HUMAN RESOURCE MANAGAMENT

MODULE 1C

Human Resource
Management: Gaining A
Competitive Advantage

Reference:
Noe, Raymond A., [Link] (2017). Human Resource Management Gaining a Competitive
Advantage, 10th Edition. USA: McGraw-Hill Education

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MODULE CONTENT
Strategic Role of the HRM Function
HR as a Business with Three Product Lines
Demonstrating The Strategic Value of HR

LEARNING OBJECTIVES

1. Discuss the roles and activities of a company’s human

resource management function.
2. Discuss the implications of the economy, the makeup of the
labor force, and ethics for company sustainability.
3. Explain how competitive challenges influencing Human
Resource Management

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Competitive Challenges Influencing Human Resource

Management

Three competitive challenges that companies now face will increase the
importance of human resource management practices: ✔the challenge of
sustainability, ✔the global challenge, and ✔the technology challenge.

These competitive challenges are directly linked to the HR challenges that

companies are facing including developing, attracting, and retaining talented
employees, finding employees with the necessary skills, and breaking down
cultural barriers to create a global company.

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The Sustainability Challenge

Sustainability refers to the company’s ability to meet its needs without sacrificing
the ability of future generations to meet their needs.

Sustainability includes the ability to deal with economic and social changes,
practice environmental responsibility, engage in responsible and ethical business
practices, provide high-quality products and services, and put in place methods
to determine if the company is meeting stakeholders’ needs; that is, HR systems
that create the skills, motivation, values, and culture that help the company
achieve its triple bottom line- ✔economic, ✔social, and ✔environmental benefits
and insure the long-term benefits for the organizations stakeholders.

Intangible assets have been shown to be responsible for a company’s competitive

advantage. Intangible assets include ✔human capital, ✔customer capital, social
capital, and ✔intellectual capital. Intangible assets are equally or even more
valuable than financial and physical assets but they are difficult to duplicate or
imitate.52

By one estimate, up to 75% of the source of value in a company is in intangible

assets. Intangible assets have been shown to be responsible for a company’s
competitive advantage.

Human capital • Distribution channels

• Tacit knowledge Social capital Intellectual capital
• Education • Corporate culture • Patents
• Work-related know-how • Management • Copyrights
• Work-related philosophy • Trade secrets
competence • Management practices • Intellectual property
• Informal networking
Customer capital systems
• Customer relationships • Coaching/mentoring
• Brands relationships
• Customer loyalty

Human resource management practices such as training, selection, performance

management, and compensation have a direct influence on human and social
capital through influencing ✔customer service, ✔work-related know-how and
✔competence, and ✔work relationships.

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Emphasis on Empowerment and Continuous Learning

To completely benefit from employees’ knowledge requires a management style

that focuses on developing and empowering employees. Empowering means
giving employees responsibility and authority to make decisions regarding all
aspects of product development or customer service. Employees are then held
accountable for products and services; in return, they share the rewards and losses
of the results.

A learning organization embraces a culture of lifelong learning, enabling all

employees to continually acquire and share knowledge. Improvements in product
or service quality do not stop when formal training is completed.

Talent Management is a systematic planned strategic effort by a company to

attract, retain, develop, and motivate highly skilled employees and managers.

Need to Adapt to Change Change refers to the adoption of a new idea or

behavior by a company. Technological advances, changes in the workforce or
government regulations, globalization, and new competitors are among the many
factors that require companies to change. Change is inevitable in companies as
products, companies, and entire industries experience shorter life cycles. This has
played a major role in reshaping the employment relationship.

Concerns with Employee Engagement. Employee engagement refers to the

degree to which employees are fully involved in their work and the strength of their
commitment to their job and the company.64 How do we know if an employee is
engaged? An engaged employee is passionate about his or her work, is
committed to the company and its mission, and works hard to contribute.

Talent Management. Talent management refers to the systematic planned

strategic effort by a company to use bundles of human resource management
practices including acquiring and assessing employees, learning and
development, performance management, and compensation to attract, retain,
develop, and motivate highly skilled employees and managers. This means
recognizing that all HR practices are inter-related, aligned with business needs, and
help the organization manage talent to meet business goals.

Use of Alternative Work Arrangements. Alternative work arrangements include

independent contractors, on-call workers, temporary workers, and contract
company workers.

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Measuring Performance to Stakeholders

The Balanced Scorecard. The balanced scorecard gives managers an indication

of the performance of a company based on the degree to which stakeholder
needs are satisfied; it depicts the company from the perspective of internal and
external customers, employees, and shareholders.81 The balanced scorecard is
important because it brings together most of the features that a company needs
to focus on to be competitive. These include being customer-focused, improving
quality, emphasizing teamwork, reducing new product and service development
times, and managing for the long term.

The balanced scorecard differs from traditional measures of company

performance by emphasizing that the critical indicators chosen are based on the
company’s business strategy and competitive demands. Companies need to
customize their balanced scorecards based on different market situations,
products, and competitive environments.

Social Responsibility. Increasingly, companies are recognizing that social

responsibility can help boost a company’s image with customers, gain access to
new markets, and help attract and retain talented employees. Companies thus try
to meet shareholder and general public demands that they be more socially,
ethically, and environmentally responsible.

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Customer Service and Quality Emphasis

Total quality management (TQM) is a companywide effort to continuously improve

the ways people, machines, and systems accomplish work.

Core values of TQM include the following:

• Methods and processes are designed to meet the needs of internal and
external customers.
• Every employee in the company receives training in quality.
• Quality is designed into a product or service so that errors are prevented
from occurring rather than being detected and corrected.
• The company promotes cooperation with vendors, suppliers, and customers
to improve quality and hold down costs.
• Managers measure progress with feedback based on data.

ISO (International Organization for Standardization), a network of national

standards institutes including 160 countries with a central governing body in
Geneva, Switzerland, is the world’s largest developer and publisher of international
standards. The ISO develops standards related to management, as well as a wide
variety of other areas including education, music, ships, and even protecting
children! ISO standards are voluntary but countries may decide to adopt ISO
standards in their regulations and as a result they may become a requirement to
compete in the market.

Changing Demographics and Diversity of the Workforce

Company performance on the balanced scorecard is influenced by the

characteristics of its labor force. The labor force of current employees is often
referred to as the internal labor force. Employers identify and select new
employees from the external labor market through recruiting and selection. The
external labor market includes persons actively seeking employment. As a result,
the skills and motivation of a company’s internal labor force are influenced by the
composition of the available labor market (the external labor market). The skills and
motivation of a company’s internal labor force determine the need for training
and development practices and the effectiveness of the company’s
compensation and reward systems.

• Aging of the Workforce

• Generational Differences
• Gender and Racial Composition of the Workforce

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Legal and Ethical Issues

• Emphasis on eliminating discrimination in recruitment and hiring based on

disability, pay rates, job category, family leave, religion (Ex. employee need
to pray during work and wear religious clothing), and harassment ( Ex. sex
and race).
• Ethics can be considered the fundamental principles of right and wrong by
which employees and companies interact (Ex. fairness, nepotism).

The Global Challenges

Entering International Markets

Many companies are entering international markets by exporting their products
overseas, building manufacturing facilities or service centers in other countries,
entering into alliances with foreign companies, and engaging in e-commerce.

Offshoring refers to the exporting of jobs from developed countries, such as the
United States, to countries where labor and other costs are lower. India, Canada,
China, Russia, Ireland, Mexico, Brazil, and the Philippines are some of the
destination countries for offshored jobs.

Reshoring is becoming more common. There are several reasons for this including
higher product shipping costs, fear of supply chain disruptions due to natural
disasters and political instability, quality concerns, and customer preference for
U.S.-made products.

The Technology Challenges

Social networking refers to websites such as Facebook, Twitter, and LinkedIn, and
wikis and blogs that facilitate interactions between people usually around shared
interests.

Mobile devices refer to smartphones and tablet computers. Mobile devices are
increasingly being used to provide employees with anytime and anywhere access
to HR applications and other work-related information.

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A human resource information system (HRIS) is a computer system used to acquire,

store, retrieve, and distribute information related to a company’s human resources.

Meeting Competitive Challenges through HRM Practices

HRM practices have not traditionally been seen as providing economic value to
thecompany. Economic value is usually associated with equipment, technology,
and facilities. However, HRM practices have been shown to be valuable.
Compensation, staffing, training and development, performance management,
and other HRM practices are investments that directly affect employees’
motivation and ability to provide products and services that are valued by
customers. Research has shown that companies that attempt to increase their
competitiveness by investing in new technology and becoming involved in the
quality movement also invest in state-of-the-art staffing, training, and
compensation practices.

HRM practices that help companies deal with competitive challenges can be
grouped into four dimensions
• The human resource environment
• Acquiring and preparing human resources
• Assessment and development of human resources
• Compensating human resources

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DISCUSSION QUESTION

How do companies’ sustainability efforts help a company attract, retain, and

develop employees? Explain your answer.

What are some of the potential disadvantages of using social networks and mobile
devices for HR practices?

10 Jeffrey M. Mayor, LPT, CLDP®