human resource
WD5787.039-048 2/5/97 11:51 AM Page 39
HR AS A SOURCE OF SHAREHOLDER VALUE:
RESEARCH AND RECOMMENDATIONS
Brian E. Becker, Mark A. Huselid, Peter S. Pickus, and Michael F. Spratt1
Introduction
The role of the Human Resource Management
(HRM) function in many organizations is at a crossroads. On one hand, the HRM function is in crisis, increasingly under fire to justify itself (Schuler, 1990; Stewart, 1996) and confronted with the very real prospect that a significant portion of its traditional responsibilities will be outsourced (Corporate Leadership
Council, 1995). On the other hand, organizations have an unprecedented opportunity to refocus their HRM systems as strategic assets.
Indeed, the same competitive pressures that provide an incentive for firms to outsource costly HRM transactions have dramatically increased the strategic value of a skilled, motivated, adaptable workforce, and the HRM system that supports and develops it .Transforming this crisis into an opportunity, however, requires a new organizational perspective on the HRM system, one that is also a perspective shared by the CEO and the chief HR officer
(CHRO). At its core, this strategic perspective requires that the CHRO be focused on identifying and solving the human capital elements of important business problems (e.g., those problems likely to impede growth, lower profitability, and diminish shareholder value). The tangible evidence of this focus is an internally coherent, externally aligned, and effectively implemented HRM system.
The New Strategic Role for HRM
Pfeffer (1994) describes how changing market conditions have rendered many of the tradi-
tional sources of competitive advantage, such as patents, economies of scale, access to capital, and market regulation, less important in the current economic environment than they have been in the recent past. This is not to argue that such assets are not valuable, but rather in a global economy that demands
HR AS A SOURCE OF SHAREHOLDER VALUE:
RESEARCH AND RECOMMENDATIONS
Brian E. Becker, Mark A. Huselid, Peter S. Pickus, and Michael F. Spratt1
Introduction
The role of the Human Resource Management
(HRM) function in many organizations is at a crossroads. On one hand, the HRM function is in crisis, increasingly under fire to justify itself (Schuler, 1990; Stewart, 1996) and confronted with the very real prospect that a significant portion of its traditional responsibilities will be outsourced (Corporate Leadership
Council, 1995). On the other hand, organizations have an unprecedented opportunity to refocus their HRM systems as strategic assets.
Indeed, the same competitive pressures that provide an incentive for firms to outsource costly HRM transactions have dramatically increased the strategic value of a skilled, motivated, adaptable workforce, and the HRM system that supports and develops it .Transforming this crisis into an opportunity, however, requires a new organizational perspective on the HRM system, one that is also a perspective shared by the CEO and the chief HR officer
(CHRO). At its core, this strategic perspective requires that the CHRO be focused on identifying and solving the human capital elements of important business problems (e.g., those problems likely to impede growth, lower profitability, and diminish shareholder value). The tangible evidence of this focus is an internally coherent, externally aligned, and effectively implemented HRM system.
The New Strategic Role for HRM
Pfeffer (1994) describes how changing market conditions have rendered many of the tradi-
tional sources of competitive advantage, such as patents, economies of scale, access to capital, and market regulation, less important in the current economic environment than they have been in the recent past. This is not to argue that such assets are not valuable, but rather in a global economy that demands
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