Presentation on theme: "An investment perspective of HRM"— Presentation transcript:
1 An investment perspective of HRM Learning outcomes:Context of SHRMInvestment perspectiveValuation of AssetsUnderstanding and measuring human capitalHR Value chainFactors 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 employeesSales employees???Superlative customer servicesHeavy investment in the organization’s sales forceExtensive 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 worthEmployees do have value and worthSources of employee value
4 An investment perspective of HRM Sources of employee valueTechnical knowledge:Markets, customers, processes, environmentAbility to learn and GrowOpenness to new ideas, acquisition of knowledge/skillsDecision making capabilitiesMotivationCommitmentTeamworkInterpersonal skillsLeadership ability
5 An investment perspective of HRM Adopting an investment perspectivePhysical 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 employeesCosts against potential benefits of trainingTaking investment perspective towards HR is critical
6 An investment perspective of HRM Invest in physical assets:FacilitiesProductsServicesTechnologiesMarketsHuman assets can not be duplicated and become competitive advantage!!!!Critical for organization to select to invest in physical or human assetsWhat do you think????????
7 An investment perspective of HRM Valuation of Assets:Ease of measurementFinancialEquity, securities, investment, receiveablesPhysicalPlant, land, equipment, raw materialsMarketGoodwill, branding, product line, customer loyalty, trademarksOperationalManagement practices, technology, structure of workHumanEducation, knowledge, skills, competencies, personal relationshipMore Difficult
8 An investment perspective of HRM Understanding and measuring human capitalHPWS???Demonstrated that integrated, strategically focused HR practices were directly related to profitability and market value.Organizational profitability is the effective management of human capitalHuman capital can result in up to 47 percent increase in market valueVariety of HR management quality indices found that organizations enjoyed 391 percent on ROI in human capitalIts HR value chain……
9 An investment perspective of HRM HR value chain:Performance could be measured via four different sets of outcomes;EmployeeOrganizationalFinancialMarket basedSequential cause – and – effect relationship
10 organizational outcomes Financial/ accounting outcomes An investment perspective of HRMHR value chainEmployee outcomesAttitudesBehaviororganizational outcomesProductivityQualityFinancial/ accounting outcomesExpensesRevenuesprofitabilityMarket based outcomesstock price
11 An investment perspective of HRM Factors influencing how “investment oriented”An organization is???Management valuesAttitude toward riskNature of employee skillsUtilitarianismAvailability of outsourcing
12 An investment perspective of HRM Management ValuesManagement 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 returnHigher risk investments generally are expected to have a greater potential returnsLower risk, safer investmentInvest on human asset is more risky than physicalInvestment 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 skillsApplicable widely in industrySpecialized trainingRetention strategyMarketable skillsDemanded skills or less marketable
15 An investment perspective of HRM Utilitarianism:Mentality of the organizationIt should be useful and practical rather than attractiveCost benefit analysisDifficulty to quantify
16 An investment perspective of HRM Availability of outsourcingCost effective outsourcingInvestment produce a sustainable competitive advantageEmployees in fast food industryMcDonalds, invest in their people or physically?