How Human Capital Management Benefits Your Organisation

How Human Capital Management Benefits Your Organisation

For decades, Human Resources has been considered a kind of ‘protector’ of both employees and employers. But changes in modern business philosophy have opened the way for a change in HR’s focus, turning its attention to nurturing talent through Human Capital Management.

The key change in philosophy relates to the role that employees now play. This is an age when the individual can define the business rather than the business defining the individual; where business growth is influenced by key employees, not a rigid policy set in a boardroom.

This rigid model has depended on strict human resources management to ensure everything runs according to policy, but now, in a more fluid and creative time, experts no longer see this as the ideal role for HR to have. After all, if individuals are to define the business, then in order to reap the benefits, these individuals must be encouraged and supported. That’s where Human Capital Management comes in.

HRM and HCM: What’s The Difference?

The difference between Human Resources Management and Human Capital Management is subtle, but quite straightforward.

Human Resources focuses on the responsibilities that employers have to their staff members, making sure that every employee receives the entitlements due to them. However, its role is equally designed to ensure employees do not take advantage of those regulations – absenteeism for example. HR must also ensure that both the employer and the employee fully comply with the respective set of regulations. So, in effect, HR plays a policing role as much as anything else.

Human Capital Management, however, is more interested in the value an employee brings to a company through their individual skills, experience and knowledge. It focuses on the contribution that people make to the growth of a company, and the influence an employee has on an organization or team overall.

Experts believe that the modern HR department should evolve its focus so as to develop the company’s human capital. It should seek to empower employees that wish to grow the company and their own roles and encourage investment in staff rather than just oversee regulation compliance.

3 Ways Human Capital Management Can Benefit Your Organisation

  1. Replacements In The Wings
  2. The sudden departure of a key employee can have devastating effects if there is no-one in the wings ready to step in. It’s a situation that many of the top companies around the world live in fear of, but it’s not only the loss of a high-performing individual; the cost of an often long, frustrating search for a suitable replacement can be as high as 9-month’s salary. Surely, it would be better to invest in existing human capital over time. That way, the enforced transition would be seamless and momentum lost minimal.

  3. Happier Employees
  4. It’s no secret that employee satisfaction results in some key benefits, not least greater productivity and longer services. Investing in the needs of existing staff – like internal professional education – and developing the human capital at hand, is one of the surest ways of increasing that level of satisfaction. In fact, according to a 2014 survey, 42% of 600 participating employees admitted their company’s commitment to professional development was very important to their own sense of job satisfaction.

  5. Higher Employee Retention Rate
  6. When surveys reveal as much as 54% of workers consider career advancement opportunities more important than salary, and 70% of millennials cite a lack of leadership development as the reason for wanting to leave their job [A 2016 Deloitte survey], it shows a strong desire to grow within an organization. Human Capital Management invests in employee development, so making the switch from the more orthodox Human Resources Management model will lessen the desire to leave and improve employee retention rates.

About the Author

AnnualLeave is a leading employee leave management tool on the market, lifting the HR headache by cutting request processing times, monitoring leave trends, and maintaining company compliance all with one user-friendly, affordable self-service app. For more information you can get in touch with one of our team via our online form or email at

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