an investment perspective of hrm learning outcomes: context of shrm investment perspective valuation...
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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
• 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
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
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
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
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????????
An investment perspective of HRM
Valuation of Assets:
An investment perspective of HRM
Ease of measurement
More Difficult
Financial
Physical
Market
Operational
Human
Equity, securities, investment, receiveables
Plant, land, equipment, raw materials
Goodwill, branding, product line, customer loyalty, trademarks
Management practices, technology, structure of work
Education, knowledge, skills, competencies, personal
relationship
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……
An investment perspective of HRM
HR value chain:• Performance could be measured via four
different sets of outcomes;– Employee– Organizational– Financial– Market basedSequential cause – and – effect relationship
An investment perspective of HRM
• HR value chain
An investment perspective of HRM
Employee outcomes
• Attitudes• Behavior
organizational outcomes
• Productivity • Quality
Financial/ accounting outcomes
• Expenses• Revenues
• profitability
Market based outcomes
• stock price
• Factors influencing how “investment oriented”An organization is???– Management values– Attitude toward risk– Nature of employee skills– Utilitarianism– Availability of outsourcing
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?
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
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
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
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?
An investment perspective of HRM