What rubric factors would you use to determine whether an organization uses a traditional or
strategic approach to HRM? What decision makers in the organization mostly influence the
evaluative response to the questions raised by the rubric factors?
The Context of Strategic Human Resource Management
Distinctive Human Resources Are Firms
Core Competencies Peter Cappelli and Anne Crocker-Hefter
Find a firm with a reputation for excellence in some function, copy its practices, and your company, too, will excel. Advice such as this, under the rubric of best practices or bench- marking, has flooded the popular business literature. Each article implicitly extends the argument that superior manage- ment practices are readily identifiable and can be transferred across organizations.
The best practices advocates, however, must contend with a discomforting reality: Many firmssome very successfulstubbornly refuse to adopt those practices. Are we to assume, perhaps, that competition drives out firms that do not adopt the most efficient techniquesand that the intrac- table companies will ultimately fail? Hardly the case.
To understand what is happening, we need to look at a counterpoint to the best practices approach. When it comes to explaining how and why certain firms have carved out compet- itive advantages, attention increasingly focuses on unique, differentiating resourcesthe notion of core competencies being perhaps the best known of these resource arguments.
We believe that the notion of a single set of best prac- tices may, indeed, be overstated. As we illustrate below, there are examples in virtually every industry of highly successful firms that have very distinct management practices. We argue that these distinctive human resource practices help to create unique competencies that differentiate products and ser- vices and, in turn, drive competitiveness. Indeed, product dif- ferentiation is one of the essential functions of strategic management, and distinctive human resource practices shape the core competencies that determine how firms compete.
The argument that there should be a fit between human resource practices and business strategies can be traced back to manpower planning and is certainly not new in management circles. What is new here is the argument that people management practices are the driversthe gene- sis of efforts to create distinctive competencies and, in turn, business strategies.
We illustrate this point by examining pairs of successful organizations competing in the same industry. We chose the paired companies by asking analysts, consultants, and other industry experts to help us identify successful organizations in
their industry that appeared to have very different employee management practices. We began our investigation with finan- cial reports and other publicly available information on the organizations, including stories in the business press over the past five years. We also contacted each organization for infor- mation and in most cases visited them. The most revealing sources of information, however, tended to be competitors and former employees. The competitors in particular, typically the other member of an industry pair, had a keen sense for what was truly distinctive in each organization. Former employ- ees also have a clear sense about what actually happens inside organizations, as opposed to what the written practices say.
With the help of industry experts and competitors, we then identified the distinctive competencies and competitive advantages of each organization. There was remarkably little variance across respondents in what they believed these com- petencies to be. In most cases, competencies were clearly associated with particular employee groupscustomer ser- vice, for example, or marketing.
The next step was to describe the employment practices associated with the relevant employee group. In cases where practices have recently changed, we describe the longstanding practices that were in place when the distinctive competen- cies were developed. In our final step, we compared the dis- tinctive competencies for each organization with the employment practices for the relevant employee group to suggest how these competencies were created.
When Employees Are the Product
The link between people management practices and the way organizations compete is most direct in industries where employees, by themselves, create what the organization sells where the product is a service provided directly by employees interacting with customers. Consider the following cases.
Professional sports are obviously big-businesses in their own right, and its easy to see how employee performance mat- ters in this arena. The rules governing each sport standardize
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