How HRM can Help Firms Secure a Competitive Advantage (Research Paper Sample)

How HRM can help firms secure a competitive advantage.
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How HRM can help firms secure a competitive advantage
Introduction
People are considered as the assets that build up competitive advantage. This is in private, public sector, education or corporate world. Human resources are important assets of any organization; however, it is only a few organizations that are able to harness the potential of human resources. Recently, an intense focus on people performance in organizations has become success mantra. According to latest human resource theories people are an asset that is “inimitable”. Competing Organizations can not be able to imitate the workforce and their skills (Singh, 2003). A firm’s performance has been seen to be enhanced through effective and efficient workforce. This has been achieved through serious contribution to customer contentment, productivity, innovation, as well as, development of firms’ reputations that are favorable. This calls for the need to have these talents retained.
Liberalization of economies and policies in a global environment has led to the emergence of a hyper competitive environment. As a result of these fierce competition issues of effectiveness, survival, and sustainability has risen. It is clear that an increase in labor demand has forced firms to have a focus shift on retaining and attracting employees who are high performers into tremendously aggressive business environment (Green, Whitten, and Medlin, 2006.). The need to enhance workers opportunity has been realized by many firms where they now invest more on developing skills and abilities to ensure full performance and growth which results into retention of brilliant workforce. In return these firms will be able to increase performance eventually in terms of productivity and profitability. This shows that firms have become aware that the quality of labor force employed in today’s business competitive environment will formulate all the divergence.
Human Resource
Firms HRM can be defined as those practices, policies, and systems that have influence on the behavior of employee’s performance and altitude. In other times it is referred to as the involvement to “people practices”. Some of these practices include; designing and analyzing work, seminal on human resource requirements, attracting latent employees, and selecting the best employees. In addition, evaluating their performance and teaching them on how to go about their duties effectively.
Human resources plays a crucial role as firms tries hard to recognize and gain competitive advantage. This also helps them to deal and cope with the competitive environment that is growing fast thus, increasing the demand for quality employees. According to the conference board research there are a number of key workers related activate that HR completes with an aim of adding value to a firm (Boselie, Dietz, and Boon, 2005). These include; utilizing and managing people effectively, giving a try to performance appraisal, coming up with competences that are in favor of enhancing organizational and individual performance. In addition, firms aim to increase on creativity, innovation, and flexibility in order to enhance competition.
Competitive advantage
This refers to a condition that makes it possible for a firm to maneuver in a well-organized or higher quality work approch compared to its competitors. The operation process in this case should be directed into result benefit accruing. One thing to note with competitive advantage is that it originates from core contingency. Core contingency of a firm is one thing that any firm can do better compared to its competitors in the business environment. There are a number of company characteristic that can be entailed from competitive advantage, for example, brand equity, workforce capabilities, focus on customers, research and innovation (Harel, and Tzafrir, 1996). Therefore, competitive advantage can be amorphous as any action that gives an organization edge or gap over its competitors in the market. This implies that in order to be effectual a competitive advantage has to be applicable to a number of situations, difficult to mimic, sustainable, unique, and better than competition (Porter, 1998).This competitive edge is created when a firm manages to put into place a strategy that is able to boost its value where it is hard or the competitor has not implemented such a strategy. Therefore, a competitive advantage occurs when the competing firms are not able to duplicate the strategy adapted.
In line with the resource based view, advantages of sustainable competition results from implementation of strategies that helps in exploitation of firms internal strengths. This is done by responding to the environmental opportunities and at the same time neutralizing exterior threats and keeping an eye on the internal weaknesses (Huselid, 1995). The view also puts it that human resource can be taken as the human capital pool under the control of a firm in the relationship of direct employment. HRM is also valuable in the role of having a given aggressive situation that is more flexible and intelligent compared to those of their competitors (Becker, and Huselid, 1998). This takes place once firms hires and invests in developing talented staff, as well as, synergizing their input within the resource package of the firm. This implies that HRM has a chance of laying baseline for a sustained competitive advantage.
Low unit labor cost
Unit labor cost is used in measuring price of labor from a single unit of output, for example, a single product. This can be done from a business level, or nationally. It is important to note that when there is an increase in the unit labor cost there is a reduction in the level of productivity (Jackson, and Schuler, 2000). Unit labor cost = total wages and the employees benefits paid in a given period of time divided with the number of units of output produced within that particular period, for example through the use of formula E (f+w)/Q
Boxes manufacturing business; paid benefits and wages in a month= $10,000, units produced = 5,000 boxes in a month,
Unit labor cost = $10,000 /5,000, = $2 per box.
It is clear that once the unit labor cost is increased productivity is likely to go down. In this case, productivity is efficiency that enables a firm to generate output through some inputs (Chang, and Chen, 2002). Again increase in unit labor may result into increased expenses or an increase in the price of services with an aim of increasing revenue. This move will eventually reduce a firm’s profit. It is therefore, important to learn on how to decrease the unit labor in order to remain productive, as well as, retain the competitive edge.
Importance of labor cost
It is important for the firms to put focus on proper, analysis and management of labor costs because of the following reasons. Labor cost in the main cost element that covers key portions of the entire cost of a merchandise or job (Myloni, Harzing, and Mirza, 2004). As compared to material cost the labor cost are hard to control because they involve human elements. Another reason is because it is affected by environment policy change and the requirements of the trade union. Dissatisfaction, high labor turnover, and negative approach of employees greatly affect labor cost. Finally, labor cost is important due to the fact that the cost of direct labor is considered as the estimating basis of the amount of firms overheads in the process of determining the product cost.
Approaches
Human Resources Practices
There are several contemporary high-quality HR practices that have resulted into effective human resource, and attrition problems management. Some of these best practices include the following;
Selective Hiring- This is a practice that is adapted by a firm to make sure that the right people with required skills and knowledge are placed in the right place within the firm.
Training and Development- This practice can be linked to a firm performance in a number of ways. Programmers training help in increasing certain employee’s skills which results into an increase in employee’s productivity (Lam, and White, 1998). This approach also reduces the cases of job dissatisfaction resulting into employee’s turnover.
Job Security- This practice helps to create a climate of self-confidence amongst employees, which helps to cultivate their loyalty on the firm’s workforce. This builds up a confidence feeling and employees consign themselves to disburse superfluous effort for the firm’s benefit.
Performance Evaluation- It is important to note that an evaluation system that is fair and is able to link the employees’ performance to the goals of the business and the organization priority.
Highlight Performers-This is the case of employees rewarding where high performers receives better fallout in a fast way and close enough to the targets. Organizations come up with profiles indicating their top performers where the make them visible in the display boards. As a result, employees are encouraged to continue working hard and results in increased productivity and a competitive edge over other firms in the market
Contingency
Contingency approach is the point where the decision making method often applied is devising suitable for human resource (HR) strategies. It is considered the “best fit” approach which is in contrast to “best practice” approaches.
The base principle in this case is that of picking the HR policies, as well as, practices that are most effective and matching them with them with the one that is most suitable to the organization's environment (Dyer, Reeves, 1995)...