Contemporary Issues in HR Management Chapter 2

Contemporary Issues in Human Resource Management

• This book/course discusses contemporary issues in human resource management.
• The editor is Nicole Dodd.
• Several contributors are listed, including Bothma, Brewster, Chinyamurindi, Cox, De Villiers, Holland, Kougiannou, Mazingi, Paulet, Robinson, and Steynberg.
• The book is published by Oxford University Press South Africa (Pty) Ltd.

Chapter 2: Human Resources, Dynamic Capabilities, and Sustained Competitive Advantage

• The chapter examines human resources in achieving sustained competitive advantage.
• Learning outcomes include explaining sustained competitive advantage, discussing exploitation and exploration strategies, explaining the role of human resources in achieving sustained competitive advantage, distinguishing between sources of sustained competitive advantage, and discussing paradigms covering human resource contributions to organizational performance.

Sustained Competitive Advantage (SCA)

• SCA is the range of factors that distinguish an organization from its competitors, allowing for market share maintenance and profit increase.
• SCA sources can be organization-specific advantages.
• Human Resources (HR) plays a crucial role in unlocking employee potential, boosting profits through effective organizational design, and shaping organizational culture and responsiveness.
• HR must have the opportunity to assist in strategic management.

HRM and Organizational Performance

• Research explores how HRM influences organizational outcomes.
• Initially, researchers believed best practices would universally improve performance.
• However, contingency theory argues that each organization operates in a unique environment, necessitating HRM practices tailored to its specific identity and strategy.

Ability-Motivation-Opportunity Framework

• Vertical fit describes the alignment between an organization's strategy and its business strategy.
• Horizontal fit focuses on the alignment of HRM practices within the organization.
• Expectancy theory posits that motivation stems from the belief that effort leads to valuable rewards.
• The AMO framework combines ability, motivation, and opportunity to achieve high performance and avoid negative combinations.

Competitive Advantage and SCA

• Competitive advantage refers to unique value-creating strategies not employed by competitors.
• Sustained competitive advantage refers to rare, easily un-imitated sources of competitive advantage.
• Organizations often leverage internal strengths to respond to external possibilities.
• SWOT analysis (strengths, weaknesses, opportunities, and threats) is useful in identifying sources of competitive advantage and SCA.

Resource-Based View of SCA

• The resource-based view of SCA utilizes the VRIO framework (Value, Rarity, Imitability, Organization) to assess resources.
• Internal strengths (resources) enable organizations to exploit opportunities and neutralize threats.
• Human resources are crucial for organizational competitiveness.

Organizational Strategy

• SCA can be achieved through exploitation or exploration strategies.
• Exploitation strategies involve leveraging existing capabilities to improve product, service, and process delivery.
• Exploration strategies involve risk-taking to discover new prospects and opportunities through product/service innovation.
• Business functions must align to support these strategies.
• Tensions may arise between short-term and long-term perspectives.

Organizational Resources

• Organizational resources include financial capital, physical capital, human capital, and organizational capital.
• Resources contributing to SCA must be valuable, rare, imperfectly imitable, and non-substitutable.
• Organizations need the capacity to fully utilize these resources.
• Strategic fit refers to an organization's alignment with its environment.
• Strategic flexibility refers to an organization's ability to adapt to changes in the environment.

Capabilities versus Dynamic Capabilities

• Capabilities are the functions and operations of a business.
• Dynamic capabilities involve utilizing processes and managerial skills to respond to and shape the business environment.

Diversity in the Workplace

• For diversity to contribute to SCA, HR managers must prioritize employees, their thriving environments, and removal of barriers to workplace functioning.
• Transformation requires deliberate inclusivity and giving voice to marginalized groups.

Criteria for HRM Practices and Human Capital to Contribute to SCA

• Questions to evaluate resources include whether they are valuable, rare, inimitable, and substitutable to determine their SCA potential.

The Role of HRM and Human Capital in SCA

• HRM practices form the system for attracting, developing, motivating, and retaining employees.
• Effective HRM practices and exceptional human capital contribute to SCA.
• Organizations can achieve SCA by giving special treatment to employees with core competencies or strategic strengths.
• This leads to better products, service, innovation, and problem-solving capabilities.
• Deliberate efforts to build internal dynamic capabilities support the attainment of SCA.