An organization is always regarded as a united community, a close group, or a cohesive company, which is trying to find a better way to manage the organization essentially in response to its environment. (Patrick M.Wright, Gary C.McMahan & Abagail McWilliams,1994 ) There are some questions that what really an organization should do to maintain or promote its current situation in its environment? Or what is really a competitive advantage of an organization? What should an organization focus on, its financial situations, its technology, or its human recourses? The answer is human recourses.
Human assets are a key source of sustainable advantage because of casual ambiguity and systematic information making them inimitable. (Paul Sparrow, Randall S. Schuler & Susan E. Jackson,1994) We are now living in a world in which knowledge is becoming more and more important. The demand for employing intelligent people is higher than the demand for other resources. Thus the role of human resource management ( HRM ) strategic and practice has been established. HRM practitioners are striving to achieve the organizational goal by recruiting, training and maintaining talented employees.
An organizational competitiveness refers to a company’s ability to maintain and gain market share in its industry. (Schuler.R.S,MacMillan.I.C,2006) An organization’s human resource management practices are supporting the organization’s business strategy and provide valuable customer services. It is also helping the organization to enhance its performance to establish its competitive advantages by contributing to employee customer satisfaction and so on.( Cummings.F.T & Marcus.S,1994) Some people argue that the organizational competitive advantages is created by HR practice while other people states that the most important objective in an organization is the matching between HR practice and other organizational factors such as technologies and financial resources.
HR practice itself can create sustainable competitive advantages for the organization nowadays. In the past, land and capital generate competitive advantage for business. HR was considered as a cost department in an organization and it was in a position that is attempted to be minimized. However, nowadays human resources have become the most important resource in organization. In the fierce competitive environment, organizations are facing recessions. (Wilkins. David,2012) The most strategic asset is changing into human resource which is the innovator, change initiator and quality deliver to the organization.
The reason why human resources is the most competitive advantage is that trained and empowered employees are the most difficult resources for replicate when the organization is through a competition on innovation, customer services, and manufacturing products. (Boxall.P,2003) In order to create such a competitive workforce, HR practitioners are struggling to recruiting, developing and maintaining the best human resource for the organizations. They are also helping other departments with employment interviewing, performance rewards and discipline and ways to improve quality and productivity.
CEO and business leaders in many large organizations are fond of saying that HRM has made the company much better, more effective and stronger. HR practices are trying to establish the firm’s competitive position by creating superior human capital including skills, experience and knowledge which has a great contribution to firm’s financial value. HR practice has turned to be the most valuable asset and tool of corporate strategy.(Powell.TC, Dent-Micalle.A,1997) The appropriate way of mixing HR practices is essential to maximize the effectiveness of the HR capital pool .There are correlative practices that many companies implemented in achieving competitive success through managing employees.
By recruiting and training talented employees and enhancing their contribution within the firm’s resource, HRM may lay the basis for a sustained competitive advantage. HR practices may establish the human capital pool and stimulate human behavior to create an advantage. (Jackson.SE, Hitt.MA ; DeNisi.AS,2003) Therefore, HR practice generates a sustainable competitive advantage for the organization. As a result of HR practice, the shareholder’s value, employee satisfaction and overall competitiveness of the organization have been maximized and achieved.
There is also other saying that the most important thing for organization to focus on is not HR practice but the relationship between HR practices and other organizational factors. By what extent are they matching with each other? The Best-fit approach view of human resources management states that firms can develop its HR strategies to make sure that they are suitable to the different circumstance of the organization, together with culture, operational processes as well as external environment. (Barney, J.B ;Clark, D.N, 2007) The best-fit approach suggests that HR strategies should focus on the given demand of both the organization and the people.
The HR strategies of the organization need to make a best fit between the strategies itself and other factors such as finance, culture, and some other external factors. Furthermore, the Resource-Based View (RBV) points out that the resources are bundles of resources rather than sole resources. The bundle of resources is intangible and complex (Boxall.P ;Steeneveld.M, 2002) which requires the combination of all resources in an organization that is all the factors owned by the organization.
Those resources are combined into a final products or services by applying a whole range of the organizational assets such as technology, management information systems, physical assets and business strategies. (Boxall. P, 1998) Therefore, HR practice itself cannot create the competitive advantages for the organization but the combination of the resources of all organizational factors. So business needs to put much effort in regulating its HR practice in order to make it match with other organizational factors. As a result, the effective business strategy can be made for achieving the organizational objective.
In my opinion, I am not on the side of the statement that HR practice can create sustainable competitive advantages independently. I think that the “fit” of other organizational factors with HR practice is most important thing for organizations to focus on. In order to achieve the organizational objective, the business needs to make a suitable business strategy by considering and integrating all the resources it owned. What is a good business strategy? A good business strategy must be established by an good awareness of external and internal environment of the business and the position of the business in the market. (Lismen Chan.L.M, Shaffer.M.A; Snape.E,2004)
Once the business strategy has been determined, a suitable HR practice should be implemented to assist it to achieve an organizational competitive advantage. In this sense, a good HR practice must be matching with the five Ps – Plan; Ploy; Pattern; Position and Perspective, so that the HR practice can coordinate well with other department in an organization. (Seydjavadin.S.R;Zadeh.M.H,2006) Therefore by making effective combination of HR practice and other business factors, the organization can be managed and controlled in a more correct and effective way.
Barney, J.B ;Clark, D.N, 2007,Resource-based theory : creating and sustaining competitive advantage, Oxford University Press.
Boxall. P, 1998,”Achieving competitiveadvantage through humanresource strategy: Towards a theory of industry dynamics”, Human Resource Management Review,Volume 8, Issue 3,pp.265–288, Elsevier.
Boxall.P,2003,”HR strategy and competitive advantage in the service sector”,Human resource Management Journal,volume 13, issue 3, pp.5-20, wiley online library.
Boxall.P ;Steeneveld.M, 2002,Human Resource Strategy and Competitive Advantage: A Longitudinal Study of Engineering Consultancies,Journal of Management Studies,Volume 36, Issue 4,pp.443-463,John Wiley ; Sons.