TM/U1 Topic 2 Role of Talent Management in Building Sustainable Competitive Advantage to a firm
Organizations work towards the achievement of their mission and strategic objectives. This requires a thorough understanding of the resources required for achieving the same. Resources here imply financial and non financial both and they are equally important and interdependent.
Technically these resources have been divided into two, non contingent and differentiating capabilities. Whereas non contingent capabilities are basics that enable an organization to compete and exist in the marketplace, differentiating capabilities are those that differentiate an organization from that of the other and offer competitive advantage. Effective marketing management, for example can be one of non contingent capabilities. Similarly many HR processes aspire to develop non contingent capabilities but they often fail to align with the strategy and offer competitive advantage. Most of these processes end up developing people in similar areas and similar capacities as their rival firms but this fails to provide any competitive advantage.
For organizations to develop competitive advantage through HR processes it is very important to define strategic differentiating capabilities and then develop a process for identifying and developing the same. This empowers the HR people to create an impact on the organizational strategy and also provides a link between talent management and strategy.
For HR to prove that talent management can be of strategic importance to organizations, the critical relationship between the two must be proven. Talent management specially needs to be projected as a differentiating strategic capability that can offer real and substantial competitive advantage.
According to research conducted by various bodies it was found out that creation of differentiating strategic capabilities signifies the relationship between business strategy and human resources. Human resources, it was deduced are the primary sources of strategic advantage. The research study was primarily based on Resource based view (RBV) of an organization. This view has gained significant ground among HR practitioners as basis of models for formation and structure of resources.
Unlike other non contingent capabilities that can be developed easily and cannot contribute to a large extent towards the development of a sustainable competitive advantage, differentiating strategic capability such as strategic HR through talent management can. However for human resources to qualify as potential sources of competitive advantage they should fulfill the following criteria:
- Strategic Value: The resource has to contribute substantially and add value in his/her area of expertise.
- Rare: Unique in terms of skills, knowledge and abilities in order to qualify as rare.
- Appropriable: The extent to which the resource is owned by the firm.
- Inimitable: Such that the resource cannot be replaced even after the competitors having spotted the same.
- Cannot be Substituted: This means that the resource cannot be substituted by the rival firms and that there is no match for the talent!
There are not many things in the business environment that can fulfill all the above criteria and offer unique competitive advantage except human resources and that is under the jurisdiction of talent management. There is also a need to understand the strategic intent of the organization before defining strategic capabilities.