Investing in People for Competitive Advantage

Despite the substantial support for the importance of the human factor in achieving sustainable performance, human resources continue to primarily be given lip service, partly owing to the commonly perceived difficulties of quantifying their impact on bottom-line performance and competitive advantage. This article uses well-established business criteria to compare the contribution of human resources to sustainable competitive advantage to that of traditionally recognized resources such as financial, structural, and technological capital. The article presents support for three dimensions of human resources that warrant its inimitablity and sustainability for competitive advantage. Two of these dimensions are human capital (explicit and tacit knowledge) and social capital (networks, norms/ values, and trust). Then, a new dimension of human resources, positive psychological capital, which involves measurable, developable psychological capacities that can be readily enhanced and managed for performance improvement, is introduced. These capacities include self-efficacy/ confidence, hope, optimism, and resiliency. There is growing evidence that human resources are crucial to organizational success, and may offer the best return on investment for sustainable competitive advantage. Jeffery Pfeffer's extensive work, summarized in his book The Human Equation, discusses substantially supported but unfortunate findings that only about half of today's organizations and their managers believe that human resources really do matter. Moreover, only half of those organizations act upon their beliefs beyond paying lip service to this vital resource. Few organizations have adopted high performance work practices, such as 360-degree feedback, pay-for-performance, self-managed teams, employee empowerment, and other human-oriented initiatives. Furthermore, Pfeffer shows that about half of those who " believe " that human resources are their most important asset and " do something about it " actually " stick to " their beliefs and commit to these high performance work practices over time. Pfeffer carefully documents that the resulting " one-eighth " are the world-class that may vary in size and technology, and across industries and countries, but share worldwide superiority in profitability, productivity, innovation, quality, customer satisfaction, and bottom-line profitability. As Carly Fiorina of Hewlett-Packard Co. recently observed: " the most magical and tangible and ultimately the most important ingredient in the transformed landscape is people. " Other well known business leaders such as Intel Corp.'s Andy Grove and Microsoft's 4 Bill Gates further support this claim in their observation that " our most important asset walks out the door every night. " In other words, there finally seems to be the realization that human …