Recognizing people as a vital competitive advantage is a big change from traditional business strategies. Growing evidence shows the importance of leveraging people as a competitive advantage, yet many modern organizations continue to rely on traditional strategic approaches.
Usually, these conventional strategies focus on financial metrics, market positioning, and operational efficiencies, often overlooking the human aspect. The humanistic/existential approach, based on humanistic and existential psychology, offers a transformative perspective by placing individuals at the core of strategic decisions. This discussion explores how this approach can improve processes, leadership, and overall effectiveness in an organization.
People as a Competitive Advantage
In today’s dynamic and complex business environment, leveraging people as a competitive advantage has emerged as a critical strategic priority. Organizations are increasingly recognizing that their employees are not just a resource but a pivotal element that drives innovation, productivity, and long-term success.
When we talk about competitive advantage, we mean the unique qualities and resources that enable an organization to outperform its rivals in the same industry. According to Chaharbaghi and Lynch (Sustainable competitive advantage: towards a dynamic resource-based strategy. Management Decision), it’s about having attributes that set you apart and give you an edge. Walker adds that it’s not just about having an edge today, but maintaining that advantage even as things change. Essentially, it’s about being in a strong position that makes a real difference and stands the test of time.
To achieve a competitive advantage through people, you need employees who set your organization apart from the competition. Jack Welch, the former CEO of General Electric, put it simply: the quality of your people is what will sustain your competitive edge in the future.
There are four key criteria for resources to generate a sustained competitive advantage: Value, Rarity, Imperfect imitability, and non-substitutability (Jay Barney: Firm resources and sustained competitive advantage). In the past, financial capital and technology met these criteria, but today, these resources can be easily acquired by anyone with enough money. As a result, more organizations are discovering that their lasting competitive edge lies in their human capital—the knowledge, experience, skills, and energy of their people.
Human capital refers to the unique abilities and contributions of employees that can’t be easily replicated or substituted. This includes their creativity, problem-solving skills, and ability to innovate. These qualities are invaluable in creating products, services, and processes that stand out in the market.
Human Capital Theory suggests that the true market value of human potential can only be realized when employees work together. However, modern employees are driven by engaging work that offers them the freedom to shape their roles and live their chosen lifestyles, as well as the expectation that their jobs will provide self-respect, non-material rewards, and ample opportunities for personal growth. While managers focus on efficiency, productivity, and the bottom line, employees prioritize growth, satisfaction, and contribution. This difference in priorities highlights the significant challenge for organizations: finding ways to motivate employees to cooperate and align their personal goals with the organization’s objectives to achieve a competitive advantage.
The conventional view of strategy
The term strategy originates from the Greek word “strategos,” meaning general. In organizational contexts, this military metaphor suggests a fundamental competition for survival. Strategy in business has a dual meaning: it refers to the commercial logic that explains why a firm can achieve a competitive advantage and encompasses the actions the organization takes to position itself and conduct the competitive battle. This duality highlights the central role of strategy in achieving and maintaining a competitive advantage.
A strategy is the outcome of strategic management, a process primarily driven by managerial decisions and actions. Traditionally, strategic management follows a continuous process depicted in various models (see below figure), which typically begins with an analysis of the external and internal environment.
This analysis is crucial for understanding the opportunities and threats facing the organization, as well as its strengths and weaknesses). Following environmental analysis, strategic management focuses on defining the organization’s direction, encompassing its vision, mission, and objectives. These elements serve as a roadmap guiding the organization towards its desired future state.
The strategy itself acts as the vehicle for achieving these organizational objectives, outlining the specific plans and actions to be undertaken. Once the strategic plan is developed, the next phase involves its implementation, where the strategies are put into action to realize the organization’s goals. Strategic control then plays a crucial role in assessing the effectiveness of both the strategic plan and its implementation, ensuring adjustments can be made as needed to stay on course and achieve desired outcomes).
A humanistic perspective on strategy
Senior managers need to go beyond traditional focuses like strategy, structure, and systems, and instead build their approach on purpose, process, and people. They emphasize that purpose, not strategy, is the core reason organizations exist.
Strategy revolves around three main components: the strategic process, leadership, and organizational effectiveness. Using these three components, we can explore how humanistic and existential principles can be applied to strategy.
Values before strategy
Strategic processes involve both planning and implementing strategies. Organizations should start with a core set of values that inspire and empower their employees. These values are foundational, guiding every decision and action within the organization. By fostering a values-driven approach, companies can unlock the full potential of their people, enhancing motivation, creativity, and overall effectiveness. This approach not only shapes strategic planning but also ensures that organizational decisions resonate with the broader purpose and goals of the company.
The first step in formulating strategy is establishing the organization’s core values and beliefs. These foundational principles guide the development of policies and practices within the company. As these policies are implemented, they help build the organization’s core competencies—unique strengths and capabilities that can shift the competitive landscape in its industry.
Once core competencies are established, the next step involves crafting a strategy that aligns with these strengths and positions the organization effectively in the market. Senior management plays a crucial role in overseeing this entire process, ensuring that the organization’s values are upheld and that strategies are continually adapted to meet changing circumstances and goals. This ongoing management ensures that the organization remains true to its principles while pursuing its strategic objectives.
The concept of values holds significant importance in humanistic and existential psychology, where individuals derive meaning in life by committing to their values. Abraham Maslow, a key figure in humanistic psychology, highlighted that pursuing values is a fundamental aspect of self-actualization.
Similarly, Viktor Frankl, the founder of logotherapy, viewed values as crucial for finding meaning, describing them as ‘meaning universals’ that resonate across different people. According to Frankl, meaning can be discovered through creative endeavors, personal experiences, and the attitudes we adopt in challenging situations. In organizational contexts, values serve as the fundamental reasons for a corporation’s existence and provide a sense of purpose that guides and motivates everyone within the organization. Thus, organizational values not only influence strategic processes and corporate strategy but also play a pivotal role in establishing the sense of purpose essential for modern organizations, echoing humanistic and existential beliefs about finding meaning through values.
Don’t manage. Lead!
Leadership is about the actions individuals take to guide an organization. Specifically, it involves influencing and supporting others to work enthusiastically towards achieving goals. Leaders play a crucial role in helping organizations gain a competitive advantage through their people. This role comes with various challenges and opportunities, as leaders must motivate and inspire their teams, create a positive work environment, and align everyone’s efforts with the organization’s objectives. Effective leadership is key to unlocking the potential of employees and driving the organization toward success.
One of the biggest challenges for leaders today is creating a sense of purpose within the organization. To achieve this, leaders need to focus on several key areas: instilling a sense of purpose in employees, fostering self-determination, building a sense of impact, enhancing feelings of competence, and developing shared values. These efforts are crucial for building a “collective system of meaning”.
Integrated HRM
Hope Hailey (A chameleon function? HRM in the 90’s) introduced the idea of “Integrated HRM,” where managing people as a competitive advantage becomes a core part of mainstream management thinking. This means that HRM should be seamlessly integrated into overall strategy, with HR professionals acting as internal consultants who offer specialized advice. This approach can be a model for applying humanistic and existential principles to strategy. It requires all managers to understand these principles well enough to create an environment that supports individual growth and helps employees find meaning in their work. HR managers, as experts in human behavior and processes, should guide and support this effort by providing the necessary services and advice. By doing so, organizations can enhance their effectiveness and fully leverage their people’s potential as a competitive advantage.
Using people as the primary competitive advantage, means that people management should play a central role in strategy. However, this often doesn’t happen, which is one of the criticisms of traditional strategy approaches. To truly achieve a people-based competitive advantage, a different strategy might be needed. One alternative is to apply principles from humanistic and existential psychology to strategy. These principles can enhance strategic processes, leadership, and organizational effectiveness, making them more aligned with the needs and potential of the people within the organization.
In most corporations today, people no longer know – or even care – what or why their companies are. In such an environment, leaders have an urgent role to play. Obviously, they must retain control over the processes that frame the company’s strategic priorities. But strategies can engender strong, enduring emotional attachments only when they are embedded in a broader organizational purpose. This means creating an organization with which members can identify, in which they share a sense of pride, and to which they are willing to commit. In short, senior managers must convert the contractual employees of an economic entity into committed members of a purposeful organization. – (Changing the role of top management: beyond strategy to purpose. Harvard Business Review)
List of references:
Bartlett, C.A. & Ghoshal, S. (1994). Changing the role of top management: beyond strategy to purpose. Harvard Business Review.
Drucker, P.F. (2002). They’re not employees, they’re people. Harvard Business Review
Maslow, A.H. (1969). A theory of human motivation.
Morin, W.J. (1994). HR as director of people strategy.
O’Reilly, C.A. & Pfeffer, J. (2000). Hidden value: how great companies achieve extraordinary results with ordinary people.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management.
Chaharbaghi, K. & Lynch, R. (1999). Sustainable competitive advantage: towards a dynamic resource-based strategy
