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HRM as a significant factor for achieving competitiveness through people: the Croatian case.

Article Excerpt
Abstract This paper evaluates the quality of human resource management (HRM) in Croatia because excellent human resource (HR) policies, programs and activities enable enterprises to maximize their workforce productivity. The research was conducted in enterprises with more than 200 employees. The value of HRM was assessed using the HR audit approach. Fifty-five HR indicators were analyzed from the top 10 Croatian HR enterprises to serve as benchmarks for the final sample of 80 enterprises. Results indicate Croatian enterprises have deficient HR practices, on average. Independent sample t-tests showed 61.82% of HR indicators were significantly better in the benchmark firms. Consequently, HRM in Croatia can not be considered solid ground for achieving competitiveness through people.

Keywords Human resource management (HRM) HR practices Competitive advantage. Competitiveness through people. HR indicators

JEL M00. M10. M12

Introduction

Traditional sources of competitive advantage, such as production capacities, research laboratories, access to financial resources, distribution channels or economies of scale, are necessary but not sufficient for success in today's business world. It is commonly acknowledged "people are the key assets in the new world market and that all other assets are nothing more than commodities that can be purchased at market prices, because only the human asset has potential to learn, grow, and contribute" (Fitz-enz 1995, p. 45). As "we do live in a world in which knowledge, rather than physical capital, is increasingly important, we need smart people who can do great things--increase productivity, build new products and services--and do so even more quickly" (O'Reilly and Pfeffer 2000, p. 1). Researchers emphasize: the role of employees for achieving enterprise goals (Boudreau 1997; Baird and Meshoulam 1988), employees are the most important enterprise asset (Quinn 1992; Mayo 2001), and human capital represents the only sustainable source of competitive advantage (Hamel and Prahalad 1994; Pfeffer 1994; Spencer 1995; Boudreau 1996). In other words, "the biggest, most valuable asset any company has is its people, because all management plans for success enhancement are carried out, or fail to be carried out, by people" (Darling 1999, p. 317).

Consequently, human resource management (HRM) deals with recruiting, developing, and keeping the best people. It now has the opportunity to move out of the background and into the mainstream organizational strategy and management. In a world where "all work is knowledge work and intellectual capital is crucial for economic success, it is logical that the ability to attract, retain, and use the talents of people provides a competitive edge" (O'Reilly and Pfeffer 2000, p. 257).

The aim of this paper is to evaluate the quality of HRM in Croatia because excellent HR policies, programs and activities enable firms compete through their employees. Hence, in order to reveal whether HRM in Croatia is strong enough to be a solid ground for achieving competitive advantage through people, an empirical study was conducted using sample and measurement tools as the principle research methods. Altogether, the key objectives of this research study were: (1) to provide a literature review of HRM's contribution of the firm's competitive advantage through people and (2) to assess the quality of human resource (HR) practices in Croatia, on the basis that only strong HR systems enable enterprises to achieve a competitive advantage through their employees.

Literature Review

HRM in modern enterprises has two main purposes: (1) to foster the performance of an enterprise and (2) to act as a support for achieving a worker competitive advantage (Poloski Vokic 2004, p. 457), as Fig. 1 exhibits.

[FIGURE 1 OMITTED]

The majority of HR scholars provide evidence sound HR systems contribute to productivity improvement and enterprises using approved and/or innovative HR practices financially outperform those enterprises not using them. They explore the foremost benefit of high-quality HRM (organizational performance) but seldom take a second step of investigating its relationship with organizational competitive advantage, as resourced based investigations do. Resource-based researchers are striving to provide evidence that the development of an effective HR system can play a major role in the creation of a workforce competitive advantage. (1) The results of their investigations of the relationship between an enterprise's HR practice and its competitive advantage through people are summarized in Table 1.

Table 1 Academic findings on relationship between HRM and labor competitive advantages Authors Findings Snell and Dean (1992) HR practices enhance the firm's competitive position by creating superior human capital (skills, experience and knowledge) that contribute to firm's economic value Swiercz and Spencer (1992) HRM could be a valuable asset and tool of corporate strategy Wright et al. (1994) The correct mix of HR practices is necessary for maximum effectiveness of the HR capital pool Pfeffer (1995) There are interrelated practices that Characterize companies who are effective in achieving competitive success through people management Boxall (1996) By hiring and developing talented staff and synergizing their contribution within the firm's resource bundle, HRM may lay the basis for a sustained competitive advantage Boxall and Purcell (2000) HR practices may build the human capital poor and stimulate human behavior to create an advantage O'Reilly and Pfeffer (2000) Companies need cultures and systems where great people can actually use their results from almost everybody Bontis and Fitz-enz For senior managers to manage the dynamic (2002) changes of turbulent economic environments and filter the massive sources of information into knowledge (or, better yet, wisdom), an integrated perspective of human capital management plays a considerable role Chen et al. (2003) HR activities are frequently acknowledged to play a central role in linking employee capabilities with the performance requirements of a firm Laursen and Foss (2003) Strategy scholars have argued human resources are particularly likely to be sources of competitive...