The paper 'How People in an Organization Can Be Source of Competitive Advantage and the Role of HR Functions in the Process' is a good example of a Management Assignment. The evaluation of the effectiveness of human resource functions in an organization is of increased emphasis in the contemporary world. Historically, human resource management functions were considered costly and expensive. Given that the money allocated for human resource activities was within the budget, then everything was assumed to be fine. However, the current outlook of human resource management in organizations has been view in changing light.
Apparently human resource management functions can now be subcontracted or even outsourced to external stakeholders and therefore institutions are closely monitoring the actual cost incurred when in-house MRM functions are introduced. Most organizations view HRM practice as competitive activities often apply their human resources in ways that generate a strong competitive advantage over other organizations. This perception creates an ideological concept (framework) that defines the roles of people in the organization and the way they are developed to create a competitive advantage. Human resource management as a process takes two dimensions depending on the resources and the outlook of the organizational structure of an institution.
It can be an essential source of competitive advantage or it may not. According to DeNisi (2003), today’ s managers in organizations need to concentrate on three strategic level decision making: corporate strategy, business, and functional. It is apparent that the three strategies have an impact on human resource management functions and therefore a strategic approach is needed in order to use HRM practice as a source of competitive advantage. Activities like globalization, advance in technology, and change in the nature of the workforce and workforce diversity mean that the organization should be better. Role of people and HR functions in enhancing competitive advantage Intellectual capital and organizational learning theory Intellectual capital has undertaken an extraordinary advance in the 21st century.
Organizations at the moment are focusing on intellectual capital as a key in managing a rising difference between the organization’ s market value and its book value. The use of intellectual capital framework enables the identification of the value contribution of intangible assets (in this case people).
The strategic perspective theory is subsidiary to intellectual capital it focuses on identification and valuation of core competencies that promote competitive advantage. Intellectual capital is classified into three; human capital, which focuses on employees' competencies, skills and capabilities in performing assigned roles, relationship capital, where the focus is on a relationship with customers and stakeholders, and organizational capital, where the focus is on processes, system, and structure. The three intellectual capital resources are acquired through organizational learning where human resource management functions play an important role in the training and development of employees.
The capabilities attained in the process (organizational learning) will improve the company’ s value and therefore a sustainable competitive advantage is achieved. Human capital can be a very essential factor in creating a sustainable competitive advantage since it is difficult to emulate by the competitors in the market (DeNisi, et al, 2003). The mobility of human capital may not necessarily raise the competitive advantage but rather, the complementary resource from HR functions is what develops and sustains competitive advantage. The theory of intellectual capital simply implies that HRM functions generate and implant knowledge and skills to individuals.
This promotes social interaction that is later institutionalized and owned by an organization thus creating a sustainable competitive advantage.
Barney , J. B. (1991). Firm resources and Sustained competitive advantage. Journal of Management, 17: 1, 9 9 -120
Barney, J. B., & Wright, P. M. (1998). On Becoming A Strategic Partner: The Role Of Human Resources In Gaining Competitive Advantage. Human Resource Management, 37(1), 31-46.
DeNisi, A. S ., Hitt, M. A., and Jackson, S. E. (2003). The Knowledge Based Approach to Sustainable Competitive Advantage. New York: Ox ford University press.