Human Capital vs. Human Resources: What’s the Difference?
News
(Hint – It’s not organ harvesting!)
Today, most organizations focus either on:
- Creating a fun, exciting company culture, or
- Producing results
What if we told you the real magic happens when you bridge the gap between the two? Understanding your human capital while operationalizing human resources is essential to your success in creating a company culture that thrives.
What is Human Capital?
Let’s start by understanding human capital on its own.
Human capital is the measure of skills, knowledge, and experience that your employees possess. These attributes are viewed in terms of their value to your organization.
The idea of human capital, however, takes a less “by the book” approach. The biggest differentiator of human capital is that it is intangible.
It’s a “quality that isn’t (and can’t be) listed on a company’s balance sheet.” Instead, human capital is perceived to increase productivity and thus profitability,” according to Investopedia.
Human capital focuses on the value an employee can bring, and also the future value of employees as an investment the company can make.
Examples of human capital include:
- Education
- Training
- Intelligence
- Skills
- Health
- Loyalty
- Punctuality
- The list goes on!
At Culture Works, we love the concept of human capital—as the approach focuses more on the person behind the resume than anything else.
What is Human Resources?
Now, what is Human Resources? Human Resources (HR), a term first coined in the 1960s, is “used to describe both the people who work for a company or organization and the department responsible for managing all matters related to employees.”
At Culture Works, we specialize in fractional HR. When looking to hire an HR team or manager, some of the roles and tasks they’d oversee (and implement into human capital) include:
- Employee handbooks and manuals
- Employee conflict
- Upper management
- Onboarding
- Payroll
- Benefits administration
- Paid time off and leave
- Enforcing company policies
- Contract violations
- And more
For any organization, it’s valuable to know when your business needs an HR team.
How Can You Translate Human Resources into Human Capital? (And Ultimately into Human Investment…)
As you look to operationalize your company culture, it’s important to understand each of these aspects to managing your talent.
When your company culture and human resources are operationalized, a few things happen for your employees.
- Employees feel safer in the workplace
- They are more engaged and excited about work
Naturally, employees who are engaged in their work are more efficient, which ultimately, contributes greater value to your business.
How Role Alignment Can Lead to Greater Human Investment
Firstly, what is role alignment? Role alignment prioritizes a values-based recruiting process to attract, acquire, and retain exceptional talent that fits your culture and grows with your company.
Think: An employee might apply for a role with all of the requested qualifications (or maybe they are even overqualified!). This, however, does not automatically mean they are the best fit for the specific role or company.
They might not be “role aligned.”
When you’re recruiting employees, you need to look not only at skills but also at whether or not they are role and value-aligned. Hiring isn’t just about a resume, it’s about the person you’re hiring.
Why is Role Alignment So Important?
Role alignment is one of the key factors at the heart of an operationalized human resource strategy, and it is at the core of bridging the gap between human capital and human resources.
Role alignment breeds great company culture and produces results. Additionally, role-aligned employees stay in their jobs. As the adage goes, happy marriages don’t end in divorce! (In other words, people who aren’t role or culture-aligned aren’t going to stay).
Optimizing an employee’s knowledge, skills, and experience to align them in a role that fits their strengths is essential to their success (and your organization’s).
Your investment in your employees will pay off as your employees become more aligned in their roles.
A Final Word
Successful HR means hiring for people who are role and value-aligned.
At Culture Works, we hire for culture – not for skill. We operationalize culture to ensure that the right people are in the right roles because we know that with proper role alignment, your employees will increase productivity and engagement.
Read on to learn more about role alignment and why it’s the golden ticket to your next key player on the blog.
