1. An investment perspective of HRM
Learning outcomes:
Context of SHRM
Investment perspective
Valuation of Assets
Understanding and measuring human capital
HR Value chain
Factors influencing how “investment oriented” an organization is

2. An investment perspective of HRM
Nordstrom:
How can retailer gain a competitive advantage in a cutthroat marketplace?
Nordstrom, has consistently produced above industry average profits and continued to be profitable when its competitor’s profit were falling or flat.
Nordstrom’s success lies with the different way its manages its employees
Sales employees???
Superlative customer services
Heavy investment in the organization’s sales force
Extensive training

3. An investment perspective of HRM
Effective organization:
Source of competitive advantage is not only from product design or service, marketing strategy or financial services but having appropriate systems for attracting, motivating, retaining and managing organization’s HR.
Adopting a strategic view of HR, in large part, involves considering employees as human Assets.
Appropriate polices and programs as investment in human assets to increase their value to the organization and market.
What an asset actually is; something of value and worth
Employees do have value and worth
Sources of employee value

4. An investment perspective of HRM
Sources of employee value
Technical knowledge:
Markets, customers, processes, environment
Ability to learn and Grow
Openness to new ideas, acquisition of knowledge/skills
Decision making capabilities
Motivation
Commitment
Teamwork
Interpersonal skills
Leadership ability

5. An investment perspective of HRM
Adopting an investment perspective
Physical and Capital assets in organizations such as plant, property, machinery, and technology are acquired and subsequently managed most effectively by treating them as investments.
Return of such expenditures?
Expense of new training program for employees
Costs against potential benefits of training
Taking investment perspective towards HR is critical

6. An investment perspective of HRM
Invest in physical assets:
Facilities
Products
Services
Technologies
Markets
Human assets can not be duplicated and become competitive advantage!!!!
Critical for organization to select to invest in physical or human assets
What do you think????????

7. An investment perspective of HRM
Valuation of Assets:
Ease of measurement
Financial
Equity, securities, investment, receiveables
Physical
Plant, land, equipment, raw materials
Market
Goodwill, branding, product line, customer loyalty, trademarks
Operational
Management practices, technology, structure of work
Human
Education, knowledge, skills, competencies, personal relationship
More Difficult

8. An investment perspective of HRM
Understanding and measuring human capital
HPWS???
Demonstrated that integrated, strategically focused HR practices were directly related to profitability and market value.
Organizational profitability is the effective management of human capital
Human capital can result in up to 47 percent increase in market value
Variety of HR management quality indices found that organizations enjoyed 391 percent on ROI in human capital
Its HR value chain……

9. An investment perspective of HRM
HR value chain:
Performance could be measured via four different sets of outcomes;
Employee
Organizational
Financial
Market based
Sequential cause – and – effect relationship

10. organizational outcomes Financial/ accounting outcomes
An investment perspective of HRM
HR value chain
Employee outcomes
Attitudes
Behavior
organizational outcomes
Productivity
Quality
Financial/ accounting outcomes
Expenses
Revenues
profitability
Market based outcomes
stock price

11. An investment perspective of HRM
Factors influencing how “investment oriented”
An organization is???
Management values
Attitude toward risk
Nature of employee skills
Utilitarianism
Availability of outsourcing

12. An investment perspective of HRM
Management Values
Management appreciate the value of its human assets relative to capital assets such as brand names, distribution channels, facilities and equipment.
Organization see its people as being central to its mission?
Role of human assets in achieving goals?
Management philosophy encourage the development of employees?

13. An investment perspective of HRM
Attitude towards risk:
Trade off exist between risk and return
Higher risk investments generally are expected to have a greater potential returns
Lower risk, safer investment
Invest on human asset is more risky than physical
Investment on employees in necessary for success or invest on physical resources for competitive advantage

14. An investment perspective of HRM
Nature of employees skills:
Specialized skills
Applicable widely in industry
Specialized training
Retention strategy
Marketable skills
Demanded skills or less marketable

15. An investment perspective of HRM
Utilitarianism:
Mentality of the organization
It should be useful and practical rather than attractive
Cost benefit analysis
Difficulty to quantify

16. An investment perspective of HRM
Availability of outsourcing
Cost effective outsourcing
Investment produce a sustainable competitive advantage
Employees in fast food industry
McDonalds, invest in their people or physically?