To understand the meaning of Human Capital Management let us first find out the meaning of “Capital”.

What does the word “Capital” stand for?

Capital refers to already produced durable goods which further contribute to the production of goods and services. In simpler words, capital refers to any produced good/service which enables an individual/organization to deliver high quality output. Capital acts as a catalyst to increase productivity in organizations.

What is Human Capital?

Employees are the lifeline of an organization. An organization can’t survive if there are no employees. Organization runs with the help of individuals who contribute in their own way in its success and productivity. Employees spend maximum part of their day in offices and strive hard to achieve the goals and objectives of the organization. Employees ought to be motivated from time to time so that they develop a sense of attachment towards their organization and also deliver their best.

Every employee in his/her tenure acquires some set of skills through his experience, exposure, trainings and so on which further increase his/her productivity eventually benefitting the organization. Knowledge and expertise which employees develop in due course of time to further increase the productivity of organizations refer to human capital. Every employee tries his level best to sharpen his/her skills during his stint with the organization. Human capital is defined as the collective stock of skills, attributes, knowledge, and expertise of employees which further plays an integral role in increasing the productivity of the organization.

Every organization invests its money and resources to train new employees. Employees in turn work hard, upgrade their existing knowledge and contribute in their own way to increase the productivity of their organization.

The word “Human Capital” was introduced by A. W. Lewis in “Economic Development with Unlimited Supplies of Labor”.

Human capital plays a crucial role in increasing the productivity and output of an organization.

What is Human Capital Management?

Human Capital management refers to managing an organization’s employees for them to contribute significantly in the overall productivity of organization. In a layman’s language managing workforce of an organization refers to human capital management.

Human Capital Management is defined as the process of acquiring, training, managing, retaining employees for them to contribute effectively in the processes of the organization.

In simpler words, upgrading the existing skills of an employee and extracting the best out of him/her refers to human capital management.

Human Capital management has more to do with how organizations treat their employees? Do not treat your employees as mere labors. Senior management must ensure timely growth and development of every individual concerned for him/her to contribute efficiently when required.

The key objective of every organization should be to train its employees so that they become efficient resources later on. In human capital management, organizations treat their employees as important resources that play an instrumental role in productivity of the organization.

The development and management of individuals in line with their key responsibility areas not only make them an indispensable resource in the future but also ensure their hundred percent contribution towards the organization.