Human Resources vs Human Capital: A Philosophical Review of Human Conception in the Industrial World

Abstract

This paper attempts to systematize the literature to understand the differences between the conceptions of human resources and human capital and their implications for human resource management in the industrial world. This study uses the literature review method in collecting and evaluating data relevant to the research topic. The result of this paper shows that organizations need to pay attention to the role of individuals as important capital and maintain a balance between organizational needs and individual needs in managing human resources. The development of the concept of partnership in the industrial world makes companies have to change their point of view regarding human resources from workers to human capital. Besides that, the concept of humanizing humans also needs to be considered by managers because humans have an advantage over other resources.

1. Introduction

In the era of globalization and increasingly fierce industrial competition, many organizations and companies view human resources as their most valuable asset [1, 2]. However, the conception of human beings in the organizational context has experienced a shift from mere resources to capital that can be managed and optimized. This conception gave rise to a debate about the difference between human resources and human capital leading to an ongoing debate about the human conception in the industrial world, especially in terms of the treatment and management of human resources. Along with the times and technology, the more traditional concept of human resources began to shift into a more modern human capital. In this case, many organizations or companies view humans only as workers who are required to improve their performance in order to achieve organizational goals. However, some experts and business practitioners consider this concept inappropriate and tend to ignore the humanitarian aspect of managing human resources [3, 4].

The debate about human conception in the industrial world is becoming increasingly important because many companies and organizations are competing to achieve a competitive advantage in the global market. In an effort to achieve this goal, organizations often treat human resources as one of the important factors that must be managed effectively to increase company productivity and profitability [5, 6]. However, in managing human resources, companies must consider individual needs and organizational needs in a balanced way. When treating humans only as resources, organizations tend to think that human resources are nothing more than assets that must be managed as effectively as possible to achieve business goals. However, this view is considered inhumane because humans have dignity and rights that must be respected in the management of human resources [7]. In addition, human resources are also different from other company resources such as machinery, finance, buildings, and others because humans have reason and thoughts, commonly called intangible assets [8].

Along with technological developments and increasingly fierce global competition, many organizations and companies are starting to view humans as human capital [9]. The concept of human capital emphasizes the development of individual creativity and innovation as key factors in achieving competitive advantage. In line with the opinion of Salimi and Torre [10], which makes it clear that the contribution of employees to innovation is important, and attention should be directed to understanding the role of HR practices in influencing organizational innovation. This view shows that humans are not only a factor in production but also a key factor in achieving organizational success [9]. Organizations must view human resources as their business partners to achieve common goals, not just to achieve organizational goals.

Some of the research problems that will be studied in this study are; (1) What is the difference between the concepts of human resources and human capital in the management of human resources in the industrial world? (2) How does the human conception affect the management of human resources in organizations? (3) How can companies and organizations manage human resources humanely and sustainably by considering individual needs and organizational needs in a balanced way? (4) How does the philosophical view of humans affect the conception of humans in the industrial world? and (5) What are the implications of the differences between the concepts of human resources and human capital on organizational success and employee welfare? From some of the questions above, this study will discuss the differences between the concepts of human resources and human capital and their implications for managing human resources in organizations. This research aims to discover the human conception in the industrial world and how the balance between organizational needs and individual needs in managing human resources. Thus, this research can provide input for companies or organizations in treating and managing human resources more humanely and sustainably.

2. Literature review

2.1 Human resources

An organization must consist of a group of people with the same goals. The people who gather in the organization are often referred to as human resources. Dessler [4] defines human resources as employees or the workforce who are part of the organization and contribute to achieving organizational goals. He said that human resources include employees’ skills, knowledge, experience, and abilities, in line with [11], which says that human resources are employees or workforce with the capabilities, skills, knowledge, and experience needed to achieve organizational goals. Human resources also include the process of managing and developing employees to achieve competitive advantage. These human resources can become part of the organization, can go through the recruitment process and end with release, which can be in the form of retirement or dismissal. Much literature proves that human resources have become a key factor in the success of a company [4, 12].

The philosophical concept of human resources can be found in various classical literature. HR is said to be the most important resource because humans have ideas and thoughts that are different from other resources. Aristotle considers humans as rational beings who are able to think and understand the world well [13]. Meanwhile, the previous philosopher, Plato, said humans are creatures of two parts, a soul and a body. The soul is the more important and eternal aspect, while the body is only temporary and limited [14]. Long after that, René Descartes created the concept “I think, therefore I exist,” asserting that humans are conscious beings with self-awareness [15]. In general, philosophy tries to understand human beings as complex and meaningful beings with the capacity to think, contemplate, and search for the true meaning of life. In the Qur’an, humans are said to be the best creatures (QS. At-Tin: 19). From some of the explanations above. It can be said that humans are not only seen by their physical appearance but are subjects who have the ability to think, so they are called the best creatures on earth.

2.2 Human capital

The latest view related to human resources is the concept of human capital. This concept is seen as better in the modern era because human capital does not only view humans as workers but as company partners in achieving success. Companies are not only concerned with their goals but must pay attention to the goals of their employees, which is the concept of human capital. Barpanda and Bontis [16] defines human capital as a collection of employees’ knowledge, skills, experience, and emotional intelligence who are a valuable intellectual resource for the organization. Meanwhile, Tidd & Bessant [17] defined human capital as a collection of intellectual resources owned by employees, contributing to innovation and adding value to the organization. Organizations can utilize and manage these intangible assets effectively to achieve competitive advantage. Humanizing humans in the world of industry/work is also seen as more appropriate to be applied to modern organizations where in ancient times humans were only considered as workers like machines and even slaves.

2.3 The difference between human resources and human capital

From the understanding of human resources and human capital above, it is clear that the difference between the two lies in the perspective of the company/organization looking at its workers. The human resources perspective is more on transaction contracts between companies and workers, while human capital is more burdensome on business partners who are valuable assets of the company. However, these two perspectives are closely related because both are still in the context of human resource management. As for some literature that discusses the differences between human resources and human capital, according to Becker and Huselid [5] that human resources refer to employees as organizational resources that can be managed, transferred, and replaced as needed, while human capital refers to the abilities, knowledge, and skills of employees that cannot be separated from the individuals themselves. Another opinion says that human resources is a management function related to the management of human resources in the organization. Meanwhile, human capital is an investment in improving employee skills and knowledge that contributes to organizational performance [18].

In simple terms, it can be exemplified as providing training for employees is an administrative process that incurs costs from a human resources perspective but can be an investment for the company from a human capital perspective. The difference between human resources and human capital lies in the management focus [19]. He continued that human resources are more focused on management efforts to acquire, retain and manage employees in administrative and operational terms, while human capital is more focused on managing employee intellectual resources to create a competitive advantage. There are different views regarding the nature of human resources and human capital in an organization. Some say they are the same, and some are different. As previously explained, the difference between the two is from the perspective of a leader/manager in managing and treating employees in their organization.

2.4 Human conception in the industrial world

The human conception in the industrial world has an important role in the management of human resources and human capital in organizations. In this context, human resources and human capital are seen as strategic resources and have added value to the organization [9]. However, different human conceptions can affect how organizations view employees and manage and treat them. Human conception in the industrial world can be divided into three main views according to Robbins and Judge [20] (1) The mechanistic view, which states that employees are only a factor of production and must be managed efficiently and effectively. In this view, employees have no particular freedom or desire other than fulfilling their duties and responsibilities. This view ignores employees’ social and psychological aspects and tends to emphasize production efficiency and increased productivity. (2) The humanistic view emphasizes the importance of the relationship between employees and management and the welfare of employees in achieving organizational goals. This view assumes that employees who feel valued and cared for will be more motivated and contribute more to organizational goals. This view also recognizes the importance of the social and psychological aspects of employees. (3) The contingency view recognizes that the conception of people in organizations depends on a particular situation or context. Accordingly, this view recognizes that every organizational situation has unique needs that call for different approaches and solutions. This view sees humans as different individuals and seeks the most suitable solution for every organizational problem.

In view of human capital, employees are seen as intellectual resources that have added value to the organization [6]. Investment in employee development can improve their abilities, knowledge, and skills to make a greater contribution to the achievement of organizational goals [21]. The human capital theory states that employees are a valuable resource for organizations and that investing in human resource development can increase organizational productivity and performance [22]. The concept of human capital associated with this theory emphasizes the importance of employee abilities, knowledge, and skills as intellectual resources that cannot be separated from the individual himself. In the context of the human conception in the industrial world, organizations need to choose the views or concepts that best suit their goals and values and develop appropriate strategies to manage their employees.

3. Data source and methods

This study used the literature review method in collecting and evaluating data relevant to the research topic. Several articles from previous researchers and recent research in terms of the concept of human resources and human capital in the industrial world were the focus of our data sources. The collected data were analyzed using content analysis techniques to identify themes and patterns that emerged from the literature that had been studied. Several steps were taken to achieve the research objectives; (1) Identification of research questions that form the basis for determining the criteria for articles to be used in this study. (2) Search for articles and books as data sources using certain keywords such as “human resources,” “human capital,” “concept of man,” “philosophy of human,” “industrial world,” and other keywords related to the research topic. We have also added several articles related to the impact of human capital on organization and creativity, then articles that discuss philosophers’ opinions related to humans. (3) Article analysis, conducting a systematic analysis of the articles that have been selected and assessing the quality of the articles. (4) Synthesis of the findings from each article to produce comprehensive conclusions about the conception of humans in the industrial world and their implications for human resource management. (5) Interpretation of the findings by interpreting the findings of this research to provide relevant recommendations for business practitioners and organizations in managing human resources more humanely and sustainably.

We collected 150 articles and books related to the above keywords through Google Scholar. After reviewing titles, abstracts, some paper contents and paper quality, we reduced as many as 114 articles and books for reasons of time and resource efficiency because the sources we found were able to explain our research objectives. Several other articles discuss the concept of human capital but are not in the industrial world and several articles are irrelevant to the discussion of our research objectives and are of low quality. We do not refer to just one or two authors because our discussion compares the concept of human resources with human capital, whose sources are very broad. In addition, we also see the role of human capital in shaping the creativity of employees in an organization.

4. Results and discussion

The philosophical view of the human conception in the industrial world refers to the view of how organizations view individuals. In this context, there are two main conceptions, human resources and human capital. Several studies have shown that human resources and human capital have significant differences in meaning, focus, and impact on employees and organizations [5, 21, 23]. The conception of human resources sees individuals as resources the organization can utilize to achieve its goals [23]. In this conception, individuals are considered objects that the organization can manage to meet the needs and goals of the organization. Human resource management includes employee development, training, and performance management so that employees can contribute effectively and efficiently to the organization [20]. Therefore, in this conception, organizations tend to focus more on individual efficiency and productivity to meet organizational needs. This concept has long been applied in the industrial world, where employees/workers need a company to make a living to meet their daily needs. In a philosophical context, the conception of human resources tends to be reductive and ignores the human aspects of individuals [4].

This view is considered obsolete and requires further elaboration to change the company’s paradigm toward its workers. In a philosophical context, the conception of humans in the industrial world shows that individuals must be considered as subjects who have unique abilities and potentials that organizations can utilize to achieve competitive advantage [8]. This has also been expressed by the philosopher René Descartes who views humans as subjects whose thoughts are separate from the physical world with the concept “I think, therefore I exist” [15]. Changes in workers’ views of workers’ functions in the modern era are also driving a paradigm shift in viewing the nature of workers in an organization. Modern workers consider themselves more meaningful to the company. They can contribute more to the company through creative ideas so that human resources are not only workers paid by the company but as human capital who have knowledge, skills, and abilities as a differentiator between a company and other companies. This has long been conveyed by the philosopher Francis Bacon who said that “knowledge is power” which is an advantage that only humans have [24]. Therefore, in the conception of human capital, organizations tend to focus more on developing and utilizing individual abilities to achieve their goals. This philosophical view also shows that it is important for organizations to maintain a balance between organizational needs and individual needs in managing human resources [5]. Organizations need to pay attention to the role of individuals as important capital and maintain a balance between organizational needs and individual needs in managing human resources [25]. The development of this concept of human capital, which can “humanize humans,” has become an alternative for modern companies to compete.

In order to take advantage of the conception of human capital, organizations also need to encourage individual creativity and innovation as important capital in achieving competitive advantage [10]. Individual development as an organizational investment capital is also an important key in utilizing the concept of human capital [22]. Becker and Huselid [5] explained that it is important for organizations to maintain a balance between organizational needs and individual needs and pay attention to the human aspects of individuals in managing human resources. From the literature analysis, the conception of humans in the industrial world has experienced a shift from human resources to human capital. The concept of human resources sees people as assets that organizations can utilize and manage to achieve their business goals. On the other hand, the concept of human capital sees humans as investments that need to be optimized and developed through education and training to increase the economic value of the organization [26]. The concept of human capital also emphasizes the importance of individual creativity and innovation in achieving competitive advantage [27].

From the patterns that emerge from the literature that has been described previously, there are different views regarding the conception of human resources and human capital. Several studies state that the two concepts are not always separate from each other but can complement each other and become a unified whole in employee management [4]. However, there is also the view that the difference between human resources and human capital is significant, so organizations need to choose the concept that best fits their goals and values [23]. In addition, the literature also shows that the conception of humans in the industrial world has changed along with the times and the values that have developed in society. Initially, the human conception in the industrial world emphasized the mechanistic and productivity aspects, so employees were considered machines that could be programmed to achieve organizational goals [20].

However, at present, the human conception in the industrial world emphasizes humanistic aspects, where employees are considered individuals with needs, hopes, and potentials that need to be developed [20]. The human conception in today’s industrial world also emphasizes the importance of creating a healthy and productive work environment where employees can develop personally and professionally [28]. This can be seen in several modern companies having programs to increase employee job satisfaction, such as family gatherings, visits for worship, and other bonuses. In this case, the literature shows that the human conception in the industrial world affects not only employees and organizations but also society and the surrounding environment [4, 29]. Good employee management can positively impact productivity, innovation, and organizational profits, as well as improve the welfare and quality of life of employees and the surrounding community. However, poor employee management can have negative impacts, such as decreased productivity, a tendency for work accidents, and a decrease in the quality of life of employees and society at large. For this reason, the human concept in the industrial world needs to be carefully considered in managing employees and organizations.

The shift in human conception from human resources to human capital reflects a paradigm shift in managing employees and organizations. The conception of human resources places more emphasis on employee resources as a means or factor of production that can be utilized to achieve organizational goals [23]. In the conception of human resources, employees are considered part of a system managed to achieve organizational goals. Meanwhile, the conception of human capital emphasizes the importance of developing employee potential as the main capital for the organization [30]. Aristotle considered humans rational beings with the ability to think and make decisions based on logic and reason [31]. This is what makes the difference between humans and other resources. In the conception of human capital, employees are considered individuals with the ability, skills, knowledge, and experience which can be an important asset for organizations to compete in the global market. It is undeniable that humans are the main key that differentiates a company from other companies.

This shift in conception can occur in line with the rapid development of technology and the global economy, from human workers who are considered merchandise to a human concept that creates sustainable value in a company. These changes encourage organizations to adapt to environmental changes and compete in an increasingly competitive global market. Shaw et al. [26] explained that the conception of human capital places the importance of investing in human resource development as an integral part of organizational strategy. This includes developing employee potential through training and skills development, providing incentives, promotions, and recognition for work performance. In the conception of human capital, organizations place more emphasis on values related to creativity, innovation, excellence, and sustainability [9]. This involves developing employees who can think critically, creatively, and innovatively, as well as adapt to changes in the environment and market.

The shift in the human concept from human resources to human capital shows a paradigm shift in managing employees and organizations. This shift requires organizations to treat employees as unique and valuable individuals [8]. Good employee management can positively impact organizations and society, while poor employee management can harm organizations and society. In the conception of human capital, organizations need to treat employees as strategic partners in achieving organizational goals [32, 33]. Treating employees as business partners in competition is a form of the organization’s concern in giving trust and responsibility to its employees. This involves managing employees who are more oriented toward a balance between the needs of the organization and the needs of employees. In addition, giving employees trust and responsibility is the company’s recognition of human capabilities as a unique resource. In the conception of human capital, employees are considered investors and have the same rights as the organization to obtain profits and benefits from their investment.

The shift in the human conception from human resources to human capital also reflects changes in the pattern of relationships between organizations and employees. In the conception of human resources, the relationship between organizations and employees tends to be hierarchical and based on formal employment contracts [23]. While in the conception of human capital, the relationship between organizations and employees tends to be collaborative and based on trust, mutual understanding, and equality [6, 33]. For this reason, organizations need to be able to create a conducive work environment by seeking employee development and organizational innovation. This involves managing an organizational culture that emphasizes values related to diversity, inclusivity, participation, and fairness. In this conception, organizations are also expected to pay attention to noneconomic aspects of organizational success, such as employee welfare, work-life balance, and the social and environmental impacts of organizational activities [4].

Although the concept of human capital has become the dominant paradigm in managing human resources at this time, it cannot be denied that the concept of human resources is still relevant in certain organizational contexts. This depends on the values and goals of the organization, the work environment, and other aspects that affect the success of the organization [5]. This phenomenon can be seen in several organizations/companies that still apply this paradigm, especially small-scale organizations. Some organizations also apply these two paradigms simultaneously, which are mutually reinforcing, as discussed earlier. There is nothing wrong with organizational actions like this, but according to some literature, humans/workers are not only seen as workers, but companies need to pay attention to their needs and desires, which is known as “humanizing humans.” Immanuel Kant emphasizes that humans have high dignity because they have the ability to understand the principles of morality [34].

This paradigm shift reflects the concern of organizational leaders in managing employees within the organization. This shift emphasizes the importance of developing human resources as the main capital for organizations to compete in an increasingly competitive global market. The human capital paradigm also places the importance of investing in employee development as an integral part of organizational strategy. Therefore, the organization needs to choose the human conception that best suits the values and goals of the organization in order to achieve long-term success. The human capital paradigm is said to be more reliable because, with this conception, employees’ creative ideas and innovations can develop better. According to Richard et al. [35], individual creativity and innovation are very important in achieving competitive advantage for organizations. Organizations need to encourage employees to think creatively and develop innovative ideas, provide the necessary support and resources to realize these ideas and ensure that the resulting innovations can be implemented effectively and efficiently within the organization.

By carrying out individual development as an organizational investment capital, the organization can strengthen its competitiveness in the market, increase productivity and quality of products or services, and maintain qualified and motivated employees. In addition, managing human resources in organizations involves balancing organizational and individual needs. These two needs are not always in line, so it is necessary to balance so that the interests of both parties are met. Sometimes organizational needs and individual needs can conflict [36]. For example, organizations need flexibility in terms of shifting tasks and responsibilities between employees, but this can disrupt the stability of the employee’s personal life. Therefore, human resource management must take the right approach and maintain a good balance between organizational needs and individual needs in order to achieve organizational goals by paying attention to the welfare of employees. In addition, it should also be remembered that employees are not just mere resources or capital but human beings with different uniqueness and potential, called intangible assets [8, 22]. Therefore, efforts should be made to appreciate and maximize individual potential by providing opportunities to develop, hone skills, and gain valuable experience. In this case, human resource management can broaden the scope of career development and provide opportunities to learn and broaden employee insights.

In conclusion, human resource management must maintain a balance between organizational and individual needs in managing human resources. This can be achieved by providing adequate facilities for employees, career development, and learning opportunities. Employees must also be considered human beings with unique potential and must be respected and maximized. For this reason, leaders are needed who not only pursue organizational targets but employee goals can also be a priority side by side with organizational goals. Thus, organizations can achieve a competitive advantage, and employees can achieve their personal goals.

5. Conclusion

Our research succeeded in explaining the fundamental differences between human resources and human capital in the management of human resources in the industrial world. The human concept in the industrial world has experienced a shift from human resources to human capital. The concept of human capital emphasizes the importance of individual development as an organizational investment, while the concept of human resources emphasizes organizational efficiency and productivity. However, organizations need to consider the balance between organizational needs and individual needs in managing human resources. Several views of philosophers regarding the importance of human existence to answer life’s challenges in a sustainable manner, as well as in the industrial world. Finally, our writing contributes to understanding human conceptions in an industrial context, and can serve as a guideline for decision makers in managing employees so that they can have a sustainable competitive advantage by utilizing the human capital of the organization.

6. Research implications

This research has several important implications in human resource management, which can contribute to managers, especially in human resources. First, this study shows that the shift in human conception from human resources to human capital significantly impacts human resource management in the industry. This shows that organizations must properly pay attention to and manage human capital to gain a competitive advantage. Second, this research indicates that individual creativity and innovation are crucial in achieving a competitive advantage. Therefore, human resource management must provide adequate opportunities and facilities for employees to develop their creativity and innovation. Third, this study shows that individual development as an organizational investment capital is very important in the human resource management of a company. This shows that companies must pay attention to and provide opportunities for career development and learning for employees in order to maximize individual potential and achieve organizational goals. Fourth, this study shows that the balance between company needs and employee needs is an important factor in human resource management. Therefore, human resource management must maintain a good balance between company and employee needs to achieve organizational goals by paying attention to employee welfare.

7. Suggestions for further research

In addition to practical implications, there are theoretical implications that we can provide for the development of further research related to the field of human conception in the industrial world. First, further research can be conducted to understand more deeply the role of individual creativity and innovation in achieving competitive advantage in the industrial world. Research can focus on how organizations can enhance employee creativity and innovation and how employees can leverage their creativity and innovation to achieve organizational goals. Second, further research can focus on how human resource management can balance organizational needs and individual needs in managing human resources. Research can involve surveys and interviews with employees and managers in various industries to understand how human resource management can optimize this balance. Third, future research can understand more deeply how organizations build a work culture that encourages employee creativity and innovation. Research can involve case studies and interviews with organizations that have successfully created a work culture that encourages employee creativity and innovation. Finally, research can be focused on the impact of technology and digitalization on human conceptions in the industrial world. Research can involve surveys and interviews with employees and managers in various industries to understand how technology and digitalization affect the human conception of the industrial world and how organizations can best manage this.