Organizational Flexibility : Real Option Approach

Organizational flexibility is the main capability that enables organizations to face environmental fluctuations, as it makes them more responsive to change. This paper study the long term impact of HR practices on organizational flexibility with help of real option approach. Concept of real option is very important in understanding various HR options created by HR practices. HR options are to be viewed as a sub-set of real options. HR options are generated through a specific type of HR practices that are intended at building a HR capability to respond to future uncertain events. Paper develops a conceptual framework to identify the uncertainties associated with human assets and provides measurement approach by deploying methods of extended NPV and real options. Better HR practices in terms of HR planning, recruitment and retention strategies will effectively respond to external environment and hence enhances organizational flexibility