1. An Investment Perspective of Human Resources Management

2. The Strategic View of Human Resources
Employees are human assets that increase in value to the organization and the marketplace when investments of appropriate policies and programs are applied.
Effective organizations recognize that their employees do have value, much as same as the organization’s physical and capital assets have value.
Employees are a valuable source of sustainable competitive advantage.

4. Sources of Employee Value
Technical Knowledge
Markets, Processes, Customers, Environment
Ability to Learn and Grow
Openness to new ideas
Acquisition of knowledge and skills
Decision Making Capabilities
Motivation
Commitment
Teamwork
Interpersonal skills, Leadership ability

5. Adopting an Investment Perspective
Human assets are core competencies and have become a source of competitive advantage
HCL Technologies
MANTRA:
“EMPLOYEES FIRST
CUSTOMERS SECOND”.
- Vineet Nayar, CEO

6. Adopting an Investment Perspective (Cont.)
Required skills become less manual, more knowledge-based
Appropriate, integrated, strategy-consistent approach is needed

7. A Dilemma Failure to invest in employees causes
Inefficiency
Weakening of organization’s competitive position
Human assets are risky investment
Require extra effort to ensure that they are not lost

8. Retention Strategies Employee growth and training and development
Pay for performance programs

9. Hygiene factors (extrinsic factors)
Motivators (intrinsic factors)
Better pay and working condition
Recognition, appreciation and providing challenging work
These factors just keep the employees from becoming dissatisfied
The best way to motivate a person is to provide with motivator factors
Adding more of these factors will not generate extra motivation for the employees
Adding more of these factors will enrich the job and get the employees further motivated

10. Valuation of Asset and Types of Organizational Assets/Capital

11. Research Findings
HR practices directly related to profitability & market value
Primary reason for profitability:
Effective management of human capital
Integrated management of human capital can result in 47% increase in market value
Top 10% of organizations studied experienced 391% return on investment in management of human capital

12. Exhibit 1-3 HR Value Chain

13. HR Metrics Are Complex
90% of Fortune 500 organizations evaluate HR operations on basis of three metrics:
Employee retention and turnover
Corporate morale
Employee satisfaction
These metrics do not necessarily illustrate how HR impacts
Profits
Shareholder value

14. Mercer Model of Measuring HR Impact
Identify a problem HR can impact
Calculate actual cost of the problem
Choose HR solution that addresses the problem
Calculate the the cost of solution
Calculate value of improvement 6 to 24 months after implementation
Calculate specific return on investment
ROI in human assets often not realized until some time in future

15. Exhibit 1-4 Factors Influencing Investment Orientation

16. Investment Orientation Factors
Senior Management Values & Actions
Managers need “investment orientation” toward people
Attitude Toward Risk
Investment in human resources inherently riskier
Human assets never absolutely “owned”
Nature of Skills Needed by Employees
The more marketable employee skills, the riskier the firm’s investment in skill development

17. Investment Orientation Factors
Utilitarian (“Bottom Line”) Mentality
Attempt made to quantify employee worth through cost-benefit analysis
“Soft” benefits of HR programs difficult to objectively quantify
Availability of Outsourcing
Given availability of cost-effective outsourcing, investments in HR should produce highest returns & sustainable competitive advantages.

18. Investment Orientation Factors: Models of Strategy
Industrial Organization (O/I) Model
External environment is primary determinant of organizational strategy rather than internal decisions of managers
Environment presents threats & opportunities
All competing organizations control or have equal access to resources
Resources are highly mobile between firms
Organizational success is achieved by
Offering goods & services at lower costs than competitors
Differentiating products to bring premium prices

19. Investment Orientation Factors: Models of Strategy
Resource-Based View (RBV)
An organization’s resources & capabilities, not external environmental conditions, should be basis for strategic decisions
Competitive advantage is gained through acquisition & value of organizational resources
Organizations can identify, locate & acquire key valuable resources
Resources are not highly mobile across organizations & once acquired are retained
Valuable resources are costly to imitate & non-substitutable

20. I am convinced that nothing we do is more important than hiring and developing people. At the end of the day, we bet on people, not on strategies.” – Lawrence Bossidy

21. Thank You!