable assets. Their personality, perspectives, overall health, and other factors are also crucial in defining human capital. HCM focuses on bringing out the best in employees to maximize the benefits of a firm. 

The key insight for human capital management vs HR is that their primary focus or objective is different from each other. A human capital-oriented company will look for candidates with specific skills they require to meet their business targets. 

 In human resource management, one can observe a streamlined recruiting pattern that helps companies create an identical human resource pool. 

What is Human Capital Management in HR? 

The creation and management of human capital is one objective of human resource management. This entails making investments in personnel to support their skill and talent development.  

Human resource managers do this by hiring talented individuals, monitoring their development, and providing training opportunities to assist them in advancing their skills. 

Wrapping Up 

Knowing the exact differences between human capital and human resources is essential for you to grow your company the right way.  

Always remember that strong teams can build a concrete foundation for you to build on. After all, “alone we can do so little; together we can do so much!”