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HR: A Strategic Asset

Strategic assets are “the set of difficult to trade and imitate, scarce, appropriable, and specialized resources and capabilities that bestow the firm’s competitive advantage”.

It is easy to understand why organizations talk about people as an asset, but tend to manage them largely as a cost to be minimized. Aside from accounting principles that encourage this perspective, HR costs are easy to observe, while HR value creation is not. Largely because of the traditional perspective on HR, organizations have no way to measure HR’s strategic performance. Nevertheless, we know that intangibles in the aggregate are an increasingly important source of firm value, and that human capital ought to be a part of that asset value.

HR is a strategic asset as it can play a critical role in both strategy implementation and management systems. Namely, the ability to execute strategy well is a source of competitive advantage, and “people” are the lynchpin of effective strategy execution.

We think it simply means that firms do a reasonably good job of choosing the right strategy, to the point where this is no longer a differentiator. What does differentiate firms, however, is their ability to execute strategy effectively.
Organizational assets rise to the level of a strategic asset when they become a source of competitive advantage. Talent, commitment, and flexibility are desirable characteristics in a firm’s human capital, but are not sufficient to make people a strategic asset.

The ability to align both management systems and employee behaviors in way that works to implement the firm’s strategy becomes an “invisible asset” that tends to be idiosyncratic to the individual firm and not easily imitated by competitors.

Comments

  1. UnknownFebruary 24, 2010 at 11:42 AM

    congratulations

    ReplyDelete
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    1. UnknownJuly 13, 2012 at 1:17 PM

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      Business Management

      Delete

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