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.

10 responses to “Talent management is not the same as human capital management

  1. Donald:

    Nice dissection of the differences between TM and HCM. I am generally in agreement with what you said – and that it doesn’t matter that much what organizations call it as long as they do it.

    Execution is the big issue in this space. And technology is not the answer. Organizations that “get it” just “get it”. People in these organizations are aligned around clear, explicit, shared goals, and work together to move achieve them.

    For organizations that don’t “get it” installing a technology platform for TM is not going to make a whit of difference. Culture eats strategy for lunch. TM and HCM are both very much about Sr. Management leadership and commitment to people. Not technology.

    Tom O’Brien

  2. Hi Tom

    Thanks for the comment. I particularly like your phrase

    Culture eats strategy for lunch

    I was going to steal it for my next posting title, then visited your blog and realised I was too late.

    Still, great comment, and a good trailer for my next thoughts on this thread.


  3. Donald:

    I have to attribute the phrase to Sally Colella a presenter – on Social Network Analysis – at a recent Human Capital Institute seminar in Chicago.

    Tom O’B

  4. Great post!

    I have worked with a number of organizations that would not differentiate between human capital management and strategic human resource management.

    Talent management also seems to be sprouting several different denotations. One defines it as focusing on high potential types; the other applies it much more widely.

    robert edward cenek, RODP
    Uncommon Commentary on the World of Work

  5. Robert

    Thanks for the comment. I think it’s fair to say that Talent Management originally applied to the limited area of taking care of future senior managers, but it’s since spread like wildfire and as you say it’s now applied much more widely, so that nobody quite agrees what it means, only that we all feel nice and warm inside when we talk about ‘talent’.

    Like the blog by the way – and in particular your vow that you will “avoid pop psychology – and to not tell you what he ate for breakfast, or what airport serves the best sandwiches”.

  6. talent management

  7. it is awsome .but till i have doubts whether talent management is wider than HRM or vice-versa

  8. Pingback: eTOM and Human Capital in Third Generation KM « Astimen's Blog of KM Telecom

  9. Prashant Verma

    Great Insights Don !!!

    I truly agree with your arugument on TM & HCM… yes we phrase and rephrase as per our convinience & usages. But yet it is much differenct from each. HCM talks about the Fundamentals of HR, where as TM is all about how we are doing it presently … Very truly quoted by you ” ‘Talent’ is an apple-pie and motherhood word.”.. Todays era is emphasised only on this and may be we mature our motherhood word to Global HCM..looking at the present challenges.

    Prashant Verma

  10. Don:
    Thanks for your article, which is very inspiring.
    It’s always easy to talk about what should be done. However, if we would like to see a clearer picture, we should look at how to do it!
    Human Resources Management, Human Capital Management, Talent Management are all involving Management. Management is the noun of the verb Manage. If we look at how these Management Functions are to be done, we will see their differences. 
    HRM’s main goal is to manage expenses.
    HCM’s main target is to manage investment.
    TM’s main job is to manage innovation for value-creation.

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