CHAPTER 2

An Investment Perspective of SHRM

CHAPTER OUTLINE

• Employee as an asset
• Sources of employee values
• Adopting investment perspective
• Factors influencing investment perspective of the organisation

LEARNING OUTCOMES

• Human capital
• Asset
• Book value
• Market value
• Career plateau
• Counter cyclical hiring
• Utility theory
• Return on investment
• Realistic job preview (RJP)
• Intellectual capital

INTRODUCTION

The business environment has become fiercely competitive and hence there is an emerging need to develop strategies to maximize the return on investment (ROI) in human resources (HRs). The changing environment has coerced the organisations to reframe their strategic priorities. As a result, there is a greater recognition that distinctive organisational competencies obtained through highly developed employee skills; unique organisational cultures and effective management systems form the basis for achieving competitive advantage (Greer 2001; Johnson & Scholes 1999). In this context, Lengnick-Hall and Lengnick-Hall (1990) argue that competitive advantage is the essence of competitive strategy encompassing those capabilities, resources, relationships, and decisions, which permit an organisation to capitalize on opportunities in the marketplace and to avoid threats to its desired position.

 

Basis for achieving competitive advantage: Highly developed employee skills unique organisation cultures and effective management systems.

For any organisation to achieve a competitive advantage over its competitors, it is crucial to make good investments in human resources. This not only facilitates organisations to produce skilful and productive employees, but also retains the loyalty in them.

EMPLOYEE AS AN ASSET

In yesteryears, the “book value” and the “market value” were considered same with only tangible assets included under this. But, the trend has brought about the dissociation of “book” and “market” value. “This disassociation of market and book value meant that companies were now able to generate excess earnings, that is, earnings higher than what would be expected for their tangible assets alone. Earnings on tangible assets are same as the cost of capital of the product and its “book value.” Investors and economists reasoned, therefore, that something other than tangible assets must be producing the excess earnings behind the disassociation of market and book values. In due course, the root cause was discovered to be intangibles, a whole other class of assets.” These intangibles include intellectual capital, goodwill, and human capital. Organisational value comprise of three major classes of assets that are integral to an organisation’s ability to produce goods and services. These are as follows:

 

Something other than tangible assets must be producing the excess earnings behind the disassociation of market and book values. In due course, the root cause was discovered to be intangibles, a whole other class of assets.

• Financial assets: Financial assets include assets such as cash and marketable securities and may also be referred to as financial capital.
• Physical assets: Physical assets include such tangible assets as property, plant and equipment, and other furnishings.
• Intangible assets: Examples of intangible assets, also called intangible capital, include intellectual capital (patent formulas, product designs, and process technology, i.e., the methods that delineate the steps in a process), goodwill, and human capital.

Three categories of assets are financial, physical, and intangible.

Value of Human Capital

The changing environment expects human resource management (HRM) to define the value of human capital, to find ways to accurately measure it, and to ensure the investment and protection of this human capital. Anything less, and HR professionals have failed their organisations.

 

The changing environment expect HRM to define the value of human capital, to find ways to accurately measure it, and to ensure the investment in and protection of this human capital.

And yet this process is replete with problems and obstacles. Calculating the value of our employees is difficult because they are not like any other asset; they are simultaneously the greatest potential asset and the greatest potential liability that an organisation has at any given time. They are the only intangible asset that can be influenced but never completely controlled. A company can invest heavily in its human capital, or it can waste it without a care. Either way, the human capital still has its inherent value, but perhaps—tragically—with another organisation if the employee resigns. In the book, The Wealth of Knowledge, Tom Stewart writes: “It is incontrovertibly true that present financial and management accounting does not give investors, directors, the public, or management the information they need to make informed decisions.”

The unique nature of human capital requires vigilant and proficient consideration and management. Organisations should seek wisdom in their management of human capital; whether from within or from external third-party sources. In the future, we may well see new ways to identify and measure human capital. Companies that recognize the inherent and crucial value of their employees will be miles ahead of those companies that fail to recognize this imperative intangible asset. In addition, the development, fortification, and nurture of employees will make all the difference in the market value and success of the company that handles human capital as its most valuable asset. Unworthy CEO or CFO would misuse financial resources and assets. In the same way, human capital must be wholly and correctly leveraged, which means we must do all we can to cultivate our human capital.

An Investment Perspective and HRs

The strategists state that having superior production facilities or a superior product are usually not enough to sustain an advantage over competitors as such physical facilities or products can be duplicated, cloned, or reverse-engineered and no longer provide a sustainable advantage. Management scholar Edward Lawler has described these investment requirements as follows: To be competitive, organisations in many industries must have highly skilled, knowledgeable workers. The stability of the workforce is also important as the attrition rate impacts the organisational performance. According to Lawler, these investments will become increasingly important due to forecasts of shifts in skill needs from manual to cerebral. It is evident from the contemporary management practices that many leading companies like Tata steel ltd., Infosys, P&G have recognized and acknowledged the strategic importance of HRs and have adopted an investment perspective toward these resources. Further, there is greater awareness of the costs of treating employees as variable costs, which is beginning to change views of HR practices. An investment perspective provides a valuable guide for strategic management.

 

It is evident from the contemporary management practices that many leading companies like Tata steel ltd., Infosys, P&G have recognized and acknowledged the strategic importance of HR and have adopted an investment perspective toward these resources.

Rationale Behind Investment Perspective

Strategic moves toward investments  in HRs will develop a more skilled, innovative, and productive and committed workforce, thus providing an organisation with a competitive advantage over other players in the market. Investment in human capital provides both short- and long-term benefits that help produce not only skilled, productive employees, but also those who are both committed and ethical. HR investments should not simply be made in the traditional sense often thought of as compensation and benefits, vacation allotments, and holiday pay. Rather, these investments should also include those that impact the organisational culture of the firm. By investing in its HRs, an organisation can gain a competitive advantage within the marketplace.

 

Strategic moves toward investments  in HRs will develop a more skilled, innovative, and productive, and committed workforce, thus providing an organisation with a competitive advantage over other players in the market.

Investing in HRs is one of the greatest investments which a firm can make. It has long been advocated that HRs should be viewed from an investment perspective. The basic principle that all investments are made to provide a ROI must be utilized throughout all HRM decisions. Employees are at the core of all organisations regardless of the organisation’s technological level. As a result, HRM and senior managers must develop functional systems that promote employee performance. While the fundamentals might seem as obvious as offering higher wages or some other tangible factor, the solutions are not always so simple. The direction that HRM investments should take must focus on developing fundamental management and corporate values. In order to develop the desired corporate culture, benefit programs can be utilized. For example; adoption assistance, paid training, stock options, tuitions reimbursement plans, and job enrichment and job satisfaction programs, can all work to define a company and its values. Furthermore, these programs can help to both attract and detract employees from the firm itself. Thus, the HRM programs are capable of working to not only develop a corporate culture, but to retain it as well. However, regardless of how well a program might appear, there is always a given cost associated with it.

The financial impacts of any HRs investment program must be considered in order to determine if the program will provide a ROI. One method to determine the potential ROI of a HR investment is the utility theory. The utility theory provides a means to determine an economic value of HRs programs and procedures. Thus it can be used to help identify specific programs and benefits that might provide greater returns through employee behaviour prior to the actual implementation of the program in the workforce. While ROI is generally thought of as the primary calculator for returns; the not-for-profit think tank Human Capital Institute reports that firms should not be as focused on calculating precise ROI. Rather, they should focus on determining which investments will have the greatest impact on creating the organisation’s strategy. Companies can obtain a competitive advantage if they utilize strategic HRs investment practices.

 

The utility theory provides a means to determine an economic value of HRs programs and procedures.

SOURCES OF EMPLOYEE VALUE

Employees are the valuable source of sustainable competitive advantage. Employees add value and can certainly become competitive advantage for the organisation but the important issue is the source of the value addition. Nowadays, researchers talk about this in terms of the employee competencies, which they consider must align with the organisational objective. As shown in Figure 2.1, the technical knowledge, which includes the knowledge of markets, processes, customers and environment, equips the employee to contribute toward organisational goal as he or she has basic awareness of the factors affecting the business. Ability to learn and grow makes the employee open to new ideas and facilitate him or her to acquire knowledge and skills which strengthens the employee worth. Decision-making capabilities, motivation, commitment, and teamwork are the other competencies which increase the employee worth and hence contribute toward the organisational excellence.

Source of employee value:

• Technical knowledge
• Ability to learn and grow
• Decision-making capabilities
• Motivation
• Commitment

HR Investment Considerations

Not all organisations realize that human assets can be strategically managed from an investment perspective. The factors to be considered for the strategic HR investment decisions include management’s values risk, and ROI, the economic rationale for investment in training, utility theory, and alternatives to HR investments.

 

The factors to be considered for the strategic HR investment decisions include management’s values, risk and ROI, the economic rationale for investment in training, utility theory, and alternatives to HR investments.

Management Values

The extent to which the organisation can be characterized as investment oriented may be revealed through the answers to the following questions:

• Are employees considered central to the organisational mission or strategy?
• Does the organisational vision mission, and the strategic goals emphasize upon the value of employee as human assets and their contribution toward achievement of organisational goals?
• Does the management philosophy of the organisation encourage the development of any strategy to prevent the depreciation of its human assets, or are they considered replicable or amortizable, like physical assets?

Fundamental values must be addressed in many HR issues, particularly those involved in major strategic initiatives. The HR policies and practices of the organisation reflect the values and philosophies of the senior management. For example, senior managers who are committed to the preservation of the organisation’s HRs can manage the stress associated with major strategic events, through such measures as dealing with rumours and providing accurate information, so that misinformation does not have such a debilitating impact on employees. How employees are treated following significant strategic events, such as a merger or acquisition, are a reflection of these values and communicate whether the organisation views employees from an investment perspective. Those adopting an investment perspective seek to enhance the value of their human capital or, at least, prevent its depreciation.

Risk and ROI

A trade-off exists between risk and return. Higher risk investments generally is expected to have a greater potential return; lower risk, safer investments generally are expected to have a modest return. Although there are a number of important benefits to investments in HRs, such investments contain an element of risk. Investing in HRs is inherently riskier than investing in physical capital because the employer does not own the resource. Employees are free to leave, although contractual arrangements may limit their mobility. In order for investments in HRs to be attractive, the returns must be great enough to overcome the risks. Further, for some investments, such as cash outlays to maintain no-layoff policies, the benefits are not easily quantified and there are meaningful costs. Decision makers have to be prepared to trade-off current costs for long-term strategic benefits, such as a more flexible, committed workforce, and related positive aspects of the organisational culture to which such policies contribute.

 

Decision makers have to be prepared to trade-off current costs for long-term strategic benefits, such as a more flexible, committed workforce, and related positive aspects of the organisational culture to which such policies contribute.

Economic Rationale for Investment in Training

HR investments mostly involve training. Stating the difference between specific and general training, Nobel Laureate Economist Gary Becker discusses the rationale when employers would provide training. The decision whether to invest in training and development depends, in part, on whether it is specific training, that is, the training imparts skills that are specific to the employing organisation or it is general training, that is, it imparts skills which are general and transferable to other employers. Employers generally partly or wholly invest in specific training as the skills imparted are not readily transferable to the competitors. After the training, the increased revenue due to the increased productivity of employee repays the investment made toward the employee’s training. Conversely, conventional human capital theory predicts that employers will pay for none of the cost of general training because employees can transfer skills developed at employers’ expense to other employers and would rather hire an employee who has the requisite general skills. But, when hiring such employees is difficult, the employer is bound to invest in general training. General training can be obtained in on-the-job training as well as in formal programs such as tuition reimbursement. It also can occur unintentionally simply as a by product of the work situation as employees learn work skills that are applicable to other employers. Employers may make general training investments in employees by deducting the training costs. Like general training, specific training can be obtained through formal programs as well as through on-the-job experience, as much of what employees learn on the job tends to be of a specific nature. Further, employers do not seem to make clear distinctions between general and specific training. There are many considerations in layoff decisions in addition to the employer’s investment, such as equity, contractual obligations, and different business needs. Nonetheless, the concepts of specific and general training can provide insights on the conditions in which investments in HRs are more favorable.

 

Employers generally partly or wholly invest in specific training as the skills imparted are not readily transferable to the competitors.

Utility Theory

In considering investments in HRs in terms of hiring or development of current employees in order to pursue given strategies, there must be a method for evaluating the financial attractiveness of such investments and also of “selling” the investment to senior management. These tasks may be accomplished by determining the returns for such investments through cost–benefit analytical approaches like utility analysis. Utility theory attempts to determine the economic value of HR programs, activities, and procedures. As such, utility theory might be used to determine the cost of a selection test that enables an employer to identify and hire managers for a specific job whose productivity is higher than those hired without the test. The calculations of utility might involve several variables. For example, validity of the selection test would be a critical variable, in that it provides an indication of the predictive ability of the test. Additionally, the increased production, its contribution to profitability, and the standard deviation of the contribution, would be variables in the calculations. Finally, other variables might be included in the analysis, such as the cost of testing enough applicants to obtain a sufficient number having scores above the cut-off point.

Outsourcing as an Alternative to Investment in HRs

Investments in HRs must be aligned with the organisation’s strategies. Unless, there is the potential to build capabilities that provide an advantage over competition, cost considerations often lead to the rational decision to outsource through specialized service providers rather than invest in HRs. This concept has been discussed in the other chapter of this book.

Traditional Ways of Investment

Investments in Management Development

Employee development contributes toward an individual and organisational growth by enhancing the employee capabilities. The employees’ perception toward the organisation becomes positive as it makes the employee believe that the organisation values them and care about their career growth and development. Perceived investment in employee development facilitates greater obligation by employees toward the organisation and, in turn, a willingness by employees to work hard to increase the organisation’s effectiveness. Moreover, given the rapid changes that are taking place in workplaces, organisations in many parts of the world are re-examining their employees’ need for continuous development of skills.

 

Perceived investment in employee development facilitates greater obligation by employees toward the organisation and, in turn, a willingness by employees to work hard to increase the organisation’s effectiveness.

The development of human capital is a critical strategic issue in most organisations and has to be a continuous practice as the business environment is challenging and demands the massive shifts in strategy. Organisations are becoming less hierarchical and there is flattening of organisations. Moreover, there is increase in professionals joining the workforce, who expect to participate more in decision making. The trend is toward team work and hence, power has to be shared, managerial status needs to be deemphasized, and leadership role has to be rotated. Due to these changes, professionals require more exposure to managerial responsibilities and in the due course, develop related skills. Job rotation is an important management development approach where in the employee is moved on from one assignment to other more challenging assignments. These job rotation programs seek to provide a broad view of the organisation and therefore may involve interdepartmental or cross-functional assignments. A major advantage is that such programs develop a pool of managers who have been exposed to an area of the business who can then provide management talent in the situation when there is an unexpected or sudden increase in the level of business in that area.

 

The trend is toward team work and hence, power has to be shared, managerial status needs to be deemphasized, and leadership role has to be rotated. Due to these changes, professionals require more exposure to managerial responsibilities and in the due course, develop related skills.

Updating the Skills to Prevent Skill Obsolescence

The skill obsolescence among professionals and managers can be attributed to the technological changes. The technological obsolescence can paralyze an organisation’s strategic alternatives, which could be shattering and therefore, companies should invest rationally to prevent this.

Handling Career Plateau

Career plateau is the phase of career when employee has occupied a job in an organisation for some period of time, has mastered all aspects of the job, and now has low prospects for promotion, which have the potential to create resentment and a feeling of redundancy. Plateaus arise because of a lack of organisational growth or change, the pyramidal shape of organisations and organisational inflexibility. Employee-specific causes of plateaus are the personal choices of employees, lack of career skills resulting from naive perceptions of organisational realities, and lack of requisite skills for promotion. Plateaus must be avoided as they are detrimental to the productivity of the employee as well as the organisation. Plateaus may be avoided by more deliberate identification of stars (outstanding performers with high potential) and solid citizens (satisfactory or outstanding performers with less potential). More developmental assignments, challenges, and lateral moves can produce a pool of qualified managerial talent that should enable the organisation to be more flexible and adaptive to strategic needs. Job rotation for plateaued employees also can reduce frustration and increase the chance for improved performance.

 

Career plateau is the phase of career when employee has occupied a job in an organisation for some period of time, has mastered all aspects of the job, and now has low prospects for promotion, which have the potential to create resentment and a feeling of redundancy.

Investment for Improved Retention

Employee turnover costs companies money. These costs include paying overtime to other employees to fill in the vacancy until the company hires a replacement, the cost of the recruitment process and the cost of training the replacement. Retaining employees within the organisation reduces these costs. Employee retention techniques also increase employee motivation and improve work quality. Some best practices have emerged that improve employee retention in organisations.

Accordingly, there are sound practices that employers can follow in order to retain their employees.

Organisational Cultures Emphasizing Interpersonal Relationship Values

To describe the culture of an organisation is to explain the interaction of people at all levels, and to understand how this interaction defines the organisation’s attitude toward people and process. Understanding organisational culture is central to strategic HRs and ought to lead to initiatives which develop the organisation as a whole.

 

To describe the culture of an organisation is to explain the interaction of people at all levels, and to understand how this interaction defines the organisation’s attitude toward people and process.

The research indicates that it is normally cultural issues which cause people to leave an organisation. The following can be the strategic HRs initiatives which can have a positive impact on organisational culture, and concomitantly increase retention rates.

• Compatibility of the prospective employee and employer’s organisational culture: Before developing an employment relationship, the recruiter should discuss about the organisation’s cultural values and norms, to determine if an alignment exists between your organisation, and the potential new hire. Alignment of individual and organisation values is a crucial factor in successful assimilation of new organisation members into the organisation’s unique culture.
• Transparency: Leaders of the organisation must promote a high level of organisational awareness and openness; let the employees know what is happening, or will be happening. Organisations with high internal and external awareness tend to engage in organisational development, which enhances employee development and contributes to positive retention through mutual commitment.
• Employee oriented: The organisation must support the “well-being” of employees; express gratitude, appreciation, and understanding (with both tangible and intangible rewards). Organisations which do this are normally considered among the best places to work. Fewer people leave these organisations, and incumbents contribute at a consistently higher level.

These initiatives enhance the culture of the organisation by addressing and resolving relevant issues which improve overall organisational performance. Employees who are supported in their work, and who have a substantive role in meeting organisational goals, are not concerned with moving out of the organisation. Such strategic leadership and HRs initiatives contribute to reducing retention issues for the organisation. These outcomes result in increased competitive advantage and greater ROI.

Effective Selection Procedures

When firms hire employees that match well with the organisation, the job, and their co-workers, there is an increased likelihood of retention.

• Competency-based hiring: The recruitment initiatives must be designed to align the competencies required in the position with those of candidates. This will result in more successful hires, which will be recognized in the superior impact of the new employee on the organisation. Successful hires, those with competencies aligned with the goals and culture of the organisation, will stay longer, contribute more to the organisation and enhance overall business performance; a positive and measurable ROI.
• Realistic job previews: RJP is the realistic picture of the job, presented to the prospective employees, so that the candidate makes the informed decision. The organisations have introduced a very different practice in the selection process, where the current employees meet prospective employees and discuss the workplace aspects. In the process, both the parties are being able to evaluate each other. This increases the likelihood of employee retention.

RJP is the realistic picture of the job, presented to the prospective employees, so that the candidate makes the informed decision.

Compensation and Benefits

Compensation can have a direct impact on employee retention. While employers may use employee incentives and monetary rewards to retain employees, there are ways to complement compensation that have a much greater impact. Based on the type of compensation, along with the terms and conditions of an employee compensation package, an employer can boost employee retention.

• Equitable compensation: Equitable compensation is important for employee retention. The compensation equity is a function of fair appraisal reviews, equitable ratios of inputs (e.g., effort, skill, education) to outputs (various rewards), no politics in compensation decisions, fair compensation structures, and communication of compensation procedures.
• Performance-based compensation: Increased retention occurs with performance-based compensation, pay incentives, and benefits that are valued by employees.
• Retention bonus: Retention bonus is one of the important tools that are being used to retain employees. Retention bonus is an incentive paid to an employee to retain them through a critical business cycle. Retention bonuses are becoming more common in the corporate world because companies are going through more transitions like mergers and acquisitions. They need to give key people an attractive incentive to stay on through these transitions to ensure productivity. Nomura offers up to 40–130 percent retention bonus to Lehman employees in India.

Retention bonus is an incentive paid to an employee to retain them through a critical business cycle.

Job Enrichment and Job Satisfaction

Job satisfaction has been found to be the most important tool for employee retention. Job satisfaction refers to how employees perceive their jobs. It is an emotional state resulting from experiences at work. If employees experience high satisfaction with their jobs, it may create a pleasurable emotional state and a positive reaction with the organisation. Both job content and job security are found to affect the overall job satisfaction of employees. Employees feel satisfied when they are provided with certain degree of freedom and autonomy in carrying out their tasks and taking job-related decisions. Moreover, they enjoy performing jobs which demand higher levels of skills and knowledge. Job-enrichment practices, such as those building in increased responsibility or autonomy, knowledge of results, meaningful work, knowledge of how assigned tasks contribute to the greater activity of the larger organisation, and skill variety, have been found to produce moderate reductions in turnover.

 

Job-enrichment practices, such as those building in increased responsibility or autonomy, knowledge of results, meaningful work, knowledge of how assigned tasks contribute to the greater activity of the larger organisation, and skill variety, have been found to produce moderate reductions in turnover.

Work Life Balance

Work life balance is becoming an important matter of concern for the HR department. The change in the sociological environment like dual career couples, increasing nuclear families, demands the balancing act between job and home or social demands. The work life balance is a practice to improvize the work life of the employee, which helps in retention. Flexi time, child care facilities, and so on are few such arrangements.

Organisational Direction Creating Confidence in the Future

When employees are confident about their organisation’s future direction, they are more likely to stay. Thus, setting a clear direction for the future and building confidence in the vision for the future should help improve retention.

Investments in Job-Secure Workforces

Companies invest in their HRs when they keep employees on the payroll through business downturns. However, companies differ in the extent to which they resort to downsizing or layoffs as many of the best ones did little or no downsizing during the economic downturn rather they invested in developing  them. Although some companies provide employment security to enhance their chances of remaining union free, others provide such security for other workforce advantages.

The job insecurity adversely affect the morale and satisfaction of employees.

Nontraditional Investment Approaches

Investments in Disabled Employees

A nontraditional area of HR investment involves providing support for programs that return disabled employees back to the workforce. Geetanjali Gems in Andhra Pradesh, India employs disabled people. The increased loyalty and higher performance of these youth has made sourcing, training and hiring disabled youth an integral part of Gitanjali Gem’s talent management strategy. As they expand to hiring 5,000 people in the next 2 years, the plan is to ensure at least 1,000 of them are disabled.

Investments in Employee Health

Another nontraditional investment approach involves improvement of employees’ health. Such investments can increase the productivity of employees. The best companies to work for are increasingly making investments in employee wellness programs, offering an array of onsite health services and rewarding employees for progress toward developing healthy habits.

Employers should invest in workplace wellness programs because it makes financial sense to do so. Investments in health and wellness programs can lead to reduced benefits costs, reduced absenteeism, and higher productivity. These cost savings are often used to demonstrate the positive impacts of wellness programs on an organisation’s bottom line. A successful workplace wellness program can also help build an organisation’s profile as a socially responsible employer of choice, improving its ability to attract new talent and retain existing talent. Employers also need to keep in mind that such programs can help them fulfil their legal duty to create and maintain a safe and healthy workplace for their employees. 

Countercyclical Hiring

The countercyclical hiring is a strategy of talent acquisition during economic downturn times. The companies do hiring for the key managerial positions during this time. As such they attempt to hire employees at times when other companies are also competing for labour. During the economic boom, the need for talent increases and it is challenging to get talented employees for key positions. The contrarian strategy of countercyclical hiring is based on the rationale that companies can invest in their stock of HRs by hiring key managerial and professional employees before there is a realized need, based on the knowledge that the services of such highly qualified individuals will be needed in the future.

 

The countercyclical hiring is a strategy of talent acquisition during economic downturn times. The companies do hiring for the key managerial positions during this time.

Summary

• The changing environment expects HRM to define the value of human capital, to find ways to accurately measure it, and to ensure the investment in and protection of this human capital.
• It is evident from the contemporary management practices that many leading companies like Tata steel ltd., Infosys, P&G have recognized and acknowledged the strategic importance of HRs and have adopted an investment perspective toward these resources.
• Strategic moves toward investments in HRs will develop a more skilled, innovative, and productive and committed workforce thus providing an organisation with a competitive advantage over other players in the market.
• The utility theory provides a means to determine an economic value of HRs programs and procedures. 
• The technical knowledge which includes the knowledge of markets, processes, customers, and environment equips the employee to contribute toward organisational goal as he or she has basic awareness of the factors affecting the business. Ability to learn and grow makes the employee open to new ideas and facilitate him to acquire knowledge and skills which strengthens the employee worth. Decision-making capabilities, motivation, commitment, and teamwork are the other competencies which increase the employee worth and hence contribute toward the organisational excellence.
• The factors to be considered for the strategic HR investment decisions include management’s values, risk and ROI, the economic rationale for investment in training, utility theory, and alternatives to HR investments.
• Decision makers have to be prepared to trade off current costs for long-term strategic benefits, such as a more flexible, committed workforce, and related positive aspects of the organisational culture to which such policies contribute.
• The decision whether to invest in training and development depends, in part, on whether it is specific training, that is, the training imparts skills that are specific to the employing organisation or it is general training, that is, it imparts skills which are general and transferable to other employers. Employers generally partly or wholly invest in specific training as the skills imparted are not readily transferable to the competitors. After the training, the increased revenue due to the increased productivity of employee repays the investment made toward the employee’s training.
• Perceived investment in employee development facilitates greater obligation by employees toward the organisation and, in turn, a willingness by employees to work hard to increase the organisation’s effectiveness.
• The trend is toward team work and hence, power has to be shared, managerial status needs to be deemphasized, and leadership role has to be rotated. Due to these changes, professionals require more exposure to managerial responsibilities and in the due course, develop related skills.
• Career plateau is the phase of career when employee has occupied a job in an organisation for some period of time, has mastered all aspects of the job, and now has low prospects for promotion, which have the potential to create resentment and a feeling of redundancy.
• To describe the culture of an organisation is to explain the interaction of people at all levels, and to understand how this interaction defines the organisation’s attitude toward people and process. Understanding organisational culture is central to strategic HRs and ought to lead to initiatives which develop the organisation as a whole.
• RJP is the realistic picture of the job, presented to the prospective employees, so that the candidate makes the informed decision.
• Retention bonus is an incentive paid to an employee to retain them through a critical business cycle.
• Job-enrichment practices, such as those building in increased responsibility or autonomy, knowledge of results, meaningful work, knowledge of how assigned tasks contribute to the greater activity of the larger organisation, and skill variety, have been found to produce moderate reductions in turnover.

References

Duggan, Brian and Horton, David (2004). Strategic Recruitment and Retention: Competitive Advantage and Return on Investment. Business Voice. CHRP Marathon Human Resources Consulting Group Limited.

Greer, C. R. (2001), Strategic Human Resource Management, A General Managerial Approach. Second Edition. Pearson Publishing.

http://blogs.hbr.org, accessed July 2018.

http://careers.tatasteelindia.com, accessed July 2018.

http://www.pg.com, accessed July 2018.

Johnson, G. and Scholes, K. (1999), Exploring Corporate Strategy (5th ed.), London: Prentice Hall.

Lee, Chay Hoon and Bruvold, Norman T. (2003) Creating value for employees: investment in employee development. International Journal of Human Resource Management 14:6. Pg-981–1000.

Lengnick-Hall, C.A. and Lengnick-Hall, M.L. (1990), Interactive Human Resource Management and Strategic Planning, Westport, CT: Quorum Book.

Mello, J. Strategic Human Resource Management. 2nd Edition. South- Western Publishing.

Schmidt, J. (Spring 2002), “How much is good will worth?” American Management Association, MWORLD.

Stewart, T. (2001), The Wealth of Knowledge: Intellectual Capital and the Twenty-First Century Organisation. New York: Doubleday.

Weatherly, L. (March 2003), “Human Capital: The Elusive Asset,” SHRM Magazine.

Please refer to: Careers>Working with Us>Learning and Development, TATA Steel India, www.atasteelindia.com, accessed July 2018.

Proctor & Gamble Global Sustainability Report 2010, www.pg.com, accessed July 2018.

G. Seetharaman. “CareGiver” Business Today. Edition:March 4, 2012.

Review Questions

1. Explain employee as an asset.
2. What are the different sources of employee value and how does it facilitate in adoption of investment perspective.
3. What are the factors influencing investment perspective of the organisation.
4. What are the traditional and nontraditional ways of employee involvement?
5. What is counter cyclical hiring? How does it impact the organisational performance?

Time to Apply Theory to Practice: Assignment

Prepare a report on “Investment Perspective”

1. Read the articles in journals and magazines regarding the changing attitude of employer toward employee.
2. Discuss about the changing attitude of employer and the key drivers.

Critical and Analytical Thinking: Caregiver

“Why leave a Tata company?” Those words from his father were enough for Latesh Sewani, a chartered accountant in the corporate strategy team at Tata Consultancy Services (TCS), to reject a job offer from ICICI Bank in 2004. Never mind that it promised to nearly double his salary. “I haven’t regretted my decision,” declares Sewani. Being a part of the Tata Group meant everything. Nitin Mohan found himself in a tight spot a year ago when his father fell ill. “All I had to do was drop a mail to my manager for a month’s leave and he took care of all the insurance paperwork,” says the team leader in the BPO arm of TCS. It is this personal connect that has helped TCS emerge as India’s best company to work for in the Business Today-Indicus Analytics annual survey. Achieving that connect is no mean feat, considering that the company has 226,000 employees, from 103 nationalities, spread around the globe (Indians make up 93 percent of the workforce).

Keeping  employees productive and happy  is a key objective for the company. And it seems to be succeeding handsomely. TCS has the lowest attrition rate in the sector, at 12.8 percent, compared to 15.4 percent for its nearest competitor, Infosys, which it pipped to the post in the BT-Indicus survey. That perhaps explains how nearly 70 percent of the Tata company’s total cost is incurred on personnel.

Today, TCS is well on its way to beating its projection of hiring 60,000 people this financial year. It made 43,600 campus offers between August and December 2011, the highest for the company in a single year. “They will start joining by the end of June. We have never deferred an offer,” says Ajoyendra Mukherjee, the company’s Vice President and Head, Global HR.

S. Vaidhyasubramaniam, Dean, Planning and development, of SASTRA University in Thanjavur, Tamil Nadu, corroborates that “We have been associated with TCS for over a decade and we have never had any issues.” The  company has been recruiting from SASTRA since 2002. This year, it made offers to 1,755 final-year students from the university.

TCS’s health care benefits are the best in the industry, says Mukherjee. “One of our initiatives is called ‘Mpower.’ As part of this, we have people managers at our centres and they deal with issues that employees might have.” Another initiative, ‘Maitree,’ reaches beyond employees, to their families, bringing them together for a number of cultural events.

Perhaps that’s why Latesh Sewani wants to retire at TCS.

Questions

1. What does the cases of Mr. Lalit and Mr. Nitin, reflect about the employer’s attitude toward employee?
2. What are the sources of employee value at TCS? Does it affect the status of TCS as the “Best Place to Work”?

Internet Sources for Reference

Suggested Readings

• ™ Investment perspective of human resource management - SlideShare

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• An Investment Perspective of Human Resource Management - Scribd

  ™https://www.scribd.com

• Ch 1 An Investment Perspective of Human Resource Management …

  ™PPT – The Investment Perspective In Human Resource Management …

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• HRM Review Magazine | Strategic Human Resource Management …

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• Workforce Effectiveness: Acquiring Human Resources and …

  ™https://www.nap.edu

• Human Resource Management Reading List: Perspectives on HRM …

  ™mismain.bsa.kent.edu

• Human Resource Management and Organisational Psychology …

  ™psychology.oxfordre.com

• PPT – The Investment Perspective In Human Resource Management …

  ™www.powershow.com

• Realities of Human Resource Management

  ™https://books.google.co.in

• Human Resource Management: The Key Concepts

  ™https://books.google.co.in

• Human Resource Management: The Key Concepts

  ™https://books.google.co.in

• Why We Love to Hate HR…and What HR Can Do About It

  ™Human Resource Management: Scope, Analysis, and Significance …

  ™www.oxfordhandbooks.com

• Changing Perspectives on Human Resources Development - org.un.

  ™unpan1.un.org

• Summary and Further Reading - HRM Guide UK

  ™www.hrmguide.co.uk

• an investment perspective of human resource management

  lib.vcomsats.edu.pk

Case Studies

• Case Study | Human Resources Return on Investment - YouTube

  https://www.youtube.com

• An Investment perspective of human resource management …

  www.assignmentpoint.com

• Walmart case study

  Case study of strategic human resource … - Assignment Help

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• Case study of an IT company

  HRM trends in India – a professional perspective: Strategic HR …

  www.emeraldinsight.com

• A Case Study of Orissa Power Reforms ..

  strategic human resource management - Oxford University Press

  https://india.oup.com

• ANALYSIS OF HR PRACTICE 1 Case Study - Ashford Writing Center

  https://awc.ashford.edu

• HRM Case Studies Catalogues - Ibscdc

  www.ibscdc.org

• Case study 110 | Human Resource Development (HRD) - Invest In …

  cws.cengage.co.uk

• The Discovery of HR from Strategy-as-Practice Perspective: A Case …

  www.sciencedirect.com

• Case study analysis in 5 knowledge-intensive firms in Luxembourg

  Human capital and strategic human resource management in …

  https://www.researchgate.net

• The need for capacity building in human resource management related …

  https://eujournal.org

Movies and Videos

• Films and HR Lessons: HR Takeaways from Movies - Mettl

  https://mettl.com

• Strategic Human Resource Management Video Lecture

  https://www.michiganstateuniversityonline.com

• CSR for HR - SlideShare

  Ten Steps to a Global Human Resources Strategy - Strategy+Business

  https://www.strategy-business.com

  www.slideshare.net

• Buy Strategic Human Resource Management: A General Managerial …

  https://www.amazon.in

• Buy Human Investment Management: Raise the Level by Capitalising …

  https://www.amazon.in

• Human Resource Management: Michael Beer: 9780029023600 …

  https://www.amazon.com

• Strategic Human Resource Management Video Lecture

  https://www.michiganstateuniversityonline.com

• Mellody Hobson is president of Ariel Investments, a value-driven money management firm

  Mellody Hobson: Color blind or color brave? | TED Talk | TED.com

  https://www.ted.com

Tools

• Key Issues in Strategic Human Resources - The Scholarly Commons

  scholarship.sha.cornell.edu

• Utility Analysis: A New Perspective on Human Resource Management …

  digitalcommons.ilr.cornell.edu

• strategic human resources management - American College of …

  https://www.ache.org

• Workforce Effectiveness: Acquiring Human Resources and …

  https://www.nap.edu

• Human Resources Key Performance Indicators - Journal of …

  www.Human Resources Key Performance Indicators - Journal of competitiveness

  www.cjournal.cz

• Investment Analysis Tools - Video & Lesson Transcript | Study.com

  study.com