Human capital focuses on the skills and training of people as an investment that can produce returns beyond the initial investment, while human resources oversees the hiring of capable employees. The HR department identifies potential employees with the necessary capital and invests in human capital to improve employee performance. Human capital includes education, training, personal development, and medical attention.
The difference between human capital and human resources lies in the fact that while human resources are focused on the work done by people, human capital is more concerned with the skills and training of people. HR can also be defined as a branch office in an organization that oversees the hiring of capable employees, while human capital is the measure of skills and competencies that the HR department requires from prospective employees. Another way of looking at the difference between human capital and human resources is to look at the different factors that make up the two concepts.
Human capital can be explained by looking at it from a material point of view. Capital, in its general sense, refers to an investment that is capable of earning returns beyond the initial investment over its lifetime. For example, a manufacturing facility can be described as a capital investment that will produce profits for investors in addition to the initial cash used to purchase or install the facility and any other operating costs. Similarly, capital investments in humans are also capable of producing dividends beyond the initial cash or investment.
A differentiator between human capital and human resources is that when human capital refers to returns on investments, one of the responsibilities of human resources is to identify potential employees who have the type of capital the organization needs. The HR department is also responsible for deciding how the organization can invest in human capital in order to improve the pool of available employees. Organizations understand that the more human capital improves, the more the organization will benefit in the long run. That is why some organizations offer their employees training, conferences, seminars and even further education. Such an investment in human capital will yield rewards in the form of improved and effective employee performance.
Human capital includes aspects such as education, training, personal development and medical attention. This can be delivered through schools, tutors, boot camps and hospitals. Since humans are linked to any capital investment related to their job skills, training or education will always be linked to them, even if they no longer work for the company or organization responsible for the initial capital investment. Such a concept also separates human capital and human resources, as human resources as a department in an organization will always be associated with the organization.
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