Talent management is not the same as human capital management

Is talent management the same thing as human capital management?

Certainly not.

Of the many differences between these two terms, at least one is fundamental. Does it matter? Yes, for lots of reasons. Yet, when I open this Friday’s eLearning Network conference on Talent Management, I shall argue that for now, at any rate, we can ignore the differences.

Here’s why.

As with any argument on phraseology, two things matter here: the concept itself, and the way we express it.

The concept is that organisations need to make best use of their employees to succeed. This idea that people are a valuable asset has its origins in academic work on human capital, and is a thought frequently – and usually inadequately – expressed by CEOs (see previous post: ‘People are our greatest asset’).

How do you make the most of your employees’ potential? You have to do the following well:

• Recruitment
• Assessment
• Performance management
• Targeted learning and development
• Succession planning
• … etc. etc (I’m sure that you’ve seen this list before)

You can argue that all these processes could fall equally under Talent Management (TM) or Human Capital Management (HCM), although not everyone would agree. Some commentators suggest that talent management focuses only on the identification and development of the organisation’s most talented people (Eddie Blass, Ann Knights, Angelita Orbea, Ashridge 2006 explore this). Others note that – at a practical level – there’s a lot of grand talk around Talent Management from vendors who are actual recruiters trying to big themselves up (Systematic HR is good on this).

But even if we allowed that all these processes fall under TM, there is one process that clearly does not:

• Strategic reporting on capability

Whereas Talent Management is focused on the individual, human capital management, with its academic/accounting origins in aiming to understand the value of people, includes the aggregate view. For this reason, HCM has to include an idea of the overall value of the human asset in an organisation. It also, from this data, includes analysis of the hot spots and problems in the current development and deployment of employees.

This, then, is the big issue that divides HCM and TCM. But if they are not the same thing, why do we so often read phrases such as:

Talent Management, often times referred to as Human Capital Management, is the process recruiting, managing, assessing, developing and maintaining an organization’s most important resource-it’s people!

(Presumably in this case the Talent in question is not grammatical.)

The answer is simple: TM right now is HOT. Here’s one measure:

Technorati search on ‘Human Capital Management’ this morning: 1,456 returns
Technorati search on ‘Talent Management’: 4,641 returns

So, people are claiming the phrases are synonymous for the simple reasons that while HCM has been picking up pace slowly since the phrase was used in its current context by Theodore Schultz in the early 1960s, what people really want to hear about is that sexy, quasi-military thing called Talent Management that we read about in The War for Talent.

This is the second part of the argument on phraseology, the way we express the concept, and it comes down to this: ‘Talent’ is an apple-pie and motherhood word. Nobody is going to disagree with it, and it is so much more appealing than dull old ‘Human Capital’.

In other words, HCM and TM are different, but the phrase everyone is using right now is TM, even though it does not necessarily convey everything they want to express.

You might guess that I care about this – I do – so why, having spent most of this post explaining why TM and HCM are different am I going to argue this Friday that we needn’t worry about it?

Because, in the short term, what matters is the concept rather than its expression. Finally it seems we have a growing understanding that it is vital to understand the skills of your personnel, and to report on them as a whole, as well as by team, and individually.

Fantastic. If people get more excited about that under the banner of ‘Talent Management’, so be it.