 Good afternoon, my name is Brigitte Kohn and today I will talk about the second part of the book Which is about making a business case for human resource management? Today I will talk about what it means to make a business case I will talk about which organizational outcomes matter in the business case for human resource management I will introduce the concept of resources and I will introduce the concept of Resource-based theory all these concepts are important for chapter two three and four So before I move on let's let's take a moment to think about what it means to talk about making a business case When you make a business case for something it means that you suggest to a stakeholder for example an organization to invest money in Something that your organization has this can be people but it can also be materials or it can be for example Working with somebody from outside your organization However, you will you make it you invest money in a resource with the intent to eventually Make a better performing organization But if you read to read human resource management literature, you'll find out That is that this language of making a business case investing in people is very central to human resource management So let's have a look for example at the very famous definition of human resource management if we take a look at the definition of the action shuler and young in 2014 they wrote an excellent overview article of all the HRM and performance Literature they define human resource management as the sum of all the strategy Policy procedures and day-to-day acts that together aim to guide employment relations in organizations and now mind you Towards the goals of organizations. So it is all the strategy policy procedures That together aimed to guide the employment relationships or the relationship between the organization and their employees but with the intention to realize the goals of the organizations and of course this needs to happen in Alignment with all the contextual conditions as the organization characteristics large ones small ones Industry service industry. Are we manufacturing What does the competitive environment look like what's the labor market look like what are legal and institutional settings and what are societal dynamics So this letter part of the definition will be elaborated more on in part three and four of the book in part one will focus On the first part of this definition. So the strategy policy procedures day-to-day acts that aim to guide employment relations Towards the goals of organizations Well, what are these goals of organizations because if we make a business case We might have well might as well want to understand what kind of goals organizations want to improve Well, this is a list that is often used to illustrate what kind of outcomes matter for organizations of course on the top of the list you see operating performance Everything that eventually leads to making money in organizations of productivity sales product quality loyal customers Financial performance to the profits return on assets return and investments But then it comes to already closer to human resource management. So also employee performance So investing in resources can lead to better employee employee performance. So for example Employees staying in the organization rather than leaving the organization replacing people is very expensive employees being motivated and Contributing to the performance of organizations with their best efforts is also very valuable for organizations in some the value added per employee to To the product to the outcomes of the organization, of course, that's also Innovations or employees could contribute potentially to the development of new products or new services And of course organizations also have more these intangible outcomes that before for example, they want to be the top employer They want to be the top whatever you want in in their competition well the word resources is Is used a lot when we when we talk about the outcomes. So There's an idea to invest in resources and then you will have better Performance and this is a very central topic in in many organization theories So before we move on to understanding these theories it is important to understand what we mean by resources So let me give you an example so Resources are essentially anything you need in order to Realize your outcome. So imagine that you want to build a house The better your resources so the more money you have the more materials, but also the nicer the architect Is who builds your house the better capable this person is to to design a beautiful house The more or the better your house will look like eventually So in the definition of resources you see that this is this one's really broad resources are basically any tangible and in jet tangible feature that Enable actors to realize their goals. So features remind materials money processes people knowledge and actors contributing to the goals are also Part of these resources. So these can be individuals the Collaborations between individuals the organizations in the countries The grandfather and a godfather of resource-based theories is is Joel Barney And and I will elaborate a little bit on his theory to make you understand How important it is to take this resource perspective if you want to make a business case and make organizations better performers So by this resource-based view Nests entirely in the idea that once you invest in resources that this this thing is your Organization from your competition you will have a unique set of capabilities that will help you outperform other organizations Take soccer if you have an excellent team that works together very very well Existing of high performing individuals Chances are that you will do better in the competition and you what when you have just is a club of Sunday amateurs Well Barney In his theory says if you want to understand the resources that matter to organizations you need to distinguish three categories of them first one is Physical capital so these are all the things are on the bank account of the organization The offices the factories all the machines the materials the computers all the hardware of the organization is part of the physical capital of organizations second There Barney distinguishes Organizational capital the organizational capital is already a little bit more difficult to capture because it's more difficult to count And this is definitely not on the on the balance sheet of a company, but these are all the Systems of routines that determine how the work is done in an organization and there are two types of sub types of Organizational capital first there is structural organizational capital which are The organization strategy the HR systems the planning and control systems So these are all the systems that you that are written down in in handbooks or they are Algorithms or they are kind of visible and easy to trace So if you want to understand an organization strategy, you can go and have a look at their website And there it is you can read the strategy the mission and division of an organization Another part of organizational Capital is social organizational capital Social organizational capital is nested in the people that work in the organization. There's all their internal and external relations So people knowing other people in the organization knowing who to go to if they have a question knowing who to ask if they need something to to make To realize their day-to-day work But also relationships with customers. These are oftentimes not only contracts but a relationship with the customers also nested in the Individual relationship with one employee and a customer so these are important sources of capital Because if there's a good relationship with a customer a customer is more likely to to come back to the organization and do Business, but it's not on the balance sheet. Neither is it very well to observe. So it's a difficult resource to to capture So remember that that's important for the theory In the final set of resources are human capital and human capital is defined as all the knowledge and skills that Exists in all the employees in the organization so whereas Organizational capital and especially social organizational capital is about the group of people human capital is in essence What all the knowledge that is nested in each individual in the organization and for sure if you add all add them all together Then for example, the average workforce can be better educated or the average workforce can be more knowledgeable because they work They have a longer tenure and they work longer together So these three resources according to Barney are very important for organizations to reach to a unique set of capabilities That distinguishes one organization from their competition And the better an organization is able to to make to create a a set of capabilities that is very efficient and very Powerful, but also very unique the more the position of the organization is There to perform other organizations. So what does it look like in a model? It's like this So Barney claims that if a set of resources Together is sustainable rare non transparent and non transferable and I'll explain what those are in the moment Together this will lead to a unique capability of the organization and capability meaning being capable to make a very good performance being able to Outstand in all the performance outcomes that matter to organizations and this is what is called competitive advantage So what is meant with sustainable rare non transparent and non transferable? Sustainable means if I have a resource today, it will be there tomorrow So I can have I can be lucky. I could have money today if I invest it my money is gone So how you to make sure that you have money buildings that? Yeah, that you can build that you can rely on That's the first thing the second thing if you have a resource that is rare that's of course beneficial to the organization imagine that you're a restaurant and you have a Perfect spot, you know center of the city Historical building that is a rare resource that is difficult for other restaurants to compete with Still these are buildings money things but can also apply to to other resources Where it becomes really interesting if you if you look at resource number Quality number three and quality number four. So non transparent means that it's for Outsiders from the organization difficult to understand what is really happening So what are for example the processes that are used in those restaurants to create these delicious meals? So the final one the non transferable part That means that it is very difficult to take a resource out of the organization and put it somewhere else So for example, if I'll stay with this restaurant idea If the restaurant is well known for its atmosphere and its team culture and that's you they know all their customers and by name and that That's one of the reasons why a restaurant is really successful Well, if you take out just one person out of that organization you put them in another organization With new clients all this knowledge about clients all this working together with colleagues all these you know all these not all these Things that worked in the one context will not work in the other context. So that's what we mean by non transferable So summarized if an organization manages to create a set of resources that is sustainable rare non transparent and non transferable Only then will they have a unique set of capabilities that will contribute to creating a competitive advantage and therefore of course Realize all the outcome set metaphor organizations a closer look So where do you humor resource management compared to all these criteria for unique resources? So we distinguish physical capital Organizational capital with two elements the procedures are structural or the people that work together at the social part and human capital So what's in the minds of employees? And we have these four criteria that creates unique capabilities sustainable rare non transparent and non transferable Physical capital the money the machines the buildings sure they are here and they are hopefully also rare So that makes them a Relative unique capability however other organizations can also buy the machines also other organizations can have Similar things so sometimes if you have something entirely new for example new products There's a short while there when there's a first move at founders, but but after a while Competitors will jump up in the same thing. They think hey, this is cool. We are going to do the same thing Something similar happens with with the structural organizational capital. So you can you can have a unique strategy for your company But after a while competitors may say hey, this is an interesting strategy We can actually do exactly the same and also make money and then you also all of a sudden are facing competition in the same field so The downside of physical and structural capital organizational capital is that it is they are Transparent and they are transferable When we move to the people side of organizations who are nested in the social organizational capital a human capital we'll see that here it is More true that these are non transparent. So what is what does it make? What what an organ is it how an organization works together effectively? I used the example before about An employee who holds a very good relationship with a client. Well, this is something that is not visible And even if you if it is to some extent visible, it's again It's non transferable because you know the client the employee is what links the client to the to the organization Similar about human capital Especially the human capital so the knowledge that is that is related to processes that are Specific for one organization. So all the implicit understanding of how we work together About organizational procedures about just experience how things are done are done best This human capital is tied to the context of of organizations. It is very different to transfer to another organization Whereas for example general education like a university degree or some kinds of skills Diploma, of course that can be replaced refer to another organization But especially the human capital that is business specific is very difficult to take out of an organization and go place somewhere else so according to Barney's idea of Resources and the resource base view Social and human capital have the highest value for unique capabilities And this is because a social and organizational capital a human capital They are stored in the minds and in the behavior of people in the organization and If people leave the organization, they will take their skills and all its and their networked with them So they are lost for the organization, but also they cannot be used in the in the other organization and This is because the transfer of skills and all this and social Relations that exist within the context of this organization is really really difficult So this brings me to the end of the overview clip of part two of the book Now you know that organizational outcomes matter for making a business case So you need to understand a little bit of this business language You also need to understand the value of resources to realizing competitive advantage and the importance that people in organizations Contribute to creating a competitive advantage. So people in organizations create a unique organizational capability for a competitive advantage There's a load of research evidence for the HREM performance Relationship that can support this business case And in the chapters to come I will elaborate on those The next clip you will have a first explanation about we will talk about the social and human capital and social exchange theory