Question 1: Sustainable competitive advantage relies on the implementation of sophisticated HR systems that go beyond the utilization of functional best practices
Front line managers play a significant role in building an organization’s competitive advantage. In the modern environment, managers understand the implications of a knowledge-driven economy. For any firm to acquire sustainable competitive advantage, it must implement human resource systems which focus beyond utilizing the best practices (Barney, 1991). The modern economy requires a combination of systems which address flexibility, speed and self-renewal in a continuous manner. For a company to flourish, it must have a skilled and motivated personnel that helps it gain a competitive advantage (Wittmer, 1991).
In implementing such systems, organizational de-staffing and de-layering have resulted in the exhausting of employees instead of empowering them (Stone et al. 1993). Most companies tend to focus on marginal managerial practices when dealing with motivation and capability problems. This has resulted to wastage of human capital that is precious. Although there is a common consensus that the biggest impediment to success is the structure of the organization, the fact that managers’ understanding of strategies is outdated cannot be ignored. Most companies employ outdated strategic perspectives despite the fact that there are dramatic changes in external and internal strategic resources.
In the modern economy, the competitive strategy model should guide managers to make a decision on which business to invest (Akingbola, 2006). This should be facilitated by strategic-planning systems that are sophisticated. Despite all the planning and investment, competition dictates that the product-market positions which are carefully developed are subjected to imitation and leapfrogging.
The urge for organizations to create a competitive advantage has evolved over the years. In 1980s, many organizations supplemented the external competition analysis with an assessment of internal competency. This was because they sought to achieve an adaptive, sustainable and dynamic advantage over other organizations. Most of the organizations realized that it would be difficult for other companies to imitate development of resources and other capabilities. Because of this, they developed a core-competency perspective which mainly focused on the importance of creating knowledge and building the processes of understanding competitive advantage. This approach did not last long as the organizations realized that their employees were not equal to the tasks that were knowledge-intensive (Alexander et al. 1999). Essentially, strategies that are competency-based depend on people. To facilitate flexible market responsiveness, the relationship that the workers create with key clients is crucial. Expertise and scarcity drive product development. This implies that in any organization, people represent the key strategic resource. This calls for front line managers to build the strategy on a human-resource foundation. The fact that most companies have appreciated this finding has resulted to a huge competition for the scarce human resources.
In the recent past, there has been a shift of how the managers prioritize strategic resources. Most managers previously thought that capital represented the most strategic resource in any organization. Because of this, they thought that they should concentrate on acquiring it. In the modern era, this is no longer the case. Essentially, capital is no longer the crucial resource that can constrain an organization’s growth. The emergence of global capital markets has resulted in the supply side being opened (Ban et al. 2003). At the same time, the demand side has been reduced by the excess widespread in industry capacity. Notwithstanding the recent reversals in a number of sectors, companies are awash in capital. Most of these companies lack the ability to produce projects that are high-quality to utilize the available resources. This has facilitated the increased trend of adopting merger-and –acquisition expeditions.
Most stock markets have embarked on advising managers the value of the scarce strategic resource. Because of the traditional approach in the industry, the trend is that there is a scarcity of talented people who possess the required knowledge being chased by a surplus of capital (Barney, 1991). This has resulted in a constraint of the modern economy. This has profound implications to top management in organizations. To ensure that an organization achieves competitive advantage, the management must change its focus to view human resource as a key strategy that should hence be prioritized. To effect this, an organization should ensure that it has a competent human-resource executive to work with the CEO. With time, strategic-planning processes that are traditional in nature should be overhauled in favor of the more important human and financial resources. This is the only way that an organization can keep up with a competitive market where competitive advantage is the norm.
Stone et al. (1993) suggests that the realization that knowledgeable people is a scarce resource in companies has seen a shift in the value management concept in many corporations. In the past, most people did not take competitive strategy as a serious aspect to the development of the organization. This gradually shifted in the late 1980s as managers realized the importance of creating a unique internal capability. This saw a shift to value creation from value appropriation. The game further shifted upon realizing that knowledge and information were key in providing competitive advantage. Whereas knowledge as a resource increases when shared, capital does not. Sharing knowledge eliminates the zero-sum game. The importance of value creation dictates that managers employ a different approach from the traditional perspective of value appropriation. As such, it is essential to change the roles of senior managers in an organization to ensure it gets a competitive advantage over its rivals (Benz, 2005).
Question 2. Assessing the challenges of HRM architecture in non-profit organizations is insignificant as context is irrelevant
Although human resource management is important in nonprofit organizations for providing better management, there is a debate as to what influences their practices in terms of human resource. There is a great need that nonprofit organizations adopt a more effective measure in facing their challenges such as the changing environment, uncertain future and internal organizational conditions. According to Benz (2005) nonprofit organizations are expected to have a better reaction to deregulation and competition. However, this has been hindered by the demand to provide services. Lack of private financial and governmental support has put nonprofit organization managers in a difficult position as they have to balance between the two. Nonprofit organizations also have to facilitate their legitimacy before various stakeholders such as members, clients, donors and the government. This explains why there is a great demand for nonprofit organizations to have an effective and efficient manner of adopting the best managerial practices. The role played by human resource management plays in developing better management cannot be underrated. For any organization to develop, there must be an effective manner of recruiting employees. In most cases, the literature as to the role of human resource management in nonprofit organizations addresses the human resource management effects. Little information is available as to how such practices originate from, how the practices are developed and the circumstances that shape the architecture of human resource management in nonprofit organizations.
A number of theories are used to examine the architecture of human resource management in a nonprofit organization. The core approaches however are the human resource-based approach and the strategic approach.
According to the strategic approach, the main focus should be whether an organization’s strategic goals may directly impact the human resource practices and strategy. This strategy is concerned with investigating the processes that align the organization’s strategic orientation with the human resource management’s architecture. This approach does not take into account the nonprofit goals and profit concerns (Beer et al. 1984). Rather than handle the challenges that the organization may face at a given time, the central assumption is that the strategic orientation of the organization has the main influence on human resource management’s architecture. With this approach, more emphasis is laid on the environmental dynamics, internal and external stakeholders and situational factors which affect the organization’s strategic orientation.
The human resource-based approach seeks to examine whether there is proper and adequate use of the organization’s resources (Beer et al. 1984). Because of this, organizations should distinguish between the resources that should be developed and improved and those that should be procured. An organization’s efficiency and effectiveness are enhanced by investments into rare and valuable resources. This is based on the assumption that the possibility of specifying core competencies is increased whenever there is a continuous investment. This facilitates better outcomes in regards to the needs of the client. It also ensures the organization can achieve a competitive advantage within the industry.
Most nonprofit organizations have shifted their focus from the challenges that human resource management face because they seem to be insignificant. Instead, importance is attached to orientations that are value-driven. Most nonprofit organizations differ depending on their missions, values, social goals and ideological characteristics. In gaining a competitive advantage, an organization’s values play a significant role. The value-driven strategy has seen more organizations opt against pushing for superior operational efficiency (Stiles et al. 1999).
There are several reasons why nonprofit organizations cannot focus on the challenges they face. Practically, the nonprofit organizations cannot sustain competition against profit-making organizations that are privately owned when it comes to efficiency. This may be because their human and financial resources are limited. To them, sustaining a competitive advantage over other organizations is a demanding idea because of the tension between margin and mission. Nonprofit organizations ought to focus on the way they operate rather than the challenges they face.
Unlike profit-making organizations, non-profit organizations view stakeholders as playing a critical role in their attempt to interpret decision making in the management process. In most cases, nonprofit organizations are perceived to be fragile coalitions with differences in background, training, diverse interests and their struggle for consensus.
Wage differences in nonprofit organizations also dictate that it would be unrealistic to assess the challenges of human resource management in nonprofit organizations (Beer et al. 1984). Studies dealing with nonprofit organization compensation have laid more emphasis on nonprofit wage differences. According to research, wages in nonprofit organizations are less than the wages in profit-making organizations. There is a big debate over the origin of this differential wage structure. However, several explanations have been put forward for these differences. For instance, there is an argument that employees in the nonprofit sectors accept cut-wages because of the good services produced. Another explanation is based on the differing characteristics of workers, nonprofit organizations and jobs. Assessing the challenges of human resource architecture in non-profit organizations would, therefore, seem insignificant.
References
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Deci, E. L 1995.Why we do what we do: The dynamics of personal autonomy, New York, G. P. Putnam’s Sons.
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Wittmer, D 1991, Serving the people or serving for pay: Reward preferences among government, hybrid sector, and business managers, Public Productivity and Management Review, vol 14, no.4, pp.369-383.
