Importance of Human Resources and Management

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The primary purpose of this study is identify what human resource factors, both individual and organizational, are key to gaining and sustaining organizational competitive advantage and success. The paper examines studies that attribute the success of a firm to employee skills and motivation and others that have found significantly positive relationships between human resource management practices and firm performance, along with studies that have attempted to measure the impact of the entire human resource management system on job and firm performance.

Therefore, this study explores the link between human resource inputs and processes on job and organizational performance in public, private, and non-profit organizations. The paper concludes with some remarks regarding the importance of human resource management and role of managers in achievement of organizational success. Organizational competitiveness lies within the capabilities of employees and the processes used to recruit, train, develop, and manage the human resources that contribute to the bottom line of our organizations.

The idea that human resource management has some utility within organizations, beyond satisfying regulatory agencies and employees, is not new. In fact, the belief that individual employee performance has implications for firm-level outcomes has been prevalent among academics and practitioners for many years (Huselid, 1995). However, introduction of the knowledge worker, increased communication due to technology, and the ever-growing global economy has created an increased focus on the best ways to manage human resources within organizations.

All organizations find themselves in a growing global competitive market since entering the 21st Century. The days of simple job tasks and market domination are clearly over. The shift from an industrial to a knowledge society and the rise of human capital have created and environment that challenges organizations to stay competitive. The last two decades have been met with a substantial increase in awareness concerning the value of human resources in business (Luoma, 2000).

Kontoghiorghes (2003) noted that organizations realize that to be successful and competitive they must continuously improve the way they organize and manage themselves, stating that “competitiveness will ultimately depend on their capability to configure people and design a system for optimal execution of strategy” (p. 28). Changing demographics, globalization, recent skills gaps, and worker shortages have had a profound effect on our nation’s ability to maintain its competitiveness.

Without a well trained and well prepared labor force, businesses lose the ability to compete both nationally and internationally, resulting in decreased economic success (Laprade, 2005). Rapidly advancing technology has also contributed to this constant state of change; change that is requiring organizations to identify and implement new strategies to recruit, acquire, and develop employees that will ultimately add to the value of the organization (Luoma, 2000).

Employees must possess a wide variety of workplace skills and competencies that will allow them to work with advanced technologies and function in today’s high performing organizations. These skills may include: reading, writing, math, computer and software knowledge, problem solving, critical thinking, ability to participate in meetings, and report writing.

Once an organization successfully recruits and hires employees that meet the basic skill and knowledge requirements of the position, there must be organizational processes in place that motivate and develop employees to perform their jobs to the best of their ability, add to the financial success of the organization, and increase the organizations competitive advantage. (Hatch and Dyer, 2004) Theoretical Background Porter’s (1985) model of sustained competitive advantage (SCA) and Barney’s (1991) Resource-Based View (RBV) of the firm serve as the excellent frameworks for examining the importance of Human Resources Management in Organizations.

Porter (1985) suggests that a competitive advantage occurs when a firm is able to deliver the same benefits as competitors at a lower cost or deliver benefits that exceed the firm’s competition. Thus, a firm’s competitive advantage lies in the actions taken to create a defendable position in an industry and generate superior return on investment. Porter (1985) tends to focus on very tangible sources of competitive advantage such as the low cost and inimitability of products or services. Barney (1991) supports the theory of SCA.

However, he suggests that there are additional sources of competitive advantage that are more intangible. These intangible sources of competitive advantage lie in the people and practices used to add value and uniqueness to an organization (Barney and Wright, 1998). Creating and sustaining a competitive advantage in the growing global market is becoming increasingly important (Porter, 1985). All organizations aim to produce a product or provide a service that customers will choose over that of their competitors.

Even non-profit organizations maintain a certain level of competitiveness in order to receive continued funding and community support. It is obvious that poor performance and decreased organizational income may be detrimental to the success of any organization. In most industries, some firms are more profitable than others regardless of the average profitability of the industry. Conceivably, these superior performers may posses something special, unique, and hard to imitate that allows them to outperform their rivals.

These successful firms may have a specific brand or product, operate in a more efficient manner, or have more capable and skilled employees that better contribute to the success of the organization. These unique resources and skills are referred to as sources of competitive advantage (Bharadwaj, Varadarajan, & Fahy, 1993). Creating and sustaining a competitive advantage in the growing global market has become more important than ever (Porter, 1985).

A competitive advantage occurs when a firm is able to deliver the same benefits as competitors but at a lower cost or deliver benefits that exceed the firm’s competition. Thus, sustained competitive advantage (SCA) allows the firm to create superior value for its customers and increased profit for itself (Porter, 1985). This increased profit is often assessed by researchers and organizational leaders by analyzing the financial performance of the firm. For example, both economists and researchers continually evaluate the variables that impact profitability.

Successful financial performance is of interest for both organizational leaders and researchers regardless of industry type, tax or union status, or whether those organizations are public or privately owned. (Den Hartog and Verburg, 2004) A number of researchers have investigated the relationships of specific organizational variables and firm level performance. Carmeli and Tishler (2004) have examined “intangible” sources of competitive advantage including management capabilities, human and organizational resources and skills, and the firm’s external reputation.

The idea of human capital as a factor in a firm’s financial performance has also gained the interest of researchers and is consistent with Barney’s (1991) Resource-Based View of organizations. When looking at organizations through a Resource-Based View (Barney, 1991), firms utilize their resources and capabilities to create a competitive advantage that ultimately results in superior value creation. Firm resources and skills are considered valuable when they aid the firm in formulating and implementing strategies that improve firm efficiency and/or the effectiveness. (Bharadwaj, Varadarajan, & Fahy, 1993).

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