Hr Strategy ; Competitive Advantage

Strategic Human Resource Management “HR strategy, policy and practice can assist organisations to achieve competitive advantage.

Critically analyse this statement using one or more theoretical perspectives that explain the link between strategic HRM and performance outcomes. ” Abstract The focus of this paper is on the relationship between Strategic Human Resource Management (SHRM) and organisational performance outcomes, specifically sustained competitive advantage. Using the resource-based view (RBV) of the firm as an underpinning theoretical framework, this paper examines several components of

Strategic HRM including human capital (i. e. employees) capability and behaviour, human resource systems (policies and practices) and strategic fit (horizontal and vertical).

Within the context of the RBV framework, an attempt was made to explain the complexity and implications of developing human resources to meet the criteria for sustained competitive advantage in that they are valuable, rare, inimitable and non-substitutable. Because of the broad nature of this discussion, a key model of SHRM is also presented and the relevant concepts of fit and flexibility, as they relate o strategic HRM, are explored and discussed.

Introduction: Over the past two decades there has been an increasing focus on “strategic management” within organizations across the globe. This focus on strategic management has resulted in various organizational functions becoming more aware of their role in the strategic management process. Accordingly, there has been a dramatic shift in the field of human resource (HR) management as technological, economic, and social changes are causing organizations to depend more and more on human resources to accomplish their objectives (Tichy, Fombrun, & Devanna, 982).

In recent years human resource management has been integrated as the process of strategic management, through the development of a new discipline denominated strategic HRM (Wright and McMahan, 1992).

Strategic human resource management (SHRM) is defined as a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an array of cultural, structural and personnel techniques (Storey, 2001). The concept of competitive advantage emphasizes the links between the internal esources of a firm, its strategy and its performance.

It is resources that confer enduring competitive advantage to the extent they remain scarce or hard to (Barney,1991). The rise of resource-based view of the firm posits that human and organizational resources, more than physical, technical or financial resources, can provide a firm with sustained competitive advantage because they are particularly difficult to emulate (Lado et al. , 1992; Lado and Wilson, 1994; Wright and McMahon, 1992).

With the assertion that people are strategically important to organizational success,

Bailey (1993) states HR practices such as the development of selection, appraisal, training and compensation systems, to attract, identify and retain high-quality employees are critical to performance outcomes. For the purpose of this paper, the focus of the research is to examine: (1) how HR strategy, policy and practice can assist organizations to achieve competitive advantage, (2) drawing on the theoretical insights of the resource-based view, the links between strategic HRM and performance outcomes and (3) the impact and complexity of strategic fit and flexibility in both the internal and external business nvironment.

Throughout the text, an attempt is also made to provide definitions of key terms, practical examples and identification of emerging trends or issues. Defining HRM: Before one can discuss strategic human resource management, one should first define the general role of human resource management. The primary objective of the HRM function in any organisation is to ensure that its human resource management practices are effectively utilized and create value within the business by supporting and informing organisational strategy.

To achieve this, human resource professionals ndertake eight key activities including planning, sourcing and development, performance management, reward and recognition, employee engagement, communications, industrial relations and organisational development.

To simplify the definition of human resource activities, it can be viewed as including formal policies, practices and systems for managing people and influencing employee behavior, attitudes and performance (De Cieri, 2005).

Theoretical Framework: The Resource-Based View Growing acceptance of internal resources as sources of competitive advantage brought legitimacy to HR’S assertion that people are strategically important to rganisational success. HRM should ideally work to enhance the firm’s competitive position by creating superior human capital skills, experience and knowledge that contribute to firm economic value (Snell and Dean, 1992). Employing the resource- based view, HR effectiveness relates directly to firm-level outcomes, particularly when considering firm context (Wernerfelt, 1984).

In the RBV, bundles of resources, rather than the product market combinations chosen for their deployment, lie at the heart of an organisation’s competitive advantage. Under this approach, an organisation is esources that are complex, intangible and dynamic.

In the quest for talent, a firm which develops a valid selection system and has attractive HR programmes, such as higher than normal compensation packages and numerous development opportunities, can attract, select and maintain the highest quality resource pool (Wright et al. , 1994).

In addition, reward systems, communication systems, training programs and socialisation systems that encourage employees to act in the interests of the firm can be developed (Schuler and MacMillan, 1984). As identified, an HR system, defined as an organisational capability hich involves the strategic integration of the set of HR activities, functions and processes: selection, training, appraisal, promotion and compensation, carried out to attract, develop and maintain the strategic HR that allow the firm to achieve its goals (De Saa, 1999) can be an invisible asset when its embedded in the operating systems of an organisation (Itami, 1987).