Professional Documents
Culture Documents
CHAPTER 1:1:
AN
AN INVESTMENT
INVESTMENT
PERSPECTIVE
PERSPECTIVE OF
OF
HUMAN
HUMAN
RESOURCE
RESOURCE
MANAGEMENT
MANAGEMENT
•• Determines
Determines how
how to
to best
best invest
invest in
in people
people
•• Costs
Costs
–– Out-of-pocket
Out-of-pocket
–– Opportunity
Opportunity
•• Human
Human assets
assets become
become competitive
competitive advantage
advantage
•• Required
Required skills
skills become
become less
less manual,
manual, more
more
knowledge-based
knowledge-based
•• Appropriate,
Appropriate, integrated,
integrated, strategy-consistent
strategy-consistent
approach
approach isis needed
needed
•• Failure
Failure to
to invest
invest in
in employees
employees causes
causes
––Inefficiency
Inefficiency
––Weakening
Weakening ofof organization’s
organization’s competitive
competitive
position
position
•• Human
Human assets
assets are
are risky
risky investment
investment
•• Require
Require extra
extra effort
effort to
to ensure
ensure that
that they
they
are
are not
not lost
lost
•• 90%
90% of
of Fortune
Fortune 500
500 organizations
organizations evaluate
evaluate
HR
HR operations
operations on
on basis
basis of
of three
three metrics:
metrics:
–– Employee
Employeeretention
retentionand
andturnover
turnover
–– Corporate
Corporatemorale
morale
–– Employee
Employeesatisfaction
satisfaction
•• These
These metrics
metrics do
do not
not necessarily
necessarily illustrate
illustrate
how
how HR
HR impacts
impacts
–– Profits
Profits
–– Shareholder
Shareholdervalue
value
Copyright © 2005 South-Western. All rights reserved. 1–10
Mercer
Mercer Model
Model of
of Measuring
Measuring HR
HR Impact
Impact
•• Identify
Identify problem
problem HRHR can
can impact
impact
•• Calculate
Calculate actual
actual cost
cost of
of problem
problem
•• Choose
Choose HR HR solution
solution that
that addresses
addresses problem
problem
•• Calculate
Calculate cost
cost of
of solution
solution
•• Calculate
Calculate value
value of
of improvement
improvement 66 to to 24
24 months
months
after
after implementation
implementation
•• Calculate
Calculate specific
specific return
return on
on investment
investment
•• ROI
ROI inin human
human assets
assets often
often not
not realized
realized until
until some
some
time
time inin future
future
•• Sees
Sees people
people asas central
central to
to mission
mission & & strategy
strategy
•• Mission
Mission statement
statement & & strategic
strategic objectives
objectives
espouse
espouse value
value ofof human
human assets
assets inin achieving
achieving
goals
goals
•• Management
Management philosophy
philosophy encouraging
encouraging
development
development & & retention
retention ofof human
human assets
assets
•• Does
Does not
not treat
treat human
human assets
assets inin same
same ways
ways
as
as physical
physical assets
assets
•• Senior
Senior Management
Management Values
Values &
&Actions
Actions
–– Managers
Managersneed
need“investment
“investmentorientation”
orientation”toward
toward
people
people
•• Attitude
Attitude Toward
Toward Risk
Risk
–– Investment
Investmentininhuman
humanresources
resourcesinherently
inherentlyriskier
riskier
–– Human
Humanassets
assetsnever
neverabsolutely
absolutely“owned”
“owned”
•• Nature
Nature of
of Skills
Skills Needed
Needed by
by Employees
Employees
–– The
Themore
moremarketable
marketableemployee
employeeskills,
skills,the
theriskier
riskierthe
the
firm’s
firm’sinvestment
investmentininskill
skilldevelopment
development
Copyright © 2005 South-Western. All rights reserved. 1–14
Investment
Investment Orientation
Orientation Factors
Factors
•• Utilitarian
Utilitarian (“Bottom
(“Bottom Line”)
Line”) Mentality
Mentality
–– Attempt
Attemptmade
madetotoquantify
quantifyemployee
employeeworth
worththrough
through
cost-benefit
cost-benefitanalysis
analysis
–– “Soft”
“Soft”benefits
benefitsofofHR
HRprograms
programsdifficult
difficulttotoobjectively
objectively
quantify
quantify
•• Availability
Availability of
of Outsourcing
Outsourcing
–– Given
Givenavailability
availabilityofofcost-effective
cost-effectiveoutsourcing,
outsourcing,
investments
investmentsininHRHRshould producehighest
shouldproduce highestreturns
returns&&
sustainable
sustainablecompetitive
competitiveadvantages
advantages..
1.
1. Select
Select new
new employees
employees on on both
both intelligence
intelligence andand
conscientiousness.
conscientiousness.
2.
2. Assess
Assess intelligence
intelligence andand conscientiousness
conscientiousness beforebefore
values.
values.
3.
3. Define
Define the
the values
values that
that are
are important
important and and assess
assess
them
them through
through carefully
carefully developed,
developed, valid
valid
procedures.
procedures.
4.
4. Use
Use integrity
integrity tests
tests with
with ability
ability tests
tests for
for high
high
predictability.
predictability.
5.
5. Develop
Develop compelling
compelling goals;
goals; enlist
enlist participation
participation
and
and support
support itit through
through rewards.
rewards.
6.
6. Training
Training andand feedback
feedback are are important,
important, but
but errors
errors
are
are difficult
difficult to
to eliminate.
eliminate.TopTop managers
managers should
should
serve
serve as
as role
role models
models in in quality
quality ofof performance
performance
reviews.
reviews.
7.
7. Attitude
Attitude surveys
surveys are are subject
subject toto biases;
biases; study
study
behaviors
behaviors as as well
well as as attitudes.
attitudes.