The Investment Perspective In Human Resource Management

Investment Perspective in HR

 When employees are viewed as variable costs, there is little recognition of the firm’s contributions to their training and the costs of recruiting and training replacements.

 Human capital is not often included in the determination of an organization’s business capital  HUMAN CAPITAL: 1) highly skilled, 2) knowledgeable, 3) stable labor force

HR INVESTMENT considerations

 MANAGEMENT VALUES • Values and philosophies of senior management are communicated through HR policies and practices • • How 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

HR INVESTMENT considerations

 RISKS AND RETURN ON INVESTMENT IN HR • Investment in HR is more risky since employer does not own the resource unlike machines or technology • • IN 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)

HR INVESTMENT considerations

 ECONOMIC RATIONALE FOR INVESTMENT IN TRAINING • Specific vs. general training in human capital theory (Gary Becker, Nobel Laureate - Economics) – Specific training - skills that are specific to the organization – General training - skills that are transferable to other employees and other organizations.

– Employers are generally reluctant to lay-off employees they have invested in specific training – however, the distinction between general and specific training is misleading. Few skills are non-transferable.

HR INVESTMENT considerations

 UTILITY THEORY • Attempts 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

HR INVESTMENT considerations

 OUOTSOURCING AS AN ALTERNATIVE TO INVESTMENT IN HR • • • Investments in HR should support organizational strategy (vertical alignment) Strategic outsourcing is advocated where – world-class capabilities and a strategic advantage can not be developed – outsourcing is clearly cheaper – dependency on suppliers can be avoided Many HR functions have been outsourced: executive search, executive compensation, etc.

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.

INVESTMENT IN TRAINING & DEVT

 Investments in employability • job security from being employable not from being employed • social security vs. job security  Increased investment and time spent in training • • apprenticeship training mandatory training time

INVESTMENT IN TRAINING & DEVT

 On-the-job Training • cross traini • self-instruction (CBT) • personal career and development plans  Investments in Management Development • Job rotation programs • • • cross-functional assignments executive development programs mentoring and coaching programs

INVESTMENT IN TRAINING & DEVT

 Prevention of skill obsolescence • rapid changes in technology • expectancy theory vs. human capital theory – employee’s expectation of their ability to acquire new skills and the perceived reward instrumentality of such skills explain employee’s motivation for skill acquisition – Many models in preventing skill obsolescence - HP, Intel, IBM, Motorola; the emergence of corporate universities.

INVESTMENT IN TRAINING & DEVT

 Reductions in career plateauing • occurs when employees have occupied a job for some period, have mastered all aspects of the job, and have few prospects for promotion • • • creates resentment and a sense of futility natural consequence of lck of organizational growth or change can be reduced by constant inventory of potentials vs performance

PC STARS WH DW

Performance

INVESTMENT PRACTICES FOR RETENTION

          Organizational Cultures emphasizing Interpersonal Relationship Values Focusing on Technical Employees Effective Selection Procedures Equitable compensation and benefits Job enrichment and satisfaction Practices providing for work-life balance Creating confidence in the organization’s future Focusing on Technical Employees Liberal HR Policies (e.g. Transfer) Effective management of diversity Prevention of sexual harassment

INVESTMENT PRACTICES FOR RETENTION

 Organizational Cultures emphasizing Interpersonal Relationship Values • • • • • • • • • respect for people team orientation “fearless” culture positive relationships with superiors absence of conflict participation in decision making informal cultures information sharing organizational support for employees

Improved Retention: median was 14 mos longer

INVESTMENT PRACTICES FOR RETENTION

 Effective Selection Procedures • • • • • • Person-job fit Organization-person fit Careful selection Valid tests Improved interviewing techniques Realistic job previews

Improved Retention

INVESTMENT PRACTICES FOR RETENTION

 • • • Equitable compensation and benefits • • • • Fair performance appraisal equitable ratios of inputs to outputs exclusion of politics in compensation decisions communication of compensation structures and procedures performance-based compensation pay incentives benefits that are valued

INVESTMENT PRACTICES FOR RETENTION

 Job enrichment and satisfaction • • • • • • Building increased responsibility Autonomy Knowledge of results meaningful work Enhanced job latitude Job satisfaction – When high performing employees feel undervalued, they tend to have higher turnover rates

INVESTMENT PRACTICES FOR RETENTION

 Practices providing for work-life balance • • • • • Alternative work schedules Child-care services family leave Telecommuting Flextime – Unreasonable workloads found to be associated with turnover

INVESTMENT PRACTICES FOR RETENTION

 Creating confidence in the organization’s future • setting clear directions for the future and building confidence in the vision of the future improve retention  Focusing on Technical Employees  Liberal HR Policies (e.g. Transfer)  Effective management of diversity  Prevention of sexual harassment

INVESTMENT PRACTICES FOR RETENTION

          Organizational Cultures emphasizing Interpersonal Relationship Values Focusing on Technical Employees Effective Selection Procedures Equitable compensation and benefits Job enrichment and satisfaction Practices providing for work-life balance Creating confidence in the organization’s future Focusing on Technical Employees Liberal HR Policies (e.g. Transfer) Effective management of diversity Prevention of sexual harassment

INVESTMENTS IN JOB-SECURE WORKPLACES

 Recognition of the costs of downsizing and layoffs • • often, it is more cost-effective not to downsize often not practical because of LIFO practice  Avoiding business-cycle-based layoffs • offering employment guarantees • loaning out employees during downturns • cost sharing practices

INVESTMENTS IN JOB-SECURE WORKPLACES

 Offering alternatives to layoffs • • direct HR Planning toward employment stability placing emphasis on training and retraining • • • • • • • lean staffing even during prosperity maintaining stability with buffers (OT, PT) Correcting poor performance and terminating with warranted Selecting new employees for long-term Using probationary periods effectively Hiring non-specialists when possible Training for skills needed for next stage of product cycle life

NONTRADITIONAL INVESTMENT in HR APPROACHES

 Investment in disabled employees  Investments in employee health  Countercyclical hiring