Some of you might still remember the good old days in university when the theories of the firm were introduced and discussed. But for all the others, it might be new – however, I am sure it is interesting for everyone. Why? – because it shows what Ulrich really meant by introducing a new model for HR.
The resource-based view (RBV) dates back to the 50ies of the last century. Edith Penrose (1959) was the first one to talk about resources as critical factor in competition. Before, competitive advantage had to be found only outside of a firm. She was the first one to search for differentiation within the firm. She distinguished between physical and human resources. But her ideas were quiet until the early 80ies when Birger Wernerfelt (1984) took a look at Penrose’s ideas. He further distinguished resources into „brand names, in-house knowledge of technology, employment of skilled personnel, trade contracts, machinery, efficient procedures, capital, etc.“ He also claimed that through specific, targeted usage of resources, a firm can reach competitive advantage. This competitive advantage is of strategic interest, and to create such a strategic competitive advantage through resource management, the resource has to be:
- of strategic value
- scarce
- not reproducible
- not substitutable
Both, Penrose and Wernerfelt identifed that employees of a firm are such resources – or at least the knowledge and capabilities of these employees are such strategic resources. And actually still today employees can be strategic resources – if identified and utilized like that.
However, this can be both positive and negative. If employees are not motivated, not educated or not aligned to a firm’s goals, they are still differentiating – but in a negative way. And this is where we as HR professionals come into the game – all of our ideas are based on the resource-based view of the firm and we are trying to transform employees into a positive competitive advantage.
And this is also where Ulrich sees the basis for his model: The RBV is the basis for all Strategic Human Resource Management concepts. Ulrich is one of them, and so he claims that through the “Art of right HR”, the HR department can transform all of a company’s employees into strategic competitive advantage. And the “Art of right HR” means using his model.
In his books about the new mandate for HR, and also before, Ulrich talks about “Organization Capability”, the capability of organizations to serve as competitive advantage, he writes: „Organizational Capability is more than just people. People represent a critical aspect of organizational capability, but it is the organization and people management system that focus people’s attention and shape their behavior to create an organizational capability.” For him, this is the only remaining competitive advantage – all other resources can be imitated at some point. But employees and organizations remain inimitable.
And having this thinking in mind, it is easy to understand that Ulrich’s aim was not to be more cost-effective, to scale down HR costs, but he had the aim to transform the HR department in something that can create “organization capability”. This is something we should always have in mind as HR practitioners. Yes, Ulrich is also the “father” of the HR Shared Service Centers (which are focused on cost-effectiveness), but the SSCs are only one step in creating “organization capability”. In the end, more emphasize lies on HR Business Partners and Centers of Expertise. SSCs are only the foundation for the Ulrich model – the real value comes only when utilizing BPs and CoEs.
Chief HR Officer 