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An investment perspective of HRM

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Presentation on theme: "An investment perspective of HRM"— Presentation transcript:

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?

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