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
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 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
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 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
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 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.

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 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
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 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

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 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

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?