HR Assignment help on : Globalization
Introduction
In the era of globalization, there is an increased competition and the phenomenon has reestablished the fact that there is survival of only the fittest. The key issues that have emerged in the era of globalization with competitive environment among modern organizations are survival and sustainability (Ehnert, 2009). Organizations have their concentrations in designing such activities as well as practices that can equip them with additional competitive advantage. Human resource management has emerged as one such area which can provide the organization an edge over its competitors. Capable workforce ensures the success of the organization based on the belief that the organization attains competitive advantage when it used its people with efficiency and effectiveness (Price, 2011). The paper discusses the contribution of a capable workforce towards attaining sustainable competitive advantage, which is the most sought after advantage an organization wants to attain in the competitive environment of today.
Role of HRM in today’s business environment
Human resource is one of the most important factors that an organization is required to taken into consideration when thinking of attaining sustainable competitive advantage. Knowledge and intellectual capital rather than the physical capital is becoming increasingly important and there is requirement of smart people who are able to do great and smart things, for instance, increase in the productivity, building and development of new services and that too in a quick manner. The human capital in the form of capable workforce represents the only sustainable source of competitive advantage (Saha & Gregar 2012).
Competitiveness is the ability of the organizations to maintain and gain the market share in their respective industries. It is related to the effectiveness of the firm in satisfying the needs of the stakeholders. The following figure reflects that an organization can attain sustainable competitive advantage only if it has a capable workforce with adequate knowledge base. Only the presence of capable workforce is not enough, the firm has also to realize the significance of the adequate knowledge base and the necessity of having a knowledgeable workforce (Saha & Gregar 2012).(Source: Saha & Gregar 2012)
The above figure shows that the knowledge in the organization comprises of tacit and explicit forms. The explicit knowledge is codified while the tacit knowledge is present in the minds of employees regarding the knowledge and understanding of the work processes. The tacit knowledge is gained through experience and is developed by training and other appropriate organizational practices. Activities, such as developmental assignments and teaming, which lead to socialization, are important in development of tacit knowledge as a form of sustained competitive advantage (Saha & Gregar 2012).
There are several techniques and tools that help in developing a capable workforce, which can help in building sustained competitive advantage. These tools and techniques include management by objectives, management development, job analysis and evaluation, manpower planning and development of staff. Management by objective improves the performance of the organization by motivating, assessing and training employees, and aligning their personal goals with the organizational goals. This improves work quality, motivation and efficiency of employees, which ultimately has positive effect on productivity and functioning of the organization making it able to attain sustainable competitive advantage (Storey et al, 2005).
In the similar manner, job analysis and job evaluation makes the set a strong foundation for the decisions related to employee selection, appraisal, training, etc. that contributes in development of an adequate and well capable workforce. Manpower planning and development of staff are also related to developing adequate skills, knowledge and attitude required for a capable workforce (Storey et al, 2005).
Sustained competitive advantage
Human resources are rare, inimitable, valuable and non-substitutable. According to the resource based view of the firm, the internal resources of the firm have a direct implication on the strategy and the performance of the firm, and are thus the major determinant of the competitive success of the firm. According to this view, the situation of competitive advantage occurs when there is resource immobility and heterogeneity. Sustained competitive advantage occurs when other firms are unable to copy or imitate the benefits of the competitive advantage (Wright et al, 2003). The criteria for sustained competitive advantage for the firm according to the resource based view are that the resource must add value to the organization, must be rare, un-substitutable and inimitable (Wright et al, 2003). The workforce is valuable. According to the Firm Specific Human Capital theory, when both the demand and supply for labor are homogenous, it is not possible to create value through investment in human assets. But, in practical situations, both the demand and supply of labor are heterogeneous, thus can add value to the firm (Wright et al, 2003). The second criterion of resource being rare is also fulfilled by workforce capability. Job requires skills that can vary among individuals, which high quality human resources rare. The cognitive ability also remains distributed that makes the high ability levels of human resources a rare thing. The third criterion is inimitability. In long run, the human capital resources are imitable, but the competitive advantage that arises from the social complexity of the interaction of the firms is inimitable and the workforce is unique in terms of giving rise to causal ambiguities, unique historical conditions and the social complexity (Tandu et al, 2008). Moreover, the human resources are not perfectly mobile because there is a transaction cost associated with moving from one employment to another. Considering the un-substitutability, the human resources can be substituted in the short term, but in the long run, it is unlikely that such type of substitutions can give rise to sustained competitive advantage (Saha & Greagar, 2012). For instance, if a firm has competitive advantage due to its highly skilled workforce, the firm B has created the same competitive advantage in terms of increasing productivity by purchasing a new technology from the market, then the firm A can also purchase that technology, its workforce can become again the source of competitive advantage. Therefore, the human resource should be replaced by the same inimitable and rare substitute; otherwise, the substitution will not work (Saha & Greagar, 2012). When the workforce is capable, it can improve the ability of the firm to sense the changes occurring in the critical variables of environment that require changes in the activities of the firm. As the corporate environment is becoming increasingly complex and dynamic, there is increasing need for development of such alternative mechanisms that can monitor the environment (Ehnert, 2009). When there are high levels of human capital resources, they increase the monitoring capability of the firm through decentralization of the monitoring for meeting the environmental complexity and dynamics. Although the strategic direction of the firm is set by the top management, yet many subunits of the firm have to engage in the development of tactics and strategies that are necessary for effective functioning in the respective environment. When the responsive strategies are in place, they have to be implemented as quickly as possible with efficiency. And this challenge demands adaptability and flexibility from the workforce so that new skills, technology or reorganization of the functions can be quickly learnt and applied by the employees (Chaston, 2012). In regards to this, when the workforce is capable and has high level of intellectual capital with cognitive ability, it provides a high degree of adaptability and flexibility to the organization for adapting to changes. An example of sustained competitive advantage through capable workforce can be seen in Nordstrom, a departmental store chain in United States that which has enjoyed success in both the customer service and growth in profitability over years (Pfeffer, 2005). The company gives compensation to its employees in terms of commissions. Seeing the success of the company and acknowledging the success of the company as the outcome of the behavior of the employees, many of the company’s competitors started commission systems. However, just by bringing in changes in the compensation system did not provide benefits to the competitors. Instead, in some cases, it proved to be a failure as it led to employee grievances and unionization against changing the compensation system. This example throws light on importance of capable workforce in attaining sustainable competitive advantage (Pfeffer, 2005). Another practical example of capable workforce as a source of sustained competitive advantage can be seen in Southwest Airlines from United States. The much of the advantage in terms of cost comes from the dedicated, very motivated, productive and unionized workforce. Due to the capability of its workforce, Southwest Airlines has fewer employees per aircraft and has more available seat miles per employee. Almost 80% of the flights of the company are turned around in 15 minutes, while other airlines take an average time of 45 minutes (Pfeffer, 2005). The passenger service is also exceptional. The success at Southwest Airlines is sustained and cannot be easily imitated because the success has come from managing people,which is difficult to understand by competitors as the behavior and skills of the workforce are integrated in a system and it is difficult to comprehend the dynamics of how a company operates and manages its people (Pfeffer, 2005). The capable workforce can be attained by effective management practices for managing people. These practices include employment security, selectivity in recruitment, high wages, incentive pay, employee ownership, information sharing, self managed teams, participation and empowerment of employees, training and development of skills, cross utilization and cross training, promotion, etc. (Storey et al, 2005). When these management practices are well in place and the related strategies are framed that integrate employee’s performance and organizational operations into one system, the organization can attain sustained competitive advantage. It is hard for competitors to understand the integrated system of organizational work culture and source of dedication and capability of the workforce (Wright et al, 2003).
Conclusion
Today’s corporate business environment is complex and dynamic in nature. It keeps on changing rapidly due to which modern organizations have to find a source of sustained competitive advantage. The capable workforce is a source of sustained competitive advantage as it is rare, inimitable, non-substitutable and valuable as per the criteria under the resource based view of the firm. With effective HR practices in place, the skills and attitude of the workforce can be developed in the right direction. Various HR tools and techniques can be used to develop the capable workforce, such as job analysis and evaluation, training and development, management by objective, staff development, promotions, high wages, empowerment and engagement, etc. All these tools and techniques help the organization to develop new skills, attitudes and knowledge in its workforce in accordance to the changes in the surrounding corporate business environment. Through effective human resource management, capable workforce can be developed which can prove to be a source of sustainable competitive environment for modern organizations in today’s competitive environment of business.
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