Roots of Human Capital Management

Posted: December 12, 2013 by Matthew Hanwell in Human Resources, Leadership, People


I was quite shocked to read in the September HBR an interview with Caitlin Rosenthal, on Plantations of the 19th century and their use of scientific management techniques as a way of increasing effectiveness and efficiency. Her contention is that they were far more advanced at the time than factories as as unlikely as it might sound were probably the genesis for a lot of early management theory! http://hbr.org/2013/09/plantations-practiced-modern-management/ar/1

Most striking to me was the systematic way in which many Plantation owners employed advanced accounting and management tools to manage their ‘Human Capital’ – Slaves. Literally humans were their capital. They made use of Thomas Affleck’s “Plantation Record and Account Books” which contained advanced techniques such as instructions on how to calculate depreciation in your human capital.

Given this historical association, I am surprised at the popularity of the term Human Capital, as in “Human Capital Management” – http://en.wikipedia.org/wiki/Human_Capital_Management) it is so commonly used today.

I had only ever considered the term human capital management as a positive aspect of the modern workplace; however with this historical association I am now changing my mind. Many of the techniques employed by Plantation owners in the 19th century would be familiar in our modern working environments. Hopefully with the total absence of the brutality, exploitation and oppression, though not necessarily when one recalls FoxConn stories (http://en.wikipedia.org/wiki/Foxconn_suicides) of suicides in China, abnormally high suicide rates at France Telecom (http://www.reuters.com/article/2012/07/06/france-francetelecom-idUSL6E8I6BJT20120706) and the many stories of exploitation in the garment trade in SE Asia.

Today in HR we typically have Headcount and Full Time Equivalents (FTE’s), a Plantation Owner would have units of “Prime Field Hand”, “Half Hand” and “Quarter Hand” and used these units for efficiency and productivity benchmarks across plantations.

Apparently Plantation owners also experimented with ‘incentive plans’ (modern day Management by Objectives) for their ‘Human Capital’ aimed at achieving new levels of performance, but also used physical punishments for any shortfall. Group incentives were also employed to drive other behaviours.

Since slave owners had total control over their ‘Human Capital’ they were able to systematically collect data on their workforce, and could freely experiment with different tactics to increase the productivity and efficiency of their Human Capital, ultimately maximizing their profits.

I hope that in our enthusiasm for both the term and the practice of modern human capital management we never forget the very people that make up our workforce. While todays labour can generally be considered voluntary, it is all too easy to reduce people to a statistic on a headcount or productivity report and as such forget their inherent humanity and treat them in ways that both dehumanize us as HR professionals and them as human beings.

This article has certainly caused me to reflect on the term Human Capital Management and I’m not sure I’ll be enthusiastically using it in the future.

What do you think?

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