When I got started in business, after coming home from the Marines in 1968, we called the department “Personnel.” Many people didn’t like that.
In his classic book, Up the Organization, Robert Townsend suggested getting rid of the Personnel Department and replacing it with a one person “People Department.” He bemoaned the fact that “personnel experts use gimmicks borrowed from manufacturing.” Some things don’t change.
So the Personnel Department became the Human Resources Department. “Resources?” people cried, “Human beings are not mere resources to be exploited!” True enough.
It seems that you can’t come up with a term that both summarizes the business function and isn’t a bit redolent of treating people parts or equipment. In economics-speak that’s treating people as fungible resources: homogeneous and easily interchangeable.
“Human capital” is the latest term to have its day and to draw the ire of those who hold that “people aren’t capital.” In a purely economic sense, that’s not true.
In most economics, capital is used in the production of goods or services, but not significantly consumed. That’s interesting to know, but it doesn’t solve our language problem.
The root of the problem is that “human capital” in the sense of applying economic language to describe business operations makes good sense. Even then though, the definitions seem fluid. Investopedia says this:
“Economist Theodore Schultz invented the term in the 1960s to reflect the value of our human capacities. He believed human capital was like any other type of capital; it could be invested in through education, training and enhanced benefits that will lead to an improvement in the quality and level of production.”
But Deloitte has a different view. Here’s their definition.
“By human capital, we mean three things: World class HR (service delivery models, processes, technologies and programs); Talent; People issues in the business (strategic change, organization design, operational culture).”
If you’re talking about the business function, you can pick your definition. But if you’re down at the individual level you need to use words that describe individuals in all their unique humanity.
Take Phil. He’s an engineer and a good one. Over several decades, he’s built up a marvelous web of relationships and a great store of knowledge. That’s part of who Phil is.
As long as Phil works at his company, he chooses to loan the company his knowledge and his relationships. But when Phil retires or moves on he’ll take them with him.
The key is that people have knowledge and relationships. They’re the human part. When Phil leaves, another engineer will fill his slot on the org chart. The engineer may be part of the company’s human capital, but he or she will never be Phil.
Maybe Robert Townsend was onto something with his “People Department.”
