An Investment Perspective

of SHRM

Dr.S.Yogananthan

Content

Introduction and definition of SHRM

Strategic value of resources
SHRM concerns on HR
Types of assets and capital
Research findings insist on
investments
Factors considered for investment
Recommended SHRM practices

Objectives
To learn the role of SHRM in
managing organizations
To learn the value of various assets
of organization
Knowing the HR value chain
Identifying the importance of
investments in SHRM and return
Role of SHRM in creating HPO

Introduction & Definition

SHRM is defined as is the
proactive management of people. It
requires thinking ahead, and
planning ways for a company to
better meet the needs of its
employees, and for the employees to
better meet the needs of the
company.

More definitions.
According to Schuler, all those activities
affecting the behaviour of individuals in their
efforts to formulate and implement strategic
needs of business.
Mabey et al defined SHRM as the process of
developing corporate capability to deliver new
organizational strategies.
Wright & McMahan defined as the pattern of
planned human resource deployments and
activities intended to enable an organization to
achieve its goals.

Increasing scope and focus

on HR
Strategic Value of HR
The Only biological resource & growing asset
Unlike other resources, commonly
appreciated in value
Active resource which utilizes other
resources
Has got growth & developmental
perspective
Consist of extrinsic & intrinsic values
Own Sustainable competitive advantage

Why SHRM concentrates more on

HR?
Concern in the following areas are growing
importance for SHRM:
Human Process Skills Creativity & Innovation, Decision
making, Judgment, Motivation & Commitment,
Leadership and Team work
Growth Over a period of time, enhancement in
performance by the means of productivity, contribution,
reliability & responsiveness and monitory value
Development Achieving new milestones in individuals
career and developing new knowledge (of
conceptual/technical /human personal domains)
according to External / Internal environment, markets,
processes, customers & Technology needs.

Types of organizational assets & capital

(Courtesy: Jeffrey. A. Mello, text book on SHRM, South- Western, 2 nd edition, 2005 Edition)

Is it risky to invest in HR?

According to Robert Kaplan & David Norton, The authors
of Balanced Score Card, in their research revealed both
sides of the coin that less than 10% of all strategic
business plans are effectively executed.1
Moving from Tangible to Intangible assets of human
capital becoming increasingly risky as performance
metrics are not periodically redefined and developed.
2800 firms have been surveyed from 1992 to 1998,
among the companies, top 10 and bottom 10 companies
are compared between their workforce in terms of sales,
market value and turnover. 391% of return on
investments shown by the top 10 companies revealed
the secret of investing on human capital. 2

Research revelations on Human

Capital

Reference: given below.

HR value chain

Factors considered on investment

perspectives by Management

Management Values
Nature of employee skills
Availability of outsourcing
Utilitarianism
Attitude towards risk

Management Values
Virgin Atlantic case
While looking into Virgin Atlantic
case, their HRM policy to hire the
suitable who bring their personality
to provide best of its kind work
They recruits the workforce who
assimilates with Virgin way of life.

Nature of employee skills

According AMA (American
Management Association) critical
skills survey reports 2010 revealed
that the 4 Cs as core importance
skills are given below
Creativity & Innovation
Critical thinking & problem solving
Communication
Collaboration

Availability of outsourcing
A default role of corporate, Make or Source
decision, is largely exercised based upon
the following domains of organization.
Core
Critical
Non core
Non critical

Freedom of outsourcing derived from

strategic framework along with
(organizations) vision and mission.

Utilitarianism
John Stuart Mill & Jeremy Bentham
the authors of Utilitarianism , pave
the understanding of this concept en
route for investment perspective, by
the means of fulfilling following
concerns - early returns, win win
situation, process development and
progressive growth.

Attitude towards risk

Dispersion of authority by either
centralization or decentralization
have an immense impact on attitude
towards risk. Also from top to
bottom, it is declined relatively and
gradually as the risk-aversion
behaviour reciprocally surged.
Boundary less organizations are the
classic examples of encouraging risk.
(Ex- Google)

Creating high performance

organizations (HPO)
Recommended SHRM practices are
Selective recruitment & hiring
Creating and empowering teams
Integrating HRM strategy
Enhanced training and development
Channelizing proper communication
Linking performance and pay
Creating supportive culture
Promoting EHS (environment, health and
safety)

Recommended SHRM
practices.
Selective recruitment & hiring ensures
right man(with congruency and tactful
discipline) in right job on right time in
given right environment .
Creating and empowering teams
identification and designing precise mix of
(delegated) personnel as team and
empowering them to enable excellence.
Enhanced training and development
headway from organizational learning to
learning organization at all levels.

Recommended SHRM
practices.
Channelizing proper communication- devising a
communication mix (with combination of formal ,
informal & other forms) which serves all the ideal
objectives of organization.
Linking performance and pay Merit / Contingency
pay models are largely exercised in todays
corporate scenario in ensuring high performance.
Creating supportive culture to mold and tap
intrinsic worth of the employees, human process
interventions taken into consideration.
Promoting EHS (environment, health and safety) as
per norms & guidance of OSHA, at ILO, Geneva.

Summary
In comparison with other resources of
organization, HR has been identified as most
vital strategic & growing asset and SHRM play
the top level hierarchy of HRM domain.
It is equally realized that investing on intrinsic
development is highly risky and to be
amended with caution.
Various factors considered in investment
perspectives along with recommended
practices.

Reference
Michael Armstrong, Armstrongs handbook of SRHM, Kogan page, 5 th edition.
Kaplan, R., & Norton, D. (2001). The strategy-focused organization: How
balanced scorecard companies thrive in the new business environment.
Boston: Harvard Business School Press.
Leslie Weatherly, HR content expert, Performance management - getting it
right from the start, Kronos SHRM research quarterly, 2004.
Gary Dessler, Chapter 3, Strategic Human Resource Management and the HR
Scorecard.
Jeffrey. A. Mello, Text book on SHRM, Cengage learning, Indian Edition, 2001,
7th reprint edition.
http://www.virginatlantic.com/en/gb/allaboutus/ourstory/forstudents.jsp#human
http://www.businessperform.com/blog/2010/12/04/employee-skills-globaleconomy-593.htm
Ronan Mclvar, The outsourcing practices: Strategies for evaluation &
management, Ambridge university press, 2005 edition, Page 118 to 121.
Stanford encyclopedia of philosophy, history of utilitarianism.
Ajit Kumar Kar, Strategic Human Resource Management: An Organizational
Perspective for High Performance, International Journal of Business and
Management Tomorrow Vol. 2 No. 6 , page 9.