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Human Resource vs. Human Capital: What’s the Difference?
Safira Adnin
September 4, 2024

Ever noticed how some companies call their HR department “Human Capital Management” while others stick with “Human Resource Management”? It’s not just a name change – it’s a shift in perspective on how employees are viewed and managed. Understanding this difference is essential for aligning your HR strategy with your company’s goals.

So, what exactly sets Human Resource (HR) and Human Capital (HC) apart? And how do these differences impact your approach to managing your workforce? Let’s dive into these concepts and explore how they impact recruitment, employee development, and overall your business success.

What Is Human Capital?

The term “human capital” first emerged from theories developed by economists like Becker (1962) and Rosen (1976). They argued that workers have skills and abilities that can be enhanced through training and education.

In today’s organizational landscape, human capital is seen as a valuable asset. Companies view employees not just as resources but as investments that can grow in value. This perspective focuses on maximizing the potential and returns from their workforce.

As Dave Bookbinder, author of The New ROI, puts it:

“The value of a business is determined by how well it manages both financial capital and intellectual capital through its human capital. It’s crucial to handle human capital effectively.”

What Does a Human Capital Role Involve?

Human Capital (HC) management covers a broad range of functions. It involves allocating budgets for recruiting, training, and compensating employees, treating these expenses as investments rather than just costs. The goal is to achieve a return on investment (ROI) by:

  • Offering competitive compensation and benefits
  • Providing opportunities for skill development
  • Supporting career growth
  • Creating an optimal work environment

HC also focuses on strategies to boost employee engagement, enhance loyalty, and reduce turnover. Metrics for assessing human capital include the significance of contributions, growth in employee value, and skill development.

What Is Human Resource?

Human Resource (HR) management, on the other hand, views employees as resources to support organizational goals. From this perspective, employees are seen as resources that could diminish in value over time—especially as they age or if they are less productive.

What Does a Human Resource Role Involve?

HR’s functions are centered around managing employees through recruitment, training, evaluation, and compensation. Key responsibilities include:

  • Handling employee relations, job security, and well-being
  • Managing employment costs, which are viewed as expenses rather than investments
  • Implementing strategies to maximize employee productivity and benefit the organization

HR measures success by evaluating job performance, with high-value employees being those who deliver exceptional performance and receive rewards such as bonuses, salary increases, and promotions.

HR Management vs. Human Capital Management vs. Talent Management

The terms HR Management (HRM), Human Capital Management (HCM), and Talent Management (TM) are often used interchangeably, but they each have distinct roles:

AspectHuman Resource Management (HRM)Human Capital Management (HCM)Talent Management (TM)
FocusEmployee management as a resourceEmployees as valuable assetsDevelopment and optimization of talent
View of EmployeesAs expendable resourcesAs investable assetsAs high-potential individuals
Investment ApproachCosts associated with employmentInvestments in development and growthInvestments in skills and career paths
Metrics for SuccessPerformance and productivityROI on employee developmentSuccess in talent development and retention

Why Is Human Capital Management Important?

  1. Boosts Employee Satisfaction

Investing in employee development enhances job satisfaction. The Society for Human Resource Management (SHRM) found that 42% of employees view organizational commitment to professional growth as crucial. When employees feel valued, they’re more likely to be satisfied with their jobs.

  1. Improves Retention and Engagement

Lack of growth opportunities can lead to feelings of undervaluation and job stress. For millennials, career development opportunities are key. Deloitte’s 2016 survey revealed that 70% of millennials left their jobs due to insufficient leadership development. Investing in employee growth can enhance retention and reduce turnover costs.

  1. Increases Return on Investment (ROI)

HCM understands that investing in employees positively impacts business growth both short-term and long-term. Salaries, benefits, and training are seen as investments that boost productivity, innovation, competitiveness, and profitability.

  1. Enhances Recruitment

Companies that invest in human capital attract top-quality candidates. Beyond compensation, job seekers look for career advancement opportunities. Without these, it’s challenging to draw the best talent.

  1. Strengthens Organizational Culture

Investing in employees can also fortify company culture. Satisfied and engaged employees contribute to a positive work environment. Employees eager to learn and advance in their careers improve overall productivity and foster a supportive culture that enhances engagement and happiness.

By understanding and applying these insights, you can better manage your workforce, align your HR strategies with your business goals, and foster a thriving organizational culture.

Build your borderless team with Glints today

Glints TalentHub is our complete talent solution that covers all aspects of talent acquisition, management, and development. Our team can help you access the extensive talent pool across Southeast Asia and build great teams quickly and affordably. Simply schedule a call with us and our dedicated experts will be thrilled to guide you in your journey towards building a borderless team.


This article is brought to you by Glints TalentHub. Leading companies are actively building their borderless teams in Southeast Asia, Taiwan, and beyond. However, the prospect of going borderless can be daunting due to complex regulations and cultural ambiguities. With Glints TalentHub, you’ll have a dedicated team of in-market legal, HR, and talent experts by your side at every step of the way.

Glints TalentHub offers an end-to-end, tech-enabled talent solution that encompasses talent acquisition, EOR, and talent development. We empower businesses to leverage the strengths of regional talent efficiently to build high-performing, cost-efficient teams.

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