LECTURE 05

HRM & Competitive

Advantage
Jiveta Chaudhary – Facullty, DIAS
HRM Systems & Firm Performance
HRM Systems & Firm
Performance
 Organizational Capability
 Traditional way to think about CA  focus on the

company’s financial, strategic and technological

capabilities
 Dave Ulrich & date Lake  Contemporary view 

traditional means must be supplemented by

‘Organizational Capability’ – the firm’s ability to
manage people to gain CA
 High performing companies engage in explicit

competition for the most capable employees

HRM Systems & Firm
Performance
 Organizational Capability (Contd.)
 OC relates to hiring and retaining competent

employees and developing those competencies

through effective HR practices
 It is OC and not tech/fin capability that is most

difficult to replicate
HRM Systems & Firm
Performance
 Organizing for Success
 Robert Waterman: -
 Top performing companies provide employees with: -
 Something to believe in
 A feeling of control
 Job challenge
 Opportunity to engage in lifelong learning
 Recognition for achievements
 The best firms are better organized to meet the needs of
their people, so that they attract better people than
competitors do and their people are more greatly
motivated to do a superior job, whatever it is they do
HRM Systems & Firm
Performance
 Competitive Advantage through Effective
Management of People
 Jeffrey Pfeffer
 What distinguishes the most successful firms in our
economy from all the others is that for their
sustained advantage, they rely not on technology,
patents, or strategic position, but on how they
manage their workforce
HRM Systems & Firm
Performance
 Competitive Advantage through Effective Management
of People (Contd.)
 Jeffrey Pfeffer (Contd.)
 Management practices that result in sustained CA for
highly successful firms: -
1. Selectivity in recruting
2. Incentive pay
3. Employee ownership
4. Training and skill development
5. Cross-utilization and cross=training
6. Symbolic egalitarianism
7. Wage compression
Competitive Advantage:
From the Past to the Future
Competitive Advantage: From the Past to the
Future
 CA entails having the capability to provide better
products, services, or financial returns than the
competition does. HR should help its firm create
value in the marketplaces for said capital, products
and services before its competitors do. As HR creates
this kind of value in a timely manner, it contributes
to the firm’s CA
Competitive Advantage: From the Past to the
Future
 Operational HR Activities  routine, day-to-day delivery of HR
basics
 Strategic HR Activities  Five criteria: -
1. Long term

2. Comprehensive

3. Planned

4. Integrated

5. High-value added
 Two dimensions of HR Activities: -
1. Reactive

2. Proactive
 Competitive Advantage: From the Past to the
Future
 Dimensions of CA for HR Activities: -

REACTIVE PROACTIVE

STRATEGIC Makes strategy Creates strategic

happen alternatives
OPERATIONAL Implements the Improves the basics
basics
Competitive Advantage: From the Past to the
Future
 HR Competitive Advantage Index: -

Operationally Operationally Strategically Strategically

reactive Proactive Reactive Proactive

Low High
Competitive Advantage: From the Past to the
Future
 Lifecycle of HR Competitive Advantage: -