Human resources as a source of sustained competitive advantage*

Human resource researchers and managers have long maintained that the HR function plays an important role in firm performance. In fact, most corporate annual reports boldly state that the firm’s people are its most important asset. Despite these widely held beliefs and all-too-frequent statements, however, many organizational decisions suggest a relatively low priority on both the human resources of the firm and the HR department. For example, when organizations require cost cutting, they often look first to investments in the firm’s people such as training, wages, and headcounts. In addition, even when top managers value the firm’s people, they may not value the HR department. For example, when asked how the founder and CEO of one of the most successful high-technology companies in the world viewed the importance of human resources, the director of Strategic Leadership Development replied: Which do you mean? If you mean the Human Resource function, or what we call ‘big HR’, then he doesn’t have much value for them at all. If you mean the people of the company, or what we call ‘little hr’, then he places an extremely high value on them. If top managers publicly espouse their commitment to the firm’s human resources, and the firm’s HR function has substantial responsibility for managing this valuable firm resource, then why do many organizational decisions not evidence this stated commitment to people or a respect for the HR function? This chapter draws from Barney and Wright (1998).