The Investment Perspective In Human Resource Management

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The Investment Perspective In Human Resource
Management
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Investment Perspective in HR

• When employees are viewed as variable costs,
  there is little recognition of the firms
  contributions to their training and the costs of
  recruiting and training replacements.
• Human capital is not often included in the
  determination of an organizations business
  capital
• HUMAN CAPITAL 1) highly skilled, 2)
  knowledgeable, 3) stable labor force

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HR INVESTMENT considerations

• MANAGEMENT VALUES
• Values and philosophies of senior management are
  communicated through HR policies and practices
• How employees are treated is a reflection of
  their values and communicates whether
  organization view employees from an investment
  perspective.
• Those adopting an investment perspective seek to
  enhance the value of their human capital, pr at
  the very least, prevent their depreciation

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HR INVESTMENT considerations

• RISKS AND RETURN ON INVESTMENT IN HR
• Investment in HR is more risky since employer
  does not own the resource unlike machines or
  technology
• IN order for investments in HR to be attractive,
  the returns must be great enough to overcome
  risks.
• Investment in HR may be long-term and benefits
  may not be direct (I.e., loyalty, organizational
  commitment, etc)

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HR INVESTMENT considerations

• ECONOMIC RATIONALE FOR INVESTMENT IN TRAINING
• Specific vs. general training in human capital
  theory (Gary Becker, Nobel Laureate - Economics)
• Specific training - skills that are specific to
  the organization
• General training - skills that are transferable
  to other employees and other organizations.
• Employers are generally reluctant to lay-off
  employees they have invested in specific training
• however, the distinction between general and
  specific training is misleading. Few skills are
  non-transferable.

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HR INVESTMENT considerations

• UTILITY THEORY
• Attempts to determine the economic value of
  human resource programs, activities and
  procedures.
• To what extent can the results of HR programs be
  quantified?
• ROI considerations particularly in training

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HR INVESTMENT considerations

• OUOTSOURCING AS AN ALTERNATIVE TO INVESTMENT IN
  HR
• Investments in HR should support organizational
  strategy (vertical alignment)
• Strategic outsourcing is advocated where
• world-class capabilities and a strategic
  advantage can not be developed
• outsourcing is clearly cheaper
• dependency on suppliers can be avoided
• Many HR functions have been outsourced executive
  search, executive compensation, etc.

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Mergers and Acquisitions

• What are the negative implications of mergers and
  acquisitions to the investment perspective in HR?
• Identify at least three ways in which the
  investment perspective in HR can still be upheld
  even during mergers and acquisitions.

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INVESTMENT IN TRAINING DEVT

• Investments in employability
• job security from being employable not from being
  employed
• social security vs. job security
• Increased investment and time spent in training
• apprenticeship training
• mandatory training time

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INVESTMENT IN TRAINING DEVT

• On-the-job Training
• cross traini
• self-instruction (CBT)
• personal career and development plans
• Investments in Management Development
• Job rotation programs
• cross-functional assignments
• executive development programs
• mentoring and coaching programs

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INVESTMENT IN TRAINING DEVT

• Prevention of skill obsolescence
• rapid changes in technology
• expectancy theory vs. human capital theory
• employees expectation of their ability to
  acquire new skills and the perceived reward
  instrumentality of such skills explain employees
  motivation for skill acquisition
• Many models in preventing skill obsolescence -
  HP, Intel, IBM, Motorola the emergence of
  corporate universities.

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INVESTMENT IN TRAINING DEVT

• Reductions in career plateauing
• occurs when employees have occupied a job for
  some period, have mastered all aspects of the
  job, and have few prospects for promotion
• creates resentment and a sense of futility
• natural consequence of lck of organizational
  growth or change
• can be reduced by constant inventory of
  potentials vs performance

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Potential
PC
STARS
WH
DW
Performance
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INVESTMENT PRACTICES FOR RETENTION

• Organizational Cultures emphasizing Interpersonal
  Relationship Values Focusing on Technical
  Employees
• Effective Selection Procedures
• Equitable compensation and benefits
• Job enrichment and satisfaction
• Practices providing for work-life balance
• Creating confidence in the organizations future
• Focusing on Technical Employees
• Liberal HR Policies (e.g. Transfer)
• Effective management of diversity
• Prevention of sexual harassment

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INVESTMENT PRACTICES FOR RETENTION

• Organizational Cultures emphasizing Interpersonal
  Relationship Values
• respect for people
• team orientation
• fearless culture
• positive relationships with superiors
• absence of conflict
• participation in decision making
• informal cultures
• information sharing
• organizational support for employees

Improved Retention median was 14 mos longer
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INVESTMENT PRACTICES FOR RETENTION

• Effective Selection Procedures
• Person-job fit
• Organization-person fit
• Careful selection
• Valid tests
• Improved interviewing techniques
• Realistic job previews

Improved Retention
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INVESTMENT PRACTICES FOR RETENTION

• Equitable compensation and benefits
• Fair performance appraisal
• equitable ratios of inputs to outputs
• exclusion of politics in compensation decisions
• communication of compensation structures and
  procedures
• performance-based compensation
• pay incentives
• benefits that are valued

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INVESTMENT PRACTICES FOR RETENTION

• Job enrichment and satisfaction
• Building increased responsibility
• Autonomy
• Knowledge of results
• meaningful work
• Enhanced job latitude
• Job satisfaction
• When high performing employees feel undervalued,
  they tend to have higher turnover rates

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INVESTMENT PRACTICES FOR RETENTION

• Practices providing for work-life balance
• Alternative work schedules
• Child-care services
• family leave
• Telecommuting
• Flextime
• Unreasonable workloads found to be associated
  with turnover

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INVESTMENT PRACTICES FOR RETENTION

• Creating confidence in the organizations future
• setting clear directions for the future and
  building confidence in the vision of the future
  improve retention
• Focusing on Technical Employees
• Liberal HR Policies (e.g. Transfer)
• Effective management of diversity
• Prevention of sexual harassment

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INVESTMENT PRACTICES FOR RETENTION

• Organizational Cultures emphasizing Interpersonal
  Relationship Values Focusing on Technical
  Employees
• Effective Selection Procedures
• Equitable compensation and benefits
• Job enrichment and satisfaction
• Practices providing for work-life balance
• Creating confidence in the organizations future
• Focusing on Technical Employees
• Liberal HR Policies (e.g. Transfer)
• Effective management of diversity
• Prevention of sexual harassment

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INVESTMENTS IN JOB-SECURE WORKPLACES

• Recognition of the costs of downsizing and
  layoffs
• often, it is more cost-effective not to downsize
• often not practical because of LIFO practice
• Avoiding business-cycle-based layoffs
• offering employment guarantees
• loaning out employees during downturns
• cost sharing practices

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INVESTMENTS IN JOB-SECURE WORKPLACES

• Offering alternatives to layoffs
• direct HR Planning toward employment stability
• placing emphasis on training and retraining
• lean staffing even during prosperity
• maintaining stability with buffers (OT, PT)
• Correcting poor performance and terminating with
  warranted
• Selecting new employees for long-term
• Using probationary periods effectively
• Hiring non-specialists when possible
• Training for skills needed for next stage of
  product cycle life

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NONTRADITIONAL INVESTMENT in HR APPROACHES

• Investment in disabled employees
• Investments in employee health
• Countercyclical hiring