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Investment Perspective
Investment Perspective
2 Investment Perspective in HR
When employees are viewed as variable costs, there is little recognition of the firms
contributions to their training and the costs of recruiting and training replacements.Human
capital is not often included in the determination of an organizations business capitalHUMAN
CAPITAL: 1) highly skilled, 2) knowledgeable, 3) stable labor force
3 HR INVESTMENT considerations
MANAGEMENT VALUESValues and philosophies of senior management are communicated
through HR policies and practicesHow 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 HRInvestment in HR is more risky since
employer does not own the resource unlike machines or technologyIN 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 TRAININGSpecific vs. general training in
human capital theory (Gary Becker, Nobel Laureate - Economics)Specific training - skills that
are specific to the organizationGeneral training - skills that are transferable to other employees
and other organizations.Employers are generally reluctant to lay-off employees they have
invested in specific traininghowever, the distinction between general and specific training is
misleading. Few skills are non-transferable.
6 HR INVESTMENT considerations
UTILITY THEORYAttempts 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 HRInvestments in HR
should support organizational strategy (vertical alignment)Strategic outsourcing is advocated
whereworld-class capabilities and a strategic advantage can not be developedoutsourcing is
clearly cheaperdependency on suppliers can be avoidedMany 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.
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