Human Resource Dynamics

Human Resource Dynamics

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Human systems reflect the dynamism of the human beings that serve as their fundamental components. They can be as rigid as the tightly monitored assembly line system producing manufactured goods, or as flexible as the virtual organization whose decentralized nature leaves production performance outside the strict control of management. The challenge for organizations is to create a human resource system that harnesses the dynamism of its human components to best complement the nonhuman subsystems, thereby maximizing the ability of the organization to efficiently achieve its strategic objectives. Across increasingly competitive industries, the efficiencies gained by human systems of the organization are crucial in generating competitive advantage. In order to be successful, business leaders must understand three key concepts related to the human system of their organization. First, that strategic human resource management can result in a sustainable competitive advantage. Second, that the design of organizational structures will either help or hinder an organization’s ability to achieve its strategic objectives. And finally, leaders must understand that the distribution of power and influence impacts all levels of the workforce and its ability to function in pursuit of common goals.

The resource theory of a firm recognizes that because firms within a strategic group are mostly similar, resource differences are the source of sustainable competitive advantage. Across firms, process improvements, successful marketing approaches, and creative financial tools are often emulated by ones competitors. It is differences generated by successful human systems that are most difficult to imitate, and thus, firms whose strategic management of human resources generate maximum efficiency will find themselves in a position of competitive advantage. As Kurt Lewin aptly described, “There is nothing quite so practical as a good theory”. Throughout history, the resource theory has proven its practicality time and again in its application to human systems. Henry Ford’s assembly line revolutionized the manufacturing industry, greatly increasing the production capacity of the Ford Motor Company’s human resources and creating a long-sustained competitive advantage. More recently, General Electric’s incorporation of the Six Sigma Quality process “into the DNA of GE”, has created competitive advantages through a data-driven, customer-focused organizational philosophy.

The relationships between people in an organization and the way in which work is organized are the crucial elements of organizational design. Ensuring that this design is not only compatible with, but advances, the strategic objectives of the organization must be a priority for business leaders. The changing nature of business has forced a reevaluation of the time-tested structural view of organizational design. Where bureaucratic, departmentalized structures with a clear chain of command once served as sufficient for business organizations, a changing workforce, new technology, and increasingly global competitive pressures have encouraged a shift to the systems view of organizational design, which better recognizes the pace and fluidity of modern business processes. Whether an organization employs a static bureaucratic structure, or a dynamic, systems-based structure such as the Projectized Organization, success will be largely dependent upon whether or not the organizational structure is compatible with the core processes and strategic objectives of the firm.

Because organizations must work in concert to best achieve their strategic objectives, workforce governance models must adequately address the friction of power occurring at every relationship level within the organization. The reversion to territorial power relationships characterized simply as “Us” and “Them”, often creates a self-destructive fault line within an organization, and must be avoided wherever possible. Depending on the makeup of an organization’s workforce, governance structures may be determined by a participatory process or through a collective bargaining arrangement. Organizations whose governance structures are formed without workforce participation risk an alienation that can quickly quell employees’ motivation. Understanding the nature of power in the organization, and designing avenues for employee participation in development of the rules, rights, and obligations of the employment relationship are crucial steps in creating an atmosphere of fairness and respect. While the friction of power will always remain, business leaders must recognize that governance policies based on fairness and respect will allow their organizations to avoid truly costly conflagrations and permit their workforces to work in better concert toward their strategic objectives.

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