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Human Resource Management (HRM) as a Source of Sustainable Competitive Advantage in Modern Organizations – Prof. Shijimol E A

29th January 2026

Course Relevance

·  BBA / B.Com (HRM, OB, Strategic HRM modules)

·  MBA/PGDM (Strategic HRM,OB, Talent Management)

Academic Concepts and Theories

a) Strategic Human Resource Management (SHRM)

  • HRM as a strategic partner rather than a support function
  • Alignment of HR practices with business goals
  • HR systems as firm-specific capabilities

b) Resource-Based View (RBV)

  • Human resources as valuable, rare, inimitable, and non-substitutable (VRIN) assets
  • Social complexity and path dependency of HR systems
  • HR architecture as a source of sustained competitive advantage

c) Ability–Motivation–Opportunity (AMO) Framework

  • Role of HR practices in enhancing employee abilities, motivation, and participation
  • Bundling of HR practices for superior performance outcomes
  • Mediation between HR practices and organizational performance

d) Social Exchange Theory & Human Capital Theory

  • Reciprocal relationships between employees and organizations
  • Trust, commitment, and psychological contracts
  • Investment in firm-specific skills and reduced turnover

e) High-Performance Work Systems (HPWS)

  • Complementarity and internal fit among HR practices
  • Synergistic effects of selection, training, performance management, and engagement
  • Configurational approach to HRM

f) Organizational Culture as a Strategic Asset

  • Culture influencing employee behaviour, service quality, and innovation
  • Leadership commitment in sustaining culture
  • Culture as a difficult-to-imitate organizational capability

g) Sustainability and Green HRM

  • Integration of environmental sustainability into HR practices
  • Green recruitment, training, and reward systems
  • Employer branding and organizational legitimacy

3. Teaching Notes (Instructor Use)

a) Teaching Objectives

After discussing this paper, students should be able to:

  • Explain how HRM contributes to sustainable competitive advantage
  • Apply RBV and AMO models to real organizational contexts
  • Analyze HR practices as interconnected systems rather than isolated tools
  • Critically evaluate the sustainability of HR-based advantages

b) Suggested Teaching Approach

  • Lecture + Caselet Discussion: Introduce theories followed by organizational examples (Toyota, Google, Southwest, Unilever)
  • Concept Mapping: Ask students to link HR practices with AMO elements
  • Group Activity: Students design an HR system for a hypothetical firm using RBV principles
  • Debate: “Can HR-based competitive advantage be sustained in the gig and AI-driven economy?”

c) Discussion Triggers

  • Why are HR practices harder to imitate than technology or products?
  • Can culture really be managed, or does it evolve organically?
  • Are Green HRM practices strategic or symbolic?
  • How does data analytics change the role of HR managers?

d) Assessment Ideas

  • Short answer questions on RBV, AMO, HPWS
  • Case-based essay questions using real organizations
  • Reflective assignment: “HR as a cost centre vs strategic asset”
  • Application-based questions aligned with Bloom’s higher-order levels

e) Practical Takeaways for Students

  • HR decisions have long-term strategic consequences
  • Competitive advantage increasingly depends on people and systems, not assets alone
  • Sustainable HRM requires continuous investment, alignment, and leadership commitment

Blog

It is evident in every organizational situation that machines, capital and products can be copied but the way people are recruited, developed, motivated and organized are much difficult to imitate. When HRM is strategically aligned with business goals and objectives, embedded in organizational routines, it becomes a sustainable source of competitive advantage. This caselet explains why HRM holds strategic value, how this advantage is created in practice, and what managers and HR professionals can learn from organizations that have successfully leveraged people management as a competitive asset

Theoretical foundations of strategic HRM

The major theories that establish the foundations for why HRM can generate a competitive advantage for organizations are:

  1. Resource-Based View(RBV)

It argues that firms achieve long-term competitive advantage when they possess resources that are valuable, rare, difficult to imitate and non-substitutable (Barney, 1991). Organization-specific HR systems and their human resources meet these conditions because they have evolved, are moulded by social relationships and aligned superior organizational contexts. Besides, skilled and committed employees who supported by well integrated HR practices cannot be easily copied by competitors (Boxall &Purcell, 2016).

  • Ability Motivation Opportunity Model(AMO)

The AMO framework deals with how HR practices translate into employee performance. According to this model, employees perform well when they have the necessary abilities (organizational effort through Training), Motivation (supported by rewards, recognition and engagement) and opportunities to contribute (enabled through Job design, inclusion and empowerment) (Jiang et al, 2012). Therefore, a bundle of practices across AMO produces superior performance by human resources in the system, in turn leads to improvement in organizational outcomes.

  • Social Exchange and Human Capital theories

As envisaged by theSocial Exchange and Human Capital theories, employees feel more valued and respected as a consequence when organizations build strong relationships with them. That is evident by showing trust and support, and being an integral part of the organizational culture.  In return, they are more willing to work harder, share new ideas, and stay with the organization for a longer time (Cropanzano & Mitchell, 2005). Similarly, when companies invest in skills that are specific to the organization, employees feel a sense of belonging and loyalty, which in turn leads to improved performance and reduced employee turnover over time (Wright &McMahan, 1992).

Mechanisms for how HRM becomes an advantage

  1. Unique capability building

Systematic planning and investments in capacity building of employees, providing encouraging career paths, and knowledge management frameworks create capabilities that competitors find difficult to copy. Toyota company’s emphasise on continuous improvement (kaizen), multi-skill development programmes and long-term employee development supports this approach. These people-oriented practices develop extremely high quality and operational reliability, forming the competitive advantage for them (Liker, J. K. 2004).


2. HR Evidence, Managerial Change and Performance Outcomes

When HR functions in the organizations, utilises data and analytics to guide managerial development, firms can mitigate issues in managerial quality and hence the improvement in organizational outcomes. Google’s Project Oxygen proves this approach; the way people analytics were used to ascertain operative managerial behaviours. They redefined the training and feedback systems, which in turn enhanced managerial capability, a higher rate of employee retention and quantifiable performance by the employees(Garvin etal, 2013).

3. Organizational Culture as a Strategic Asset

While an employee is becoming a part of the organization, the culture significantly influences their behaviour. It impacts the employee effort, customer service quality, and innovation. Southwest Airlines introduced a “people-first” culture to promote employee loyalty and high levels of customer satisfaction, making culture central to its competitive positioning. (Pfeffer, 1998). However, cultural advantages are not an easy one, which requires continuous reinforcement and leadership commitment. Lately, the strategic change initiated at Southwest proves that culture requires continuous leadership commitment and security, especially during the Organizational Developmental Intervention. 

4. Sustainability and Green Human Resource Management

Green HRM is the mantra of progressive organizations. They achieve it by integrating sustainability into HR practices such as Green Recruitment, sustainability-linked rewards, and Green training, which bring into line with sustainability efforts of the organization. These practices boost employer branding and enrich the organizational legitimacy among all stakeholders (Renwick et al, 2013). Companies such as Unilever and Patagonia practice upkeep the organizational competence by linking HR processes with environmental sustainability.

5. High-Performance Work Systems (HPWS)

Recent research studies are consistently evidencing that alignment across the HR practices overtake the secluded interventions because of the complementarities among the practices (Appelbaum et al, 2000). Combined mutually exclusive systems involving selection, training, performance Management and employee engagement create strengthening effects that increase the organizational outcome. This initiates the firm-specific capabilities that are not replicable by the competitors. The AMO model emphasises why such HR systems are evident in improving organizational performance (Delery & Doty, 1996)

Managerial Implications: Developing a Lasting HR-Based Advantage

To build a sustainable HR based advantage, organizations may follow the suggestions given below:

  1. Design integrated HR systems where different practices are mutually exclusive than the isolated practices.
  2. Investments in HR should be focusing on firm-specific requirements with the hel of experiential learning and Knowledge Management practices.
  3. Proper use of data analytics to identify and formulate effective Managerial behaviours.
  4. Align organizational sustainability objectives with the HR practices

 Conclusion

Human resource management facilitates the sustainable competitive advantage as Human Resources are the machinery for achieving organizational objectives. It attains the level when organizations intentionally formulate company specific human resource, implement coherent HR systems and align employee behaviour with strategic objectives. The experiences discussed here explained well about the both the potential of HR-based advantages. When managed thoughtfully and continuously, HRM function will prove not to be a cost centre but as a strategic asset that supports organizational sustainability.

Questions for reflection

  1. 1. Explain how the Resource-Based View (RBV) justifies HRM as a source of sustainable competitive advantage.
  2. 2. Describe the AMO model and discuss how HR practices influence employee performance.
  3. 3. Using one real organization, explain how HRM contributes to long-term competitive advantage.
  4. 4. Critically analyze whether HRM-based competitive advantage can be sustained in a highly competitive environment.

References

  • Appelbaum, E., Bailey, T., Berg, P., & Kalleberg, A. L. (2000). Manufacturing advantage: Why high-performance work systems pay off. Cornell University Press.
  • Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
  • Boxall, P., & Purcell, J. (2016). Strategy and human resource management (4th ed.). Palgrave Macmillan.
  • Cropanzano, R., & Mitchell, M. S. (2005). Social exchange theory: An interdisciplinary review. Journal of Management, 31(6), 874–900. https://doi.org/10.1177/0149206305279602
  • Delery, J. E., & Doty, D. H. (1996). Modes of theorizing in strategic human resource management: Tests of universalistic, contingency, and configurational performance predictions. Academy of Management Journal, 39(4), 802–835. https://doi.org/10.2307/256713
  • Garvin, D. A., Wagonfeld, A. B., & Kind, L. (2013). Google’s Project Oxygen: Do managers matter? Harvard Business School Case, 9-313-110.
  • Jiang, K., Lepak, D. P., Hu, J., & Baer, J. C. (2012). How does human resource management influence organizational outcomes? A meta‐analytic investigation of mediating mechanisms. Academy of Management Journal, 55(6), 1264–1294. https://doi.org/10.5465/amj.2011.0088
  • Liker, J. K. (2004). The Toyota way: 14 management principles from the world’s greatest manufacturer. McGraw-Hill.
  • Pfeffer, J. (1998). The human equation: Building profits by putting people first. Harvard Business School Press.
  • Renwick, D. W. S., Redman, T., & Maguire, S. (2013). Green human resource management: A review and research agenda. International Journal of Management Reviews, 15(1), 1–14. https://doi.org/10.1111/j.1468-2370.2011.00328.x
  • Ulrich, D., Brockbank, W., Johnson, D., Sandholtz, K., & Younger, J. (2008). HR competencies: Mastery at the intersection of people and business. Society for Human Resource Management.
  • Wright, P. M., & McMahan, G. C. (1992). Theoretical perspectives for strategic human resource management. Journal of Management, 18(2), 295–320. https://doi.org/10.1177/014920639201800205