european journal of social sciences issn: 1450-2267 - EuroJournals

European Journal of Social Sciences – Volume 5, Number 3 (2007)
Derived Demand and Human Resource Management: An
Important Linkage in Organizational Strategy
Robert A. Figler
Associate Professor of Management, Department of Management
The University of Akron, Akron, OH 44325-4801
E-mail: Figler@uakron.edu
Tel: 330.972.5437
Steven R. Ash
Associate Professor of Management, Department of Management
The University of Akron, Akron, OH 44325-4801
E-mail: Ash@uakron.edu
Tel: 330.972.6429
Introduction
Business markets around the globe continue to become more dynamic, complex and uncertain. Today’s
business firms find it increasingly challenging to establish and sustain a market competitive advantage
and require that managers develop a more strategic mindset within each functional area. This has
become particularly true with regard to the increasing global context in which firms now operate. In
particular, the forces shaping and changing the knowledge, skills, and abilities (KSAs) of the firm’s
workforce are expected to play an increasingly larger role on the firm’s performance, efficiency,
productivity, and profitability (Perkins and Shortland, 2006).
Historically, the “HR” function has been one of handling the paperwork for hiring employees
and setting up their compensation and benefits. The HR folks were the ones that employees would call
to complain about a problem with their paycheck. They were also often allowed to plan the annual
company picnic – after all they were the “people” people. This will no longer suffice (Jamrog and
Overholt, 2004).
Human resource management has become one of the central factors for building and sustaining
competitive advantage (Pfeffer, 2005). Most organizations find that the systems that are used to recruit
top talent, select the best fitting candidates, train associates in the latest processes and technologies,
design work, develop team interaction, evaluate performance, and reward with appropriate
compensation systems are the very factors that determine industry leadership. Yet, one of the most
common criticisms levied against HR managers is their lack of understanding of the way the business
operates (Hammonds, 2005). In this paper, we attempt to delineate the role of HR in the organization
through an economic business lens. With this conceptual understanding, HR managers will have the
ability to participate in strategic planning for the turbulent changes which are likely in store for many
organizations.
Recently, many publications regarding HR have placed the term “strategic” in front of HR. The
idea behind strategic human resource management revolves around involving and utilizing the function
of human resource management as a participant in the formulation and positioning of the firm in its
product/service market. We argue that without a sound understanding of HR from the economic
perspective it’s strategic role can not be fully appreciated.
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