Personnel Management to HRM to Human Capital – How Human Resources have Evolved and What You Can Do About It as an Organization?

Human Resource Management (HRM) is relatively a new concept.

This term came into the business scene in the 1980s.

Before that, the relationship between the employees and the employers was more of like laborers and workers reporting to the managers/supervisors.

And it was more like personnel management where the relationship was more of like servants and masters relationship.

But over the last twenty to fifty years, personnel management evolved to become the human capital management that we now talk about in length.

In this brief guide, we will talk about the why of personnel management, human resource management, and human capital management and the important aspects altogether to see how HRM has become the cornerstone of every organization.

Objective behind Personnel Management & the important aspects

Personnel management was more about –

  • How many workers/laborers are working?
  • How many products they’re producing?
  • The wages that are being paid
  • How can the management extract more productivity by paying any additional wages?

As you can see from the above statements that personnel management was more about profits than the well-being of the laborers/workers.

And everything that was done was due to maximize the value of the company and its stakeholders.

The important aspects of personnel management are –

  • Top-to-bottom communication: Communication is more about how the workers should follow the orders instead of using their creative potentials. And it’s more about instructions than facilitation.
  • Profits over well-being: The primary objective of personnel management is to ensure that the workers work more, produce more, and don’t squander any time to enhance the profits. It’s never about the well-being of the workers and how their lives are impacted.

Objective behind Human Resources Management & the important aspects

In the 1980s, the management of the organizations realized the value of their workers and instead of putting them through terrible conditions, the management started to treat them as resources.

And as every resource has return on investment, every employee’s productivity was judged based on a set of metrics. 

And the concept of training was introduced and the parameters were also set to see how each employee performs after specific training.

The important aspects of human resource management are –

  • Human element was introduced: Even if the workers were treated as resources, a human element was introduced. And the most important element of HRM was the transformation of workers into employees.
  • Profits still was the most important objective: Even while practicing the HRM, the organizations’ chief agenda was to maximize the value of the shareholders and not the well-being of the employees.
  • Two-way communication was introduced: The communication channel also evolved during this time where top to bottom and bottom to top, the two-way of communication was established –  though the percentage was 70-30 respectively.

Objective behind Human Capital Management & the important aspects

This is the most evolved version of employee management.

Instead of considering the employees as resources, this concept treats employees as capital.

And this is at this stage, employees are knowledge workers and not laborers that would only take orders from the management.

The important aspects of human capital management are –

  • Knowledge workers are more about creative potential than taking orders: Under human capital management, knowledge workers are given the creative freedom to think for the well-being of the organization rather than taking instructions from the management.
  • The employees are treated as assets: An asset pays off much more than you invest in them. For human capital management, every employee is an asset for an organization and will ensure the perpetuity and over-all growth of the organization.
  • Profits with well-being: The two most essential aspects of human capital management is well-being of the employees, their families, the societies, and the world at large along with making money. 

In the final analysis

If you notice, you’d see that there’s a clear shift from personnel management to human resource management and from human resource management to human capital management.

The shift is from doing to being, from only profit-making objective to ensuring the well-being of the human that exchange a piece of her life for the growth of a business, and from squeezing out every sweat of the workers to offering them creative freedom to become intrapreneurs. 

And we have come a long way.

If you still treat your employees like the tools of the company, eventually you’d become the tools of the tools.

And if you treat them as assets and offer them autonomy, empathy, and inclusion, they could be your biggest leverage.

Realize this and act.

And we Skillhubbers can help. Reach out to us and let’s see how we can help you gain that competitive advantage in your business.

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