Human Resource Management And Its Connection to competitive Advantage

Gaining Competitive Advantage through Human Resource Management Practices

Introduction

Definition of competitive advantage

Competitive advantage is the leverage that a business has over its competitors. This can be gained by offering clients better and greater value, advertising products or services with lower prices or higher quality interests’ consumers and target markets recognize these unique products or services. Human resources are defined as firm's knowledge, experience, skill and commitment of the employees to the firm; their relations with each other and with others outside the firm.

They are the most important firm asset, the ones that research, design, project and differentiate the firm from other firms.

HR researchers and managers for a long time have emphasized that the HR function plays an important role in the performance of the firm. From a historical perspective, the human resource department is not considered one of the main departments in the organization. Even nowadays, due to many reasons, most HR functions are seen as less important than the departments of finance, information technology, marketing etc.

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According to Armstrong (2008) the overall purpose of human resource management (hereinafter referred as HRM) is to ensure that the organization is able to achieve success through people. In contemporary Strategic Management of Human Resource human capital concept is more often encountered. This concept was first developed by Beer et al. (1984). The new concept of HRM sees people as the most important resource in the firm. It represents the human factor in the organization, combined intelligence, skills and experiences that gives the organization its distinctive character.

Empirical studies support the fact that satisfaction of employees is related to the quality of services and HR practices are important determinants of employees’ satisfaction. Role of HR in providing competitive advantage as a topic of great importance has not been studied much in Kosovo firms. While, worldwide there are a considerable number of such studies.

An initial understanding of where companies can gain competitive advantages through their HRM practices is facilitated by a discussion of Strategic targets and Strategic thrusts.

Targets:

There are four targets of FIRM practices that can be used for competitive advantage. These four targets represent upstream and downstream activities as well as the company itself. Accordingly, the four include: self(the focal company); customers; distributors l servicers; and suppliers.

Thrusts

There are two strategic thrusts, or ways to beat the competition, through human resource management practices. One is a cost ef efficiency thrust. The case of Lincoln Electric; is an example of the use of HRM practices to increase the efficiency of production and thereby lower the cost of the electric motors and arc welders. PEOPL Express Airlines is a similar example of, a cost/efficient thrust. The second thrust option is a differentiation thrust. The cost/efficient thrust represents HRM practices that are used to improve the efficiency of product production_ and thus to lower the: e cost, of the product.

Planning

Progressively, organizations are being compelled to connection human asset arranging with vital business arranging. Another aspect of planning that companies are addressing is rather opposite to the one already described. It is that of the baby boom bulge that is moving through the work force. This is creating a rapid expansion of potential managers with a narrowing base of managerial jobs.

Staffing

The American Productivity Center in Houston utilizes its staffing practices to gain a competitive advantage. Furthermore it supports its staffing practices with consistent training practices. What changes in capability, staffing, and structure of the HR function will be required to meet the challenges presented by human resource management's new roles, priorities, and linkage to the business.

Appraising

The objectives of performance appraisal, listed above, point out the purpose which such an exercise seeks to meet. What needs emphasis is that performance evaluation contributes to firm's competitive strength. Besides encouraging high levels of performance, the evaluation system helps identify employees with potential, reward performance equitably and determine employee's need for training.

Another critical aspect of appraising is correcting poor performance. At Emery Air Freight, the company was losing $1 million annually because employees on the airport loading docks were shipping small packages separately rather than placing those with the same destination in one container that would be carried at lower rates by air carriers.

Compensation

As the economy recovers and demands for new work returns, a shortage of experienced and capable industry professionals – particularly at the management and executive levels – is hindering many businesses’ ability to grow. Competition to keep these valuable, high-performing employees is at an all-time high. A strategic performance and reward system is one of the most effective ways to retain your company’s top performers and grow profits. A balanced compensation and ownership plan that incentivizes performance can also improve recruitment and retention efforts, positioning the company to achieve its business goals.

At Hewlett-Packard, entrepreneurial behavior is stimulated in project leaders by tying more rewards to their success. Successful project leaders are being given banquets, stock options, and personal computers. At TRW, units or teams are given credit for sales generated in another department in return for helping that department. Consistent with the prescription by Rosabeth Moss Kanter in The Change Masters, TRW fosters innovation by stimulating interdependence through its compensation practices.

Training and Development

Training and development is the field which is concerned with organizational activity aimed at bettering the performance of Individuals and groups in organizational setting. It is a combined role often called human resources development (HRD) meaning the development of “Human” resources to remain competitive in the marketplace. Training focuses on doing activities today to develop employees for their current jobs and development is preparing employees for future roles and responsibilities. It carry out an analysis that the objective of training and development is to creative learning organizations which ensure that employees through value addition can effectively perform their jobs, gains competitive advantage and seek self-growth: this measurable performance resulting from good training and development, shall enhance organization development. It is a process transferring information and knowledge to employers.

Union-Management Relationships

Critical to the success of many companies vis-a-vis competitors are their labor costs. In many industries today, companies face possible bankruptcy due to high labor costs. Helping to lower costs are wage reductions reached between unions and management. Recently American Airlines, Greyhound, McDonnell Douglas, Boeing, and Ingersoll-Rand have negotiated two-tiered wage systems to help reduce total costs by reducing labor costs. Without these jointly negotiated systems, these companies would not have survived.' Thus, a company's relationship with its union can be critical to its survival, and the better its relationships are, the more likely it is to ever gain a competitive advantage.

SUMMARY AND CONCLUSIONS

Critics argue that HR is still a cost center for the organizations and a liability. Much of this can be attributed to lack of understanding of ‘business’ by HR executives and their inability to direct the HR activities towards developing the characteristics of the firm’s human resources that can affect the strategy of organizations. But, of late, HR Department has undergone a drastic change and now people are talking about HR being a strategic partner providing sustainable competitive advantage to the organizations.