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A major premise of the investment perspective of this text is
that investments in human resources can provide a sustainable
source of competitive advantage and can increase the
likelihood of successful implementation of the firm’s business
strategies. Because of these effects, investments in human
capital have the potential to produce attractive rates of return
for the firm’s shareholders. The process of investing in human
resources goes beyond simply hiring and retaining good people,
although these are fundamentals. Investments in human
resources can take several forms. They may be relatively direct,
such as in the case of training employees in order to increase
their productivity. Human resource investments may take a
more indirect approach as well. For example, such investments
may be pursued through an attractive compensation plan that
helps the firm boost employee productivity and facilitates
retention of a highly talented workforce. Other examples might
include investments in improved selection procedures, such as
by acquiring more valid selection tests, or increasing the
amount of advertising of job vacancies.
In recent years, human resource executives have been
extremely interested in the empirical evidence on the
relationship between various human resource management