Company Comparative Research on Human Resources Investment

Company Comparative Research on Human Resources Investment
MIAO Zhenqing
Zhongyuan University of Technology, P.R.China, 450007
Abstract Enterprise group’s human capital investment has its special characters and factors of influence.
This strategy relates to the existence and development of an enterprise group. This paper puts forward a
new decision-making model of human capital investment based on fuzzy set.
Key words Enterprise,HR Investment,Decision-making
1. Introduction
The enterprise group shows strong vitality in modern market competition. A large number of
theoretical and empirical studies have shown that human resources and its management which creates a
strong positive correlation to the performance of enterprises is the only major source of sustainable
competitive advantages.And the important way to get the human resource is to invest in human capital.
Therefore, enterprise (enterprise group) human capital investment strategy is directly related to the
subsistence and development of an enterprise (enterprise group). Through the analysis about the features
of enterprise group and affecting factors of human capital investment decisions, this thesis constructs an
model of human capital investment decisions based on fuzzy cluster theory.
2. The Affecting Factors of Enterprise Group HR Investment
Adam Smith, the founder of economics, regards the useful abilities (physical and mental) of all
citizens as part of social capital in “The Wealth of Nations”. This is the earliest exposition about human
capital. And human capital investment refers to a country’s investment in education, civic training and
so on for the development of economics. Backer says that the human capital investment influences the
activities of the future monetary and psychological income by increasing the human resources.
2.1 The characteristics of human capital investment of enterprise group
Property as the main link, parent corporations as the mainstay, enterprise group is an enterprises
commonwealth with a multi-level structure and numbers of corporations.
According to the characteristics of human capital investment and enterprise group, compared with
the general enterprise, the characteristics of enterprise group human capital investment can be
summarized as follows: (1) Paying attention to the development of investment. With a close relationship
to enterprise group diversified development strategy, enterprise group human capital investment focuses
enterprise benefits as a whole. Therefore, compared with the general enterprise, enterprise group human
capital investment is mainly in training and developing. The development includes staff skills and
training programs. On one hand, an enterprise group requires staff with a variety of skills and accepting
a more comprehensive skills training; on the other hand, efforts must be made in sustainability if an
enterprise group want to be successful in developing new business and getting involved in new areas. In
order to meet the diversification and sustainable strategy of the enterprise group, it’s particulate
important to give staff development and trainings. Therefore, enterprise groups stand for advanced
technologies and products; attach great importance to the development training of human capital.
Through the development training to its own characteristics, it’s not only enable staff to adapt quickly
and competently, but also greatly reduce the wastage rate. Then it dramatically increases the receipts of
enterprise group human capital investment. (2) The diversification of investment and the adequacy of
capital. Enterprise Group human capital investment is made by lots of enterprises with legal personality
that has the autonomy of decision-making for human capital investment. Enterprise Group as a
decision-making body, is responsible for the group's strategic of human capital investment, and
coordinates group’s rational and efficient allocation of human capital development. As a result of the
diversification of the group investment decisions in human capital, moreover, more and more enterprises
，
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recognize that the driving force of survival and development of enterprises is constant innovation, all the
world-renowned enterprise groups have to increase investment dynamics in research and development
(R & D) and human capital to make enterprise groups human capital investment generally have
adequate financial support. (3) High efficiency in investment. Enterprise groups, as a self-organizing
system, competition and cooperation are the motivating force and source of its evolution and
development. In terms of enterprise group human capital investment, members of the enterprise for their
own interests are bound to compete for the limited resources of group human capital investment.
Through this competition, it makes enterprises human capital investment more efficient, risk even lower.
Meanwhile, because enterprise Group that is the gathers of enterprise members linked by capital
property, personnel and other business is a relatively loose commonwealth both interdependent and
mutually independent, it has decision-making power in personnel, technology, management and other
aspects, which make the competition between members of enterprises, achieve synergy relatively simple
in the premise of the overall interests. This is not only beneficial to the rational use and effective
allocation of resources, but also to the reduction of transaction costs. Because the internal characteristics
of enterprise group, the competition and synergy, the efficiency of its human capital investment is even
higher. (4) Investment management is more complex. First of all, the enterprise group as the main
investor and the main interest group, it should consider the overall return on investment, and take the
management of subordinate enterprises. Therefore, the management of enterprise group human capital
investment should consider not only the interests of the members, but also overall strategy of the group.
Then, in enterprise groups, the senior management group of enterprise members is selected and removed
by the headquarters level, and other staff is selected by the secondary level of enterprise management.
Due to the appointment of staff and the different sources, the object of enterprise group human capital
investment is much more complex. Lastly, investment centers, profit centers and cost centers are
separated from each other in the enterprise group. This management model makes human capital
performance evaluation, pay system and the measurement of investment returns in different calculation
centers vary so greatly. Correspondingly, the management of human capital investment has also become
more complex.
2.2 The Affecting Factors of Enterprise Group HR Investment
Enterprise Group human capital investment is affected by a number of factors, including the scale
and scope, operations and condition, the organizational structure of the enterprise group, and the
integration of departments and business groups. In addition, it also includes the investment costs and
benefits, the investment rate of return, the internal rate of return and some other factors.
Therefore, while making decisions about human capital investment, the enterprise group must fully
consider its factors and characters. And because of the large number and different dimension of these
factors and characteristics, the degrees of impact on policy options about human capital investment are
different. It makes enterprise group investment decision-making in human capital become much more
complex and difficult.
3. The Corporation HR Invest Decision Making Model
，＝
Suppose the target case of the corporation labor capital invest police decision is S S {S1,S2…
SM}. Each target case, good or bad, is evaluated by a system P {P1,P2… Pn},which composed by a
series of different physic meanings and dimensions index (the number =n). Then we get an m×n policy
decision index vector matrix. Standardize it, a new vector matrix X is set up:
＝
P1 ,
P2 , L ,
 x11 , x12 ,
x , x ,
22
 21
 L, L,

S m  x m1 , x m 2 ,
S1
S2
X =
L
Pn
x1n 
L, x2 n 
 =(Xij)mn
L, L 

L , x mn 
L,
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（１）
i=1,2…n, j=1,2…m
In the matrix, Xi,j represents the ith index of the jth target case after standardization. Generally
speaking, there are 2 types:
(1) “The bigger, the better” type, the calculate formula is
γ i, j ＝
（２）
xi , j
x max
(2) “The smaller, the better” type, the calculate formula is
γ i , j = x min x
i, j
So we get matrix ℜ
Suppose
＝（ γ ）
（
（
（
（
ij
m× n
（３）
.
）
v
K = k1,k2,…kｍ T
= γ 11 ∨ γ 12 ∨ L ∨ γ 1n , γ 21 ∨ γ 22 ∨ Lγ 2 n , LL , γ m1 ∨ γ m 2 ∨ Lγ mn
v
B = b1,b2,…bｍ T
γ 11 ∧ γ 12 ∧ L ∧ γ 1n , γ 21 ∧ γ 22 ∧ Lγ 2n ,LL , γ m1 ∧ γ m 2 ∧ Lγ mn
=
v
v
K is the first vector of the matrix, and B is the second vector of the matrix.
） （４）
）
T
） （５）
T
Form target function by least square method and let the derivative equal 0, the corporation labor
capital invest police decision is established:
Uj=
（６）
1
(
)
(
)
 m
 ∑ Wi γ ij − g i
1 +  i =m1

Wi γ ij − bi
 ∑
i =1
p
p





2
p
Wi is formal weigh of index, and P is distance coefficient. If P=1, P is Haiming distance; if P=2, P is
Eula distance. Two kinds of distance often infer the same conclusion.
Formula (6) can calculate the subjection degree consideration to learns degree limit linear measure
surmise of corporation different labor capital policy decision target case, according to maximum
principle, we can find the best labor capital policy decision after ranging order.
4. An Application of the Model
A corporation plans to invest 1000000 on managers training. The training department puts forward 2
ways and counts some indexes about them. The results as follow:
１：
Figure
Training case comprehensive index
Index
Case 1
Time on post (year)
4.5
Invest reward rate
40.17
Member company inner profit rate
26.59
Corporation inner profit rate
18.85
Training goal achieved effect
0.155
％
％
％
Case 2
5.2
45.32
29.17
21.8
0.146
％
％
％
How to make policy decision as a corporation? If use only one index to appraise, it’s hard to handle the
problem. But if use the model in the third part discussed, the problem can be get rid of in theory at least.
Suppose
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case2 
5.2 
％　45.32％
＝
％　29.17％
％　21.8％ 
0.146 
case1
 4.5

 40.17
X 
 26.59
18.85

0.155
All of the 5indexes time on post (year), invest reward rate, member company inner profit rate,
corporation inner profit rate, training goal achieved effect are “the bigger, the better” type, so according
to formula (2):
1
0.886

ℜ = 0.912

0.865
1
0.865

1


1

1

0.942
v
Then according to (4), (5) K = 1 1 1 1 1 T
v
The second vector of the matrix B = 0.865 0.886 0.912 0.865 0.942
Experts set the formal weigh to every index by normal experience:
v
T
W = 0.30 0.25 0.20
v v0.15 0.10
v
Use formula (6) by the ℜ , K , B and W above, and let P=2:
v
0.326 0.674
U
（ ，， ，， ）；
（ ， ，
（ ， ， ， ， ）
＝（
，
，
，
）.
T
）
If let P=1, the conclusion is the same.
All the results show that case1 is better than case2.
5. Conclusions
Enterprise Group investment decisions-making in human capital is a multi-objective one, and the
factors are complex. However, with the application of the investment decision-making model based on
fuzzy set theory and the consideration of other factors in the case, enterprise group decision-makers
should be able to make scientific and rational human capital investment decisions. Investment
decision-making should adhere to the combination of qualitative and quantitative methods, and to
achieve quantitative analysis of human capital investment decisions. Based on the different degrees of
impact on policy options about human capital investment, choices are made about the characteristics and
affecting factors of enterprise group human capital investment successively. As a result, the model of
decision-making becomes relatively simple and accessible.
Schultz, the well-known American economist and Nobel Prize-winner in economics, says that
government and society should increase investment in human capital. Such as: the development of
national education, the construction of a system for lifelong education and vocational training. For the
enterprise groups, they should establish a corresponding human capital investment mechanism. For
Chinese enterprise groups, they can take the following measures:
(1) With a strong foundation for funds, establish a comprehensive system for training staff. Form a
training system similar to lifelong education. In accordance with the development of enterprise group,
the staff should continue to learn and have regular training, and then the enterprise will become a true
learning organization. Meanwhile, pay attention to distinct the relationship between development
training and general vocational skills training.
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(2) Construct a good human capital incentive mechanism. Play the role of human capital needs its
creative workforce. The property of human capital is a very special; it belongs to the individual and
can’t be separated from the owner. This means that the owners of human capital, easy "lazy" and not
"incentive", is difficult to control. So for the owners of human capital, it is necessary to ensure the
implementation of incentive policies and from the distribution system, according to the principle of
giving priority to efficiency, establish a distribution system according to the combination of work and
factors of production. On one hand, the human capital can be evaluated to the stocks and participate in
the investment, registration and business directly. There isn’t any low limit or limit (for example, only
30%) about the human capital as investment, but it should be reasonably determined by its own values,
market prospects and risk factors. On the other hand, outstanding entrepreneurs, managers can also
participate in the distribution of income reasonably according to their performance.
(3) Establish the mechanism of enterprise groups retain qualified professionals. It is precisely
because of the uniqueness of human capital, it is with the person closely. Only retain the talents, human
capital investment gains can be achieved and enterprise group can be developed. Therefore, with the
model above of human capital driving mechanism, the enterprise group can adopt some mechanism of
detaining the talents such as the stock option, the staff lifelong system and so on.
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Harvard Business School Press, 1994
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(in Chinese)