Thinking about 'People' as Capital (Part 3): Is 'Human Capital Management' just about Reskilling?

I have been hearing the term "Reskilling" much more often lately.

In a survey asking why companies engage in reskilling,
'to develop human resources with the skills necessary for business growth and new business ventures'
was the most common answer, exceeding 75%. Perhaps because of that,

'Is human capital management basically just the promotion of reskilling?'
is a question I sometimes receive at training sessions.

Reskilling is a topic also discussed in the context of side jobs, second careers, and preparations for retirement, but here I will proceed from the perspective of human capital management, specifically'reskilling for the company'.

The answer to the previous question is 'Yes and No'.

Not the same, but inseparable

From the perspective of 'the company spending money to provide employees with opportunities for growth,'reskilling certainly embodies human capital management. However, the two are not completely synonymous. I believe it is appropriate to view

reskilling as 'one of the measures' to realize human capital management.

Let's organize the differences between the two.

'Human capital management' is a management method itself that treats human resources as 'capital' and invests in their growth and utilization.
The goal is the sustainable growth and strengthening of corporate competitiveness, covering all aspects of human resource strategy, from recruitment and development to evaluation and environment improvement.

On the other hand, 'reskilling' refers to initiatives that have existing employees acquire new skills and adapt to new business areas.
The goal is to respond to changes in the business environment and effectively utilize human resources, with the focus mainly narrowed down to skill development and career transition.

In other words, while human capital management refers to the entire corporate human resource strategy, reskilling is a concept within that which specifically focuses on 'skill transformation'.

Why is reskilling essential now?

In recent years, due to rapid changes in the environment surrounding companies, reskilling has become an essential element of human capital management. There are mainly four backgrounds to this.

The first is the acceleration of digitalization and DX. With the evolution of AI utilization, data analysis, and cloud technology, conventional work is changing significantly, creating a need for existing employees to acquire new skills.

The second is labor shortages and recruitment difficulties.
With the declining birthrate and aging population making new recruitment difficult, the aim is to reduce dependence on mid-career hiring by enhancing the skills of existing employees.

The third is the spread of job-based employment.
As the practice of clearly defining job duties and assigning personnel progresses, passive career paths based on seniority will no longer be viable.

The fourth is the request for disclosure of human capital information.
There is a growing movement to disclose how investments in people are being made to investors and the market (I will talk in detail about the international standard 'ISO 30414' established in 2018 in the final installment). Whether or not a company has a human resource development strategy that includes reskilling is becoming a factor in corporate evaluation.

What these four changes have in common isthe reality that 'necessary skills are being replaced at an unprecedented speed'. That is why, instead of re-hiring people, we are having the people we already have re-learn... Reskilling has leaped to the center of strategy.

It is different from "multi-skilling"

Also, reskilling is different from "multi-skilling."
While reskilling aims to transition into new business areas in response to technological innovation and market changes, multi-skilling involves adding multiple skills related to existing job duties to increase the breadth and flexibility of work.
For example, in a factory, having employees who can handle different assembly lines to respond to sudden absences or production increases is one such case.

There is one thing I would like to add here.
Reskilling is not just a matter within the workplace.
When thinking about your own second career, you will inevitably face situations where the value you provide and the conditions under which you work change.
That is precisely a situation where reskilling for the individual is called into question.
I hope you will read this not just as a company policy, but also as something that concerns you personally.

Next time, we will look at what is required of companies to make that reskilling "successful."

Thank you for reading until the end.
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