International Journal of Human Resource Management

Irrespective of the sector in which organizations are operating, employees are considered to be assets that under certain conditions constitute companies’ competitive advantage (Lado & Wilson 1994). People make direct contributions towards realization of goals of their organizations in all sectors of the economy. Human capital is considered to be the most significant resource in the organization. However, only a few organizations are capable of utilizing capacity of its human capital to the full extent. It is necessary for organizations to focus on people in order to ensure success of its operations. According to evidence in the literature about human resource management, people are regarded as ‘inimitable’ assets of any company (Collins & Smith 2006). Efficient workforce is regarded as a factor that results in the improved performance of the organization by causing employees to be satisfied, innovative, and productive and develop a better reputation for the organization. It is critical for these capabilities to be harnessed and retained (Kuo 2004).

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As a result of economic liberalization and globalization, it has become possible to create a competitive environment. However, improvement in competitiveness has resulted in certain issues regarding their capabilities, including maintainability and sustainability (Bjorkman & Xiucheng 2002). Good human resource practices have ensured that recruitment is focused on skilled performers and employment of capable employees in highly competitive business conditions. There has been recognition of the need to enhance the capability of workers to improve skills and abilities within their position and specialization. Assistance would result in ensuing employment of strong workforce as well as improved performance on the basis of profitability and productivity (Becker & Huselid 1998). A lot of companies have realized that in the current competitive business conditions, hiring of highly competitive employees results in corresponding improved output of the organization.


Human capital is referred as resources that provide organization with a competitive advantage and can positively affect on the capital endowment of a firm as well as relationship with employers (Lam & White 1998). Initially, it was believed that the practice of human resource management is only dedicated to recruitment and layoffs of employees.  However, this has been changed to include practices and activities of managing employees and ensuring that resources are targeted towards accomplishment of intended purposes of the organization (Green, Wu, Whitten & Medlin 2006).

The study of human resource management has also gone beyond the definition and includes analysis of the resources’ utilization by employees in the organization. A lot of attention in the human resource management was initially focused on behaviours of employees as a method of measuring strategy of the organization’s performance (Chiu, Luk & Tang 2002). A number of studies have been conducted, findings of which provide open system models of human resource systems that explicitly demonstrate the interrelationships between KSA and behaviours of employees.

This paper shows that despite the use of employee behaviours as the most direct ways of implementing HR strategies, there are certain competencies that are necessary in their behaviours. A lot of studies on the strategic human resource management put strong emphasis on the behaviours of employees and neglect importance of employees’ competencies (Harel & Tzafrir 1996). This has been explained by the fact that certain goals are required to be achieved by employees without considering particular technical competencies, skills and abilities that are required during performance of certain tasks.

Considering human capital in terms of resources of the organization, this paper is mainly focused on sustaining of human resources in the organization and managers’ approaches to control over it. This paper discusses human resources in the context of sustained competitive capability, particularly in the description of current resources, their scarcity and how managers deals with this problem in order to achieve goals of the organization. This paper also includes description of methods that ensure good relationship between employees and managers to make employees willing to continue work in the organization.

1.2.Problem Statement

There is evidence that most organizations ignore certain human resource functions that are considered to be significant in achieving the goals of the organization (Singh 2003). It has been observed that most HR departments in organizations do not pay attention to certain human resource practices which can be beneficial to all its members if implemented. Some of the actions that have been ignored by HR managers include provision of employees with surprise news regarding an event in the organization, recognition of achievements of employees and gaining competitive advantage over their competitors (Chang & Chen 2002).

Inefficient relationship between the management and employees also results in the recruitment of less competent employees to perform certain tasks in the organization. Most HR managers also neglect training as one of the factors that need to be considered in order to improve employees’ competencies. They do not provide opportunities for sharing of knowledge within the organization. In addition, recruitment process has been based on willingness of employees’ to work rather than consideration of specific skills and competences (Katou & Budhwar 2006). This paper provides the major human resource management functions which are important in ensuring effective management of employees. These include recruitment based on competence, provision of training and effective communication between the work force and employees. Moreover, this paper also provides a correlation between these HR functions and perceived performance of the organization.


The main focus of this study is to identify the relationship between human resource practices and their effects that can contribute to the competitive advantage of the organization. The literature review section of this paper provides a review of current organizational management practices and their effects on the performance of organization. It identifies major areas of human resource practices in most organizations in various parts of the world. Another objective is to determine whether these human resource practices contribute to any competitive advantage for the organization over its competitors. Finally, remaining objectives of this study are the following:

I. To determine the types of human resource management practices that are considered to be crucial in bringing out the best employees through recruitments, training and employees’ motivation.

II. It also focuses on the study of relationship between HRM activities and perceived output of employees, such as probability to perform better, possibility to communicate with fellow employees.

III. This paper also provides analysis of the relationship between different values of human resource practices and perceived satisfaction at work as well as the correlation between the organizations.


In order to achieve objectives of this research, a number of hypotheses were formulated. These hypotheses are significant to ensure the study is focused on achieving its purpose and objectives. Some of the hypotheses that were formulated are the following:

  1. There is direct relationship between organizational performance and HRM practices, such as appraisal, career management, training, provision of rewards, and recruitment
  2. HRM practices such as performance appraisal; career management, training and provision of rewards are positively related to employees’ motivation and improved performance of the organization.
  3. The level of HRM practices, such as appraisal of performance, career management, and training are positively related to administrative innovation in terms of employees’ performance.


Human resource practices are considered to be a set of activities, functions and processes that are aimed at attracting, developing and maintaining human resources of the organization (Dyer & Reeves 1995).

Presently, it has been observed that human resource management is a significant factor in sustaining competitive advantage of any organization. Most organizations develop competitive advantage by ensuring that scarce resources are managed effectively. Effective human resource management enables organizations to use their resources at the most optimum, effective and consistent level (Boselie, Dietz & Boon 2005). It takes time for the organization to nurture and maintain human capital in the form of knowledge, capabilities, willingness to work, attitude, relationship with colleagues at work and gaining a competitive advantage over competitors.

Human capital is regarded a vital resource for sustained performance of any organization (Huselid 1995). In the education environment, human capital is considered to be a tool of making strategic decisions that ensure organizational profitability and sustainability. This observation has motivated the consideration of a new role of human resource management as a method of making strategic decisions and implementing them in organizations (Jackson & Schuler 2000). Organizations are focused on creating proactive HRM practices and procedures that result in capitalization of their capabilities for competitive advantage in business environment (Myloni, Harzing & Mirza 2004).

Examination of HR practices in the top companies resulted in the observation that recruitment and selection of the right employees’ is positively related with the improved employees’ productivity that in turn enhances organizational performance and reduction of employees’ turnover (Pfeffer 1998). This has led to the conclusion that HRM practices include recruitment and selection, effective training and development, rewarding of productive employees’ and management of performance. The financial estimates associated with better HR practices include higher profits, improved sales and wider market coverage of the organization (Backer & Gerhart 1996). Non-financial measures of good HR practices include increased production, higher quality of output, higher efficiency of production and better attitudes, such as commitment, low possibility to quit and demonstration of satisfaction.

As a result of the current competition in global business environments, a number of challenges have been created for organizations as well as people (Wernerfelt 1984). In order for organizations to remain their competitiveness, it is critical for them to recruit and retain the most talented work force in various fields.

Changing conditions in the operations of business have resulted in the need to adopt the right HRM practice to gain competitive advantage by organizations (Barney 1991). There have been extensive studies about the impact of HRM practices on performance of businesses in the recent years. As a result, the effects of human resource management are regarded as proactive and strategic in creating more dynamic working conditions in any organization (Brunsson et al 2000).

There has been association between HRM practices and employees’ turnover, level of production and financial management. High performance activities have been associated with positive effects on the firm’s performance (Bi, Sun, Zheng & Li B-Z 2006). Specifically, HRM practices, such as selection and training are regarded as contributing factors towards high performance and profitability in organizations. Other HRM practices that are considered to have a positive impact on the performance of the organization include staffing, training and promotion, employee participation, incentives, safety and healthy working environments for employees (Baron & Kenny 1986). A case study of Taiwanese high technology organizations showed that HRM activities of planning the work force, training the workers, providing benefits to hardworking employees and encouraging teamwork resulted in the appraisal of productivity (Barney 1991). Another study found that strategic implementation of HRM practices resulted in significant effects on the performance of organizations in India (Barney 1986).  Similar results were obtained for Korea and China.

Studies indicate that HRM practices targeting acquisition and development of employees are considered as essential practice that results in the development of human assets. Other factors that are significant in influencing performance of the organization include selective staffing, provision of compensation, motivation and positive influence (Akgun, Keskin, Byrne & Aren 2007).

A lot of efforts are made by HRM practitioners to meet the current challenges of values of workers that have contributed to the need of ensuring that they are tackled by making investments into innovative use of human resource management practices and human capital to attract and retain talents for sustainability of the organization (Agarwala 2003).

A number of firms are aiming to adopt novel management practices, including problem solving staffs, workers who are employed to assist in enhanced communication, providing security at work, allowing employees to work at flexible hours and providing training in multiple jobs (Johnson 2000).

Another HRM practice that is considered to be significant in any organization is performance-based compensation (Porter 1985). This practice ensures that employees are rewarded and compensated based on their level of performance. Employees who have this information in mind tend to work hard so that they are adequately rewarded or compensated by the company. Performance-based compensation results in a positive impact on the overall performance of organization or employee (Lado & Wilson 1994). Introduction of the self-management teams and decentralized activities are also considered as crucial factors that lead to overall higher performance.

Currently, most organizations promote the use of non-physical assets and human resources as a method of getting a competitive advantage over competitors.

The most important assets for any company in obtaining goods and services include financial resources, such as cash and securities; physical assets, such as buildings, plants and equipment and intangible assets (Collins & Smith 2006). The main components of intangible assets of the organization include social capital, human capital, intellectual property, and customer capital. Intangible assets are considered to be equal or even more important compared to physical or financial assets. However, they have been considered as difficult to initiate and duplicate (Kuo 2004). A company derives its values from intangible assets as well as human intangible assets towards accomplishment of its competitive advantage.

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