The Theory Of Strategic Human Resource Management

Published Date: 02 Nov 2017

Human resource management is a system, which concern to manage organization work force (Bateman & Zeithaml, 1993:346). To manage organization work force HRM use HR activities. These activates include: strategic HRM; human capital management; knowledge management; organization development; resourcing (human resource planning, recruitment and selection, and talent management); performance management; learning and development; reward management, employee relations and employee well-being. These above activities cover the whole organizational work. This mean HRM is an important element for every organization. So organizations which have proper HRM systems are able to improve firm’s performance and overall success of any organisation (Guest, 1997; Schuler and Jackson, 2005; 2007).

Our main concern is SHRM. Boxall, Purcell, and Wright (2007) separate HRM into three major subfields such as micro HRM (MHRM), strategic HRM (SHRM), and international HRM (IHRM). They divided micro HRM into two subfields. The first subfield relates to manage individuals and small groups. To manage individuals and small groups firm can use many transactional or administrative HRM activities like; recruitment, selection, induction, training and development or learning, performance management, motivation, compensation, commitment, quality performance, etc. (Inynag, 2008a). The second subfield of micro HRM is to manage organizational work and employee voice. Employee vice is include union-management in HRM. The second subfield of HRM is Strategic HRM. SHRM covers the implementation of HR strategies with business units and companies and tries to measure the impacts of SHRM strategies on performance. The final HRM subfield is international HRM. This covers HRM strategies across national boundaries. According to the above description HRM is the root of all organization. It will influence all activities from employee recruitment to employee redundancy. In summary HRM is always in a battle to justify their position in organization (Ducker, 1954; Stewart; 1996).

Among this three HRM subfield our main concern is about SHRM. Armstrong (2004:105) describes SHRM as a combination of human resource management and strategic management of the firm. According to the above introduction strategic human resource management treat human resource as a core organizational resource. This means among the all organizational assets human capital is the most important asset. Boxall et al., (2007) describe organization important asset is the people of any business who walk out the door at the end of each day. Because of this reason organizations should give careful consideration to manage their work force. It is important to manage human resource accurately. The reason is human resource is the key element of generating competitive advantage for any organization (Boxall and Purcell 2003; Pfeffer1998; Gratton et al. 2000).

The above paragraph talks about the relationship between human resource and competitive advantage. Competitive advantage means the activities which relate to maximise organization performance and position compare to its competitors. Work of Michael Porter (1980; 1985) in competitive advantage illustrates three potential strategies which lead to generate competitive advantage in business. First element is cost leadership, which means an organisation can produce product or service less than its competitors; the first company is face the cost leadership in the market. The second factor is innovation; this means creating new and unique product or services compare to organization competitors. The final factor is quality. Good quality products and services are act as barriers for new entrances as well as current market competitors.

Further to gain organization competitive advantage, organizations should manage their resource perfectly. When we consider the resource, there are three types of resources, which lead to generate competitive advantage (Barney, 1991). The first resource is physical capital resources. This includes firm’s plant, equipment, and finance. Next resource is Organizational capital, this consists firm’s structure, planning, controlling, coordinating, and HR systems. Final resource is human capital. This includes employee skills, and intelligence.

Above paragraph illustrates about three main resources. Further to generate competitive advantage through above three resources; these three resources should carry following four characteristics such as; rare, valuable, inimitable and non-substitutable. Snell, Youndt & Wright (1996) mentation human resource is the only resource which has above four qualities, because human resource is unique, incomparable, and difficult to imitate in the short term (Barney, 1991). Organization competition was increased by technological development, globalization, and other internal and external environment factors. Organizational work force should understand these changes and they should develop their strategies to overcome these barriers, because organization those who can understand and face these changes are able to generate competitive advantage for the organization (Boxall et al., 2007, p. 88). This means competitive advantage can be create by proper link between human resource with external environment and the organization’s strategies (Beaumont, 1993).

The below paragraphs illustrates the relationship between above four resource characteristics and human resource to generate competitive advantage. The first element is value. Value of a firm’s human resources can be generating through cost reduction or differentiation. Firms’ short term goal is to manage people (among other resources) to generate cost-effective and deliver higher return on investment (Boxall, 2007). Above statement proof human resource function is the only function which can add value, so firms those who develop their human resource can achieve competitive advantage (Hamel & Prahalad (1989). To gain competitive advantage through employees, their capabilities are important. These capabilities are include skills, knowledge, attributes, and values (Selmer & Chiu, 2004). These capabilities were developed by HR functions like training and development, feedback, and reward (Kochanski, 1996).

During the long term, organizations concern is to build competitive advantage through knowledge, training and development and innovation. To achieve these objectives employee’s capabilities are important. These capabilities include skills, knowledge, attributes, and values (Selmer & Chiu, 2004). These capabilities were developed by HR functions like training and development, feedback, and reward (Kochanski, 1996). According to Guest and Conway (2002), effective employer and employee relation was associate with psychological contracts. Psychological contracts will lead to generate more positive workplace outcomes.

Above paragraphs discuss about SHRM and competitive advantage theories. When it comes in practical it is very complicated. To understand this we will see how SHRM work in small organization. To increase small organizational profit these organizations provide less training to their work force. The reason for this is to reduce cost. Arthur and Hendry (1990) and Storey (1999) explain this as an ‘Economies of training’, because less training will increase labour turnover.

Above paragraph illustrates the result of lack of training provided by small business. To avoid this negative impact small and medium organization should develop and improve their HRM issues like training and development (learning). The reason for this development is, human resource is the core competitive advantage factor of any organization (Huiban and Bouhsina, 1998). As well as these organizations can use on the job or off the job training and modern management approaches like; JIT and TQM (Deshpande and Golhar, 1994; Wagar, 1998; Van der Bij, Broekhuis, and Gieskes, 1999). These management approaches are mainly strategic choice, which relate to strategic human resource management (SHRM).

The value of a firm’s human resources is a necessary for the organization success, but it is really hard to generate competitive advantage in long term. The reason for this is in the long term same characteristic of human resources can found in many competing firms. To maintain long term competitive advantage HR executive should examine the methods to develop and exploit rare characteristics of the firm’s human resources to gain competitive advantage.

To understand the rare characteristic of a firm’s human resources, we will examine the Google Company strategies. Google holds the passion of dominant search engine in the world, with 65 present of the total search market (Hitwise). To gain competitive advantage, Google Company has developed their infrastructure to generate a fast and efficient search engine. They not only develop their infrastructure they also develop there are own servers, storage systems, bandwidth and hardware that supports the fastest search on the web. These new innovation is a long term investment for Google. These investment act as barrier to its competitors like Bing, because new and current competitors need high capital or knowledge to compete Google. These speed search engine help to create and increase its current and new users. The problem is in long term Google competitors can copy their strategy, so Google is not only depend their fast search; they also develop tools and services like; Google toolbar, Google Maps, Google Earth and Google News. These toolbars facilitates users to conduct a search without leaving their homepage. Services such as Google Maps and Google News provide another type of support on top of the general search engine.

Next element is Imitability. The vale and rare characteristics can generate firm’s human resources competitive advantage in short term. In the long term other firms can imitate these characteristics, then in the long time these characteristic unable to generate competitive advantage. This is the point where HR are executive should develop their human resource that cannot easily be imitated by competitors. For the above purpose organization can use employee skills like; unique talents, knowledge, flexibility, higher productivity and high performance Porter (1985). Among these qualities employees’ unique talents and knowledge is the most important fundamentals which contribute organization success Chiavenato (2001). Apart from the employee skills and attitudes, organization’s competitive advantage depends on the organization factors like; organizational unique history and culture. These organizational unique qualities are hard to imitate.

Imitability characteristic relate to the SHRM resource-based approach. This approach focuses on key factors relate to employee behaviours. This approach believes employee behaviours are depending on core skills and routines, rationality across skills, and uniqueness. Human resource practices and policies can generate a sustained competitive advantage for firm (Wei, 2006). To generate competitive advantage through HR policies and practices these strategies should be unique, properly blend with business, concern about the employee capabilities and organizational culture, which are difficult to imitate. One of the most important factors of competitive advantage is, the ability to differentiate what a business supplies to its customers from its competitors.

To understand the human resource imitability, we will discuss about the Apple organization. Apple's secret weapon in generating competitive advantage is there brand name, good quality, and product features. Apple is the leading brand in electronic items. As an example many iPad and Mac computers buyers are first-time Apple customers. The reason for this is Apple's products quality and features. Once customers buy one Apple’s product, like an iPad, Apple's other products like the iPhone or a laptop computer become a natural. Two years ago that wasn't the case. Apple had Mac customers. Apple had iPod customers. Apple had iPhone customers. But now, with each advance iPhone's development and the iPad's introduction, Apple moves closer to market power. The strength of Apple is the difference-maker, innovation and quality. Apple gains millions of more consumers in every passing quarter. These unique qualities of Apple act as barriers for current and new competitors.

When we concern about the organization short term and long term objectives, we can use SHRM approach of best-practice to achieve these objectives. This approach mainly concern is to generate ideal set of best practices which increase organization performs. Pfeiffer’s revised practices (1998) explain that the organization putting employee first be able to generate more profit. Organizational employee always expected employment security, discriminating hiring, training and development, communication, self-managed teams and team working, reduce status differentials and pay differentials from the organization. According to the Schlesinger and Zornitsky (1991) highlight satisfy employee are provide more customer satisfaction than others. Employee attitudes such as job satisfaction were related to measures of organizational performance Tornow and Wiley (1991).

When we discuss about the human capital competitive advantage, Flamholtz (1974) introduce a very important theory called HR accounting. HR accounting mainly concern about creating value for the organization through human resources, to achieve this organization needs proper HR planning; proper responses to the business environment; matching human resources with strategic or organisational conditions; and the broader scope of HR strategies.

According to the above decision generating competitive advantage is a difficult task. Though it is difficult organization should competes it. The main tool which helps to generate competitive advantage in an organization standard HR strategies. Budhwar and Sparrow (2002) propose four HR strategies to achieve above aim. The first HR strategy is ‘talent acquisition’. This strategy is to attract best human talent from external sources. To attract these candidates organisation has to work with recruitment, selection, training and development processes. The second strategy is ‘effective resource allocation’ which means maximises the use of existing human resources by always having the right person in the right place at the right time. The third strategy is ‘talent improvement’ strategy. This helps to increase the talents of existing employees by continuously learning and development, recognition and reward. Final strategy is ‘cost reduction’ HR strategy, which relates to reduces personnel costs to the lowest possible level. This was affected by job design and organization strategies.

This essay explains the relationship between SHRM and competitive advantage and show how strategic human resource management can generate competitive advantage. As explained above the key role of SHRM framework is to help organisations to develop and generate source of competitive advantage. Further this essay explains the increasing importance of SHRM which can generate competitive advantage. This framework will help HR representatives and managers to estimate all the explained functions against value, rareness, imitability and organisation. These are factors that an organisation must perform to maintain competitive advantage or to provide temporary competitive advantage. Further the SHRM and its relationship with competitive advantage demonstrate the ability of organisations in achieving and sustaining competitive advantage.

SELF-ASSESSMENT FORM

Extent to which the essay addresses the actual question

The essay consists of identifying different theories related to HRM and SHRM. Further it defines the relationship between SHRM and comparative advantage. Finally it explains how SHRM can generate and sustain comparative advantage in an organisation.

Extent to which the essay demonstrates wide reading and familiarity with the literature

This essay comprises many readings for HRM, SHRM, and comparative advantage strategies in organisations. Further the literature covers human resource and resource based view of organisations and HR functions which helps to explain how SHRM helps to sustain comparative advantage in an organisation.

Extent to which the essay demonstrates analytical approach to the question and theory

In order to explain how SHRM can generate and sustain comparative advantage in an organisation I have break problem down into the three parts. First explain the HRM and SHRM, then the relationship between SHRM and comparative advantage and finally explains how SHRM helps to sustain comparative advantage in an organisation.

Extent to which arguments/analysis are supported with evidence

In this essay all arguments and analysis are supported by evidence. The books, articles, and research material that include in the reference section provide this evidence to back up the important points.

Extent to which main points are illustrated with topical examples

Managed to find relevant and topical examples both to illustrate the learning, in HRM and SHRM area and sustainability of comparative advantage in a organisation. For an example the effect of HRM in an organisation which helps to form and develop the organisation.

Is the answer in a well structured essay format with good punctuation, spelling and grammar

The essay is in a well-structured format with good punctuation, spelling and grammar. Also the essay is in a Well presented manner which enables the readers to understand the answer to the question.

Has proper referencing in Harvard format been provided (both in text and at the end of the essay)

Harvard format referencing is the standard way which has been used in this essay to provide this evidence, allowing anyone reading the essay to quickly trace the original source.

What changes were made following self-assessment

Following self-assessment, manage to represent the reference style in standard Harvard format. Also double check the spelling and grammar.