How organisations build competitive advantage through strategic hrm


Every organisation today understands the strategic implications of having a strong partnership with their human resource department. They know that with the evolving focus in the organisation strategy, towards competition for talent and dreams, the Human Resource role becomes central to ensure that the organisation will have continuous self-renewal and maintain its competitive advantage in the industry. This essay evaluates how an organisation needs to deal with competitive challenges that Human Resource Management faces in competing by attracting, motivating and retaining employees. This, at the same, time considers the role of information management and information technology in the organisation's competitive strategy as part of Human Resource innovations in their different practices.

Human, not financial capital must be the starting point and ongoing foundation of a successful strategy.

Attracting employees in the organisation are one of the three main challenges that many Human Resource (HR) Managers of big companies are facing today. Every HR Manager will concur that attracting the right employee is a challenging process. They know that attracting and hiring the wrong employee will be expensive, costly to the organisation and time consuming. On the other hand, attracting and hiring the right employee, pays the organisation back in employee productivity, successful employment relationship and a positive impact on the organisation total work environment. Currently, every organisation starts to understand that HR role is central to its success and development. Many organisations are now investing and diverting some of their resources to their Human Resource Department for the HR personnel to develop more aggressive approaches in recruitment and for them to attract top talents in their organisation. (Bartlett & Ghoshal 2002)

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The common most attractive and easiest way HR attracts new employees to their organisation is through offering employees a higher salary, almost all employees understand and agree on the importance of having high salary in an organisation. Research agrees that money really matters and that money as an effective incentive is not simple matters of opinion; rather, these premises are supported by logic and by decades of research and practice, all pointing in the same direction - money is a powerful incentive (Gupta, N. & Shaw, J. D. 1998). An organisation should understand that offering only high salary is not the effective way in attracting future employees. Most often, the organisation who only offers high salary to their employees will eventually lose the employee as they may more willing to leave their job when offered more money elsewhere. In fact, many employee quits because they are more affected by the change in wage than by their current level of wage (Campbell III 1994).

In contrast, the key element of attracting employees effectively is through the company's prestige and reputation. This guarantees that a particular person will choose to work for a particular company if the particular company had a better understanding of their employee needs and how those needs are met. And if the organisation satisfies those needs, it will have better odds of attracting better employees (Highhouse et. al. 2003). And when HR knows how to tailor the employee perception towards how they take pride of their job, the company can create a positive and attractive image. Such classic example of a company which shows this element is IBM. IBM is well known for insider and outsider's perception of favourable work environment, in which these positive perceptions have been created by what the company is doing over the years (Cornelli 2004).

A new study released by the American Psychological Association (APA) shows that job applicants are attracted to organisations when their websites include employee testimonials. Moreover, the study appears to suggest that employee testimonials are an important method of attracting top talent (Walker, et al. 2009). Also, other research supports the use of employee testimonials; it has been found for instance that employee experience in an organisation influence job seekers due to their interpersonal nature (Van Hoye & Lievens, 2007) and that current company employees, as they are closer to the work situation, are perceived as credible sources of information (Fisher, Ilgen, & Hoyer, 1979).

In addition, the study revealed that the applicant reactions are greatly influenced by the type of media used to display employee testimonials. Employee testimonials delivered using audio or video are more attractive and credible than those delivered through picture or text. The studies suggest that this kind of media (audio, video, and multimedia) may be worthwhile when using employee testimonials to attract applicants into the organisation. This way, it tends to be more interesting and engaging for possible job applicants because it has the ability to provide more information through tone, facial expression and other nonverbal cues (Walker, et al., 2009).

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So whether the organisation is swarmed with resumes of all sorts of job seekers or preparing to boost their recruitment efforts, it's clear that employee testimonials are a valuable part of any organisation's effort to improve their recruitment as they positively affect job applicant reactions and inexpensive to employ at the most basic level. Hence aside from publishing employee testimonials, it is also important to stimulate positive word-of-mouth about the organisation through different HR recruitment activities by image management, building relationships with key influential and opinion leaders, employee referral programs and conducting off site recruitments (Van Hoye & Lieven 2007).

And when an organisation adopts these practices in attracting employees and able to succeed in communicating these employees' success stories outside the organisation, an organisation will surely be successful and have a competitive advantage in the talent wars. It is now in every organisation that they have to understand that the management and selection of a quality workforce has become an increasingly critical factor in its success (Greening & Turban 2000), thus having HR central in formulating and managing these policies is now a vital role in the organisation success.

Now that the employee is part of the organisation, the next challenge that organisation face is on how to motivate their employees in the long run. Studies show that motivation is the number one problem facing business today (Watson 1994 cited in Wiley 1997); thus every organisation should put focus on employee motivation to maintain their competitive advantage in the industry. And the HR role is certainly central in becoming a strategic partner of the senior managers in overcoming this challenge.

There was a time that employees were considered just another input into the production of goods and services. Thus to be able to motivate employees, managers simply inject more money in the operations. This way of thinking was changed when the Hawthorne Studies, conducted by Elton Mayo from 1924 to 1932, found out that employees are not motivated solely by money and that the employee behaviour is linked to their attitudes (Doyle, Pignatelli, Florman 1985). Therefore, Hawthorne Studies began the human relations approach to management, whereby the needs and motivation of employees becomes the primary focus of the organisation.

After the Hawthorne Studies were publish, different approaches in understanding of motivation were studied and two categories of motivation theories were released, content and process theories (Mc Shane & Travaglione 2009). And naming some motivation theories that HR Management applies in their practices are Maslow's Need Hierarchy Theory, Herzberg's Two Factor Theory, Vroom's Expectancy Theory, Adam's Equity Theory and Skinner's Reinforcement Theory. Understanding these theories should be the working guideline of each organisation spearheaded by the HR Manager in motivating their employees to increase their work performance.

Before, the common pitfall of managers is that managers tend to motivate people without understanding what motivation really is. The concept of motivation is defined as the force within a person that affects their direction, intensity and persistence of voluntary behaviour (Mc Shane & Travaglione 2009). Thus, motivation is attached to human behaviour and attitude, and the best that organisation can do is to only influence in a manner that result in employees feeling motivated to perform at high levels. Therefore, tapping into the HR expertise and competencies is very critical and important for the success of organisation as they have the knowledge, ability and skills in the aspect of understanding human behaviour.

In early management theories, they suggest that simply using financial compensation can impel motivation and job performance, but the rise of behaviourism altered workplace behaviour and many behaviour modification techniques were then developed to enhance job performance (Wiley 1997). Now, HR Managers should then create job designs to strengthen employee motivation by creating work environments that promote sense of achievement, perception of competence and autonomy.

Almost all organisations understand that motivated employees are needed in the rapidly changing workplaces. They clearly know that motivated employees help organisations survive. It simply translates too that motivated employees are simply more productive. For the employees to be effective, organisation needs to understand what motivates employees within the context of the roles they perform. In the end, motivating employees is arguably the most complex part of the fundamental function a manager performs in the organisation. This is due, in part, that there are some differences in how managers view the reasons why the employee works and on how employees view the reasons why they work (Kovach 1987).

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Even when these motivation theories exist; Managers are still having a hard time motivating their employees because they tend to rely on their own preconceived thinking of what turns their subordinates on. They always assume that what motivates them will also motivate those reporting to them (Kovach 1980). Many managers perceive that financially performance based incentive is the easiest and common type of way in motivating their employees. Though sometimes this incentive drives performance, study shows financial incentives does not apply for all type of jobs. Incentives sometimes hurt when employees are faced with tasks that have problems which are too difficult or it includes risky choices, and thinking harder makes things worse and placing more incentive to the employee does not affect their mean performance (Camerer & Hogart 1999). The study concludes that financial incentives only improve performance in easy task as problem solving, recalling items from memory or clerical tasks.

In contrast, to know what really motivates employees in the organisation, HR should conduct a survey from time to time to explore the attitude that employees hold concerning factors that motivate them to work. This has been proven effective since 1930's, as employee attitude surveys were being used frequently in business to assess the employee morale (Schneider et al 1996). It shows that employee attitude surveys constituted useful means for comparing the effectiveness of supervision and as a direct approach to finding out what employee perceive as job related motivational factors. Through this, HR will have a better understanding of what employee really wants and can now create an environment that may foster employee motivation.

While controversy persists, pay and good wages are generally valued by all employees, regardless of gender, occupation, age, income and employment status (Wiley 1997). Since then, good wages continue to be ranked among the top five factors that motivate people in their jobs. But as this information may be complex in understanding how the employees will be motivated, HR Managers strategy for motivating employees will depend on which motivation theories are used as their reference point (Wiley 1997). If Hertzberg's theory is followed, HR should begin by focusing on pay and job security (hygiene factors) before focusing on interesting work and full appreciation of work done (motivator factors). If Adams' equity theory is followed, HR should begin by focusing on areas where there may be perceived inequities (pay and full appreciation of work done) before focusing on interesting work and job security. If Vroom's theory is followed, HR should begin by focusing on rewarding (pay and interesting work) employee effort in achieving organisational goals and objectives.

Also recognition of a job well done or full appreciation for the work done is often among the top motivators of employee performance. This simply involves giving positive feedback to the performing employee. Typical example of this positive reinforcement which is in practice in the Internal Medicine Business Office of Washington School of Medicine includes workplace visit by top executives to high performing employees, personal handwritten notes of thanks accompanying pay checks and telephone call by top executives at home (Steele 1992). This practice has enabled the university to achieve productivity improvements.

Currently, as we consider the status of our economy today where workforce reductions are becoming a commonplace in this country, job security is already an increasing importance to employees. Though study shows that employees' reaction to the lack of job security varies (Wiley 1997), Employees may experience severe psychological reactions to job loss or if the employee's job is threatened, this may include low self esteem, low self confidence, social isolation, anxiety and powerlessness. These reactions extend beyond actual job losers to their partners and other family members. And when work commitment of the employee is weakened by job insecurity, organisational effectiveness will surely deteriorates. And the best thing for the organisation to counteract this negative effect, HR should implement different reward strategies. In cases that an organisation undergoes workforce reduction efforts, HR should introduce different compensation strategies like several packages and early retirement incentives, HR can also create career development schemes and outplacements techniques. And all of these are intended to arouse positive psychological states of the employees that encourage and sustain productive, rather than destructive, behaviour (Wiley 1997).

Finally, HR should continue developing the skill of its manager to be able to motivate their employees as a critical part their job in the organisation. In conclusion, if the organisation can maintain a motivated workforce, it can make a powerful contribution to the organisation thus making the organisation competitive in the industry.

The next challenge that the organisation will face is on how to avoid their motivated employees leaving the organisation. Organisation should always understand that employee motivation directly affects behaviour within the organisation which includes employee retention. And in today's highly competitive labour market, there is extensive evidence that organisation regardless of size, technological advances, market focus and other factors are facing retention challenges. Thus understanding the relevance of motivation theories may offer an explanation on how employee motivation affects employee retention within the organisation (Ramlall 2004). And if the HR Manager learns to address this connection, this may become the basis of implementing successful employee retention practices.

The organisation understands that aside from the significant economic impact of losing any of its critical employees, knowledge is also lost when the employee leaves (Nandi 2008). This is the knowledge that is used to meet the needs and expectations of customers, and if the organisation fails to protect this knowledge, this will create a great impact on the business. With the HR at the helm, organisation needs to create either an intellectual capital environment where the transmission of knowledge takes place throughout the structure, or continue to lose important individual knowledge that has been developed through the length of service. This deep knowledge is what many believe will help to meet the needs and expectation of customers and will sustain a competitive advantage within the global economy in which organisations are competing in today (Ramlall 2004).

Considering the importance of motivation theories in keeping the employees motivated, it is equally important to understand that these theories can significantly affect the retention efforts of the organisation if left unattended. From the different studies conducted, the following are always on the top list of factors that need to be addressed by HR as part of its retention practices. HR should always address; the needs of the employee, its work environment, employee responsibilities, supervision, fairness and equity, effort, employee development and feedback (Ramlall 2004). And if HR did a good job of creating processes, regulations and practices in taking care of these factors, there will be a positive impact that will minimize the employee turnover of the organisation.

To understand deeply the bottom line when it comes to employee retention, HR should seek the help of the managers, who are in the frontline of the organisation, because study shows that the quality of the supervision receives by the employee is very critical to employee retention (Kovach 1987). More often, employee leaves the managers and supervisors than they leave the companies or jobs. If a manager is well-liked or a nice person this will surely earns some positive points from the employees. And on the other hand, a nasty or controlling manager creates negative points for the organisation. Therefore, we may conclude that aside from the market benefits and compensation; a manager or supervisor, who is in the front line of operations, who knows that the quality of supervision is one of the key factors in employee retention.

When employees form a perception concerning their valuation by the organisation, they develop general views concerning the degree to which the managers and supervisors value their contributions and care about their well being. And because managers and supervisors acts as the agent of the organisation, employees would view their supervisors and managers favourable and unfavourable orientation towards them as indicative of the organisation supports (Eisenberger et al, 2002). With this it is imperative that the organisation should support and equip their managers and supervisors with proper training for them to become an effective medium of communication which conveys the organisation positive practices from the top level to the bottom level of the organisation and for them to be an efficient tool in minimizing employee turnover.

With all of this in hand, HR will play a very important role in increasing the manager's ability to retain employees by developing their management skills. HR should teach their managers on how to value people and how can it be more challenging. Particularly manager should realize that the task of valuing people is not easy as it will cover different aspects of human management and if the manager have a hard time valuing their people and their contributions, it will be a leap for the manager to change their employee values (Jackson 2002). Therefore, HR should help the managers by training them to develop their skills and ability especially on how managers should value their people in ways that it supports their organisation drive in different programs of employee retention.

One company who understand this connection is Wal-mart, Wal-mart embodies the business philosophy of making their customer number one. And by understanding the customer's needs, Wal-mart would also serve its associates, shareholders, communities and other stakeholders. In summary, the company indicates that they clearly understand the basic of getting, keeping and growing people and these become their cornerstones of all their human resource activities. Though they know that these HR problems are overwhelming, dissecting the problems into how to get people, how to keep people and how to grow good people for identification and solution, their company was able to celebrate success. And with this focus, the company reduced total turnover from 70% in 1999, when the industry average was 63%, to 44% in 2003 versus the current industry average of 65% (Peterson 2005).

Also in some degree, some research shows for hourly wage employees, the most powerful indicator for employee retention were; Positive experience with regards to consistent working hours, sense of fulfilment with the job, positive experience with performance reviews, longer tenure with the current employer, higher level of satisfaction with the job and pervious work experience (Milman 2003). And for medicare industry especially the nurses, they target employee retention; by assessing and cultivating their culture, by investing in professional development to accommodate diverse learning styles, use mentoring and reverse mentoring that acknowledge and value both the experiential wisdom of older workers and the technical knowledge of younger ones and by learning from the best through studying the actions of organisations that have been recognized for high performance (Myers & Dreachslin 2007).

Through all of this, to be able to establish a competitive advantage in the industry, each organisation should adopt a strategy capable of helping them to maintain and sustain a favourable market position (George, Laurentiu & Catalin 2008). Especially in the war of talent era, organisation now realized that the role of HR is very important that their very existence now have a very important role in planning and strategizing on how to take care of their employees. And if the organisation is committed in investing some of their resources in the development of their HR Department, HR Managers will be able to create programs and policies that can build human capital as a core source of the organisation competitive advantage. With the extra resources, HR Managers can easily secure and protect these processes so that their rivals could not easily copy, imitate and improve their programs which in return will help the organisation's competitive advantage sustainable and durable over time.

To pull into the lead in global competition, HR Managers should control labor costs, motivate employees to high quality, improve customer oriented performance and continuously search out new and better ways of doing both. Thus all organisations have a stake in exploiting information technology to better manage their human resources (Broderick & Bounreau 1992). In summary, HR becomes a prime candidate to benefit from information technology because HR systems are typically associated with distressingly difficult task with longer lead times to finish and investment in information technology will means speeding up the process and improves to hasten management decision making. With the rapid emergence of technology these past few years, it has unlocked new potentials and capabilities to improve the current practices and efficiency of human resource management which now suggests a new direction for strategic HRM. And with effective management of HR as an integral part of any organisation's success, researchers have conducted many studies that examine specific HR techniques like behavioural performance appraisals and structured interviews in correlation with the new technology in the industry. Often this research has focused on the technical aspects of a particular HR practice in an attempt to assess its validity and to enhance its utility (Tannenbaum & Dupuree-Bruno 1994).

And when these objectives are met in the face of shrinking headcount and a global environment in which employees are more culturally diverse and are located throughout the globe. All the relatively routine task of employee record keeping and legal and regulatory compliance are geometrically intensified in this context, therefore such complexity now demands more sophisticated applications of technology that go beyond simply improving the HR routinely task. And with the success of these new technologies, several companies already started adopted new technologies that are now embedded in their HR practices. (Howarth 2010).

One company which integrates information technology to their HR processes and in turn resulted into achieving better performance of the organisation is Sinclair Knight Merz (SKM). SKM is one of the leading professional services companies in the Asia Pacific region and is in constant pursue of increasing its ability to manage and grow its workforce capabilities. As a leader in its industry, they knew that maintaining that position would take constant vigilance. When they use technology in their HR processes, their competitive advantage in terms of workforce performance improves. The recruitment capabilities of the company becomes fast, efficient and effective; they were able to recruit key staff faster and able to increase the company's ability to handle large recruitment assignments therefore producing employees with superior workforce performance and employee engagement. In result, these significantly increase the satisfaction of managers with the HR recruitment service. Also, HR exploited the company's technology in improving its learning and development capability thru e-learning which resulted in a significant increase in the level of knowledge of their employees in the first year. To improve further HR services, HR increases its communication to staff through online surveys and regularly reviews its communication programs to supplement the preferred method of communication by the employees. With these innovations, SKM was able to exhibit strong financial results; making its capital efficiency and return on invested capital among the highest in the industry (Accenture 2010).

Finally, In conclusion, to maintain the competitive advantage of an organisation in the industry, every organisation should accept the challenge that creating an environment that will attract, motivate and retain people is very crucial and important so that employees will commit to the organisation. With the war of talents, organisation should view their employees as talent investor and it is vital that the role of HR should be central in formulating strategy in building the human capital as a core source of organisation's competitive advantage. At the same time, HR should use information technology in their innovations to exploit all the technologies available in the market to keep them advanced and updated thus in return add to the organisation's ability to move forward and sustain above average industry performance.