Human capital management (HCM) is concerned with obtaining, analysing and reporting on data that informs the direction of value-adding people management strategy. A HCM strategy is therefore closely associated with strategic HRM. In the words of Manocha (2005: 29) it can also provide ‘evidence of a robust people strategy mapped to the business strategy’.
The defining characteristic of HCM is the use of metrics to guide an approach to managing people that regards them as assets. It emphasizes
that competitive advantage is achieved by strategic investments in those assets through employee engagement and retention, talent management, and learning and development programmes. HCM is a bridge between HR and business strategy. It provides the basis for ‘evidence-based human resource management’, ie the process of ensuring that decisions and proposals on the development and application of HR strategies and practices are backed up with hard data derived from research, benchmarking and the analysis and evaluation of the organizational context and management activities.
The Accounting for People Task Force Report (2003: 3) stated that HCM involves ‘the systematic analysis, measurement and evaluation of how people policies and practices create value’. HCM was defined 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”’ (ibid: 7). The Task Force expressed the view that HCM had been underexploited as a way of gaining competitive edge.
Scarborough and Elias (2002: 3) defined human capital as ‘something that employees bring to the organization but is also developed through training and experience within the organization’. Nalbantian et al (2004: 75) described human capital as ‘The accumulated stock of skills, experience and knowledge that resides in an organization’s workforce and drives productive labour’ and suggested 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 sometimes defined more broadly without the emphasis on measurement and this approach makes it almost indistinguishable from strategic HRM. Chatzkel (2004: 139) pointed out that ‘Human capital management is an integrated effort to manage and develop human capabilities to achieve significantly higher levels of performance’. And Kearns (2004: 14) asserted that ‘everything done in the name of HRM is done in the name of value’. He described HCM 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’ (ibid: 205).