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some still view their employees as valuable costs of production.‡ Current practices in many organizations indicate that employees are viewed as valuable investments ‡ However. there is little recognition of the firm s contribution to their training and other HR welfare practises . while physical assets are treated as investments ‡ When employees are viewed as variable costs.

‡ A focus solely on investment in physical resources is shortsighted ‡ It will not help the organization to build sustainable competitive advantage ‡ Thus there is recognition of having superior human resources to build the desired comp advantage .

‡ Therefore investment in human resources practices is gaining due importance in many organizations ‡ There is a growing recognition of the relationship between companies overall strategies and their human resource practices .

FACTORS AFFECTING HUMAN RESOURCE INVESTMENT DECISIONS ‡ ‡ ‡ ‡ ‡ Management values Risk and Return on investment Economic rationale for investment in training Utility theory Outsourcing as an alternative to investment in Human Resources .

MANAGEMENT VALUES ‡ Many HR practice decisions are highly influences by the values and behavior of senior management ‡ In case of change management. approach of senior management clearly defines whether employees are viewed from the investment perspective or not . like M&A.

RISK AND RETURN ON INVESTMENT ‡ Although high returns are expected if proper investment is made in the human resources. but it involves high degree of risk as well ‡ The returns must be highly attractive enough to overcome the fear of risk ‡ Highly dependent of the organization culture and other practices .

ECONOMIC RATIONALE FOR INVESTMENT IN TRAINING ‡ Difference between specific training and general training ‡ Specific training imparts education specific only to the currently employing organization ‡ General training imparts education which can be transferred to next employers ‡ Employers generally invest and bear the cost in full or partial in case of specific training .

‡ Although general practice is that companies invest highly in general training but it involves high risk .

there must be a method for evaluating the financial attractiveness of such investments.UTILITY THEORY ‡ While considering for investment in human resource practices. Return on sales of each branch outlet of a retail store on the basis of performance appraisals of the store supervisers . like cost-benefit analytical approaches ‡ Eg.

OUTSOURCING AS AN ALTERNATIVE TO INVESTMENT IN HUMAN RESOURCES ‡ Strategic outsourcing is advocated where: ± World class capabilities and a strategic advantage cannot be developed ± Resources to be involved internally will be greater than those needed to outsource ± Excessive dependency on suppliers .