The Value Of Human Capital As A Sustainable Advantage

3052 words - 12 pages

XYZ Bank was established in 1998, in a developing country. During the first ten years, following its establishment, it was known for its pace setting innovativeness, fast growth, and strong financial performance which culminated in its listing on the local stock exchange. Notwithstanding the entrance of several new players, XYZ prided itself in its products, its robust ICT systems and banking halls with an ambience that this far has not been matched by its competition; a well groomed team that worked hard and produced the desired results for years and annual financial results that communicated the story of their success.
Over the last five years, despite its wide branch network and an 800 employees workforce, XYZ Bank's fortunes have been on a downward trend. It is now characterised by high staff turnover, damaged relationships between employees, decreased motivation to perform, resulting in losing market share and the business has posted losses three years running. As far as the founding executives are concerned, these are temporary setbacks, which should resolve themselves over time because they have a performance management system in place. At the end of every year, the Human Resources department ensures that every employee's performance appraisal is conducted and salaries are adjusted in line with the performance ratings.
Faced with mounting losses and a salary bill that keeps inflating at the end of each year, without being backed by profits, the Board of directors is worried by developments it views as unsustainable and is scouting for a way out of the quagmire. Recently, the chairman of the Board invited Enhancement Consultants to come and carryout three tasks namely:
i. to explain the concept of attaining sustainable competitive advantage from human capital;
ii. having noted the failure of the existing PM system to explain the concept so that the executives fully appreciate it and what it can do for XYZ Bank;
iii. to propose a PM system for XYZ Bank and indicate its implementation modalities.

The Value of human capital as a sustainable advantage
In a world where most of what used to be sources of sustainable competitive advantage such as more sophisticated technology, access to information among other things have become common place, one asset that has remained the differentiator and, therefore, major potential source of sustainable competitive advantage is human capital. Included in the latter are the skills possessed by employees, their intelligence, judgement, relationships and even intuition. After conducting several studies Bartlett and Ghoshal (2002) concluded that human capital constitutes the key strategic resource that must form the foundation of a firm's strategy.
Given the strategic importance of human capital (Chadwick and Dabu 2009), implementing a PM system as a way of fully harnessing this resource is every organization’s imperative as a way of remaining competitive. XYZ Bank's experience with PM has not...

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