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Journal of Contemporary Management

versão On-line ISSN 1815-7440

JCMAN vol.5 no.1 Meyerton  2008

 

RESEARCH ARTICLES

 

People in the workplace: a tool to create a competitive advantage? Fact or fallacy

 

 

TFJ Oosthuizen; M Kara

Department of Business Management, University of Johannesburg

 

 


ABSTRACT

Competitive advantage is a dynamic concept. Competitive advantage focuses on a variety of competitive alternatives. These alternatives include for example people, quality, speed, innovation, service, leadership, time utility and place utility. Developing a competitive strategy is vital to the survival and prosperity of any organisation.
The objective of this study is to establish to which extent employees perceive people as a competitive advantage factor and use employees to gain and sustain competitive advantage for success. The population focus on employees at a leading bank. The empirical study considers bank learnership candidates (employees) as sample and people as a competitive advantage factor. The study yielded a minimum response rate of 98.7%.
Analysing and establishing which people factors contributes to establishing a competitive advantage will ensure future organisational success and provide leaders with direction. Skill development; empowering members of the work force; and treating employees well has been identified as the three most prominent factors to consider when establishing people as a competitive advantage factor with reference to the research group. Learning and skill development programmes are therefore recommended to enhance the people factor for sustainability. Leadership development and employee support empowerment are of essence.

Key phrases: Competitive advantage, management, learnerships, banking, people, employees, human resources


 

 

INTRODUCTION

Competitive advantage is generally developed by focusing on competitive tools such as quality, speed, innovation, service, leadership, time utility, place utility. Developing a competitive strategy is considered important to the survival and prosperity of any organisation that plays a significant role in the relevant industry. In an organisational context employees are critical to create competitive advantage. The result is therefore that some businesses find they have enjoyed a competitive advantage in a product or service for several years only to face increasing competition as rival organisations enter their markets. In many cases organisations ignore the importance of their employees in creating or maintaining a competitive advantage. Organisations in the South African banking industry are currently establishing various learnerships in order to develop their employees. Certain of these learnerships are accredited and presented by the University of Johannesburg. The learnerships are presented in contemporary management fields such as Change Management, Business Analysis, Risk Management and Business Operations.

 

OBJECTIVES OF THE RESEARCH

Employees are a crucial resource that adds value and contribute to develop a competitive advantage. Continuous development and learning is needed to enhance the ability of employees to create and maintain a competitive advantage.

The primary objective of this study is to establish to which extent a leading bank perceives people as a competitive advantage factor and how use their employees to gain and sustain competitive advantage for success.

 

LITERATURE OVERVIEW

Organisations have acknowledged the principles associated with total quality management, learning organisations, high performance organisations and have implemented balanced scorecards. The chief executive's primary focus is fixated on retaining control of the organisation to meet shareholder expectations. Today's CEO also recognises that the core competence of the organisation lies in the intellectual capital embedded in the organisation. No longer will product design, production process or customer service alone create competitive advantage. It is the skills and abilities of the individual staff members that will impact on the future of the organisation (Weymes 2005:142).

Michael Porter is one of the most renowned writers on the subject of competitive advantage. Porter acknowledges that there is no one universal competitive strategy (Porter 1990:34). Tailored strategies considering the industry, skills and assets of the particular organisation are necessary to succeed (Thompson & Strickland 1998:136-172). Porter (1990:40) argues that a competitive advantage results through the way organisations organise and perform the discrete activities as identified in the value chain.

Various theorists including Kotler (1997:53-54), Thompson & Strickland (1998:134), and Porter (2003) define competitive advantage in various ways, indicating aspects relating to uniqueness, sustainability, not able to copy or duplicate, as well as strategy-based. Porter (1985:35, 1990:58) identifies four generic strategies for gaining competitive advantage including: cost leadership; differentiation; cost focus and lastly focused differentiation. These strategies are based on the value propositions identified by the organisation as well as the competitive advantage to be created.

Porter (1990:40) argues that competitive advantage develops and is based on the way organisations organise and perform discrete activities. Organisations create value for their buyers through performing these activities as reflected in the value chain. An organisation is profitable if this value exceeds the collective cost of performing all the required activities (Alberts 2002:11-14). Primary activities as presented in the value chain include logistics, operations, marketing and sales as well as customer service, whereas the supporting activities include human resource management, financial management, communication, information management and e-business (Nieman & Bennett 2006:16).

To gain competitive advantage over rivals, organisations must either provide comparable buyer value but perform activities more efficiently (lower cost) than competitors, or perform activities in a unique way that creates greater buyer value and commands a premium price (differentiation) (Porter 1990:40). Any organisation also needs to understand their geographical business scope: local, national and global (Porter 2003:29).

Competitive advantage can result in a situation where sometimes a trade-off needs to take place. It is almost impossible to have a cost advantage as well as a quality advantage at the same time (Porter 2003:29-35). The whole chain of service and product delivery classically involves multiple interactions between the customer (internal and external) and the employees. Customers form their perception of the rightness of a solution from these interactions between all members in this system. The vision of an organisation thus needs to be rooted in the customers and their perceptions of what is important. Employees are therefore a crucial contributor.

Kotler (1997:53) states that competitive advantage is "...a company's ability to perform in one or more ways that competitors cannot or will not match." Lussier (2006:121) indicates that a "competitive advantage specifies how the organisation offers unique customer value." Basic principles in establishing a sustainable competitive advantage are: it should not be readily duplicated; it must provide economic benefits; and finally it must distinguish the organisation from its competitors. It is important for an organisation to consider people (employees), products and services, markets and technology as primary factors in determining their competitive advantage.

Fawcett, Rhoads and Burnah (2004:346) suggest that the characteristics of a great working environment include the following: compensation that communicates that people truly are valued, exceptional facilities, a facilitative organisational culture, good relations between management and employees, a flexible work place, a family-friendly culture, and investments in employee competencies. Similarly, a culture of empowerment is built on a foundation of affirmation, belonging, and competence. Unfortunately, few organisational understand that background of effective people management and even fewer are willing to make the sustained investments required to harness the learning and passion of the workforce.

At the heart of viewing people as a factor to establish a competitive advantage, is the recognition that in a service business, achieving objectives or creating change can only be met through people. Horovitz (2000:93) also states that the quality of service delivered by an organisation depends, at least partly, on how staff interacts with customers and therefore the impact of good people management is of essence. Various researchers identify factors for managing people that will lead to a competitive advantage (Pfeffer 1994:30-55; Ogden 1992:237; Wietzman & Krause 1990:139). These practises are interrelated and cannot stand alone to achieve results (Pfeffer 1994:30). Horovitz (2000:93) also states that the quality of service delivered by an organisation depends, at least partly on how staff interacts with customers, and therefore the impact of good people management can be tremendous. A list of these people factors to establish a competitive advantage is:

Employment security: This indicates a long-standing commitment by the organisation to its workforce;

Training and Skill development: Worker autonomy and self managed teams depend on people who are empowered to make changes and improvement, but also have the necessary skills to do so. Consequently, an integral part of most new work systems is a greater commitment to training, skill and development;

Cross utilisation and Cross training: According to Pfeffer (1994:237) having people to do multiple jobs has a number of benefits, allowing people the prospect of a more varied and interesting workday. This can also be very valuable in recruiting;

Symbolic egalitarianism: Egalitarian symbols come in many forms including dress code and physical space and thus these symbols separate people from each other. This signals to both insiders, and outsiders that there is comparative equality;

Wage compression: In a strong culture organisation, one will tend to find more compressed pay because dispersion lessens the sense of community, and common fate that strong culture organisations seek to build as a source of competitive success;

Promotion from within: This not only encourages training and skill development but also facilitates decentralisation and communication because it helps promote trust across hierarchical levels;

Long term perspective: Achieving competitive advantage through the work force inevitably takes time to accomplish, once achieved though, competitive advantage through employment practices is likely to be enduring and difficult to duplicate;

Measurement of the practices: Measurement is a critical component in any management process and seeks to provide feedback as to how well the organisation is implementing various policies. Organisations committing seriously to achieving competitive advantage through people need to make measurements of their efforts a critical component of the overall process.

Selectivity in recruiting: The organisation carefully chooses the right people in the right way;

High wages: Attractive pay packages not only tend to attract more candidates but also permits the organisation more selectivity in the hiring process, and also sends out a clear message that the organisation values its workforce;

Incentive pay: Pay for performance at individual level or within groups. If people are responsible for enhanced levels of performance and profitability, they want to share in the benefits;

Employee ownership: Employee ownership effectively implemented can align the interests of employees with those of shareholders by making employees shareholders too (Pfeffer 1994:38);

Information sharing: If people are to be a source of competitive advantage, they must have the information necessary to do what is required to be successful. (Ogden 1992:237);

Participation and Empowerment: Sharing information is a necessary pre-condition to encouraging the decentralisation of decision-making and allowing broader worker participation and allowing employees some autonomy, this also includes allowing lower level employees participation, and better information to make decisions;

Teams and Job redesign: The use of teams is the alternative to traditional organisational hierarchy. Groups are a form of social interaction in which individuals can enjoy social interaction;

Zineldin (2005:329) indicates that today a competitive market position and a good reputation of an organisation can quickly translate into market share and profit. The result is often earned only through a commitment to service backed by diligent attention by employees to what customers want and need. In comparison to manufacturing and some service industries, bankers are not only selling products and services. Firstly, they are selling their organisations reputation with every "customer relationship". An effective customer relationship requires the market to make specific effort to create, establish and develop a good quality package mix in order to maintain and enhance customer relations.

Pro-active people management is crucial for competitive success. "People are either the bridge or the barrier to success" (Fawcett & Magnan 2001:2). Proactive people management requires not just the quest for high productivity but also the unleashing of employee's passion to contribute. It is more than creating knowledge, it involves fostering creativity. For employees to be the bridge to competitiveness they must be viewed as more than a commodity. They must be hired and trained not simply for the manual labour but also for their ability to think and learn and make a difference. The reality is that great people management may not always lead to outstanding success; however, employees are almost always in a position to undercut any competitive competence. Such commitment is obtained as managers cultivate a great working environment and a culture of empowerment.

An overarching philosophy of management is important as it provides a way of connecting the various individual practices into a coherent whole and enables people in the organisation to persist and experiment when things do not work out initially. The underlying philosophy of Pfeffer (1994:65) is that once a competitive advantage through employment practices is obtained, it is likely to be substantially more enduring and difficult to duplicate. This means the organisation will have to take a long term view, since although there are other sources of competitive success; gaining a competitive advantage through people is probably less readily copied and therefore most sustainable.

 

PROBLEM STATEMENT

Gaining and maintaining a competitive advantage in today's' business environment and global market place has become increasingly difficult. Low cost leadership and even quality at lower costs is easily copied. Various strategies are used to establish competitive advantage. The increasing need in global practices to consider the customer as an individual, demands increased attention being paid to the people factor. Employees are required as a corner stone in establishing a competitive advantage.

Employees can no longer merely be considered as a cost item on a balance sheet. The resource basis of employees is a strategic element of organisational success. Many organisations practicing dated managerial practices are not acknowledging the power and value of employees as a tool for establishing competitive advantage. The question arises whether these organisations consider the value of employees that learn, develop and contribute creative solutions to everyday problems and practices.

Success that comes from managing employees effectively is often not visible and transparent. The culture and practises that enable an organisation to achieve success cannot always be easily identified. It is also difficult to comprehend the dynamics of a particular organisation and how it operates because the way people are managed is part of the system. To try and copy culture is difficult. Thus by viewing the workforce as a source of strategic advantage, not merely as a cost factor, enables an organisation to gain a competitive advantage. Viewing employees as a source of competitive advantage is the means through which an organisation can achieve objectives. Horovitz (2000:93) contends that the quality of the service delivered by an organisation depends, at least partly, on how staff interacts with customers and therefore the impact of good people management can be tremendous.

 

METHODOLOGY AND RESEARCH DESIGN

The paper includes a literature study comprising relevant articles, books and discussion documents. The aim is to establish an understanding of competitive advantage and in specific how a competitive advantage can be established through people (employees). The empirical component is based on a leading South African bank as research object and employees as a competitive advantage factor. The empirical component considers a sample of learnership candidates who are bank employees. The evaluation is by means of a questionnaire. A categorical (rating) scale is used to measure the responses. The categorical scale is chosen over a comparative scale because respondents will score objects without direct reference to other objects. A 5-point Likert Intensity Scale is used as scale design for the questionnaire due to ease of construction, ease of use and good discriminating ability. The scale consists of a statement expressing either a favourable or unfavourable attitude towards the object of interest. Each response is assigned a numerical score to reflect its degree of attitude favourableness.

Statistical analysis was done by the statistical services of STATKON at the University of Johannesburg. The following statistical analysis was done:

Descriptive statistics: these are statistics used to describe the data, and is the initial phase in statistical analysis (Diamontopoulos & Schlegelmilch 2000:73)

Tests for reliability (Cronbach Alpha): Reliability refers to the degree to which an instrument (or measure) is free from random error. This measure is thus able to provide consistent data. If the scores are high, they are regarded as measuring the same construct, indicating that reliability exists. Furthermore according to Hair et al (2006:137), an alpha value of greater than 0,7 indicates a higher degree of reliability.

ANOVAs were used to compare across more than two groups (Diamontopoulos & Schlegelmilch 2000:183).T-tests were also used to determine whether significant differences exist between the groups and the mean scores (Diamontopoulos & Schlegelmilch 2000:184).

Factor analysis refers to a range of techniques which aims to describe a larger number of variables by means of a small composite of variables - so called factors. Factor analysis was done to establish whether the people factor can be identified for substantive interpretation of data (Diamontopoulos & Schlegelmilch 2000:216).

 

RESEARCH POPULATION AND REALISATION RATE

The research population considers a sample and is selected through the random sampling method. The research population considers a sample of 76 students (banking employees) who are registered for various learnerships presented by the University of Johannesburg within the Department of Business Management in 2006 and yielded a response rate of 76 (100%) for most questions and a minimum overall response rate of 75 (98.7%). The data collected is analysed by way of association between variables and by considering relevant frequencies. A conclusion is drawn from the findings of the responses to the questionnaires. Recommendations are made with regard to people as factor for competitive advantage.

 

RESEARCH INSTRUMENT

The research instrument is a questionnaire consisting of the two sections. Section A focuses on demographic factors and section B investigates 15 dimensions when considering people as a factor for competitive advantage.

The demographic factors established are: gender; age group; job level; department or division; highest academic qualification; number of years working at a leading bank and finally total number of years work experience. Annexure A represents a list of the various statements reflected in Section B, considering people as a factor to establish or maintain a competitive advantage.

 

DATA ANALYSIS

The respondents feedback in terms of the demographic factors as presented in Section A reflected on their current employee expereince. The following frequencies were reported. Figure 1 illustrates a majority of female respondents (55.3%) which is supportive of Equity programmes within the organisation, although not completely representative of legislative requirements.

 

 

The dominant age groups represented within the learnerships are the age groups 25-44 (85.5%). This reflects the investment by organisations in younger employees. Furthermore the small representation of the youngest group (7.9%) reflects on maturity and other requirements for employees to enter a learnership. The small representation on the older age groups (5.3%) indicate the possibility of more mature employees already qualified and promoted to higher managerial positions in the organisation. This is also reflected in the diversity factor on management level.

 

 

As mentioned when considering the various age groups, the dominant representation by employees is on lower management levels (86.9%).

 

 

From the previous figure, it is clear that the respondents support the aim of learnerships to empower younger and/or less experienced employees.

Representations in the research sample were limited in terms of representation of the upper management levels namely middle and senior management level. This indicates the focus of the learnership to ensure valid representation for employee development. A majority of the registered students (86.8%) on the learnerships are on junior and first level management. No predominant representation could be established when further analysis was done in terms of the department or division a candidate is placed. This can be seen as a positive factor indicating a good distribution over various departments within the organisation, allowing for numerous employees to attend a learnership in a particular field.

 

 

62.7% of the respondents did not complete a tertiary qualification and 37.4% has completed a tertiary qualification. Minimum requirements for entry to a learnership consider a variety of aspects including qualification but also relevant work experience. One respondent did not indicate highest qualification.

The categories for years worked were re-grouped in order to establish more substantive results. The categories for years worked were re-grouped to establish more substantive results. Figure 5 illustrates and confirms that employees with generally less work experience (60.5%) are considered for learnerships by the organisation. This allows these employees to continually develop and contribute. Work experienced measured is though not an indicator whether the work experience is exclusive to the banking industry.

 

 

Factor analysis for people (employees) as a competitive advantage factor

The results in this section are tested with an Alpha value which would indicate how close a correlation exists between the different sections of questions. A high correlation will be reflected by a high Alpha value. According to Hair et al (2006:137), an Alpha value of greater than 0.7 indicates a high degree of reliability. A Cronbach Alpha of 0.811 was obtained on the dimensions. All 15 statements indicated a mean of more than 3 resulting in a positive support for each statement reflecting on people as an essential competitive advantage factor. The statements are as follows:

(1) Adequate skilled personnel are essential in order to gain competitive success through people.

(2) Managing a person effectively in the department does result in competitive advantage being as visible as other more tangible sources.

(3) Employment security plays an important role in managing people towards competitive advantage.

(4) Selective staff recruiting for the department does play an important role in managing people towards competitive advantage.

(5) High wages paid to employees plays an important role in managing people towards competitive advantage.

(6) Incentive pay paid to employees does play an important role in managing people towards competitive advantage.

(7) Empowering the work force plays an important role in managing people towards competitive advantage.

(8) Training and skills development of staff in the bank (department) does play an important role in managing people towards competitive advantage.

(9) Managing people as a source of competitive advantage is more sustainable than other sources of competitive advantage.

(10) Organisations that treat employees well gain a competitive advantage.

(11) The use of teams in organisational structure will improve an organisations competitive advantage.

(12) Promotions within the organisation improve employee development, ensuring a competitive advantage.

(13) We have a system of values and beliefs in managing people.

(14) Cross utilisation of employees by having people do multiple jobs will increase people as a competitive advantage.

(15) Participation in decision- making improves people's contribution as a competitive advantage.

No significant deviation was noted between the various factors. The following factors were acknowledged and indicated a high level of support:

Adequate skilled personnel are essential in order to gain competitive success through people (4.69).

Empowering the work force plays an important role in managing people towards competitive advantage (4.65).

Organisations that treat employees well gain a competitive advantage (4.64).

Participation in decision-making improves people's contribution as a competitive advantage (4.48).

The use of teams in organisational structure will improve an organisations competitive advantage (4.41).

 

 

Considering the demographic factors, gender is the first factor analysed in order to identify whether any differences exist between the various groups for each diversity factor included. A mean of above three indicates a positive response whereas a mean of below three indicates a negative response.

 

 

By conducting a t-test the researcher can ascertain whether a statistically significant difference exists between these two groups. According to Hair et al (2006:16), if the t-test p value is above 0.05 then a significant difference does not exist between the groups when using a 95% level of confidence. The means reported indicate similar support by male and female respondents.

Further analysis by means of a Levene test supports that no significant difference exist in terms of the perceptions of men and women regarding people as competitive advantage factor indicated in Figure 8.

 

 

Considering the demographic factors, age is the second factor analysed. Considering the re-grouped factor on age similar support exists for the dominant age groups. Figure 9 illustrates similar perceptions for these age groups.

 

 

Further analysis by means of a Levene test supports that no significant difference exists between the two age groups represented in terms of their perceptions on people as competitive advantage factor as reflected in Figure 10.

 

 

Considering the demographic factors, job level is the third demographic factor analysed. A mean of above three indicates a positive response whereas a mean of below three indicates a negative response in reflection of the five point Likert scale used in Section B.

 

 

No significant difference exists between the different job levels represented in terms of their perceptions on people as competitive advantage factor as stated in Figure 12. The dominant job levels also supported this factor as stated in Figure 12.

 

 

Considering the demographic factors, qualification is the fourth demographic factor analysed.

No significant difference exists between the different qualification groups represented in terms of their perceptions on people as competitive advantage factor as indicated in Figure 14. Analysis as presented in Figure 13 indicates a mutual support by these groups for people as a factor in competitive advantage.

 

 

 

 

Considering the demographic factors, years work experience is the fifth demographic factor analysed. A mean of above three indicates a positive response whereas a mean of below three indicates a negative response.

No significant difference exists between the different groups indicating years of work experience represented in terms of their perceptions on people as competitive advantage factor as indicated in Figure 16. Equal support for people as a competitive advantage factor is stated in Figure 15.

 

 

 

 

Further analysis by means of a Oneway Anova test indicate the high level of similarity in support between the various re-grouped groups based on years work experience as illustrated in Figure 17.

 

 

CONCLUSION

Many organisations claim that their people are their most important asset, but few have built the human resources systems, processes or cultures that can even offset, let alone challenge, the deeply embedded bias toward financial assets (Bartlett et al 2002:37).

The arrival of the information-based, knowledge-intensive, service-driven economy has forced massive change on organisations worldwide, most dramatically in the way they must redefine their relationship with their employees. The shift in strategic imperatives over the past 25 years has necessitated new battle plans. The competition remains intense for strategic market positions and for scarce organisational resources and capabilities, but the war for talent has shifted the locus of the battle front. Today managers must compete not just for product markets or technical expertise, but for the hearts and minds of talented and capable people. After persuading people to join the organisation, management must also ensure that those valuable individuals become engaged in the organisation's ongoing learning processes and stay committed to the organisation's aspirations (Bartlett et al 2002:40).

Challenges however remain, ranging from functional improvements, integration of various management functions, organisation development and a global perspective of human resource management. Only with the co-operation of all parties concerned can the management of human resources create a sustained advantage for enterprises in the coming century (Lin 1997:43).

Knowing and understanding which people factors contributes to establishing a competitive advantage in a leading bank will ensure future organisational success and provide their leaders with direction. Skill development, empowering members of the work force, and treating employees well has been identified as the three most prominent factors to consider when establishing people as a competitive advantage factor with reference to the research group. Furthermore participation in decision-making is required to ensure empowerment. This can also furthermore ensure improved team work and team activities.

All members of the various learnerships, considering the various diverse facets within the organisation supports the 15 aspects identified as contributors to creating people as a competitive advantage factors. This emphasizes the reality of employees as a crucial component in establishing and maintaining a competitive advantage. Porter (2007:5-15) indicates that in terms of an organisation's success competitive advantages resides solely inside an organisation or in its industry and that competitive success depends primarily on organisational choices.

 

FUTURE RESEARCH

This research project is part of a longitudinal study. Further research will be conducted to establish the perceptions of employees on other factors relating to competitive advantage. These other three factors included in the longitudinal include: products and services; markets; and technology. The research will enable future comparative analysis between the various factors that contribute to competitive advantage.

 

RECOMMENDATION AND MANAGERIAL IMPLICATIONS

Evans (2005:120-121) contends that the human resource is the only factor that competitors cannot copy, and the only factor that can synergize, that is, produce output with value greater than the sum of its parts. The competitive advantage resulting from an organisation's people can drive low cost and differentiation. Furthermore Evans (2005:121) suggests that providing a work environment that fosters co-operation, initiative, and innovation; educating and training the workforce; and enhancing the factors that affect well-being, satisfaction, and motivation are very difficult for competitors to copy.

Learning and skill development programmes are therefore recommended to enhance the people factor for sustainability. Leadership development and employee support empowerment are of essence. The value of learnerships is essential in order to create new talent and to continuously develop existing knowledge. Well planned and curriculated learnerships leverage a wide distribution of skills development in the organisation.

Managerial development is necessary to ensure that managers on higher levels in the organisation understand the value of empowerment. Furthermore these managers need to know how to empower employees. In support of Herzberg's hygiene factors, a work environment in which employees are treated well is crucial for sustainability of the organisation (Oosthuizen 2007:13).

Strategies to ensure and develop team work and participation should be implemented by means of innovative practices considering the changes in the organisation. Continuous communication to ensure learning organisation practices and to establish a mutual understanding and shared vision in terms of employees creating and sustaining competitive advantage is required.

Seijts & Crim (2006:1-5) confirm the above-mentioned conclusion and indicate that practitioners and academics have argued that an engaged workforce can create competitive advantage. These authors say that it is imperative for leaders to identify the level of engagement in their organisation and implement behavioural strategies that will facilitate full engagement. They classify and propose the ten C's of employee engagement to ensure a competitive advantage through people as: "1.connect, 2.career, 3.clarity, 4.convey, 5.congratulate, 6 contribute, 7.control, 8. collaborate, 9.credibillity, 10.confidence" (Seijts & Crim 2006:1).

 

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