CHAPTER 1

AN INVESTMENT
PERSPECTIVE OF
HUMAN RESOURCE
MANAGEMENT

PowerPoint Presentation by Charlie Cook

Copyright © 2002 South-Western. All rights reserved
 The
The Strategic
Strategic View
View of
of Human
Human Resources
Resources

•• Employees
Employees are are human
human assets
assets that
that increase
increase inin value
value
to
to the
the organization
organization andand the
the marketplace
marketplace when when
investments
investments of of appropriate
appropriate policies
policies and
and programs
programs
are
are applied.
applied.
•• Effective
Effective organizations
organizations recognize
recognize that
that their
their
employees
employees do do have
have value,
value, much
much asas same
same as as the
the
organization’s
organization’s physical
physical and
and capital
capital assets
assets have
have
value.
value.
•• Employees
Employees are are aa valuable
valuable source
source of
of sustainable
sustainable
competitive
competitive advantage.
advantage.

Copyright © 2002 South-Western. All rights reserved. 1–2

Copyright © 2002 South-Western. All rights reserved. 1–3
 Sources
Sources of
of Employee
Employee Value
Value

•• Technical
Technical Knowledge
Knowledge
–– Markets,
Markets,Processes,
Processes,Customers,
Customers,Environment
Environment
•• Ability
Ability to
to Learn
Learn and
and Grow
Grow
–– Openness
Opennesstotonewnewideas
ideas
–– Acquisition
Acquisitionofofknowledge
knowledgeand
andskills
skills
•• Decision
Decision Making
Making Capabilities
Capabilities
•• Motivation
Motivation
•• Commitment
Commitment
•• Teamwork
Teamwork
–– Interpersonal
Interpersonalskills,
skills,Leadership
Leadershipability
ability
Copyright © 2002 South-Western. All rights reserved. 1–4
 Valuation
Valuation of
of Human
Human Assets
Assets

•• Implications
Implications for
for Individuals
Individuals and
and Organizations
Organizations
–– Determination
Determinationofofcompensation
compensation
•• Internal
Internaland
andexternal
externalequity
equityfor
foremployees
employeesininreturn
returnfor
fortheir
their
contributions
contributionstotothe
theorganization.
organization.
•• Organization
Organizationplacement
placementof ofresources
resourcesand
andreturns
returnsononemployee
employee
development
developmentarearealigned
alignedand
andwell-matched.
well-matched.
–– Advancement
Advancementopportunities
opportunities
•• Developing
Developingcurrent
currentemployees
employeescreates
createsmotivation
motivationand
andpermits
permits
promotion
promotionfrom
fromwithin.
within.
–– Development
Developmentofofretention
retentionstrategies
strategies
•• Effective
Effectivemeans
meansof ofretaining
retainingvaluable
valuableemployees
employeesallows
allowsfor
for
the
therecapture
recaptureof
of the
theinvested
investedcosts
costsof
oftheir
theirdevelopment.
development.

Copyright © 2002 South-Western. All rights reserved. 1–5

 Investment
Investment Orientation
Orientation

Copyright © 2002 South-Western. All rights reserved. 1–6

 The
The Investment-Oriented
Investment-Oriented Organization
Organization

•• Organizational
Organizational Characteristics
Characteristics
–– Sees
Seespeople
peopleasascentral
centraltotoits
itsmission/strategy.
mission/strategy.
–– Has
Hasaamission
missionstatement
statementandandstrategic
strategicobjectives
objectivesthat
that
espouse
espousethe thevalue
valueofofhuman
humanassets
assetsininachieving
achievinggoals.
goals.
–– Has
Hasaamanagement
managementphilosophy
philosophythatthatencourages
encouragesthe
the
development
developmentand andretention
retentionofofhuman
humanassets
assetsand
anddoes
doesnot
not
treat
treatororregard
regardhuman
humanassets
assetsininthe
thesame
sameways
waysasasphysical
physical
assets.
assets.

Copyright © 2002 South-Western. All rights reserved. 1–7

 Investment
Investment Orientation
Orientation Factors
Factors

•• Senior
Senior Management
Management Values
Values and
and Actions
Actions
–– An
Anorganization’s
organization’swillingness
willingnesstotoinvest
investininits
itshuman
human
resources
resourcesisisdetermined
determinedby bythe
the“investment
“investmentorientation”
orientation”ofofits
its
managers.
managers.
•• Attitude
Attitude Toward
Toward Risk
Risk
–– Investment
Investmentininhuman
humanresources
resourcesisisinherently
inherentlyriskier
riskierdue
duetoto
lack
lackofofabsolute
absolute“ownership”
“ownership”ofofthe
theasset.
asset.
•• Nature
Nature of
of Skills
Skills Needed
Needed by
by Employees
Employees
–– The
Themore
morelikely
likelythat
thatskills
skillsdeveloped
developedbybyemployees
employeesare are
marketable
marketableoutside
outsidethe
thefirm,
firm,the
themore
morerisky
riskythe
thefirm’s
firm’s
investment
investmentininthe
thedevelopment
developmentofofthose
thoseskills.
skills.
Copyright © 2002 South-Western. All rights reserved. 1–8
 Investment
Investment Orientation
Orientation Factors
Factors

•• Utilitarian
Utilitarian (“Bottom
(“Bottom Line”)
Line”) Mentality
Mentality
–– An
Anattempt
attemptisismade
madetotoquantify
quantifyemployee
employeeworth
worthtotothe
the
organization throughaacost-benefit
organizationthrough cost-benefitanalysis
analysis..
–– The
The“soft”
“soft”benefits
benefitsofofHR
HRprograms
programsand andpolices
policesare
aredifficult
difficulttoto
objectively
objectivelyquantify
quantifybecause
becausethey
theyaffect
affectmany
manydifferent
different
organizational
organizationalareas
areasand
andhave
havedifferential
differentialeffects
effectson
on
individual
individualemployees.
employees.
•• Availability
Availability of
of Outsourcing
Outsourcing
–– IfIfcost-effective
cost-effectiveoutsourcing
outsourcingisisavailable,
available,investments
investmentswill
willbe
be
made
madeonly
onlyininHR
HRactivities
activitiesproducing
producingthe
thehighest
highestreturns
returnsand
and
largest
largestsustainable
sustainablecompetitive
competitiveadvantages.
advantages.

Copyright © 2002 South-Western. All rights reserved. 1–9

 Reading
Reading 1.1:
1.1: The
The SWA
SWA Value
Value Cycle
Cycle

Value
Value at
at Southwest
Southwest Airlines
Airlines is:
is:
1.
1. CCreated
reated through
through satisfaction
satisfaction of of employee
employee needs.
needs.
2.
2. Converted
Converted to to customer
customer and and share
share holder
holder value
value
via
via organizational
organizational capabilities
capabilities (the
(the design
design of
of
specific
specific operating
operating processes).
processes).
3.
3. Captured
Captured by by SWA
SWA as as competitive
competitive advantage
advantage
through
through lower
lower costs
costs and
and superior
superior service
service
(productivity)
(productivity) inin relation
relation to
to its
its competitors.
competitors.

Copyright © 2002 South-Western. All rights reserved. 1–10

 Reading
Reading 1.2:
1.2: Effective
Effective HRM
HRM Practices
Practices
•• Employment
EmploymentSecurity
Security •• Training
Training& &Development
Development
•• Selectivity
Selectivityin
inRecruiting
Recruiting •• Cross-Utilization
Cross-Utilization& &
•• High
HighWages
Wages Cross-Training
Cross-Training
•• Incentive •• Symbolic
SymbolicEgalitarianism
Incentivepay
pay Egalitarianism
•• Employee •• Wage
WageCompression
EmployeeOwnership
Ownership Compression
•• Information •• Promotion
PromotionFrom
FromWithin
InformationSharing
Sharing Within
•• Participation •• Taking
Takingthe
theLong
LongView
Participation&& View
Ownership
Ownership •• Measurement
Measurementof ofPractice
Practice
•• Self-Managed
Self-ManagedTeams
Teams •• Overall
OverallPhilosophy
Philosophy

Copyright © 2002 South-Western. All rights reserved. 1–11