HRM Best Practices for Building Competitive Advantage

Introduction and Historical Background

Every modern organization has a human resources department to manage its employees, ranging in scale from a single person to hundreds of HR staff. Human resources can be considered a support or administrative function in some organizations, while in others it is regarded as the backbone that drives innovation, builds a learning culture, and creates a competitive advantage within the industry. The problem in many modern organizations is that they do not utilize human resources in a way that is consistent with the modern business cycle. An organization is only as good as its people and the organization of those people. Therefore, human resources is in many ways what drives business, and implementing best practices is no longer optional for companies that wish to remain competitive. This analysis focuses on ways that organizations can advance their human resource practices to propel themselves into perpetual growth.

The role of human resources in an organization has changed and evolved dramatically since its inception. The field can trace its roots to the introduction of scientific management and the development of specialization during the Industrial Revolution. It was during this period that organizations began to learn how to cooperate in order to function as teams. Today's human resources management has developed to previously unimaginable heights, transforming from simply hiring employees and administering records to leading an organization's culture and creating competitive advantage. Advanced human resources now plays a comprehensive role across all business functions.

The era of the Industrial Revolution first introduced the modern age. The specialization of labor allowed people to work together as teams to complete tasks requiring cooperation, such as assembly line work. This also led to technological breakthroughs enabling new systems of mechanization in agriculture and the introduction of textile manufacturing. Owners of capital employed laborers to trade their time and effort for money, ushering in the modern monetary system and a power struggle between laborers and owners of capital. Working conditions were harsh; factory workers labored 12 or more hours a day, seven days a week, and were not entitled to vacation, sick leave, or unemployment compensation. In 1882, an average of 675 laborers were killed in work-related accidents each week (McDougal, 2000). Between 1890 and 1910, the number of women working doubled from 4 million to more than 8 million, and roughly 20% of boys and 10% of girls under 15 held full-time jobs. It was later discovered that the scientific method could be applied to management and leadership to increase productivity, helping to improve working conditions by working smarter rather than harder.

Frederick Taylor is generally credited as the first pioneer in management to apply a scientific perspective. His followers expanded on his ideas in a variety of ways: Henri Fayol added the theory of administrative management, and Max Weber contributed the concept of bureaucracy. Each successive generation of organizational thinkers improved upon the foundation of the division of labor, which allowed individuals to specialize in specific tasks and greatly improved the efficiency of production. The theories of scientific management, administrative management, and bureaucracy were all developed to help organizations cooperate internally toward shared goals.

One of the most influential management thinkers of the twentieth century was Dr. W. Edwards Deming. Deming's 14 points of management were first introduced in Japan in the 1950s after the Second World War, helping the country improve quality control as it rebuilt its industrial base (Deming, 2011). Deming's approach continuously sought more efficient and effective ways to coordinate teams toward organizational goals. He was one of the first to take a multidisciplinary approach to organizational dynamics, drawing from engineering, physics, and statistics. By viewing production as a dynamic process rather than a static one, his framework allowed leaders to take a more holistic approach to managing in an evolving business environment. His theories were applied across manufacturing, telecommunications, railways, freight, consumer research, hospitals, legal firms, government agencies, and university research organizations (Bennet & Slavin, 2009).

Organizational Leadership Models

Researchers have developed several different leadership models to understand the various nuances of leadership. One interesting debate is whether leadership can be taught or whether it is more of a natural ability. It is generally understood that leadership abilities can be improved upon regardless of natural talent. Leadership can therefore be considered some combination of natural ability, acquired knowledge, and experience — much like athletic training, where hard work and practice improve performance but not everyone reaches the professional level.

Leadership does not have to reside in a single individual. Some research focuses on high-performance work practices that involve employee involvement in organizational leadership (EIOL). This approach is built on theories of organizational participation, shared leadership, and organizational democracy (Wegge et al., 2010). The model includes mediator variables such as knowledge exchange and moderator variables such as self-leadership competencies, explaining why and when this approach is effective. Such perspectives suggest that when employees become involved in decision-making processes, overall leadership capacity is strengthened.

Transactional leadership represents what most people view as conventional management. It is defined by an exchange relationship between managers and employees, both motivated by self-interest and by meeting the expectations associated with their job descriptions. Transactional leadership consists of monitoring, controlling, and motivating employees through economic incentives and other exchange-based rewards (Bass, 1985). Motivation in this model typically stems from financial exchanges such as salaries, performance bonuses, and benefits.

One form of transactional leadership is management by exception, which involves monitoring performance at regular intervals and taking corrective action when needed. This model can be applied actively — where the manager proactively seeks barriers to efficiency — or passively, where the manager waits for problems to arise before making decisions. This approach is well-suited to many scenarios, including those in which a manager oversees a large number of employees.

An even more hands-off approach is represented by the laissez-faire leadership model, also considered a form of transactional leadership. A laissez-faire leader actively avoids intervening in the organization, avoids decisions, delays actions, and ignores responsibilities (Bass, 1998). Such managers generally do not use their positional authority to pursue organizational goals and purposely distance themselves from the workforce. Although this type of manager lacks the drive to achieve organizational goals, they can be more common in organizations than HR departments would like to believe, often having been promoted on the basis of seniority rather than performance.

Transformational leadership is one of the most popular and effective leadership models across the various theories of leadership (Judge & Bono, 2000). Transformational leaders motivate their subordinates to reach their full potential by setting challenging expectations that often lead to higher performance (Bass, 1999). They also perform well in dynamic environments, adapting to change and playing a key role in organizational change management.

The transformational leadership model was first presented by Burns, who compared it to the transactional leader or manager role (Judge & Bono, 2000). Judge and Bono (2000) define a transformational leader as one who can appeal to the moral values of employees, motivating them to contribute to organizational goals beyond any contractual obligation. Employees who are inspired in an organization will perform better and devote more attention to what they can offer their organization.

Bass (1985) later defined transformational leadership as a leader's ability to push followers beyond their immediate self-interests, arguing that such a leader could help employees develop a higher level of maturity in their ideals, their concern for achievement, self-actualization, and the well-being of others, organizations, and society generally. This type of motivation does not depend on a material rewards system.

Bass (1985) identified four main components of transformational leadership. Idealized influence refers to a leader's ability to project and maintain the image of an ideal leader, demonstrating dedication, purpose, and perseverance. Inspirational motivation represents a leader's ability to share a vision for the future with enthusiasm, optimism, and commitment to goals. Intellectual stimulation deals with how effectively the leader can appeal to an employee's rational thinking. Finally, individualized consideration refers to how much the leader gives personal, one-on-one attention to each employee. The transformational leadership model is one of the most powerful tools in HRM and should be used to drive organizational change that creates competitive advantage.

Servant leadership is a relatively new model in leadership studies, but it has gained traction and shares overlapping attributes with many other models. What distinguishes it is that it reverses the traditional focus from the leader to the employee: the leader plays a support role, serving the needs of employees, which in turn produces high organizational performance. Through this servitude, the leader assumes a more humble role. Humility has been identified as an important leadership attribute across multiple models. This model is also growing in popularity due to increased demands for ethical behavior in organizational settings (Reed, Vidaver-Cohen, & Colwell, 2011), and it resonates as a faith-based leadership perspective for those with religious or spiritual orientations.

A servant leader continuously scans the organization and employees' needs, looking for ways to support and empower them in their roles. This represents a radical break from many traditional notions of leadership (Vinod & Sudhakar, 2011). Such leaders actively prevent their ego from using positional power for anything other than a supportive purpose. The model predicts that the ideal servant leader will have high self-esteem and not be motivated solely by the pursuit of power and status. Empathy is a core characteristic: the servant leader must be able to place themselves in others' positions and perceive the individualistic challenges their employees face. This model also shows likely overlap with the individualized consideration component of transformational leadership.

Several leadership models have emerged from outside the traditional academic literature. Collins (2001) offers fresh perspectives through research on highly successful organizations tracked over time. In Good to Great, Collins argues that "good" is the enemy of "great" and that the path to greatness is non-linear rather than incremental. Starting by examining over 1,400 Fortune 500 companies, he identified only eleven that achieved greatness for a prolonged period — defined as sustaining stock returns averaging three times greater than the market average for fifteen years following a major transition period (Collins, 2005).

What Collins found was that these organizations shared commonalities not rooted in industry, talent, or ambition, but in how their leaders behaved. The two most important behavioral traits were humility and determination. These leaders were modest yet maintained a high level of perseverance and an unwavering drive to succeed. It is significant that these qualities also overlap with transformational and servant leadership models. The HRM literature on leadership thus converges on several common traits that can be identified and cultivated to create a competitive advantage. It behooves HRM professionals to understand these traits and identify different types of potential leaders for their organizations.

Leadership Development and Executive Coaching

Identifying potential leaders is just the first step in what human resources can do to ensure that effective leadership guides an organization toward its goals. Leadership development is an equally important dimension. Although some component of leadership likely stems from natural ability, leadership skills can also be improved through training, mentoring, coaching, and other activities within the HRM domain. Human resources can thus serve a supportive role in leadership by providing the tools and attention needed for leaders to maximize their performance.

Executive coaching is a relatively new phenomenon that has grown exponentially over the past generation. As human resources has expanded its organizational role, executive coaching has become more salient as a mechanism for professional and career development. Various models have emerged in the literature to guide these activities, including behavioral and skills-based models. However, some have criticized the field for lacking sufficient empirical research. The value of executive coaching — based on its impact on organizational outcomes and on how it can be developed through training programs — has therefore been a somewhat contested issue (Oana, 2013).

The cognitive behavioral coaching model has been defined as an integrative approach that combines cognitive, behavioral, imaginal, and problem-solving techniques within a cognitive behavioral framework to enable coachees to achieve their realistic goals. It can improve performance, increase psychological resilience, enhance well-being, prevent stress, and help overcome blocks to change. It uses problem-solving, solution-seeking, and cognitive behavioral methodology to help clients overcome practical problems and address emotional, psychological, and behavioral blocks to performance and goal achievement (Palmer, 2008).

Executives in modern organizations face more responsibility in a more dynamic environment than ever before, which can lead to significant stress, fatigue, and even burnout among well-qualified leaders. Executive coaches or coaching psychologists may therefore work with executive leaders to minimize stress levels and streamline decision-making processes. Relevant issues in coaching sessions include decision-making, procrastination, stress, and feeling overworked; executives may avoid important decisions, fail to delegate, or continue with tasks that make them feel confident but that are no longer within their remit (Ellam-Dyson & Palmer, 2010).

One model, the Cognitive Behavioural Coaching (CBC) perspective, uses empathy as a key relationship component, identifying how building, establishing, and maintaining an optimal coaching alliance through explicit negotiation and renegotiation epitomizes the collaborative relationship central to the cognitive behavioral framework (O'Broin & Palmer, 2009). A further model — cognitive behavioral team coaching (CBTC) — coaches a team as a whole rather than separate individuals to increase well-being and organizational performance, and may be more cost-effective since the coach's time reaches more members simultaneously (Hultgren, Palmer, & O'Riordan, 2013).

The evidence-based executive coaching movement suggests translating empirical research into practical methods to help leaders develop crisis resiliency and value-directed change management skills (Moran, 2010). Acceptance and Commitment Therapy (ACT), applied to organizational settings as "ACTraining," has demonstrated effectiveness in increasing work performance and innovation while reducing work stress and errors (Moran, 2010). A large-scale study of rural general practitioners in Australia found that those who underwent cognitive behavioral coaching had lower distress scores, reduced intention to leave practice (dropping from 81% to 40%), and higher retention rates over three years compared to a control group (Gardiner, Kearns, & Tiggemann, 2013).

Although there are some conflicts in the research regarding the cost-effectiveness of executive coaching programs, many of the benefits are intangible and difficult to account for financially. Thus, even when these programs do not appear immediately valuable on the surface, they represent one of the key opportunities for HRM to create a competitive advantage through well-supported and effective leadership.

Conclusion

The role of human resources in the modern business environment has changed drastically throughout the generations. The HRM profession has moved from a primarily administrative role to one that can be comprehensive and help an organization build a sustainable competitive advantage. The earlier that HRM is involved in planning, the better. When HRM is included in the organization's design, it can complement every other business function in a unified manner. This research focused primarily on driving success through leadership while also touching on the many factors that support leadership, including employee selection, employee training, and executive coaching.

With the rapid development of technology in the business world, the skill sets needed to support new systems are becoming increasingly dynamic. This has made HR's role in training a critical success factor and a potential source of competitive advantage. The effectiveness of training programs has become the most salient concern among HR professionals and the broader business environment. Some estimates for the costs of employee training exceed one million dollars per employee. With such significant organizational resources devoted to training, subsidiary considerations such as employee retention have also grown in importance. Highly trained and motivated employees form the foundation of a high-performance organizational culture.

One of the highest states of effective HRM is the development of a learning culture. One strategy that can facilitate this is building a culture with motivated employees who share a predisposition toward continuous learning. Members introduced to a learning culture are more likely to take initiative for their own education and personal development. Although a learning culture can be difficult to establish, the rewards are well worth the effort. The synergies built upon this type of culture can provide the foundation for a competitive advantage in nearly any industry. The modern human resources management strategy must therefore be comprehensive, strategically integrated, and continually evolving with changing conditions.

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