HCM A depressing blast from the past

17

April 7, 2011 by Neil

Nothing says “past it” than a term that I came across yesterday for the first time in a long while. Human Capital Management. The words in themselves are enough to make my stomach turn. I know that linguistically it isn’t a million miles away from Human Resource Management, but the latter is a broad church, where as HCM has connotations that I find really quite disturbing.

Whereas the origins of the term date back to economic theory, it has been hijacked by the over willing, over eager consultants as a means of trying to squeeze metrics and measurement into everything. Thus driving “economic value” of the “human capital”. I’m not against measurement per se, but I do think we are on a hiding to nothing with it.

“You can’t manage what you can’t measure”

True, but also not so.

Because in the end, we are dealing with people, not buttons or levers and therefore we have to understand that much of our measurement will be qualitative. The example given yesterday was recruitment. I know quite a bit about recruitment metrics, I wrestled with them for years. Measure time to fill? Ok that tells you something….but what do you really want to know? My guess is the questions are more,

- Are we easily attracting the right people?

- If not why not?

Does time to fill answer that? No,but it is harder to measure what we want to know and therefore we measure the process, because that is easier and as HR people we are happier in the process than in nebulous concepts.

The other piece that rankles with the whole issue of HCM is the view that labour costs are just that….costs. As I said yesterday in the conversation, flip it around and it becomes investment. As you could buy a very cheap computer system or a very expensive one, you can also have cheap or expensive labour. Without knowing the effectiveness or the performance of both, you know nothing (and measuring that is almost impossible). If the cheaper computer system is causing employees to be less productive or is crashing then the actually cost of it could be higher.

I’ve said it before and I’ll say it again, humans are wonderfully unique and unpredictable. We should be embracing that and looking at a more humanistic approach to managing and understanding them, not trying to convert them into something they are nor – measurable assets.

For me that’s why HCM deserves to be confined to the garbage can of failed approaches to people management…if there is still any room left in there.

17 thoughts on “HCM A depressing blast from the past

  1. Doug shaw says:

    Amen to that, I find HCM a derogatory term and thankfully an impossible goal. Here’s to unpredictability, much more fun.

  2. Jon Ingham says:

    Complete tosh, depending of course on how you define the term. But for me, HCM has nothing to do with metrics, and everything about people. Which HRM absolutely does not. And please, HCM does not imply calling people human capital, it simply sees people as providers of uniquely valuable human capital as a driver of competitive advantage, which again HRM does not.

    Read the book!: bit.ly/HCMBook (or the blog!)

  3. Doug Shaw says:

    Just checking back in. Funny eh – I hadn’t associated Jon with HCM until now, guess I wasn’t paying enough attention. Seriously though I see Jon as someone more social – less…well, less HCM.

    As folks know I don’t agree with David MacLeod on much but I remember him saying, “we’re not resources, we’re not capital, we’re human – beings”. And he is right on that.

  4. David Goddin says:

    New to your blog Neil and loving the thinking!

    The apparent contradiction that most managers/leaders deal with each day is A) commercial predictability & financial success through B) unique, unpredictable but resourceful people.

    Gaining understanding of the dynamics of each requires different skills, approaches, resources and even thinking. Fundamental though, is trust & belief in your people – something you can’t measure but you can appreciate and build through engagement.

    Too often the lens required for commercial predictability and financial success has been mistakenly used on unique, unpredictable but resourceful people… and it hasn’t worked. Take employee engagement surveys as an example.

    So I think the challenge is to be clear which side of the commercial/people equation we practice or to choose to span the whole. No matter where you sit though use methods that are appropriate, work well for the whole and indeed take a more humanistic approach.

    • Neil says:

      Thanks David and a great comment, my concern I guess is that HR and HCM professionals have rushed down this path without thinking it through and being clear of the differences as you suggest.

  5. Jon Ingham says:

    Tosh may have been a bit strong. Let’s just say that I totally disagree with you that HCM is past it! That may be partly because I’ve staked quite a bit of my identify and reputation on the term, but it’s much more because I believe that an understanding of human capital is absolutely essential to a strategic and high impact approach to HR.

    And saying that metrics has nothing to do with HCM was overstating the case too, but I’d suggest (and wrote in my book 6 years ago) that because much of human capital can’t be measured, it has less relevance for HCM than it does for HRM.

    Doug, you only don’t think I’m HCM_like because you don’t understand HCM (that’s not a criticism – unfortunately very few people do). I’m HCM through and through. And HCM is personal and social so I don’t see any disconnect in this.

    Let me repeat the point: HCM does not imply calling people human capital, it simply sees people as providers of uniquely valuable human capital. This has got to be a more compelling proposition for employees that being seen as resources to be used and used up.

    And because people are the providers of this human capital, it absolutely demands treating them as human beings.

    • Neil says:

      Although Jon, if everyone misunderstands HCM and given that it has been around for a long time – could you argue that even if as a concept you feel it is valuable, it is no longer relevant because it has been tarnished?

  6. Response to Neil Morrison…

        Despite my enjoyment of the CIPD’s HRD conference , and particularly the sessions on next…

  7. It’s interesting to me because I have read both your writing (in other forms) and Jon’s and sometimes agree and disagree with both of you. On this matter, I’m in the Jon camp. Briefly, in the US when you are trying to exalt the discussion of people with a CEO and CFO, the term “human capital management” gets you there. I have asked several friends who are accountants about the nuances of that term vs. “human resource management” and have learned that it sets the tone of the conversation differently.

    Human Capital Management can be used to focus the attention on the costs and financial benefits and expenses associated with managing the people portion of the organization. Human Resource Management sets the tone around the development of those people. So, my personal preference as a business person is HCM. However, when among the HR pros of the organization we use the term HRM.

    It all comes down to language and knowing the right time to use specific words to make your message more easily understandable for the audience. It’s about tone.

    I’d love to hear more of both your perspectives at HRevolution- bring this “fight” across the pond!!

    • Neil says:

      Trish, thanks for commenting and giving a US perspective. Unsurprisingly, I can’t agree!

      The question that I would ask is why the term gets better reception with the CEO and CFO (although I know that if I spoke to my CEO about HCM they would probably throw me off the balcony)? Is it because it has connotations that are seen as more “business like”?

      I think the view that you express of HCM is somewhat different to the one that Jon is trying to portray and in this, I would argue, is exactly the reason why it is null and void. The definition of people as a cost as opposed to an investment is at the heart of where the HR profession is going wrong in discussing issues within their businesses.

      If we can’t convince our fellow business leaders of this, then as a profession we are on a hopeless path to nowhere and may as well hand the reigns over to the CFO and look for other gainful employment.

      Look forward to seeing you in a couple of weeks. Jon and I are apparently on the same flight, so we’ll have hours to discuss this. Might have to make Mervyn sit between us! :)

  8. Jon Ingham says:

    Unfortunately I tend to agree with Neil rather than Trish on that (sorry, as I would have loved to have had you in my camp) – I don’t think your CEOs are interpreting HCM in the way I’ve been describing it.

    And Neil, I agree the mis-use has tarnished the term, but I still think human capital is a vital aspect of moving towards the sort of approach you’ve been describing on XpertHR, so I think we need to reclaim the term!

    Re the flight, I won’t be in first class unfortunately!

    http://www.xperthr.co.uk/blogs/employment-intelligence/2011/04/jon-ingham-why-human-capital-m.html

  9. Jon Ingham: Why human capital management (HCM) is the basis for commercial HR…

    Is human capital management (HCM) the key to commercial HR? Consultant Jon Ingham thinks so, and has…

  10. [...] once said that “nothing says past it” more than Human Capital [...]

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