HR Value Chain and Resource-Based View

Reverse Approach HR Value Chain

• The HR value chain represents the goal-setting and strategic decision-making of a firm.
• Determine competitive advantage--this looks at the ultimate business goals (UBGs).
• Determine critical factors--things that create competitive advantage (e.g., productivity, innovation, flexibility).
• Determine employee attitudes, behaviors, and cognitive factors--which positively affect critical success factors (e.g., motivation and job satisfaction).
• Determine HR practices--which positively affect employee attitudes and behaviors (e.g., selective recruitment and selection, extensive training and development, teamwork).

Resource-Based View (RBV) of the Firm

• RBV is a dominant theory in strategic management.
• It changed the approach to strategy from "outside-in" to "inside-out."
• The emphasis shifted from external, industry-based competitive issues to internal resources used to start organizational success.
• Sustained competitive advantage is determined by internal resources that are valuable, rare, inimitable, and non-substitutable:
  • Valuable resources are economically beneficial.
  • Rare resources are scarce.
  • Inimitable resources are difficult to copy.
  • Non-substitutable resources are difficult to replace.
• Internal resources can be financial, physical, organizational, or human.

VRIO Framework

• The VRIO framework represents the qualities of RBV (valuable, rare, inimitable, and non-substitutable).
• It is a hierarchical framework, meaning that the previous level must be achieved to improve the position relative to competitors.
• For long-term success, organizational support is crucial.
• Inimitability is one of the most important characteristics of desirable resources.

Path Dependency, Casual Ambiguity, & Social Complexity

• A resource can be difficult to imitate for three reasons:
  • Path dependency: The ability to obtain a resource is dependent on unique historical conditions.
  • Causal ambiguity: The link between organizational resources and sustained competitive advantage is difficult to understand.
  • Social complexity: The resource generating an organization's advantage is socially complex and difficult to understand.
• Competitive advantage comes from past events, not just current choices.

Competitive Advantage & Critical HR Goals

• Boxall & Purcell: Linking Competitive Advantage to Ultimate Business Goals (UBGs)
  • UBGs are twofold:
    • Creating and maintaining viability with adequate returns to shareholders.
    • Striving for sustained competitive advantage.
• Organizational performance is represented by critical HR goals (labor productivity) and critical non-HR goals (market share).

Linking UBGs to Critical HR and Non-HR Goals

• Critical Non-HR goals include desired outcomes for sales, market share, and brand name.
• Employee scandals can negatively impact a firm and damage corporate reputation.
• Critical HR goals focus on desired outcomes for:
  • Labor productivity: Output per unit of input.
  • Organizational flexibility: The capacity to change and adapt.
  • Social legitimacy: The legitimacy of an organization in the outside environment and to its employees.
• There are tensions between the critical HR goals, for example:
  • High cost-effectiveness can be negatively associated with flexibility.
  • Too much focus on social legitimacy can negatively impact efficiency and flexibility.

HRM and Performance

• The HR and performance debate involves testing the impact of HRM on performance.
• There is a general agreement that HR practices are weakly linked to firm performance.
• HR practices are personnel interventions or actions that shape the employment relationship in an organization.

HRM Activities and Outcomes

• Three types of HR practices: Intended, Actual, and Perceived
• Intended practices are policies and goals set by HR departments
• Actual practices are implemented by line managers
• Perceived practices are employees' perceptions of HR practices, influenced by their direct supervisors
• Line managers play a significant role in translating HR policies into actual practices

The HR Value Chain

• The HR value chain connects organizational strategy to HR outcomes
• It involves five steps:
  • Define critical HR goals
  • Identify intended HR practices
  • Implement HR practices
  • Assess HR outcomes
  • Measure the impact on organizational performance

Guest Lecture by Lucienne Stavenuiter

• Employees are not resources, but the core assets and capital of an organization
• They add value and should not be viewed as costs
• The impact of technology:
  • Head work - Technology & data design, clever use of analyzed data
  • Handwork - Robotisation
  • Pass-through data tasks - ICT (e.g., secretaries)
• HRM as a staff function has no direct influence on performance and is outdated

Work Ability

• Defined as the physical and mental condition to work, now and in the future
• Work Ability Index is a validated tool for measuring, predicting, and training work ability
• House of Workability includes factors influencing work ability:
  • Personal: health, coping style, personality
  • Organisational: norms & values, learning climate, personnel management/policies
  • Functional: competencies, time in function, career involvement
  • Manager: inspiration, learning value, work-home interference
  • Mentor: social network, position on labor market

Five Dimensions of Employability

• Employability: The ability of a person to add value to an organization today and in the future, recognizing the value of the work for themselves
• Five dimensions of employability:
  • Good - Delivering quality products or services
  • Agile - Adapting to change
  • Flexible - Adapting to changes and recovering from setbacks
  • Connected - Aware of external trends
  • Balanced - Meeting all needs and maintaining a healthy work environment

Employability and Work Ability

• Management/employability paradox: Managers are hesitant to invest in employee development for fear of losing them to competitors
• Research shows that investing in employee development increases their commitment and reduces turnover
• The combination of work ability and employability leads to:
  • Career success
  • Higher productivity
  • Innovation
  • Flexibility
  • Agility
  • Less absence
  • Retention

Explore the HR value chain and the resource-based view of firms through this quiz. Understand how strategic decision-making and internal resources contribute to competitive advantage and employee effectiveness. Test your knowledge on critical success factors and HR practices.