Explain why human resource
management is important to organizational success.
Answer
Various
studies have concluded that an organization’s human resources can be a
significant source of competitive advantage. And that’s true for organizations
around the world, not just U.S. firms.
The Human Capital Index, a comprehensive
study of over 2,000 firms in North America, Europe, and the Asia–Pacific region
conducted by consulting firm Watson Wyatt Worldwide concluded that
people-oriented HR gives an organization an edge by creating superior
shareholder value.
Achieving competitive success through people requires a
fundamental change in how managers think about their employees and how they
view the work relationship. It involves working with and through people and
seeing them as partners, not just as costs to be minimized or avoided. That’s
what people-oriented organizations do.
In addition to being an important part
of organizational strategy and contributing to competitive advantage, an
organization’s HRM practices have been found to have a significant impact on
organizational performance.
For instance, one study reported that significantly
improving an organization’s HRM practices could increase its market value by as
much as 30 percent. Another study that tracked average annual shareholder
returns of the publicly traded companies on Fortune’s list of 100 best
companies to work for found that these companies significantly beat the S&P
500 over 10-year, 5 year, 3-year, and 1-year periods. High-performance work
practices lead to both high individual and high organizational performance.
The
common thread in these practices seems to be a commitment to improving the
knowledge, skills, and abilities of an organization’s employees, increasing
their motivation, reducing loafing on the job, and enhancing the retention of
quality employees while encouraging low performers to leave.
Even if an
organization chooses not to implement high-performance work practices, there
are certain HRM activities that must be completed in order to ensure that the
organization has qualified people to perform the work that needs to be
done—activities that comprise the human resource management process.
Source: Management,
11e (Robbins/Coulter)
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