The Investment Perspective In Human Resource Management

1. The Investment Perspective In Human Resource Management

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

3. 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

4. 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)

5. 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.

6. 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

7. 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.

8. 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.

9. 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

10. 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

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

12. 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

13. Potential PC STARS WH DW Performance

14. 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 organization’s future • Focusing on Technical Employees • Liberal HR Policies (e.g. Transfer) • Effective management of diversity • Prevention of sexual harassment

15. 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

16. 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

17. 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

18. 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

19. 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

20. INVESTMENT PRACTICES FOR RETENTION • Creating confidence in the organization’s 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

21. 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 organization’s future • Focusing on Technical Employees • Liberal HR Policies (e.g. Transfer) • Effective management of diversity • Prevention of sexual harassment

22. 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

23. 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

24. NONTRADITIONAL INVESTMENT in HR APPROACHES • Investment in disabled employees • Investments in employee health • Countercyclical hiring