With the identification of the role played by the employees in the growth and development of the knowledge-based industry, the human resources of the company have become a strategic asset to the company. Human resources have immense power in retaining the customers. With the recognition of the value of the human resources in the contribution to the business profitability, human resource management has become a strategic partner in business management.

Strategy planning aims to attain and retain the competitive advantage the firm can enjoy. Jay Barney’s VRIO analysis (Value, Rare, Imitable, and Organisation) helps to analyse how successful a resource is in adding profitability of the concern. A resource is valuable if it can add to the profitability of a concern. With dependency on human resources increasing in the knowledge industry, identification of the key skills of the organisation is important in formulating decisions which aids in retaining those who have a huge potential for growth and development. They help in creating a better value to the prices charged on the customers. Rarity denotes whether the resource is easily available to the competitors. If the competitors possess the employees with the similar skill they fail to outwit the competition. A rare skill advantageous to the company has to be retained at any cost. Similarly if the skills of the employees can be imitated but is rare they can be of help only for a shorter duration. But if the skill is rare and is not easily imitable the company can exploit it to reap huge profits. The identified human resources who are rare and tough to be imitated can be of value only when the company is capable of utilising them to their advantage. The VRIO analysis helps to identify the strengths, weaknesses, threats and opportunities in the human resources for strategic planning.

If a human skill in the organisation is valuable, rare, costly to imitate and the organisation understands and exploits it, it becomes a core competency area in the organisation. Identification of the core competencies helps in planning the allocation of the company’s resources in a manner that it adds to the profitability of the concern. As the companies have become more dependent on the human resources for their wealth maximisation, effective utilisation of the resources to those channels that can augment the returns must be identified and developed further. Training and developmental programs, remuneration, motivational factors can be redesigned to make use of these resources further. Human resource audit is conducted to bridge the gap between the cost of investing in human resources and the profitability they add to the entity. Human resource audit also ensures effective utilisation, maximum efficiency and quality of the resources, reduction of unnecessary costs, and flexibility and advancement of these resources.

Identification of the core competencies and recognition of their contribution aids the human resource department in drafting long term plans to retain the key talents of the organisation. Thus, the human resource management plays the role of a strategic partner in the organisation. As Boeing CEO James McNerney stated, “I start with people’s growth, my own included. I don’t start with the company’s strategy or products. I start with people’s growth because I believe that if the people who are running and participating in a company grow, then the company’s growth will in many respects take care of itself”.