ABSTRACT
One of the most critical strategic issues facing the HR function is determining the appropriate investment level for human resources. How much you should spend on your employees is a fundamental issue, yet in practice, it does not receive enough attention. Although some HR functions use benchmarking only – and maybe to a fault – other strategies may be appropriate. This chapter details five specific strategies for determining the investment level:
Let others do it. (Avoid the investment altogether.)
Invest the minimum. (Invest only what is absolutely necessary.)
Invest with the rest. (Use benchmarking to guide the appropriate investment.)
Invest until it hurts. (Spend too much on human resources either intentionally or unintentionally.)
Invest as long as there is a payoff. (Use a measurement system to understand the value of human capital compared with the investment.)
The majority of organizations, if not all, use one or more of these strategies. This chapter provides examples and information to help guide HR managers to determine which strategy will best fit their situation. Although the investment levels may be set initially in the past, this is an issue that should be reviewed periodically.