Order Number_10798_ Managing Human resources

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Managing Human Resources 1 Using HRM to attain competitive advantage Student name University Course Code: Name Instructor Date

Managing Human Resources 2 Business organizations constantly try to create competitive advantage so that they remain successful or deal with changes around them. Explain and analyze how HRM can contribute to this using at least two of its main functions to practically illustrate that. Business organisations, gain a competitive advantage by attaining a superior marketplace position when compared to the competition. Peter Drucker, who is considered the father of modern management, said that the only resource that every business firm has is its people. Drucker noted that people have always played a critical role in organisational success (Atwijuka & Caldwell, 2017). There is evidence that a company can gain a competitive advantage by effectively managing its human resources. Effective HRM practices pay off by enhancing employee performance which often results in better customer service. This essay looks into how the HRM functions of talent management, compensation planning, training and development, and compliance planning create a competitive advantage for business organizations from the perspective of the Resource Based View (RBV) theoretical model. Importance of competitive advantage The essence of business organizations striving to gain competitive advantage is simply increasing profitability. Competitive advantage enables businesses to expand and get a larger market share (Atwijuka & Cladwell, 2017). To attain competitive advantage a company first needs to analyze and understand all its competitors. Then the company needs to implement a culture, values and decision-making processes that align well with its business model and market. Simply copying these components from another company will not work for operational conditions significantly differ for companies (Atwijuka & Caldwell, 2017). Among all techniques that can help a business organization gain a competitive advantage is improving

Managing Human Resources 3 human capital. A company with more engaged employees has a higher chance of attaining a competitive advantage than its rivals. Research Evidence that HRM can be a source of competitive advantage Several studies conducted in the past and Human resource management models show that effective human capital management can be a source of competitive advantage. Caudron’s 2002 work “How HR Drives Profits” is one of the pioneer pieces of research on the topic of HRm being used as a source of competitive advantage. In his analysis, Caudron relies on examples from individual case studies of the time to show that investments in Human resources do pay off. Caudron (2002) argues that to boost profitability Human resource has two ways of looking at profitability. These two are cutting on costs and helping in revenue generation. He outlines employee self-service technologies as the best way through which companies can cut down on costs (Caudron, 2002). E-learning platforms and automated performance management systems are good examples of these employee self-service technologies. Regarding revenue generation, Caudron outlines that employee empowerment will eventually lead to better revenue generation outcomes. A 2005 study by Verreault & Hyland established that elements of human capital management play a vital role in the successful implementation of most other management initiatives and the attainment of a firm’s strategic goals. These authors show that companies that did not take human capital management seriously in their strategic planning faced more challenges in the attainment of their strategic goals. This translates to higher risk for the organization when human resource management is not given the attention and seriousness it deserves.

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Managing Human Resources 4 A 2013 study by Salih & Azzam that analyzed the impact of human resource management practices on the achievement of competitive advantage for industrial companies in Jordan established that there is a strong correlation between the quality of employee selection and placement and the attainment of competitive advantage. This study that sampled 40 Human Resource Directors from 40 Jordanian industrial companies recommended that organizations should pay attention to all human resource functions including recruitment, training, and development compensation and performance management in parallel. Competitive advantage is the sum total of efforts across all these areas. A 2019 study by Hamadamin & Atan examining the influence of strategic human resources management practices on the attainment of sustainable competitive advantage established that human capital development and employee commitment had a positive impact on competitive advantage. This study that analyzed 600 questionnaires recommended organizations investing heavily in human capital development to influence employee commitment which has a mediating effect on the sustainability of competitive advantage. A 2022 cross-sectional study by Nafari& Rezaei that targeted Iranian hospitals also established that the application of appropriate human resource strategies is one of the easiest ways through which healthcare organizations can attain and sustain competitive advantage. This study that investigated the relationship between human resource strategies and organizational performance based on the balanced scorecard outlines the development of a robust training and development strategy, staff compensation and rewarding, and focused recruitment as effective ways through which organizations can attain competitive advantage. The Resource-Based View (RBV) Theory

Managing Human Resources 5 This theory offers a good explanation of how effective HRM strategies can be a source of competitive advantage. It blends concepts of organizational economics and strategic management by arguing that HRM delivers added value to organizations through the strategic development of an organization’s important, exceptional, and hard-to-substitute human resources. The RBV establishes that competitive advantage is no longer dependent on natural resources, economies of scale or technology since these are easy to imitate and adjust (Wright et al., 1994). Rather, this view holds that competitive advantage is dependent on costly, valuable and hard-to-imitate resources that are an organization’s human resources. These valuable and hard-to-imitate human capital resources include intelligence, experience and judgement of the individual workers or managers in the firm. Human resource management is tasked with ensuring that an organization is implementing a value-adding strategy not being implemented by any other competing organizations. The inability of other firms to duplicate the benefits of competitive advantage is what creates sustained competitive advantage. Thus a competitive advantage is not deemed sustained until all efforts by competitors to duplicate the human resource efforts of an organization have ceased. From this view for a resource to contribute to competitive advantage sustainability it must, add positive value to the firm, be unique and rare amongst potential competitors, be, incapable of substitution by other resources by a competing organization and be imperfectly imitable (Wright et al., 1994). There are some human resource functions and strategies that create human resource abilities that fit all these qualities. Talent management and competitive advantage One of the human resource management functions that organizations can consider is to attain a competitive advantage. By definition, talent management is a set of activities that

Managing Human Resources 6 concern the attraction, selection, development and retention of the best employees in their strategic roles (Rabbi, Ahad, Kousar & Ali, 2015). Talent management recognizes people who excel at particular activities and performance. Support is offered to these talented employees to enable them to deliver this much-needed value while role modelling for their colleagues to copy and emulate. For effective talent management organizations should have the capacity to recognize talented employees and exploit this talent to create value. This is what delivers a competitive advantage for the organization. Additionally, talent management also aims at developing and deploying the right people for the right jobs at the right time. This entails providing them with the right environment to use and show their abilities in the best way possible. Talent management has become a challenge due to globalisation. Many organizations are competing for limited talent. This has called for organizations to adopt the best talent management practices which include good compensation, the creation of innovation groups, and cultural integration to create a more favourable environment for talented employees to work within teams (Rabbi, Ahad, Kousar & Ali, 2015). The talent-based theory which is a subset of the resource-based view theory holds that talent is one of the few resources which may help organizations in gaining and maintaining a competitive edge. Therefore organizations need to put effort to attract and maintain a talented workforce. In this theory, an organization is not considered a talent creation or acquisition hub, but a talent integration hub. This is because talent only resides in the heads of individuals and organizations can only provide platforms for the integration of this talent into its structural arrangements as well as the coordination between talented workers (Wright et al., 1994). To attain competitive advantage through HRM organizations thus cannot turn a blind eye to talent management.

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Managing Human Resources 7 Compensation and competitive advantage The second HRM function that can help build competitive advantage is compensation. Recruiting the right people may be hard but getting these people to stay productive might be even more challenging. Giving employees good pay and favourable rewards stimulates employees to feel a sense of partnership and become stewards of the organization’s vision(Kang & Lee,2021). An organization can have highly talented and qualified employees but unless they feel that their efforts are recognized and valued then they may not achieve great things. A good compensation plan enables an organization to attract and retain the right people for various job roles and focus these employees on the right performance factors for the organization. This in turn generates a return for the company’s investment in compensation. A compensation plan that builds and sustains competitive advantage will not fit all the outside criteria for a good compensation plan. It will not have elements of simplicity in it. Such a compensation plan will be customized to address the talent management needs of the organization in context(Kang & Lee,2021). This compensation plan will reinforce and support an effective business strategy that works around employees who know what they are doing with a good vision. This compensation plan will be competitive. A competitive compensation plan is unique in several ways. Instead of analysing salary alone, the compensation plan will be designed to include benefits and perks that resonate with individual employees and differentiate the organization from competition. Bonuses, commissions and non-monetary benefits such as vacation time, insurance premiums, paid time off, and stock options feature widely in these competitive compensation packages. Today organizations are getting even more competitive to add more personalized perks such as birthday parties, on-site daycare services and “pet to work” options. These unique perks amplify the company culture and

Managing Human Resources 8 set it apart from the crowded hiring crowd of other organizations(Kang & Lee,2021). A competitive compensation plan will attract and retain talent which will in turn drive overall competitive advantage. Training and development and competitive advantage The third Human resource function that can be used as a source of competitive advantage is training and development. According to Salih & Azzam (2013), this human resource function plays a major role in the development of competitive advantage since it adapts employees to change. The contemporary business environment is fast-paced and rapidly changing and this calls for training and development programs to keep employees abreast with changes. Nafari& Rezaei(2022) underscore the need for robust employee training and development programs by noting that employee training and development increase their capabilities. Training and development ensure that employees are continuously progressing and this creates more value for the organization. Overall this pushes the business organization forward to a stronger market position. An organization that invests heavily in employee training and development has higher chance of succeeding in making its strategies successful. When viewed from the perspective of resource-based view employee training and development enhances employee satisfaction and retention. The Resource Based view theory outlines that factors that contribute to a sustainable competitive edge should be rare, unique and not easily imitated by competition (Wright et al., 1994). A well-trained workforce is satisfied and not willing to leave. The workforce has a high commitment to their personal and professional goal and has less time to share internal organizational issues with the outside world. This makes it difficult for the workforce to be imitated and replicated by competition.

Managing Human Resources 9 Also, investments in training and development make employees feel more valued and this creates an enduring positive relationship between the employees and their organization. This is not only a motivator but a contributing factor to higher retention rates. The cost of retaining an existing employee will always be lower than the cost of bringing a new employee on board (Salih & Azzam., 2013). To attain a competitive advantage an organization thus needs to invest heavily in training and development. An important note for contemporary organizations when it comes to training and development is that the focus should not only be on productivity, employability should also be factored-in. Contemporary employers want to show their employees that they have to continuously improve to be able to stay within the organization. It is a matter of being retained for only as long as an employee is adding value to the business. By showing employees that you want them to grow with the business they are more willing to learn and stay will the business (Nafari& Rezaei., 2022). Employment is shifting from the traditional model of an employee staying with an organization for a lifetime. Human resource compliance and competitive advantage The other function of human resource management that contributes to competitive advantage is compliance. Human resource management is charged with the responsibility of implementing workplace policies consistent with state and local employment requirements. Effective human resource planning ensures that an organization operates within the stipulated employment laws and regulations. The most important of these laws are safety, compensation and equality. By effectively planning for compliance HRM saves business organizations the cost of hiring lawyers to defend non-compliance issues in lawsuits. This is a major competitive gain for any organization. These funds can be channeled somewhere else. It is also important to note

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Managing Human Resources 10 that business organizations can be hard hit by non-compliance legal claims. Fines and business closures are possible outcomes for businesses. These diminish competitive advantage by taking away revenue and denting an organisation’s image. Conclusively, from the perspective of the Resource Based View (RBV) Theory, human capital management has great potential to harness competitive advantage for business organizations. Since human resource is the only capital form that is unique in each organization, it is difficult for competition to copy. Through effective talent management, compensation planning, training and development as well as compliance planning the HRM department can create an insurmountable competitive advantage for an organization. However, it will take skill and tact from the HRM executives to achieve this.

Managing Human Resources 11 References Caudron, C.(2002). How HR Drives Profits . Workforce.com. Retrieved Dec 2, 2022 from https://workforce.com/news/how-hr-drives-profits Hamadamin,H.& Atan, T.(2019). The Impact of Strategic Human Resource Management Practices on Competitive Advantage Sustainability: The Mediation of Human Capital Development and Employee Commitment. Sustainability , 11(5782),1-19. Kang, E., & Lee, H. (2021). Employee compensation strategy as sustainable competitive advantage for HR Education Practitioners. Sustainability , 13 (3), 1049. https://doi.org/10.3390/su13031049 Nafari, E & Rezaei, B. (2022). Relationship between human resources strategies and organizational performance based on the balanced scorecard in a public hospital in Iran: a cross-sectional study. BMC Health Services Research, 22(363), 1-8 Rabbi, F., Ahad, N., Kousar, T., & Ali, T. (2015). Talent management as a source of competitive advantage. Journal of Asian Business Strategy , 5(0), 1-7 Salih, A.& Azzam,A.(2013). Impact of Human Resources Management practices on Achieving competitive Advantage for Industrial companies (An Empirical study at Al Hassan Industrial Estate-Jordan) . Information and Knowledge Management , 3(12), 29-39 Verreault, D., & Hyland, M.,(2005). Evidence for increasing the focus on strategic risk in HRM audits. Managerial Auditing Journal , 20(5), 524-543 Wright, P. M., McMahan, G. C., & McWilliams, A. (1994). Human resources and sustained competitive advantage: A resource-based perspective. The International Journal of Human

Managing Human Resources 12 Resource Management , 5 (2), 301–326.

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