Rainier Storm 0827405 Advanced Human Resource Management

Strategic Human Resource Management (SHRM) has been criticised and it has been said

that Human Resource Management (HRM) Practices have no real impact on organisational

outcomes such as performance, quality and profitability. The SHRM view that employees are

resources and in fact might actually be the only real source of sustainable competitive

advantage has also been seen as outrageous. The aim of this essay is to discuss why

SHRM practices and policies integrated with business strategy might in fact help

organisations to achieve its strategic goals. Firstly it will discuss how SHRM can fit in with

business strategies to help organisations achieve goals. The essay will then look at High

performance Work Systems (HPWS) and the outcome certain practices associated with

HPWS might have on organisational outcomes. Finally the essay will further discuss various

other HRM practices such as recruitment, retention strategies and training and Development

that if integrated and implemented with business strategies might contribute to the success

of organisations.

The competitive global economy of the world has brought various challenges for

organisations to deal with. These challenges include issues such as increased demand for

sustainable and innovative products and increase in quality of these service and products.

These new issues facing organisations also seem to have made the traditional concept of

strategy relying on technology, manufacturing plants and access to capital obsolete.

According to Feng-Hui, Tzai-Zang, & Wann-Yin (2010) there is no real consensus of what

strategy is but a widely accepted definition is that strategy is a deliberate set of actions to

achieve competitive advantage, and giving coherent and direction to the organisation.

In the traditional sense these strategies has been classified by Porter (1985) as cited in

Feng-Hui et al (2010) to be generic strategies and they are cost leadership, focus and

differentiation. To achieve these strategies companies might have taken actions such as

obtaining new manufacturing machinery that has lower running cost, more up time and less

break downs to achieve cost leadership strategies. In order to achieve a focus or strategic
Rainier Storm 0827405 Advanced Human Resource Management

scope strategy organisations might also obtain customized machines that can produce

certain specialised products that they can untimely charge a premium for. But with

globalisation these manufacturing technologies has become widely available and the ease of

copying the products of competitors has increased significantly. Even an organisation such

as Apple with revolutionary products such as the IPad has its products copied and supplied

to the consumer market by competitors at a reduced cost only weeks after the new product

is launched.

These primitive resources seems to have lost their ability to create sustainable competitive

advantages and firms now need more than just deep pockets and the best manufacturing

plants to be competitive. In the search for new sources of sustainable competitive advantage

Human Resource Management (HRM) aligned and integrated with business strategy has

been identify as a valuable source that can help organisations realise competitive advantage

in the market place.

SHRM has moved traditional HRM from just being perceived of being a tool to deal with staff

functions to being a strategic partner within various departments of organisations such as

marketing, finance and accounting (Feng-Hui, Tzai-Zang, & Wann-Yih, 2010). The

importance and higher levels of performance attached to the role of SHRM practices

strategically integrated with business strategy has been verified by both scholars and

organisations (Thompson, M., & Heron, P. 2005).

To achieve any of the generic strategies as described by Porters (1995) as cited in Feng-

Hui et al (2010) and actually create sustainable competitive advantages for the organisation

studies has proven that the integration of HRM practices with business strategies are vital.

An organisation that has implemented a cost leadership strategy and plans to achieve this

by investing in new machinery and re-engineer production processes has to realise that

their success alone does not rest on the newest technology but also on the capabilities of
Rainier Storm 0827405 Advanced Human Resource Management

their employees. These machines need to be operated, maintained and optimized by

employees to ultimately be profitable and productive.

Firms implementing a narrow competitive scope strategy within an industry and want to

differentiate their products by quality and design can also not rely on their machinery and

only a selected few designers. These firms require innovative and flexible employees that

can compete and react to increase innovation and creativity other firms from around the

world are bringing to the competition table.

According to Wernerfelt, B (1984) a firm’s resources can be defines as those tangible and

intangible assets which are tied semi permanently to the firm. Examples of these “resources”

are machinery, efficient procedures and capital. These resources however are not

sustainable because they can easily be imitated or bought by competitors putting firms at a

competitive disadvantage who has spend many years and capital to create these resources.

For an organisation to achieve sustainable competitive advantage in the marketplace it

requires resources that are unique to the company and is not being used by other

organisations for the implementation of strategies. The Resource Based View (RBV)

perspective of SHRM views employees as internal resources that can provide the required

sustainable competitive advantages. These human resources have knowledge that cannot

easily be replicated thus adding value to the organisation assisting organisations to compete

and react in a dynamic business environment (Beltran-Martin, Roca-Puig, Escrig-Tena, &

Bou-Llusar, 2009).

Unlike resources such as machinery that can be copied the “human capital” resource if

managed and developed accordingly can become a source of sustainable competitive

advantage. This is because when managed and developed accordingly and in alignment
Rainier Storm 0827405 Advanced Human Resource Management

with business strategies the human capital pool of a firm can become rare, valuable,

inimitable and non substitutable and it is these characteristics that make employees a vital

resource for competing in the new economy (Wright, P., Dunford, B., & Snell, S. 2001).

Employees with certain skills, knowledge and capabilities are resources because they add

value to a firm by being able to adapt to market trends and being innovative with products

ideas. Wright et al. (1994) indicates that these capabilities might be very rare in the human

capital pool of an industry making it sought after by various organisations increasing their

value. According to Wright et al. (1994) human capital is derived from the skill and

competency level of employees and the assumption that skills and capabilities are normally

distributed throughout the population and this means that high quality and ability employees

are rare.

The skills, knowledge and capabilities of the rare employees cannot be bought or easily

recreated making it inimitable adding even more value to a firm that does employee these

employees. Wright et al (1994) indicates that these quality employees and their abilities

might be imperfectly imitable. This is due to the presence of certain factors that helps form

these employees and their abilities such as historical conditions, casual ambiguity and social

complexity.

These employees and their abilities are also very difficult to substitute and cannot be

replaced by hiring and training any random employees thinking that they will deliver exactly

those same capabilities. According to Wright et al (1994) one great advantage of human

resources is the fact that no two people are exactly the same. This make human resources a

heterogeneous resource and capable of sustaining competitive advantage because other

organisation can’t develop employees to be exactly the same as those of leading

competitors.
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Huselid (1995) established that HR policies and practices referred to as High HPWS has a

positive effect on the outcomes and financial result of organisations. HPWS has also gone

by the name of high involvement systems because these HR policies and practices fosters

an working environment where employees are more involved and has more responsibilities

in regards to their tasks. According to Bohlander & Snell (2004) HPWS maximizes employee

knowledge, skills, commitment and flexibility. The maximising of these skills, fostering

commitment and creating flexibility help create a sustained competitive advantage for firms

in the long run.

More involvement means that employees have the increased opportunity to participate in

decision making (Barnes, 2001). By empowering employees through higher involvement

practices the organisation might insure the process of continuous process improvement. The

process of continuous process improvement can have a direct effect on organisational

outcomes such as productivity, quality and service delivery (Wright, 2000).These outcomes

are achieved because employees are encouraged to use their own expert knowledge of

processes, employees are able to take corrective actions immediately and also employee

involvement creates a feeling of belonging to the company and this increases morale of

employee. In the end a happy worker is more likely to be a productive worker that has

increased commitment towards the organisation.

Frank (1993) as cited in Jafri (2010) identifies organisational commitment as important

because it might help predict certain variables such as absenteeism and performance. Being

able to accurately predict these factors can help an organisation to more accurately develop

strategies or new projects because they are in a better position to predict what the time

period might be for a proposed project and even if their employees are able to deliver the

performance required. According to Jafri (2010) employees with affective commitment

toward the organisation are deeply engaged with organisations and that these people show
Rainier Storm 0827405 Advanced Human Resource Management

better performance and also come up with more innovative ideas that are becoming more of

a requirement to gain sustainable competitive advantages within the market place.

The process of innovation that is required by organisations to be competitive in the new

economy is also closely linked to employee commitment. According to Frank (1993) as cited

in Jafri (2010) to achieve innovation certain action are required, these actions might included

employees looking for new ways of doing things, learning from others and also challenging

current expectations and ultimately strives to exceeds those expectation. He goes on to

explain that a committed workforce has an active curiosity and willingness to challenge the

status quo and the eagerness to experiment with new methods and strategies. This can be

because HRM practices encourage experimenting with new ideas and give employees more

freedom in the decision making process of projects and work tasks.

Some more advantages of a committed workforce might include a reduction in staff turnover

because employees are more satisfied with their workplace and have a sense of belonging

to an organisation that values them because of HRM practices that might included

favourable compensation and benefits and also good work/life balance schemes that

employees can make use of. A committed workforce with the possible capability to deliver

innovative products and services can also help the organisation achieve a greater level of

flexibility that is required to compete in the ever changing business environment.

The final outcome of implementing HPWS according to Huselid’s (1995) might be an

increased level of flexibility for the organisation. To be able to better discuss the potential

advantages we first have to identify what is meant with flexibility of a firm. Because HPWS

and the RBV theories of SHRM are directly linked to the human factor of organisations we

will use the term labour flexibility to determine what is meant by the organisational flexibility.

According to Berg & Velde (2005) the term labour flexibility implies that the internal

workforce of an organisation is capable of performing various different tasks under diverse

Rainier Storm 0827405 Advanced Human Resource Management

circumstances. The researchers build on this definition by adding that the cost and time

needed to mobilise employees into new tasks are low and this can also be considered as

possible advantages of labour flexibility to the firm.

One might consider that a reason SHRM practices can create a source of flexibility for a firm

is partly due to the fact that SHRM in itself is flexible. According to (Bhattacharya, Gibson, &

Doty, 2005) the flexibility of HRM practices is the extent to which an organisation’s HRM

practices can be adapted and applied across different situations or across multiple units of

an organisation. This adaptability and flexibility ability of employees and organisation as a

unit can well be true due to the fact that if one considers the configurational approach to

SHRM practices that is customized to suit specific firm strategies, internal practices and

resources finally achieving both vertical and horizontal fit it is highly likely that flexibility can

be a outcome for organisations (Pardo & Perlines, 2008)

As seen HPWS might have various positive outcomes for organisations such as commitment

and flexibility with each outcome having various possible positive impacts on business

performance. But to achieve HPWS the process has to consist of various HRM practices that

is strategically chosen and implemented with organisational strategy. The essay will now

look at some HRM practices that are bundled together in alignment with organisational

strategies to achieve the desired results or business strategies such as cost leadership or

innovation. MacDuffie (1995) as cited in (Gooderham, Parry, & Ringdal, 2008) describes the

adoption of an effective combination of HRM practices as “bundles” of HRM practices and

also mentioned that these bundles are central to the configurational perspective of SHRM

and strategic fit with business strategy.

Strategic recruitment and retention strategies can equip a firm with human capital resources

and help organisations to retain these employees so that they can contribute to the well
Rainier Storm 0827405 Advanced Human Resource Management

being of the organisation in the long term. These recruitment and retention strategies might

include work/life balance schemes, career development opportunities and remuneration

strategies that potential and current employees can find favourable. Cappelli (2000)

indicates that the recruitment and retention of top performing human resources do impact on

organisational performance because turnover alone poses high replacement costs,

decreases employee morale and the organisation risks the chance of losing valuable

knowledge possessed by employees to competing organisations. Acquiring these talents

and retaining them can ultimately lead to firms being innovative, gaining commitment form

employees and become flexible in a market place because they retain and develop these

employee capabilities.

Training and development can play a vital role helping organisations obtaining their goals.

According to Aguinis & Kraiger (2009) training refers to a systematic approach to learning

and development to improve individual, team, and organizational effectiveness. If the

systematic approach is strategically integrated with organisational strategies organisations

might be able to developed employees so that the organisational strategies are achieved.

This is because when the strategy has identify for example that the organisation will be

starting a new product line for a niche market, HR training practices can be designed and

integrated with the strategy to achieve this goal by training employees on new design

processes, foreign markets and new technologies.

Through training and development programs that are aligned with business and

organisational strategies a workforce can be equiped with skills and knowledge to help the

organisation acheive its strategic goals. Employees can become better problem solvers and

this can lead to time and cost savings. Aguinis & Kraiger (2009) also found that certain types

of training such as on-the-job were positively related to effectiveness and profitability.

Rainier Storm 0827405 Advanced Human Resource Management

This is due to the fact that employees learn from each other and the skill level of the firm

increases and as previously mentioned workers become multi-skilled making organisations

flexibility in its ability to respond to changes and demands. Training together and learning

from other employees can increase the efficiency of team leading to possible innovation and

better problem solving. Training as part of career development can also be very beneficial to

organisational outcomes. Employees who feel valued by being presented for further career

development might foster a higher level of commitment to the firm. This as previously

discussed means organisations may retain valuable employees and not lose knowledge to

competitors.

In conclusion this essay has looked at how HRM and the various practices such as

recruitment can be integrated into business strategies to potentially create sources op

sustainable competitive advantaged in the ever changing business environment of the new

economy. HPWS consisting of “Bundles” of HRM practices indicates that some valuable

outcomes with long-term strategic benefits might be achieved if the correct fit is achieved

with the strategic direction of an organisation. These outcomes might include a firm fostering

better commitment from employees which in itself might have various positive outcomes

such as more innovative employees and reduced turnover. Flexibility might also be achieved

because employees are multi skilled and can be re-assigned to various assignment and

projects in less time and at a reduced cost to the organisation. The employees can also

adapt to market demands multi-skilled. Other HRM practices such as recruitment, retention

and training also seem to play a big role in acquiring, keeping and developing talent within

an organisation so that these human resources can strategically be used to obtain

organisational goals.
Rainier Storm 0827405 Advanced Human Resource Management

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measurement scale. International Journal of Human Resource Management, 20(7),
1576-1598.
Bhattacharya, M., Gibson, D. E., & Doty, D. H. (2005). The Effects of Flexibility in Employee
Skills, Employee Behaviors, and Human Resource Practices on Firm Performance.
Journal of Management, 31(4), 622-640.
Feng-Hui, L., Tzai-Zang, L., & Wann-Yih, W. (2010). The relationship between human
resource management practices, business strategy and firm performance: evidence
from steel industry in Taiwan. International Journal of Human Resource
Management, 21(9), 1351-1372.
Rainier Storm 0827405 Advanced Human Resource Management

Gooderham, P., Parry, E., & Ringdal, K. (2008). The impact of bundles of strategic human
resource management practices on the performance of European firms. International
Journal of Human Resource Management, 19(11), 2041-2056.
Pardo, I. P. a., & Perlines, F. H. (2008). THE RELATIONSHIP BETWEEN HUMAN RESOURCES
STRATEGIES AND BUSINESS OUTCOMES: A CONFIGURATIONAL APPROACH.
Portuguese Journal of Management Studies, 13(2), 193-219.
Wright, A. D. (2000). Scenario planning: a continuous improvement approach to strategy.
Total Quality Management, 11(4/5/6), S433.