Saturday, January 30, 2016

HUMAN CAPITAL MANAGEMENT DEFINED

Human capital management (HCM) is concerned with obtaining, analysing and reporting on data that informs the direction of value-adding people management, strategic investment and operational decisions at corporate level and at the level of front line management. The defining characteristic of HCM is this use of metrics to guide an approach to managing people that regards them as assets and emphasizes that competitive advantage is achieved by strategic investments in those assets through employee engagement and retention, talent management and learning and development programmes.





The Accounting for People Task Force Report (2003) stated that HCM involves the systematic analysis, measurement and evaluation of how people policies and practices create value. The report defined HCM as ‘an approach to people management that treats it as a high level strategic issue rather than an operational matter “to be left to the HR people” ’. The Task Force expressed the view that HCM ‘has been under-exploited as a way of gaining competitive edge’. As John Sunderland, Task Force member and Executive Chairman of Cadbury Schweppes plc commented: ‘An organization’s success is the product of its people’s competence. That link between people and performance should be made visible and available to all stakeholders.


 Nalbantian et al (2004) emphasize the measurement aspect of HCM. They define human capital as, ‘The stock of accumulated knowledge, skills, experience, creativity and other relevant workforce attributes’ and suggest that human capital management involves ‘putting into place the metrics to measure the value of these attributes and using that knowledge to effectively manage the organization’. HCM is defined by Kearns (2005b) as ‘The total development of human potential expressed as organizational value.’ He believes that ‘HCM is about creating value through people’ and that it is ‘a people development philosophy, but the only development that means anything is that which is translated into value’.

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