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Strategic Human Resource Management (MHRM 612-2) Strategic Human Resource Management (MHRM 612-2)

The Investment Perspective of Strategic Human Resource Management states that: 1) Employees should be viewed as valuable investments rather than just costs, as human capital and skills are crucial assets for organizations. 2) Determinants of HR investment decisions include senior management values communicated through policies, the level of risk tolerance, and the nature of employees' skills. 3) Organizations taking an investment perspective aim to enhance and retain human capital value through training, development, retention strategies, and other non-traditional wellness investments.

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81 views12 pages

Strategic Human Resource Management (MHRM 612-2) Strategic Human Resource Management (MHRM 612-2)

The Investment Perspective of Strategic Human Resource Management states that: 1) Employees should be viewed as valuable investments rather than just costs, as human capital and skills are crucial assets for organizations. 2) Determinants of HR investment decisions include senior management values communicated through policies, the level of risk tolerance, and the nature of employees' skills. 3) Organizations taking an investment perspective aim to enhance and retain human capital value through training, development, retention strategies, and other non-traditional wellness investments.

Uploaded by

endale
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Strategic Human

Resource
Management
(MHRM 612-2)
CHAPTER . .
.
5
INVESTMENT PERSPECTIVE
OF STRATEGIC HUMAN
RESOURCE MANAGEMENT

Addis Ababa University


School of Commerce
The Investment Perspective of
SHRM
• employees are viewed as valuable investments
• Some view their employees as variable costs
of production, while physical assets as
What does investments
• Employees are human assets
the
• Human S & K are crucial to everything that is
Investment produced
Perspective • Employees are valuable investments of an org
of SHRM • employees have value much as physical &
capital assets
state? • Employees are valuable source of sustainable
competitive advantage
Abraraw-SHRM-05-2017
Determinants of
HR Investment
•
Decisions
HR decisions are influenced by the values of senior
management
• values and philosophies are communicated through
HR policies and practices
• In case of change management, approach of senior
management clearly defines their views
Manage- • How employees are treated is
ment – a reflection of their values and
Values – communicates their views on employees
• An org is investment oriented if its people are the
core of its mission
• Those adopting an investment perspective
– enhance the value of their human capital
– prevent their depreciation Abraraw-SHRM-05-2017
Determinants …
• Investment in HR is more risky since
employer does not own the resource
unlike machines or technology
• Highly dependent of the organization
Attitudes culture and other practices
Toward • Difficult to retain current employees
Risk who see no opportunities for growth
• Risk of loosing the efficient employees
• Competing firms are often willing to
pay more to trained employees
Abraraw-SHRM-05-2017
Determinants …
• Specific training – skills that are specific to the
organization
• General training – skills that are transferable to
other employees and other orgs
• Employers are generally reluctant to lay-off
Nature of employees they have invested in specific training
• Although companies invest highly in general
Employee training, it involves high risk
Skills • Investment is less risky when specific skills are
not applicable to other orgs
• When specific skills are on a high demand, and
can move from one employer to another, then
investment involves risk
Abraraw-SHRM-05-2017
Determinants …
• Also known as bottom line perspective
• Org evaluates investments through
cost-benefit analysis
• Cost of any investment is compared
with its benefits
Utilitarianism • attempts to determine the economic
value of HR programs, activities and
procedures.
• But, “Soft” benefits of HR programs
are difficult to objectively quantify
Abraraw-SHRM-05-2017
Determinants …
• Outsourcing is advocated where:
  capabilities cannot be developed
 it is cheaper than making
  there is excessive dependency on suppliers
 Specialists are available outside the firm

Availability of  If cost-effective outsourcing is available,


Outsourcing
investments will be made only in HR

activities producing the highest returns and

largest sustainable competitive advantages.


Abraraw-SHRM-05-2017
Investment …
• Investments in Employability
• Investments in Management
Development
Investment
in Training
• Prevention of Skill
and Obsolescence
Development
• On-the-Job Training
• Reductions in Career
Plateauing
Abraraw-SHRM-05-2017
Investment …
• investing in HR practices that affect the org.’s
culture
• hiring employees that match well with the
org., the job, and their co-workers
INVESTMENT • Providing performance-based compensation,
pay incentives, and benefits that are valued
FOR by employees
IMPROVED
• obtaining a balance between work and
RETENTION
home-life
oAlternative work schedules
ochild care services
oprovisions for family leave Abraraw-SHRM-05-2017
Investment …
• Investing on employment guarantee
o e.g. keeping employees on the payroll
though business downturns
• Investing on employment security
Investment o through understaffing
in o through flexibility in job assignment
Job-Secure
o through work sharing
Workforce

Abraraw-SHRM-05-2017
Investment …
• providing support for disabled
employees
• increasing the quality of nutrition
• Providing free or subsidized lunch
Non-
Traditional • providing basic medical care
Investment • reducing smoking
Approaches • investing in fitness centers
• preventing HIV/AIDS

Abraraw-SHRM-05-2017
?

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