Nonhuman Resources

Nonhuman resources are physical resources that distinguish one organization from another. Boeing and IBM both have sustained competitive advantages but have different physical resources. Physical resources include plant and equipment, distribution networks, proximity of supplies, availability of a raw material, land, and labor.

Companies with superior nonhuman resources may not have a sustained competitive advantage without also having superior human resources. Likewise, a company with strong human resources may not be able to take advantage of windows of opportunity unless it also has strong physical resources. An Ohio-based company had a 30-year history of sustained competitive advantage on R&D projects that were won through competitive bidding. As times changed however, senior management saw that the potential for megaprofits now lay in production. Unfortunately, in order to acquire the resources needed for physical production, the organization diluted some of its technical resources. The firm learned a hard lesson in that the management of human resources is not the same as the management of nonhuman resources. The firm also had to reformulate its project management methodology to account for manufacturing operations.

Firms that endeavor to develop superior manufacturing are faced with two critical issues. First, how reliable are the suppliers? Do the suppliers maintain quality standards? Are the suppliers cost effective? The second concern, and perhaps the more serious of the two, is the ability to cut costs quickly and efficiently to remain competitive. This usually leads to some form of vertical integration.

Organizational Resources

Organizational resources are the glue that holds all of the other resources together. Organizational resources include the organizational structure, the project office, the formal (and sometimes informal) reporting structure, the planning system, the scheduling system, the control system, and the supporting policies and procedures. Decentralization can create havoc in large firms where each strategic business unit (SBU), functional unit, and operating division can have its own policies, procedures, rules, and guidelines. Multiple project management methodologies can cause serious problems if resources are shared between SBUs.

Financial Resources

Financial resources are the firm's borrowing capability, credit lines, credit rating, ability to generate cash, and relationship with investment bankers. Companies with quality credit ratings can borrow money at a lower rate than companies with nonquality ratings. Companies must maintain a proper balance between equity and credit markets when raising funds. A firm with strong, continuous cash flow may be able to fund growth projects out of cash flow rather than through borrowing. This is the usual financial-growth strategy for a small firm.

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