IS HUMAN RESOURCES THE SAME AS HUMAN CAPITAL? | Addressing the Human Capital Crisis in the Federal Government: A Knowledge Management Perspective

Some organizations have traditionally thought of human resources as being the same as human capital. The functions that a human resources director (HRD) performs are usually not the same as envisioned by the emerging position called a Chief Human Capital Officer (or Chief People Officer). Granted there should be a close alliance with the HRD and the Chief Human Capital Officer, but the latter is more involved with a strategic view of the organization versus an operational perspective, as typically performed in the HR department. The HRD usually oversees such areas as personnel actions, career counseling, compensation and benefits, and employee performance and development. The Chief Human Capital Officer would develop workforce development strategies and align them with organization missions. As Bill Sebra of Knowledge Workers Inc. indicates, the time is ripe to have a Chief Human Capital Officer as over 70 percent of Fortune 1000 CEOs view human capital management as a strategic component of their business.

Legislation for U.S. government agencies to have a Chief Human Capital Officer has already been proposed. The legislation would create a Chief Human Capital Officer in each federal agency to do the following:

Set the workforce development strategy of the agency;
Assess current workforce characteristics and future needs based on the agency's strategic plan and mission;
Align human resources policies with organization mission, strategic goals, and performance outcomes;
Develop a culture of continuous learning to attract and retain high-performing employees;
Identify best practices and benchmarking studies;
Create systems for measuring intellectual capital and identifying links of that capital to organizational performance and growth.

Industry has already begun to appoint Chief Human Capital Officers. For example, Steven J. Becker is Senior Vice President and Chief Human Capital Officer of Fujitsu Transaction Solutions Inc. Becker, who joined Fujitsu in March 2002, oversees the company's human capital initiatives and is responsible for human resources, organizational development, corporate communications, knowledge management, and facilities management.

According to Susannah Figura's article "Human Capital: The Missing Link" in Government Executive Magazine, most federal managers and human resources specialists are still more focused on short-term needs than long-term ones. It would be better for human resources departments to be rated on a more strategic scale rather than a tactical one. Such rating criteria might be: conducts strategic analysis of present and future human resources needs and workforce planning; able to obtain needed employees; able to maintain a workforce with a mix of skills that matches its needs; and ability to motivate and reward employees to support strategic and performance goals. In fact, the Human Capital Scorecard, as advocated by the Office of Personnel Management's (OPM's) Human Resources Management Council, has five key dimensions: Strategic Alignment, Strategic Competencies, Leadership, Performance Culture, and Learning. These dimensions are derived from the September 1999 General Accounting Office Human Capital Report, which indicated five parts of a human capital framework:

Strategic Planning: establish the agency's mission, vision for the future, core values, goals, and strategies
Organizational Alignment: integrate human capital strategies with the agency's core business practices
Leadership: foster a committed leadership team and provide continuity through succession planning
Talent: recruit, hire, develop, and retain employees with the skills for mission accomplishment
Performance Culture: enable and motivate performance while ensuring accountability and fairness for all employees

In the Human Capital Scorecard and the GAO's human capital framework, the mapping of the dimensions is very similar. However, the learning dimension, as cited under the Human Capital Scorecard, is something that isn't covered explicitly in the GAO human capital framework. The learning dimension looks at how an organization can become an adaptive, agile, learning organization whereby a knowledge sharing culture is built and nurtured. Here, the theme of knowledge management is expressed and fits nicely within a "learning pillar."

According to the GAO Human Capital report, human capital has two key principles. First, people are assets whose value can be enhanced through investment. Skandia typically compares their organization to a tree. With a tree, there are hidden and visible components—the hidden ones are the roots and the visible ones are the blossoms and fruit. In order to get the tree to grow, you need to nourish the roots. In the same manner, the people and their intellectual capital in an organization are the roots, and to maximize their intellectual capital they must also be nourished in terms of training and development, mentoring, recognition and rewards, and so on. Second, an organization's human capital policies must be aligned to support the organization's shared vision.

In the GAO study, eight key concepts were common to the "best practiced" organizations:

Value people as assets rather than as costs.
Emphasize mission, vision, and organizational culture.
Hold managers responsible for achieving results instead of imposing rigid, process-oriented rules and standards.
Choose an organizational structure appropriate to the organization rather than trying to make "one size fit all."
Instead of isolating the "personnel function" organizationally, integrate human resource management into the mission of the organization.
Treat continuous learning as an investment in success rather than as a cost to be minimized.
Pursue an integrated rather than an ad hoc approach to information management.
Provide sustained leadership that recognizes change as a permanent condition, not a one-time event.

The GAO and OPM further stress the need for cultural transformation as a new model for government organizations. They indicate that government organizations will need to become less hierarchical, process-oriented, "stovepiped," and inwardly focused. They will need to become more partnerial, results-oriented, integrated, and externally focused. Government organizations will need to achieve better balance between results, client/customer, and employee issues, and that they will need to work better with other governmental organizations, nongovernmental organizations, and the private sector, both domestically and internationally, to achieve results. In fact, Victor Rezendes, the Managing Director of Strategic Issues for the U.S. General Accounting Office, feels that strategic human capital management is greatly needed whereby human capital is established as a top priority, a modern and high-performance-oriented human capital system is created, and updated human capital policies, procedures, and information systems are developed and implemented (http://www.gao.gov/cghome/hvd/sld030.htm). Rezendes believes that a three-phased approach for strategic human capital management is required: do everything administratively possible; seek incremental legislative changes when necessary and base them on a sound business case; and begin to build a consensus for comprehensive civil service reform based on an analysis of existing workforce challenges and selected demonstration projects.

It is becoming clear that to make strategic human capital management really happen in organizations, especially the government, a new position of Chief Human Capital Officer should be created. This is the direction that the U.S. government and industry seem to be taking. Some of the U.S. government agencies have Chief Human Resources Officers, as at the Internal Revenue Service. It is analogous to how Chief Information Officers, Chief Knowledge Officers (CKO), and Chief Learning Officers (CLO) have been created throughout business and government in recent years. There potentially could be some overlap between some of the roles and duties of a Chief Human Capital Officer and those of either a Chief Knowledge or Chief Learning Officer. Even though the Chief Human Capital Officer would probably have a broader charter than either the CKO or CLO, there are some similarities in terms of knowledge retention activities, building and nurturing a knowledge sharing culture, and transforming individualized learning into organizational learning. In the U.S. Government, there are a few CKO positions (as at the General Services Administration, or GSA, the U.S. Coast Guard, the U.S. Navy, etc.), but perhaps the creation of a Chief Human Capital Officer may subsume some of these duties. In industry, however, the CKO position is more prevalent than the equivalent position in the government. Thus, it will be interesting to see the interplay between the Chief Human Capital Officer and the Chief Knowledge Officer in industry.