IntroductionTraditional sources of competitiveadvantages like financial resources, manufacturing capacity, and availabilityof resources, even though considered necessary are today no longer adequate forthe success of an organization without proper management of Human Resources.
Strategic Human Resource Management (SHRM) is the unique methodology formanaging an organizational workforce that aims to achieve a competitiveadvantage by strategically developing a highly skilled and capable workforce.As such, SHRM is mainly focused on the management of the knowledge,skills, and competencies, including synergies among employees. Human Resourceshave become the most valuable asset for modern organizations, the new source ofwealth, and its management is key to gaining competitive advantage inthe highly competitive modern business environment. This paper aims to providea literature review on how effective management of Human Resources enables enterprisesto gain competitive advantage.
The performance of an organization isdetermined by various factors that play different roles towards thepromotion of the firm’s core competencies. One of the factors that havebeen shown to be crucial in promoting competency within an organization isthe adequate management of human resources. Several authors amongthem Piketty (2017, p.
142) have noted that today, we are living inan era in which knowledge and intellectual capital, instead of physical capital,is gradually becoming more vital for the success of any organization. There isa growing need for highly skilled and talented people, who can enable thecompany to become more productive and come up with new innovative ideas,promptly. Human Resource Management acts as thesustenance system that provides supervision and direction for managingemployees in the work environment. HRM also plays an important task ofdeveloping knowledge and skills among the workforce through training,development, recruitment, and selection as well as planning (Omotayo, 2015, p.12). In general, HRM in modern organizations, plays two interrelatedroles, 1) ensuring effective performance of the organization, and 2) acts as asupport for attaining competitive advantage through people (Galbraith, 2015, p.
226). As such, human capital is currently the only sustainable source ofcompetitive advantage. On a similar note, Schwab (2017) contends that HRM isimportant as it determines the intensity and diversity of an organization’shuman resources which is in turn, is important in helping the organizationachieve success and competitive advantage.
In line with the ideas of various managementexperts, there are various Human Resource strategies which include, 1) buildingand guiding coalition, 2) providing vision, 3) identifying current gaps betweenthe business and corporate strategy of the organization, 4) developing policiesthat act as guides for managing the workforce, and 5) creating networks thatare important in ensuring the company has the right workforce it needs(Marshall and Broome, 2016, p. 37). In light of this, Galbraith (2015, p.229) states that the philosophy of HRM is based on the belief that anorganization is able to gain a competitive advantage by efficiently and effectivelyutilizing its workforce. Schein (2017) also notes that organizational learninginfluences Human Resource management practices in ways that have a positiveimpact on a firm’s knowledge creation process towards the attainment ofstrategic goals of the organization. Strategic Human ResourceManagement as a Means of Ensuring Organizational CompetencyThe role of Human Resources in providing acompetitive advantage as a topic has received considerable attention in thelast few decades. Various studies have been conducted thathighlight the competencies and capabilities of organizations in regards to theHRM practices and how it enables firms to create and implement competitivestrategies.
According to Parmenter(2015), a firm can gain a competitiveadvantage only when it selects and develops its Human Resources, as well asimplementing job structures and reward systems that motivate employees to workharder which in turn contributes to organizational competence. This isalso in line with the views of Grant (2016) who argues that effectiveManagement of Human Resources can provide an organization with a sustainablecompetitive advantage which in effect increases its overall performance andlong-term growth. Grant (2016) points out thattraditional techniques of differentiation such as financial resourcesprovide little in terms of what is required for an organization to achieve acompetitive advantage in the modern business environment.
The author suggeststhat companies that seek to achieve a competitive advantage should instead putmore emphasis on developing Strategic management of their Human Resources. Tobe successful in achieving this goal, HR practices should be in relation to 1)each other, 2) the overall HRM strategy, and 3) corporate strategy of the firm. Kauffman (2015, p.
119), observed that there is a relationshipbetween the performance of an organization and its HRM practices. For instance,he notes that organizations which adopt a cost reduction approach tend torequire their employees to work harder, while those that adopt qualityenhancements usually require their employees to work smarter. On the otherhand, organizations which adopt innovation strategy require their employees todo their work differently compared to conventional practices. A study conducted by Armstrong and Taylor(2014) concluded that Human Resource Practices that are aligned with theoverall vision and strategy of the organization has positive effects regardingorganizational performance.
This is in line with the ideas of Beer (2015, p.419) who showed that the corporate strategy of a company plays an importantrole in influencing its human resource management practices to achieve higherperformance as well as a competitive advantage. HRM aims to enable a company toachieve success through people. Peter Drucker (2014) strongly notedthat a business or any other institution, has only one real resource, humancapital, and plays an important role in helping the firm find its competitiveadvantage.
Moreover, Bamberger, Biron, and Meshoulam, (2014) notethat HRM is increasingly becoming a critical source of sustainable competitiveadvantage for any business or institution. On the other hand, Strategic Human Resource Management (SHRM) ismainly focused on the actions that differentiate an organization from itscompetitors (Armstrong and Taylor, 2014, p. 43). Martin et al.
, 2016, p.27) summarize that SHRM is the management of employment which aims to achievethe strategic goals and visions of the company. In the modern business environment,the concept of human capital has become one of the issues that many executivesencounter in their practice. This new concept of HRM considers people as themost important resource in an organization because it gives the organizationits distinctive character (Beer, 2015, p.
419). For an organization to remain competitive inan increasingly knowledge-based competitive business environment, it needseffective HR management practices. Grant (2016) noted that more than 80percent of executives consider Human Resources as a vital aspect to almostareas that determine a firm’s performance, especially in light of the growingbusiness challenges, increased competition, and the need to constantlyinnovate.
Bamberger, Biron, and Meshoulam(2014) have also argued thatintellectual capital is today, the most important and tangible resource that islikely to provide most organizations with a sustainable competitive advantage. In general, modern Human Resource Managementpractices recognize employees as very important assets of the organization. Theemployees, on the other hand, are required to possess a wide variety of skillsboth technical and interpersonal, to remain resourceful towards achieving thegoals and objectives of the company. The talents, knowledge, and experiencethat the workers possess are of economic value to the firm they work for,because they enable the company to adapt to changing business environment whileremaining productive and competitive (Snell, Morris, and Bohlander, 2015,p. 62). Organizations that effectively manage their Human Resources are able toachieve higher levels of productivity, higher market value as well as increasedprofitability and competitiveness.
As such, top leaders in anyorganization must always review their human resource management practices andpolicies and make sure that they are in line with the firm’s corporate strategyif they want to achieve or maintain a competitive advantage.Ensuring that employees are well preparedand motivated to perform their duties effectively requires that organizationsrecruit the most qualified, capable, committed and flexible people.This should be accompanied by a compensation and reward system thatwill boost their commitment and performance in their respective roles. Miner(2015) while discussing the theory of motivation notes that the motivationlevels of employees are directly proportional to the value of work or rolesthey are expected to accomplish, including the presence of intrinsicand extrinsic motivators in the workplace.
In essence, motivating employees byempowering them and enhancing their capabilities is the core task of HRMand is extremely crucial in achieving a sustainable competitive advantage andsuccess (Armstrong and Taylor, 2014, p. 44).The growing challenges and competition inthe modern business world have indeed caused management of Human Resources totake a more strategic role in how companies conduct their operations(Deresky, 2017, p. 74). Subsequently, the new positioning of HumanResource Management (HRM) as Strategic HRM (SHRM) shows that there is a needfor integrating Human Resource practices with the corporate strategy (Armstrongand Taylor, 2014). HRM not only influences the behavior of employees in acompany, but it also affects the development of human resources as a source ofcompetitive advantage (Snell, Morris, and Bohlander, 2015, p. 66).
Theauthors note that an increasing number of companies today have realized theimportance of SHRM as an important factor in achieving a competitive advantageand therefore recognize the need to integrate HR management practices andstrategies into their corporate strategies. Without a doubt, HRM has proven to be a keyfactor in the improvement of productivity in the workplace, which means that itnot only turns workers into developmental resources but also makes them asource of competitiveness. On the other hand, Eriksen (2014) suggestthat the competitive advantage theory does not only consider the endowmentfactors such as physical resources, human resources, capital resources but alsofocuses on how these factors are constantly being created and upgraded. Armstrong and Taylor (2014) showed howorganizations benefit from effective HR management practices towards improvingproductivity which they argued takes place in three phases.
The author notesthat initial stage is mainly concerned with acquiring and developing humancapital, which includes adequate knowledge and skills and abilities. The secondphase entails the tasks and process design, the various business units and theoutputs. The third phase deals with differentiation in terms of the company’ssource of competitiveness and the corporate strategies. Therefore, based on theempirical evidence, this study concludes that organizations should adopt andintegrate effective management of Human Resources in line with their corporatestrategies as a tool for enhancing their competitive advantage.
ConclusionDifferent studies that have beenconducted in the past have shown that effective management of HumanResources is one of the most important aspects of any business or institutionin terms of improving competitive advantage and overall performance the modernsociety. Strengthening of an organization’s workforce and empowering them toperform their duties to the fullest potential is today considered asone of the most effective ways of ensuring elevated organizational performanceand sustainable competitive advantage.