Human Resources vs Human Capital
Human resources and human capital are concepts that are clearly very similar to each other as they refer to current or potential human skills, capabilities, and talent that are essential to the success of any organization. The two concepts are often misunderstood and are mistakenly assumed to be the same. There are some very small but distinct differences between what is meant by human ‘resource’ and human ‘capital’. The article offers a clear overview of what each of these term means, explains how they are quite similar to each other, and highlights their subtle but important differences.
Human Capital
Human capital refers to the skills, training, experience, education, knowledge, know-how, and competencies that are currently being contributed by humans to a business. In other words, human capital can be referred to as the value that is added onto a company by an employee, which can be measured by the employee’s skills and competencies. Human capital is an important factor of production, and employing individuals with the right education, experience, skills and training can improve efficiency, productivity and profitability.
Companies can invest in their human capital by offering training and education facilities to its workers. Training and developing employees can help them develop a broader set of skills and abilities and reduce cost of hiring additional employees with necessary skills. One thing that must be kept in mind is that humans are not equal to one another and that human capital can be developed in many ways to obtain the highest economic value to the firm.
Human Resources
The easiest way to explain human resources is to understand the concept of ‘resources’. Resources are pools of assets that can be drawn from the pool when necessary until the pool of assets runs out. Human resources are similar in that it represents the pool of available human skills, knowledge and expertise which can be drawn on when required. In other words, it is the human potential with unlimited capability that has the possibility of improving efficiency, productivity, and profitability.
What is the difference between Human Resources and Human Capital?
The terms human capital and human resources are closely linked to one another because they look at how current and potential human skills can be used to gain the maximum efficiency and profitability. The major difference between human capital and human resources is that human resources are the human potential that can be drawn from a vast pool of resources. Human capital refers to the skills, expertise that are already invested and utilized.
Human resources need to be hired, trained, developed and provided with opportunities and challenges in order for them to be realized. Over the time, human resources can then be converted to human capital, which are human skills, capabilities and competencies that have been invested and engaged in business operations while delivering results and output.
Summary:
Human Resources vs Human Capital
• Human resources and human capital are concepts that are clearly very similar to each other as they refer to current or potential human skills, capabilities, and talent that are essential to the success of any organization.
• Human capital refers to the skills, training, experience, education, knowledge, know-how, and competencies that are currently being contributed by humans to a business.
• Human resources are the pool of available human skills, knowledge and expertise which can be drawn on and developed when required.