An Investment Perspectives of HRM Strategic Human Resource Management is defined as organizational use of employees to gain or keep a competitive advantage against competitors. Organizations success and source of competitive advantage come not from having the most ingenious product design or service, the best marketing strategy, state-of-the art technology or the savvy financial management but from having the appropriate systems for attracting, motivating, and managing the organizations’ human resources. Strategic HR includes: • Seeing the people of the organization as a strategic resource for the achievement of competitive advantage • A set of processes and activities jointly shared by human resources and line managers to solve peoplerelated business problems • The pattern of planned human resource developments and activities intended to enable an organization to achieve its goals • It focuses on actions that differentiate the firm from its competitors Human Resource Management Systems Human Resource Management operates through HRM systems. The systems include: • HR philosophy: Guiding principles adapted in managing people • HR Strategies: The directions in which HRM intends to go • HR Policies: Defining how principles and strategies should be applied and implemented in specific areas of HRM • HR Processes: Formal procedures and methods to put HR strategies plans and policies into effect • HR Practices: Informal approaches used in managing people • HR Programmes: Which enable HR strategies, policies, processes and practices to be implemented according to plan Policy Goals of Human Resource Management • Managing people as an asset that are fundamental to the competitive advantage of the organization • Aligning HRM policies with corporate strategy and business policies • Developing close fit of HR policies, procedures and systems with one another • Creating a flatter and more flexible organization, capable of responding more quickly to change • Encouraging team working and cooperation across internal organizational boundaries • Creating a strong customer-first philosophy throughout the organization *Organizing employees to manage their own self-development and learning • Developing reward strategies designed to support a performance-based culture • Improving employee involvement through better internal communication • Building greater employee commitment to the organization • Increasing line management for implementing HR policies • Developing the facilitating role of managers as enablers • HRM goals vary according to competitive choices, technologies, services, characteristics of organizations and employees, labour market conditions, societal and government regulations and national culture • HRM concerned to achieve: - Organizational effectiveness - Human capital management - Knowledge management - Reward and retention management - Employee relations - Meeting diverse needs - Bridging the gap between rhetoric and reality HRM Based Three Propositions • The human resource of an organization plays a strategic role in its success and are a major source of competitive advantage • HR strategies should be integrated with business plans. Successful organizational performance depends on alignment between business and human resource strategy • Individual HR strategies should cohere by being linked to each other to provide mutual support. • Adopting a strategic view of HR, in large part, involves considering employees as human “assets” and developing appropriate policies and programmes as investments in these assets to increase their value to the organization and the marketplace. Effective organizations realize that their employees do have value, much as the organization’s physical and capital assets have value. Sources of Employee Values * Technical Knowledge: - Markets - Customers - Processes - Environment • Ability to Learn and Grow - Openness to new ideas -Acquisition of knowledge/skills • Decision making capabilities • Motivation • Commitment • Teamwork - Interpersonal skills - Leadership ability • Viewing HR from an investment perspective, much as physical assets are viewed, rather than as variable costs of production, allows an organization to determine how to best invest in its people. Human assets cannot be duplicated and therefore become the competitive advantage that an organization enjoys in its market(s). • From investment perspectives, employee training, development, retention, reducing turnover rate, knowledge and talent management are important. • Valuation of human assets has implications for compensation, advancement, opportunities and retention strategies as well as how much should be invested in each area for each employee. Valuation of Assets Ease Financial: of measurement Equity, security, investments, accounts receivable. Physical: Plant, land, equipment, raw materials Market: goodwill, customer loyalty, distribution networks, branding Operational: management practices, structure of works, technology Human: education, knowledge, skills, work habits and motivation, personal relationships, competencies. More difficult • Financial and physical assets are relatively easy to measure via accounting practices. Most of these assets are tangible and have some clear market value. Market and operational assets are a bit more challenging to measure, but accounting practices have been developed that can place a general subjective value on such assets. Human assets however are very difficult to measure. Understanding and Measuring Human Capital • Given that employees and their collective skills, knowledge and abilities represent a significant asset for organizations, a critical issue for organizations becomes measuring this value as well as its contribution to the organization’s bottom line. A study evaluates HR operations on the basis of three rather limited metrics: a) Employee retention and turnover b) Corporate morale and employee satisfaction c) HR expense as a percentage of operational expense Common HR Metrics • Absence rate , Cost per hire ,Health care costs per employee ,HR expense factor ,Human Capital Return on Investment (ROI) ,Human capital value added ,Labour costs as a percentage of sales or revenue ,Profit per employee ,Revenue per employee ,Time of fill ,Training investment factor ,Training return on investment ,Turnover costs ,Turnover rate (monthly/annually) ,Vacancy costs ,Vacancy rate ,Workers’ compensation cost per employee ,Workers’ compensation incident rate ,Workers’ compensation severity rate ,Yield ratio. Factors influencing how ‘investment oriented’ an organization is • Management may or may not have an appreciation of the value of its human assets relative to other capital assets, such as brand name, distribution channels, facilities, equipment and information systems. The extent to which an organization can be characterized as investment-oriented may be revealed through answers to the following questions: - Does the organization see its people as being central to its strategy? - Do the company’s mission statement and strategic objectives, both company-wide and within individual business units, espouse the value of or even mention human assets and their roles in achieving goals? - Does the management philosophy of the organization encourage the development of any strategy to prevent the depreciation of its human assets or are they considered replicable, like physical assets? Company Use of Human Resource Metrics (Survey of Indian companies and society for Human Resource management) • Recruitment and selection process, Performance management, Compensation management, Reward programmes, Benefits management, Employee relations, Health, safety and security programme, Budgeting, Retention programme, Employee communications programmes, Diversity practices, Employee engagement ,Analysis of trends and forecasting ,Leadership development ,Human capital measurement ,Retirement planning ,Talent management ,Skills development ,Work-life programmes ,Succession planning ,Employment branding ,Corporate social responsibility.
