Strategic HR practices

The goal of the paper is to prove the truth of two arguments. That is, whether the importance of human resources (HR) in supporting the sustained growth of the company or whether the relationship and alignment of HR practices with other organizational factors like production, financial investments, returns, and market among many other aspects should take precedence. Human resources managers and scholars have consistently argued that their role in an organization is essential and irreplaceable (Barney & wright p.31). At the conclusion of each fiscal year, corporate bodies do carry their internal performance audit, and the outcome of those reports show that it is the firm’s people who determine the success or failure of an organization. That notwithstanding, many instances have suggested that some of the organizational decisions do not place any priority on the Human Resource department and the firm’s human resources. To illustrate this argument, when companies want to cut their cost of operations with the view to maximize their profits, the first approach they take is to cap the allocate ions on the training of personnel and when faced with no other options retrenchment.

Experienced managers and accomplished academicians have for many years of work and research tried to find the factors that improve profits of organizations. Several of them have taken the resource-based view where they have examined the role that Human Resource departments play in an organization to achieve competitive advantage. More into the bargain, there are three factors which play a central role in enabling a firm get the competitive edge on the market. They include; physical capital, which deals with equipment and the company’s infrastructure. Then there is organizational capital, which is the coordination and planning and then finally the human capital resources. The human capital resources which is the subject of analysis includes expertise, skills and the level of intelligence of the employees of the firm (Sun & tse p.35). Furthermore, the human capital resources in relation to competitive advantage still cover the areas of practices, programs and the policies that the organizations use to streamline the management of their human resources. On top of that, the evaluation of the impact of human resources in gaining the competitive advantage by an organization may not be substantive if the aspect of the actual value of the Human Resource HR department is not put into consideration. To understand the human resource value in the company, four fundamental factors should be considered. That is, the significance of Value, Rareness, Imitability and Organization framework commonly abbreviated as (VRIO).

Value

Business organizations create value by reducing the cost of the product/service. They can as well create value by differentiating the service or product in a manner that gives them the opportunity to charge an optimum price (Barney p.12). For that reason, the aim of any HR executive is to impact the value using the power of human resource. Some of the ways HR executives can participate in lowering the cost of production, recurrent expenditure of the firm is by adopting policies such as advising the employees to seek low-cost health insurance cover that will not strain the financial capability of the company to pay. That would not mean that the HR department will be seeking to downgrade the quality of healthcare of the company’s employees. Consequently, the human resource stewards of the firm can also contribute in boosting the revenues of the enterprise by coming up with business-friendly slogans and policies that will apply to all employees and create a culture of hard work which translates into revenues. For example, philosophies such as, “People First”, ”Employee satisfaction is key” among much more can help instill a feeling of appreciation and ownership of the process of more revenues among the employees. When the Human Resource executives assist the company lower the cost of production and maximize the profits earned through better management of the employees, the company will have the competitive advantage in the market (Pfeffer p.55).

On top of that, another a way in which the HR function can create a positive impact on the cost and revenue of an organization is the incentive bonus. When they come up with a policy of awarding their employees a given percentage of the money made at the end of the financial year, it will give the workers the motivation to work hard and achieve the targets. For example, an airline can promise its employees 5% bonus when they work hard and keep the airlines’ performance at the top in a month or year. More revenue for the company means better competitiveness of the firm. Therefore, it is possible for the HR functions to keep the company in a position of competitive advantage.

Rareness

Having looked at the value that firm’s human resources bring to an organization, it is undeniable that it makes significant contributions towards the attainment of competitive advantage. However, it is not a sufficient criterion for giving the company competitive advantage. The reason being, if a given human resource characteristic which gives the company a competitive edge, is discovered by other competing firms, or is present among the competitors, then it cannot be used as leverage anymore. For that reason, the HR executives of any firm will always be on the lookout for a rare characteristic in the human resources of the company that will give it an edge regarding competition.

In as much as the labor pool across the competing firms may look homogeneous, the HR executives should find the rare factor that will enable their employees to be a bit different in how they discharge their duties despite the fact that their qualifications and that of their counterparts in other firms are the same (Wright et al., p. 701). The rareness can be achieved in the process of recruitment and job training. The HR managers can ensure that they don’t just focus on academic qualifications of their prospective employees as that will be what their competitors too will be looking at, but they should also look for other aspects such as gleaning the level of the applicant’s readiness to work for the organization.

Imitability

The firm can enjoy increasing profit margins from valuable and the rare characteristics they get from the Human Resource functions over a specified period. However, the moment other organizations imitate such beneficial features; then they will cease to be a competitive advantage to the companies that once benefited from them. Therefore, the onus is on the HR executives to come up with the characteristics that no competitor will be able to copy and replicate to their advantage.

To achieve this, the HR seniors must examine the history of the company and align their new proposals with the culture and best practices of the company that will enable them to develop and nurture characteristics and practices that other companies will not manage to teach their employees. Again, when the HR, executives endeavor to inculcate the right spirit and attitude into the minds and work ethics of the employees, no matter how much the competitors will strive to copy the other things they do, they will not manage to imitate the spirit, attitude, and culture of an organization. Doing this will put them in a better position in relation to their competitors.

Additionally, the HR executives can further give the company the competitive advantage needed through their functions, by making the process of selection of employees to be very rigorous and extensive. When they adjust their interview questions in a manner that allows them to select the best people who will easily integrate into the firm’s culture of customer satisfaction, then it will not be easily copied by other competing companies. That will ensure that they stay on top of the competition. Furthermore, they can also make the selection process of the new employees more credible to the point that no other firm can replicate the transparency in which the selection process takes place. Besides selection and hiring of the new human resource capital, treating pf the existing employees with respect and fairness will boost their morale, and that will subsequently translate into more revenue. That point further illustrates the importance of the need to have a motivated and dedicated team of employees in the organization. It cannot be therefore denied that the strategic management of the human resource capital is key in achieving sustainable competitive advantage in an organization.

Organization

When it comes to this factor, the success of any organization in using the characteristics of the human resources available to them will depend on the extent to which they will exploit the resource. For the company to gain a competitive advantage by using the human resource characteristics, then the firm has to be organized to explore the full potential of the given resource. What will facilitate the achievement of the competitive advantage using the human resource characteristics is the development of systems and practices that will create the environment under which those objectives will be met.

One way of actualizing that is through focusing on reinvigorating the HR systems rather than an emphasis on the practices of a single HR. When the HR functions are organized, the employees have the liberty to participate in making crucial decisions and to utilize their cognitive skills and talents to the best of their ability. The overall impact of that will be an increased performance which will translate to a better output regarding revenues.

The examples and illustrations of the VRIO framework used above have served to demonstrate numerous ways in which firms have developed and nurtured their human resources as a means to sustainable competitive advantage. Nonetheless, there are also other aspects of human resources which do not add value and their impact is driving the organization to the path of competitive disadvantage. It is therefore, prudent for the HR executives to conduct an audit of the human resources aspects that do not add any value and expunge them from the list of the human resource functions (Bartlett & Ghoshal p.34). Moreover, there other human resources factors which only provide value but do not offer rareness. Such sources are said to cause competitive parity. Although there is no loss or disadvantage directly linked to these sources, they still do not provide a competitive advantage that a company requires that thrive over its competitors. It is quite evident that the HR functions have both a direct and indirect influence on the human resources characteristics in a firm. Therefore, it has a substantive role in the development and sustainability of the competitive advantage of the organization.

On the contrary, other arguments have supported the thought that the most important consideration is the match between HR functions and other organizational factors. According to this point of view, the performance of the organization and the attainment of the competitive advantage is through other means such as proper coordination between human resource functions and other relevant departments within an organization. Functions such as hiring and developing human assets in the firm cannot work in isolation with other departments or factors in the organization (Sparrow p.14).

Other factors that can deliver sustainable competitive advantage when used together with sound human resource functions are strong work ethics. An organization that is run by sound ethical standards and the code of conduct will achieve the better performance, better output, reduced cost of production and improved image of the company. When these factors are combined together, the resulting output puts the firm in a position of more competitive advantage.

Additionally, a sound basis of at the start of the company when integrated with better good human resources practices will enable the company to gain an edge in the competitive market, and that will, therefore, ensure that its reputation continues to thrive regarding productivity, better planning, and financial status.

Again, when an organization is transparent in the way it handles its operations such as recruitment and hiring of new employees, carrying out promotions and other functions such as remuneration of the employees, disclosing of tax records and the application of the rules and regulations of the company to all the staff without favoritism. Efficient management of that, in conjunction with sound human resource practices, will tremendously improve the company standings which in turn will give it a competitive leverage over the others.

In conclusion, it’s important to note that, critical examination and analysis of the usefulness of the sustainable human resources management show that it is possible to achieve sustainable competitive advantage in an organization with better human resource practices. Therefore, human resources management has had significant contributions to the attainment of sustainable competitive advantage.

Reference List

Barney, J.B. and Wright, P.M., 1998. On becoming a strategic partner: The role of human resources in gaining competitive advantage. Human Resource Management (1986- 1998), 37(1), p.31.

Sun, M. and Tse, E., 2009. The Resource‐Based View of Competitive Advantage in Two‐Sided Markets. Journal of Management Studies, 46(1), pp.45-64.

Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson Higher Ed.

Pfeffer, J., 1995. Producing sustainable competitive advantage through the effective management of people. The Academy of Management Executive, 9(1), pp.55-69.

Wright, P.M., Dunford, B.B. and Snell, S.A., 2001. Human resources and the resource based view of the firm. Journal of management, 27(6), pp.701-721.

Bartlett, C.A. and Ghoshal, S., 2002. Building competitive advantage through people. MIT Sloan management review, 43(2), p.34.

Sparrow, P., Brewster, C. and Chung, C., 2016. Globalizing human resource management. Routledge.

Gebauer, H., Saul, C.J., Haldimann, M. and Gustafsson, A., 2016. Organizational capabilities for pay-per-use services in product-oriented companies. International Journal of Production Economics.