Using HRM to compete in the 21st century.

• Author: Luthans, Kyle
• Position: Human resource management

Organizations going into the 21st century face unprecedented change and competition. Although internationalization and information technology receive most of the attention in this new environment, deregulation may prove to be the most complex and far reaching change effecting many industries.

Although deregulation has already dramatically changed the financial, transportation, and telecommunication industries, the biggest challenges for the years ahead lies in the electric power industry. Electric power is the biggest American industry to be deregulated and as a recent Fortune article headline exclaimed "The 120 year-old electric power industry isn't just being deregulated - it's being revolutionized. The impact will be huge."[1] Media attention so far has been focused on the big IOUs such as Consolidated Edison and Pacific Gas and Electric. However, quotes from the Fortune article such as the following have clear, direct implications for rural electric distribution cooperatives:

Already the prospect of deregulation is prompting much moaning and groaning, and with good reason: Deregulation will force many utilities to become far smaller. They will have to sell off some or all of their brawniest assets - those massive generating plants - and make a living mostly by operating the wires that run to homes and factories.[2]

In other words, deregulation will not only change the legal environment for rural electric distribution cooperatives, but more importantly will likely lead to a massive infusion of new competitors trying to better serve rural electric customers. In such a competitive environment, success and even survival depends on meeting (actually exceeding and anticipating) customer expectations. Going into the 21st century, the simple fact is that rural electric distribution cooperatives will have to give renewed emphasis to improving performance through reducing costs, increasing productivity, and improving/creating new products and services.

ENTER HUMAN RESOURCES MANAGEMENT (HRM)

Many, if not most, articles in recent years of Management Quarterly have been devoted to how cooperatives can meet the competitive challenges that lie ahead. The purpose of this article is the same. However, unlike most of the others, the "High Performance" HRM policies and practices suggested in this article are based upon a considerable research foundation and a comprehensive study of 110 rural electric distribution cooperatives from across the country.

Specifically, this article first reviews prior research that shows high performance human resource management policies and practices adds value to any type of organization. Secondly, the importance of this approach to HRM during periods of dramatic change such as is facing rural electric cooperatives is reviewed. Finally, based upon the results of the rural electric comprehensive study, specific conclusions and recommendations for the more effective management of human resources to meet the competitive challenges will be provided.

HRM AS A SOURCE OF SUSTAINED COMPETITIVE ADVANTAGE

The traditional role of the HR/personnel department has essentially been functional in nature and has revolved around specialized tasks such as HR planning, recruiting, job analysis, performance review, compensation, training, and legislative compliance. Certainly hiring, firing, and providing benefits to employees remain important tasks that must be accomplished in any effective organization. However, as a result of dramatic changes in the external environment such as deregulation, a new, more strategic approach to HRM becomes vital.

Fundamental to a strategic perspective is that HRM policies and practices influence organizational performance. This new, more proactive approach to HRM, represents a shift from a more traditional view of personnel that focused on micro issues such as an individual worker's performance and satisfaction to the new role of HRM that can be simply described as one of helping managers maximize the contribution of employees in achieving sustainable competitive advantage.

A growing body of research findings provides support for this strategic HRM approach. For example, Pfeifer noted that, over time, successful organizations do not rely on technology, patents, or strategic position for competitive advantage.[3] Instead, they utilize their people to create sustained competitive advantage. Specifically, he identifies the following types of HRM practices that seem to characterize organizations that are effective in achieving sustained competitive success through how they manage people:

1. Employment Security. Successful organizations are characterized by...