Human resources represent the single most important cost in many organizations. How effectively a company uses its human resources can have a dramatic effect on its ability to compete (or survive) in an increasingly competitive environment.
HR policies can affect an organization’s competitive position by controlling costs, improving quality, and creating distinctive capabilities.
■ Controlling costs
A compensation system that uses innovative reward strategies to control labor costs can help the organization grow. Other ways to keep labor costs under control include making better employee selection decisions; training employees to make them more efficient and productive; attaining harmonious labor relations; effectively managing health and safety issues in the workplace; and reducing the time and resources needed to design, produce, and deliver quality products or services.
■ Improving quality
Many companies have implemented total quality management (TQM)initiatives, designed to improve the quality of all the processes that lead to a final product or service. Continuing evidence shows that firms that effectively implement quality programs tend to outperform those that don’t.
■ Creating distinctive capabilities
The third way to gain a competitive advantage is to use people with distinctive capabilities to create unsurpassed competence in a particular area (for example, 3M’s competence in adhesives, Carlson Corporation’s leading presence in the travel business, and Xerox’s dominance of the photocopier market).