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CHAPTER 1: AN INVESTMENT PERSPECTIVE OF HUMAN RESOURCES MANAGEMENT -…
CHAPTER 1: AN INVESTMENT PERSPECTIVE OF HUMAN RESOURCES MANAGEMENT
THE STRATEGIC VIEW OF HUMAN RESOURCES
Effectives organizations recognize that employees have value
Employees are valuable source of sustainable competitive advantage
Employees are human assets
SOURCE OF EMPLOYEE VALUE
Decision Making
Analytical Skills
Problem Solving Skills
Change-Management and Implementation Skills
Motivation
Challenging work
Perceived 'fit' with organization
Job Satisfaction
Ability to Learn and Grow
Openness to new ideas
Acquisition of knowledge/skills
Commitment
Belief in Mission
Engagement
Technical Knowledge
Customer
Process
Market
Environment
Teamwork
Interpersonal Skills
Leadership ability
TYPE OF ORGANIZATION ASSETS/CAPITAL
MARKET
Branding
Customer loyalty
Goodwill
Product line
Distribution network
pattern, trademarks, copyright
OPERATION
Management practices
structure of work
Technology
PHYSICAL
Plant
Land
Equipment
Raw material
HUMAN
Knowledge
Skills
Education
Competencies
Work habits and motivation
Personal relationships
FINANCIAL
Security and investment
accounts receivable
Equity
THE HR VALUE CHAIN
Operational Outcomes
Productivity
Quality
Customer satisfaction and loyalty
Financial/Accounting Outcomes
Expenses
Revenues
Profitability
Employees Outcomes
Behavior
Commitment
Attitudes
Engagement
Market-based Outcomes
Stock price
Valuation/ capitalization
COMMON HR METRICS
Absence rate
-Cost per hire
-Health care cost per employees
-HR expenses factor
-Human Capital Return In Investment (ROI)
-Human Capital value Added
-Labor Costs as a Percentage of Sales or Revenues
-Profit per Employee
-Revenue per employee
-Time to fill
-Training Investment Factor
-Training Return on Investment (ROI)
-Turnover Cost
-Turnover Rate (Monthly/Annually)
-Vacancy Costs
-Vacancy Rate
-Workers Compensation Cost per Employee
-Worker Compensation Incident Rate
-Workers Compensation Severity Rate
-Yield Ratio
CALCULATION OF HUMAN CAPITAL MEASURES
HR EXPENSES FACTOR
Total Hr expenses? total operating expenses
HUMAN CAPITAL VALUE ADDED
Revenue- (operating expenses-compensation+ benefits costs) / total number of FTE employees
PROFIT PER EMPLOYEE
Revenue- operating expenses/ number of full-time equivalent(FTE) employees
TURNOVER RATE
Number of employee separations (during a given time period) / number of employees
HUMAN CAPITAL ROI
Revenue- (operating expenses-compensation+ benefits costs) / compensation + benefits costs.
MERCER MODEL OF MEASURING HR IMPACT
Calculate cost of solution
Calculate value of improvement 6 to 24 months after implementation
Choose HR solution that addresses problem
calculate specific return on investment
Calculate actual cost of problem
ROI in human assets often not realized until some time in future
Identify problem HR can impact
HR ANALYTICS
The systematic collection, reporting and analysis of various metrics which are critical to effective performance
Involve the process of benchmarking where the organization compares actual performance to goals and to the performance on a similar metric by competing organization
INVESTMENT ORIENTATION FACTORS
Nature of skills needed by employees - the more marketable employee skills, the riskier the firm investment in skill development
Utilitarian (Bottom Line) mentality
Attitude toward risk - investment in human resources inherently riskier - human assets never absolutely owned
Availability of Outsourcing
Senior management values and action - manager need investment orientation toward people.
FACTOR INFLUENCING AN ORGANIZATIONS INVESTMENT ORIENTATION
Attitude Toward Risk
Nature of Employee Skills
Management Values
Utilitarianism
Availability of Outsourcing