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I.V. Onyusheva, PhD,

Professor of RAM, RANH,

International Leadership Institute, Turan University,

Almaty, Kazakhstan

 

The Challenges of HCM: Organizational Effectiveness and Sustainable Competitive Advantage

 

Key Words: human capital management (HCM), resource-based view (RBV), challenge, organizational effectiveness, competitive advantage, firm.

Problem statement.  The key problem here is how to reach organizational effectiveness and to form sustainable competitive advantage through human capital management. The research objective is detecting challenges to manage human capital to increase organizational effectiveness and build sustainable competitive advantage for it.

Theoretical background. The human capital management is derived from the resource-based view (RBV) of the firm, which has now risen to such prominence within the theory of strategic management (Barney, 1991), has made the point more general: the distinctive nature of a firm’s total human resource pool, and not simply its senior managers, creates a large terrain for idiosyncrasy and, with it, the potential for superior performance or sustained competitive advantage (Wright et al., 2001). The RBV is deeply concerned with the conditions that give rise to valuable, inimitable resources (with inimitability covering both direct and indirect forms of copying) (Colbert, 2004). By its very nature, the RBV is laced with human resource issues: barriers to imitation, such as asset specificity and social com­plexity, are essentially about decisions that people make, and processes they build, over time.

But none of this gets us very far. The contentions that a firm needs an appropriate cluster of human and social capital to secure its viability in its chosen indus­try (or industries), and that this cluster has idiosyncratic features that may help create a source of sustained competitive advantage, are not fully considered and discussed.

Main part: summary. The critical question in the HCM literature has turned on how the HRM process can build sources of sustained advantage when firms in these contexts choose to pursue this goal. Theoretical attention is focused on the complex competencies and relationships that people develop inside organizations over significant periods of time. These are the kind of path-dependent, socially complex, and causally ambigu­ous assets that can create barriers to imitation. The key argument is that firms trying to create such assets in their structures of human capital need to pay close attention to how they construct and enhance their HR systems. HR systems - the whole bundle of work and employ­ment practices relating to a major employee group - rather than individual policies or practices, are the focus of current interest.

Many contemporary researches on this issue are going forward under the term of ‘highly performing HR systems’ (Boxall at al., 2007). Firms face two challenges if they are to build exceptional HR systems as each HR system is unique and has its own features and peculiarities depending on its field. Here there is a challenge in each branch, and for each organization, to learn to customize the content of its HR systems. This puts a premium on the insights and skills of senior managers, including, where they exist, HR directors. The second challenge is associated with managing the key mediators between policy intentions and out­comes that exist inside the ‘black box’ of any firm’s HRM, irrespective of its specific HR policies (Purcell et al., 2003). There are two critical mediators or linking elements in a sizable organization: one is the way in which first-line managers interpret and filter the policies and personal signals of higher-level managers, and the other is the way in which employees respond to the mix of messages that they receive from senior managers and from their direct line managers. It is actually very hard for any large organization to develop consistent transmission from senior management’s inten­tions through line-manager behaviors to employee responses, and thus the manage­ment of this chain of links can become a source of competitive advantage or, conversely, can function as a source of competitive disadvantage.

In this sense Purcell and Hutchison’s study of the British retail organization Selfridges [5] is a case in point. It underlines the value of senior management taking a much greater interest in the selection, development, support, and motivation of front-line managers so that they, in turn, manage front-line employees in ways that enhance their satisfaction and com­mitment and that lead on to the important store-level outcomes of enhanced cus­tomer satisfaction and retention. Thus, the research on how firms can build sustained advantage in HRM is concerned with both the astute adaptation of HR systems to management’s goals in specific contexts and with the superior management of imple­mentation processes, particularly in large and cumbersome organizations.

Conclusion. It has been focused on three important questions: (1) what is problematic in human capi­tal management, (2) how does human capi­tal interrelate with organizational effectiveness, and (3) when and how can firms build competitive superiority through their human capital?

Human capital is a fundamental and idiosyncratic part of what makes firms productive and successful. Firms are simply not viable without the willing cooperation of people who have the kind of knowledge and skills that are relevant to their industry. As the resource-based view of the firm emphasizes, it also offers the potential to build sources of sustained competitive advantage. These premises, however, do not take us far beyond the basic fundamentals. To develop sustained advantage through human capital management (HCM), firms must learn to customize their HR systems in astute ways and must manage a fragile chain of links from management intentions through line-manager behaviors and employee responses to performance outcomes. Insight into this process, and the stam­ina, skills, and managerial coordination needed for follow-through are valuable attributes.

 

References:

1.        Barney, J.B. (1991) Firm Resources and Sustained Competitive Advantage, Journal of management, 17(1), pp. 99-120.

2.        Wright et al. (2001), Human Resources and the Resource Based View of the Firm, Journal of Management, 27(6).

3.        Colbert, B.A. (2004) The Complex Resource-Based View: Implications for Theory and Practice in strategic HRM, Academy of management Review, 29(3).

4.        Boxall at al. (2007) The strategic HRM Debate and the Resource-Based View of the Firm, Human Resource Management Journal, 6(3), pp. 59-75.

5.        Purcell et al. (2003) Strategic Human Resource Management, International journal of management Reviews, 2(2), pp.183-203.