Human Assets versus Other Organizational Assets
September 18, 2014
Schuler and MacMillan (1984) stated that gaining and maintaining a competitive advantage is critical to any organization’s growth and prosperity, this involves recognizing and capitalizing on their human assets (p.1). Human assets are one of the most critical parts of a business that helps the company to maintain a competitive advantage in the market (Mello, 2015). Unfortunately, some organizations do not recognize and capitalize on their human assets. So why does senior management fail to realize the value of human assets versus other organizational assets. Human assets are often ignored compared to other assets because of five factors: management values, attitude toward risk, nature of employee skills, availability of outsourcing and utilitarianism. Each of these major factors affects how “investment oriented” a company is compared to other organizational assets (Mello, 2015, p. ...view middle of the document...
d.). Factor number three, the nature of the skills involves the specialized training provided by organizations; these skills may or may not be transferred to other organizations within market. Skills such as technical knowledge, commitment, teamwork, and decision-making are all demanded skills in the marketplace that are pertinent within an organization. It is a risk area but organizations integrate strong retention strategies to prevent their competitors from hiring their employees. “Employees with demanded skills become more valuable and sought after” by organization that have chosen not to train or develop their current employee skills (Mello, 2015, p. 13).
Factor four, availability of outsourcing is associated with the costs and determining whether it will produce long-term sustainability. In other words, the company will invest in strategies in which they will receive a high return on their investment or reach their set target (Mello, 2015). The final factor, utilitarianism involves the company’s mentality toward their “bottom line (Mello, 2015, p. 14).” The bottom line is all the company thinks about so management begins to perform cost-benefit analysis to weigh the benefits against the costs to invest. The information gathered in the analyses help the organization determine if the investment will become profitable. Unfortunately, in this phase the analysis makes it hard to quantify the HR programs and policies when deciding to invest in human assets. The biggest dilemma arises when the company decides not to invest in its own employees. Not investing in employees make the company appear unattractive to potential employees resulting in high retention rates and inefficiency and a weak competitive advantage.
Mello, J. A. (2015). Strategic human resource management, (4th ed.). Stamford, CT; Cengage Learning
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Schuler, R. S., & MacMillan, I. C. (1994). Gaining competitive advantage through human resource management practices. Retrieved from Human Resource Management, 23, 241-255. doi: 10.1002/hrm.3930230304