Human resource management and department is within a company to enhance the human capital and, by extension, to add value to an organisation. One of these objectives is developing and sustaining competitive advantages. Modern HR executive is crucial in developing and maintaining competitive advantages derived from human capital resources, including the knowledge, skills, abilities, commitment, competencies and intelligence of employees. Management psychology also plays a key role in this area.
In the area of human capital, psychology performs a crucial value-added role to the HR functioning of a company. Human resource management is intrinsically entwined with management psychology. HR managers and executives can impact the financial performance of a company through their effectiveness in traditional HRM roles, given the four basic problems most HR focuses on: motivation, leadership, interpersonal relations, and personnel selection.
Companies generate value through decreasing product/service costs or competitively differentiating their product/service to enable charging a premium. And the ultimate goal of HR executives is to create value through their human resource function, and their role in developing and sustaining positive dimensions of organisational culture through HR practices.
A case in point is General Motors (GM) and Ford. Both companies historically recruited factory workers from the same basic labour market. There is little evidence suggesting skill levels of Ford’s workers are significantly higher than GM’s. However, Ford was more successful at developing a cooperative, team-based culture than GM. Both organisations set out to develop employee involvement programs through the late 1970’s to early 1980’s.
Ford successfully changed culture and HR systems to enable and value employee participation in decision making to a greater degree than GM. Ford’s culture and HR systems enabled employees to participate in decision-making and utilize cognitive skills that GM systems have been less able to exploit. In addition, as Ford hires better qualified employees through an extensive assessment process, the participative system grants it a competitive advantage over GM.
Selection is another area where psychology can make a crucial impact. Selection deals with identifying, attracting and choosing suitable people to meet organisational HR needs, that include: finding, assessing, and engaging new employees or promoting existing staff.
The focus is matching the capabilities and interests of prospects with job requirements and challenges. Selection decisions are critical managerial decisions, because they are a prerequisite to developing an effective workforce. Selecting suitable employees is important for three reasons:
To leverage on HR’s role as a strategic partner, businesses have to increasingly meld HR practices with psychological insights in both management and general labour. In tight labour markets, the ability to recruit and retain talent is a critical part of what sustains and maintains a company’s competitiveness.