How Do Your Companies Treat Employees, As Valuable Assets or Cost?
Successful companies regard employees as their most valuable asset and biggest investment. No company will dispute the statement. But do your companies really treat employees as a valuable asset?
Capital or cost?
Human resource management (HRM) and human capital management (HCM) are very different in the concept of employee management. Employees as ‘resources’, are used. While employees as ‘capital’ must be developed in order to create value.
According to Garry Dessler, HRM is the policy and practice of determining human or human aspects in management positions in the process of recruiting, training, assessing and compensating employees, taking into account their working relationships, health, security, and justice issues.
According to Edward Houghton, CIPD senior researcher the term human capital describes employees and their intangible value – collective knowledge, skills, abilities, and capacities – to develop and innovate. Thus, HCM is a management approach that focuses on employees as asset rather than cost. In support of Houghton, according to Brian Kreissl, product development manager for Thomson Reuters Legal Canada’s human resources, HCM sees human and employee expenditure as investment rather than cost.
In other words, HRM is a management approach that sees employees as sources of operational support for company that are cost and must be managed, while HCM sees employees as assets that need to be developed to create a value.
Human resource or human capital management?
In the era of economy based-knowledge, companies are faced with challenges such as talent war, effective leadership, motivation, retention, cultural issues, loss of productivity, and others. To meet these challenges, companies need to invest in intangible competence. Hence, there is a need for HCM departments within a company.
Does it mean HRM should transform into HCM? Both are from different disciplines, but in practice they are interdependent and are the essential components a company needs if it wants to grow and be competitive. Companies cannot invest for only one element and leave the other.
To implement the HCM strategy, companies need a solid HRM infrastructure. An employee development strategy will produce the best value if the recruited employees have the best potential to develop. Vice versa, if the company focuses only on its systems and processes and lacks a long-term strategy for employee recruitment and retention, the company will lose its best employees.
Sources:
Garry Dessler, Manajemen Sumber Daya Manusia Jilid I (Jakarta, PT. Indeks, 2006)
https://www.cipd.co.uk/knowledge/strategy/analytics/human-capital-factsheet
