Managers & economists traditionally have seen HRM as a necessary expense, rather than a source of value to their organization. Economic value is usually associated with capital – equipment, technology & facilities. However, “in the changing corporate environment, more & more organizations are awakening to the importance of human capital & next competitive advantage.
The concept of HRM implies that employees are resources of employers, as a type of resource, human capital means the employees of the organization, described in terms of their training experience, judgment, intelligence, relationships & insights – the employee characteristics that can add economic value to the organization.
HRM is critical to the success of an organization, because human capital has certain qualities that make it valuable. In terms of business strategy, an organization can succeed if it has a sustainable competitive advantage. Therefore, we can conclude that organizations need resources that will give them such an advantage. Human resources have these necessary qualities:-
These qualities imply that human resources have economic potential. An organization realizes this potential through its approach to human capital management that is how it practices human resource management.
Effective management of human resources can form the foundation of a high performance work systems – an organization in which technology, organizational structure, people & processes, all work together to give an organization an advantage in the competitive environment. Maintaining a high performance work system might include development of training programs, recruitment of people with new skill sets, & establishment of rewards for such behaviors as team work, flexibility & learning.
Overview HR functions