AYESHA SYED | 151343 |

ASSIGNMENT-1
LITERATURE REVIEW OF CBHRM

COMP
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Literature Review
The competency based management is emerging as a new approach for making
employees more proficient in their work so that organizations can achieve the
competitive edge over their competitors and survive in todays time. Competency based
management has become an effective tool for HR to improve the performance of the
organization. Integration of competency model with the HR function has enhanced the
performance of individual as well as organization.
In todays changing business environment of globalization and accelerating competition,
organizations face mounting challenges to appropriately utilize each individuals
knowledge, skills and attitude to optimize performance. In this new era, HR is becoming
the source of an organizations competitive advantage [Legge 1995]. The resource based
approach considers HR as a unique source of competitive advantages of the firm
[Lorange and Murphy (1984), Boxall (1991), Lundy (1994), Storey (1998)]. Armstrong
and Baron (2002) in their article stated that, people and their skills, abilities and
experience, are making a significant contribution to organizational success and also
maintaining as a significant source of competitive advantage. HR in organizations should
be regarded as a valuable asset, in other words treated as human capital. [Beer et
al.1984]. HR is the resource that lies within employees, by whatever term it is called in
different organizations, as people, human capital, intellectual capital or talent and it is
progressively more acknowledged as important to the success and competitive advantage
of an organization [Boudreau and Ramstead 2007].
In recent years, the strategic involvement of the HR and its effect on the firms
performance has become more important [Rangone 1999, Analoui 2000]. The debate has
led to the creation of a resource based model of HRM [Boxall 1996], identifying HR as
being responsible for increasing organizational success [Kakabadse 2000] and a realistic
indicator of the improved organizational effectiveness [Analoui 1999 & 2002].
Generally HR professionals always had a relatively limited involvement in the
organizations affairs and goals, with activities being targeted mainly at the operational
level. The justification of the presence of human resource staff is mainly to enjoy
economies of scale and specialization. Generally HRM seems to be playing a secondary
role at a time when the capability to harness a firms human resources should be more in
demand and more valued than ever before [Lengnick-Hall 2003]. It has even been
suggested that there is a link between a firms performance and the utilization of its
human resources [Baird and Meshoulan 1988].
In the modern era, organizations are increasingly looking at HR as a unique and valued
asset that makes organizations to gain competitive advantage. At the same time, changing
demographics of the workforce, the fast changing business scenario with increasing

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globalization, technological changes, intellectual capital, never ending organizational

changes lead to increased importance of managing human resources.
HR professionals will have to learn to adapt to the environmental transformation ahead.
The new demands are being placed on HR staff are to develop leaders and more generally
to recruit and retain a quality workforce. Not only retaining and recruiting the desired
workforce, there needs to be an increase in workforce performance in the face of
competition, and so the compensation needs to be aligned with business strategy so that
depending on the strategy the organization follows the compensation is designed so that
employees feel connected towards the organization. It then also becomes essential to
develop employees in order to achieve the organizations goals. Individual capabilities
within the organization as a whole are becoming more important than purely within a
defined job, and hence, individuals are being recognized as capable of influencing an
organizations success [Brewster et al. (2000), Porter (1998)].
Concentrating on HRs direct influence on the organization, Ulrich et al. (1995) carried
out a large-scale survey in the United States (US) looking at specific competencies in HR
in order to produce benchmarking standards. One of the recent developments they
identified was the emergence of HR business partners, resulting in a need for the
professional growth of HR practitioners themselves, and the need to contribute to the
organizations competitive stance as a whole.
However, the HR function currently has to respond to major changes in its complex,
competitive, and challenging environment: lowering costs, enhancing quality, ensuring
that the organization is tapping into the full potential of its employees and creating
stronger business links, hence becoming a business partner. A business partner is
someone who works alongside senior managers, providing the link between business and
organizational strategies, providing support and challenge to the senior team, and
developing credible initiatives in a setting of ongoing cost reduction. [Kenton and Yarnell
(2005)].
The notion that organizations need to find new ways to manage in a global and turbulent
environment is now a well-worn concept. Organizational leaders acknowledge that
managing people is vital to organizational success, and that there is a connection between
the success and managing human resources of an organization. The challenge for the
future for HR appears to lie in sustaining a balance between strategic and technical roles,
and shifting from being a provider to being an enabler in personnel management. This
includes facilitating change and being an innovator in the face of change and may involve
the use of core HR staff outsourcing appropriate activities and devolving responsibilities
to the line and to the employees themselves [Bell (1999)].
Leaders of organizations today are always looking for a competitive edge. Therefore,
many organizational leaders have discovered a new, powerful way to reinvent human

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resource management that is competency-based HRM. Competency-based HR reinvents

traditional HR to focus on leveraging the known productivity differences between
average and best-in-class performers. In addition to attracting, retaining, and developing
top performers, organizations must now look to the ethical decisions of their top leaders
and performers. [William J. Roth well (2012)]
The competencies managerial, input-based, transformational, and output-based are
presumed to yield sustained competitive advantage for a firm. The competency-based
perspective, by focusing attention on the HR activities, functions, and processes that
enhance competency accumulation and exploitation, complements the behavioral
perspective (Schuler & Jackson, 1987) and thus potentially enhances the understanding of
strategic human resource management.
In the struggle to rethink new approaches to HR, many private business and government
entities are moving towards competencies and competency-based systems as the answer
to meeting organizational needs. Competencies reflect skills and knowledge and have
suited the need for a multi-skilled workforce in a climate of doing more with less,
downsizing, economic rationalism, turning a profit and reducing costs.

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