CONTENTS

Introduction Risks involved in investing in

human resources Factors determining the

investment orientation of an organization

Conclusion Bibliography

INTRODUCTION

Traditional viewModern view

TRADITIONAL VIEW

Human resource is a cost of the organization. Company has to pay cost for the human resource in terms of salaries, training…

MODERN VIEW

Emergence of knowledge economy.

Human skills and knowledge are crucial to everything that is produced.

Organizations have now begun to consider employees as valuable investment.

RISKS INVOLVED IN INVESTING IN HUMAN

ASSET

Difficult to retain current employees who see no opportunity for growth

Risk of loosing the efficient employees

Trained employees are more sought after, especially by employees

Competing firms are often willing to pay more to trained employees since it saves training cost.

FACTORS DETERMINING THE

INVESTMENT ORIENTATION OF AN

ORGANISATION

Management values

Attitude towards risk

Nature of skills

Utilitarian/bottom line perspective

Availability of outsourcing

MANAGEMENT VALUES

The values of senior management play a vital role

An organization is investment oriented if its people are the core of its mission.

ATTITUDE TOWARDS RISK

Investment with higher risk result in greater potential return

Investment in human assets is more risky then investment in physical assets

Organization will develop strategies to minimize the potential risks of loosing their investment.

NATURE OF SKILLS

Investment is less risky when specific skills are not applicable to other organizations

When specific skills are on a high demand, and who can move from one employer to another, then investment involves risk.

UTALITARIAN PERSPECTIVE Also known as bottom line

perspective.

Organization evaluates investments through cost-benefit analysis

Cost of any investment is compared with its benefits

AVAILABILITY OF OUTSOURCING Emphasizes on availability of

specialists outside the firm

When investment in human assets does not give higher returns, an organization should invest in employees at the cost of other resources

CONCLUSION

To survive in the competition, every organization has to invest in its human resources so that they can in return give higher output to the organization and as a result earn higher profit.

BIBLIOGRAPHY

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