“To truly be a strategic business partner, HR professionals must anticipate and articulate both the key HRM opportunities and challenges, and step up as the internal expert to proactively enact and lead change, and demonstrate how HRM is, indeed, the source of sustained competitive advantage.”
Introduction
In recent years there is an increase in aware to the important role that human resource has on creating a competitive advantage in organisations. How to manage people in organisation become a major concern, especially with globalisation companies (Björkman, et-al, 2007). Although yet, strategic thinking about human capital and its development are still not common.
HR departments today facing more complex challenges when it comes to manage the human resource in organisations, as they have to “read” correctly the rapid fast
changes organisation policy and stratagem have, and practice these changes across the organisation. One of the key factor for a company to become global company is by having a competitive advantage, and in recent years, researches show, that this is the human resource. The human knowledge of an organisation can be his continuous competitive advantage and may affect the organisation outcomes, such as profit, customer satisfaction, the employee performance, and in some cases, the organisation survival (Kapoor, 2011).
Empirical studies that were conduct in various countries, show positive connection between the wide use of HRM practice to the high performance success, such as financial. As such, investment in HRM practice seems to be affecting high performances outcomes (Björkman, et-al, 2007). In this essay I will establish the overall positive impact that HRM practice have on the organisation performance and the sustainable competitive advantage that HRM brings to organisation.
HRM impact on overall performances
Traditionally HR were seeming as a cost that need to be minimised and a potential source of efficiency gains, however, HR as a system and a function have a direct contribution to the operational and strategy decision of the organisation (Hamel, G., & Prahalad, C. K. 1994).
However, as the economic environment is rapidly changing, to compete, they must continually improve their performance by reducing costs, innovating products and processes, improving quality and productivity in the effort to be first in the market (D’Annunzio-Green, et-al 2002).
The believe that employee performance have critical effect on the company performance was common among academia and business consultants. Lado and Wilson (1994), Grant (1998), Prahalad and Hamel (1990), and Kamoche (1999), all argued that if only a few individual resources (managers) have the knowledge of how to manage the organisation, it will not lead to the establishment of sustainability competitive advantage; the investment need to be done in the high quality human capital, but this can’t be left to handle only by the managers who supervise the employee, and masher him by their department needs. The process must involve professional development and hiring and retaining high quality people with tacit knowledge (Boxall and Purcell 2003).
The significate of HRM to the organisation can be place in 4 perspectives:
Organizational learning – such as innovation, quick adjusting to changes and renewal.
External and internal fit – the organisation resources, it’s practices and capabilities need to be align or hormonally combined.
Engagement in change processes – Perhaps the most significate one. HR act as an intermediary between the business and its stakeholders and also identify threats and opportunities.
Development and deployment. This is the core competency. (Stavrou. 2005)
HR acts as a mediator of the organisation strategy and the performance outcome. It also acts as a tool for networking, create business opportunities, build relationships, capability developer and performance stimulator.
HR system can be a unique source of sustained competitive advantage, especially when its components have high internal and external fit (Baird & Meshoulam, 1988; Lengnick-Hall & Lengnick-Hall, 1988).
Effective HRM then become a source for a sustainable competitive value for the organisation.
HRM competitive advantage
Researches and professional strategist have been placing a lot of efforts in trying to understand what could be the internal and external sources to generate a sustainable competitive advantage for organisations. However, up until the 90s, a considerably greater attention was given to the external environment approach, and the strategic analysis mainly focused on the industry environment and competitive positioning of the organization (Barney, 1991, 1995; Grant, 1991, 1998).
There are two control variables that effect the way HRM practice effect the organisation performance: Independent Variable – which is the practices in HRM, and the Depended variable which is the organization overall performance.
HRM practice is pattern of resource deployments planned human activity which is intended to enable the organization to achieve its goals (Fey, et-al 2009).
The concept of the HR system as a strategic asset has implications for both the characteristics and the effects of such a system. Strategic assets are “the set of difficult to trade and imitate, scarce, appropriable, and specialized resources and capabilities that bestow the firm’s competitive advantage” (Amit & Shoemaker, 1993), and the sustainable competitive advantage is the outcome of resource selection, accumulation and deployment (through organizational capabilities), and is based upon the premise of firms’ resource heterogeneity.
Although traditional sources of competitive advantage such as natural resources, technology, economies of scale, and so forth, create value, the resource-based argument is that these sources are increasingly easy to imitate, especially in comparison to a complex social structure such as an employment system (Brian Becker, Barry Gerhart 1996).
The table below summarise the literature review on the role of HRM in creating competitive advantage.
The widely available researches on the issues in HRM shows the importance of HRM in making the company more competitive. Mossholder, et-al (2011) and Fey, et-al, (2009) claims that HRM practice affect the organisation culture the affect the cooperation between staff, staff motivation and behaviour. These HRM theories contradicting Nollen’s (1996) dominate theory on the American HRM practice, were the believe of “one fit all” should be practice in and out of the U.S. Today this believe is unequivocally accepted and in practice, recent researches show that HRM practice should adjust itself the country where they operate, as organizational culture and HRM are different among organizations. Even if it is a Multi-National Corporation (MNC), each branch of the corporation will have his own unique culture (Fey, et-al 2009).
To allow this information to be collected so it can use by HRM to create a HRM practice that includes employee training, performance -based compensation, talent based promotion and internal communication (that lead to the competitive advantage), the organisation need a system that will help to reach this goal. This solution needs to relay on knowledge system. Human knowledge are unique to each organisation and are very hard to duplicate.
Nonaka et-al (2006) claim that Organizational knowledge creation theory explains the process of making available and amplifying knowledge created by individuals as well as crystallizing and connecting it to an organization’s knowledge system.
The tables below show the implications and effect of best practice in HR system
These finding suggest that organisation will enjoy a bigger gain if they invest in their human resource and that HRM is moving from being “obstruction” to organization performance to being a neutral influence.
Conclusions
This paper discusses the broad agreement that the main activity, and the one that takes most of HR time, is in the areas of recruitment and salary and very low activity in the areas of strategy and organisational decisions.
It is clear that HRM need tools and authority to turn the human resource of the organisation into a competitive advantage. Knowledge system will help HRM be the eyes and ears and find the employees that stand out. HRM, if involve in staff review, can spot talent and advise how to grow them so they will become a competitive advantage for the organization.
Relying on the human resource department to recruit the best employees, design appropriate and effective training programs and institute successful retention programs can give the organisation a sustainable competitive advantage.
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