To ensure development and sustenance in the fast pacing business conditions, acquiring and retaining high quality employees provide a competitive edge to the business entity. The recognition and acceptance of the role played by the employees saw a transition in their portrayal from a mere industrial worker to a major investment in the company. The need for alluring skilled workers and the cost advantage on retaining them forced the management to consider employees as a major investment to the company.
Human investment can be defined as the utilisation of labour for the purpose of gaining more returns on the investment made or to increase capital or both. Return on the investment or ROI on labour is the employees’ contribution to the profit of the company in relation to the initial investment incurred by the company.
Like any investment the selection of the right mix must be ensured. Attracting quality employees is by no means an easy task. The perception of the company in the minds of the prospective candidates must be augmented. With many seeking for career growth and monetary returns, the company has to create and maintain the image of providing a base for improving the technical skills, thereby guaranteeing good prospects for advancement in one’s career. Recruitment of the right candidate must be done with great caution. The HR has to ensure that the investment has been made on the right candidate at the right ‘price’. He has to consider the ‘viability’ of the investment to ensure company’s success. The human investment must be innovative, intuitive and easily adaptable to the changes. These employees must be capable of understanding and adopting newer techniques and ideas into the existing system to guarantee wealth maximisation. The ‘investment’ is scrutinised from all aspects like the technical knowledge, reasoning skills, communication skills, etc by conducting various levels of tests and interviews.
HR must be assured of a good return on their investment. The costs involve an initial expense to get it instilled into the organisation like those incurred on the recruitment, training, and other costs like expense incurred on absenteeism, idle time, etc. Like other investments, human resources become effective only when it break-even the initial expenses.
Once the human investment is made, the HR has to ensure its presence within the entity for a longer term. Withdrawal of the investment at any time is expensive to the company as it has to seek other ways of attaining new employees. In human investment, the high rates of attrition impose a grave threat to the profitability of the concern. Departure of an employee results in the loss of know-how as well as the time and cost incurred in the delay in getting the work done. The additional expenses on adding more employees and getting them to break-even add to the cost. The concept of ESOPs emerged with the intention of retaining the employees on a long term basis.
The health of the investment must be maintained at all times to ensure maximum results. In the case of human capital, the company must sustain a good working culture which provides room for growth and stress-free environment. Absenteeism on account of frustration must be avoided at any cost as this creates a negative morale leading to poor performance.
The HR is also allotted the task of forecasting the future needs on the basis of past data and analysis of future trends. Failure to provide the correct mixture and quantity of labour can lead to the loss of business, thereby creating a negative image of the company.
The need to move with the technology at a fast pace has made employees the crucial asset of any company. The need for the continuous supply of abundant skills has made the employers view them on a long term perspective.