BUS603: Managing People

Enterprises become increasingly aware that proper investment into human resources can have a significant impact on their performance, which of course also affects their competitiveness. The corporate culture exactly offers the greatest source of competitive advantage of enterprises. Continual adaptation to changing market conditions attracts businesses to invest their energy and finance to staff by improving their competencies. Businesses improve their human resources and consequently increase their psychological and professional assets by investing into human potential of individuals by improving their skills and competencies. There exist various ways of investment into human resources. Businesses can invest in general human capital, which is an investment into specific or general training that enables acquisition of general knowledge usable in various companies. This results in higher future expected return of investment. The second option of investment into human resources is to invest in specific human capital. Specifically, it is investing in the improvement of specific competencies and skills for a particular job. This form of investment is less risky in terms of staff turnover as the use of specific knowledge is less likely to be used in other companies.

There are also other forms through which the company can provide investment in human resources, for example, by improving working conditions by using more efficient and innovative protective aids and tools. The second way is to improve the health conditions of employees through quality social program. The third form of investment in human resources could be improvement and expansion of business skills, competencies, and abilities achieved by high-quality corporate education. All the above-mentioned forms of investment into human resources aim towards the overall development of individuals and also his/her acquisition of new skills, competencies, and abilities, as well as a change in behaviour and attitudes of individuals towards the company and its objectives.

When investing into human capital, the enterprise should pay attention to the criteria used for investments into fixed capital, taking into account also the specifics and factors that affect the overall investment process. When considering the philosophy of strategic planning into human resources, it is necessary to take into account two criteria: first, feasibility of investment which answers fundamental questions about the availability of necessary resources, efficiency, time factor, the size of capital invested, and the like. The second criterion is the eligibility of the investment. Then, the investor confirms the correctness of the decision to implement the investment. The evaluation process will take into account the appropriate approaches and methods, including the time factor and also the risk of investment into the company's human resources. Another issue to be taken into consideration in company decisions to invest in human resources is the fact that such a decision is limited and depends mainly on the estimated volume and availability of capital expenditures and also on the expected amount of income from investment management, cost of capital and optimally quantified assessment of the investment period.