HR and Competitive Advantage

In order to have an effective competitive strategy, the company must have one or more competitive advantage, factors that allow an organization to differentiate its product or service. Wal-Mart builds its low cost leader strategy on the dual competitive advantage of a satellite based inventory and distribution system, and on employment policies that help it to achieve extraordinary low employment costs. Southwest Airlines achieves low cost leader status through employment policies that produce a highly motivated and flexible workforce. Its workforce is its competitive advantage. Larger airlines like Delta, faced with union rules and restrictive work rules and salary structures, find it hard to compete with Southwest, whose employees eagerly rush to ‘turn around’ an airplane in a fraction of the time it takes a Delta team. Every successful company has one or more competitive advantages around which it builds its competitive strategy.

The competitive advantages can take any forms. For a pharmaceutical company, it may be the quality of its research team, and its patents. For a Web site like ebay, it may be a proprietary software system. Many years, ago, Wal-Mart’s satellite based distribution system was so revolutionary that it was probably the firm’s predominant competitive advantage The New Workplace presents another example.

Today, most companies have easy access to the same technologies, so technology itself is rarely enough to set a firm apart. It’s usually the people and the management system is rarely enough to set a firm apart. It’s usually the people and the management system that make the difference. For example, an operations expert from Harvard University studied manufacturing firms that installed special computer integrated manufacturing systems to boost efficiency and flexibility. Data in studies point to one conclusion: operational flexibility is determined primarily by a plant’s operators and the extent to which managers cultivate, measure and communicate with them. Equipment and computer integration are secondary.

In a growing number of organizations human resources are now viewed as a source of competitive advantage. This is in contrast to the traditional emphasis on transferable resources such as equipment. Increasingly, it is being recognized that competitive advantage can be obtained with a high quality workforce that enables organizations to compete on the basis of market responsiveness, product and service quality, differentiated products, and technological innovation.

Strategic Human resources Management:

The term HR strategies refers to the specific human resources management courses of action the company pursues to achieve its aims. Thus, one of FedEx’s strategic aims is to achieve superior levels of customer service and high profitability through a highly committed workforce. The overriding aim of its HR strategy is to build a committed workforce, preferably in a nonunion environment. FedEx’s specific HR strategies stem from this aim. They include: using various methods to build two way communications; screening out potential mangers whose values are not people oriented guaranteeing to the greatest extent possible; fair treatment and employee security for all employees; and utilizing various promotion from within activities to give employee every opportunity to fully realize their potential. Strategic human resources management means formulating and executing HR systems – HR policies and activities – that produce the employee competencies and behaviors the company needs to achieve its strategy aims.

Linking Corporate and HR Strategies:

Company’s Competitive Environment>
Economic, political demographic,
competitive and technological trends.

Company’s strategic Situation>

Company’s Strategic Plan
For example
Should we expand geographically?
Cuts Costs?

Company’s HR (and Other Functional) strategies>
What are the basic courses of action HR will pursue?
To ensure that the recruiting selecting training, appraising and compensation systems are consistent with the company’s strategic plan;

Organizational Performance>

Company’s Internal Strengths and Weakness

Company’s Strategic Situation.