HR, most critical factor in achieving competitive advantage

Shifani REFFAI

Human Resource is a factor that has become part of the very essence of modern business and development, among other important factors. It is the combination of traditionally administrative personnel functions with the acquisition and application of skills, knowledge and experience; the base of this great asset is quite naturally, people.

Among a myriad of organisations constantly competing with each other in matters of assets and resulting profit and growth, is it fair to say that Human Resources is the most crucial factor in the competition?

If competitive advantage is to be defined as something that sets a business and its product apart from the rest, it can be argued that technology and marketing, rather than Human Resources per say, are highly important factors that would determine the uniqueness of the quality of an organisation's product. However, technology and marketing, though initially of quality that is decided by a company's financial status, can in fact only be innovated and developed by Human Resources.

Human Resources are thus evidently a largely substantial part of a company's productivity, but the question remains if it is the most critical part. It is no doubt a main contributor, perhaps a segment in the chain of activities and resources required for a company to achieve full competitive advantage. To give credit for a company's progress in totality to Human Resources, may be as bold as claiming that only one organ of the human body contributes the most to its entire progressive function.

However, even in that light, the heart is considered to be the most critical component of bodily functions. The basic resources that determine an organization's growth are of three folds: Human Resources, Capital Resources and Physical Resources. Although one may argue that it is a confluence of all these factors that produces results, one can also point out that all of them were, at some point, initiated by Human Resources, and will once again require Human Resources to develop and evolve according to external changes.

A critical factor is one that implicates it possesses the ability to change the course of ordinary company processes depending on its absence or presence. Despite the fact that a combination of many resources are necessary in order for a system, project or organisation to work, it is an undeniable fact that Human Resources have been, or most often still are, an integral part of almost every one of those resources.

Factors that determine competitive advantage are service, price and quality among others. All of these are defined by the workforce of an organisation, their strategic financial planning, customer care, and decision making in regard to the work, time and content put into producing a good quality product.

Development of the product, as well as of the people of the company and the company's vision as a whole, all strongly depend on factors that greatly affect the results of the company's efforts: administration, skill, knowledge and experience; in other words, Human Resources.

The thought, strategy, planning and decision to make ideas into reality, are what organisations thrive on, and it is what determines the future of a business. Financial fluctuations, which are not determined by people, are possibly the only factor which HR has no considerably control over. This too, especially in a time of recession, can be overcome completely with the right strategy and decisions.

The Essential Drucker, a valuable collection of Essential Writings on Management by Management expert Peter Drucker, words the importance of Human Resources best, "A business enterprise has only one true resource: people. It succeeds by making human resources productive. It accomplishes its goals through work."

Studies have shown that improvements made on individual employee performance automatically enhances the organisation's overall performance.

Therefore, it becomes evident that people development i.e. development of the company's Human Resources, creates a management system that runs on maximum-efficiency.

This will by effect create a qualitative product which is unique among products of other organisations, giving it competitive advantage.

"Objectives are the basis for work and assignment. Objectives are the foundation for designing both the structure of the business and the work of individual units and individual managers," says Drucker. As setting objectives are clearly the framework of a business steady development, it goes to further emphasize the theory that a company's central unit on which it depends, is people, ergo, Human Resources.

Although many factors are involved in the enterprise's productivity and business profitability, it appears that only Human Resources holds power to create turning points and important changes within an organization and its proficiency, and is therefore critical to competitive advantage.