The Impact of Strategic Human Resource Management Practices on

Global Competitiveness

Abstract

Globalization is the word used to describe the growing interdependence of the

world’s economies, cultures, and populations, brought about by cross-border trade in
goods and services, technology, and flows of investment, people, and information.
The growing interdependence of the world’s economies, cultures and population,
brought about by cross-border trade in goods and services has given a kick hike to
globalization. This increase in conceptual and empirical work has now shifted the
focus on how firms go about globally, keeping along the development and
maintaining the advantage of globalization. The global competitiveness is concerned
with overall performance of the economies all over the globe. It may have many
inferences for human resource management practices in an organization. It helps to
create job opportunities as the business expands. By providing better quality products
and employment it improves the standard of living of the people.

Strategic human resource aims for the proper management of human resources
within the organization for the impactful attainment of the goals set. Considering
global competitiveness, strategic human resource management pivots in the pursuit of
objectives that would make the organization stand distinct from its competitors. A
competitive advantage is not a short-term process but is gained through the long-term
allocation of the resources of the company and matching these resources with the
capabilities of the human resource within the organization. Thus, the organizations,
whether expanding or already expanded, should identify their needs and make sure
that they align with the organization’s objective to eye the pinnacle in the global
competitiveness. In this paper the researchers tried to focus on the impact and
relevancy of Strategic Human Resource Management practices with global
competitiveness.

Introduction
 2

Globalization has made us a multi-cultural society which has implications on

human resource management within the nations. There are four theoretical
frameworks that explore the influences on Human Resource Management across
international boundaries, including: cultural, institutional, universal and contingency
perspectives. It enables sharing of technology among different countries and gives a
variety of options to a customer to choose from for a single product. Globalization
means the multitude of economic and social transformation of humanity currently
registered, and integrative large-scale financial flows generated by the impact of
monetary haul on the characteristics of social interactions among different nations.
Human Resources departments are transforming as the modern business faces
numerous and complex challenges, and exploit opportunities. The transformation of
human resources today is a direct call of the rapid changes within businesses due to
factors such as globalization. Globalization is a process by which the people of the
world are united into a single society.

This process is a combination of economic, technological, socio-cultural, and

political forces. However, from the point of view of business with which we are
concerned here, globalization should be taken on the basis of economic and
technological forces only though organizations opting for global business have to take
care of socio-cultural and political forces of the countries concerned while
implementing their strategies. From this point of view, degree of globalization is
measured on the following features:

• Goods and Services – exports and imports as a proportion of national income.

•Human resource – inward/outward migration flows in relation to total national

population.

•Capital – inward/outward direct investment as a proportion of national income.

• Technology – International research and development flows, proportion of

population using particular inventions particularly factor-neutral advances such as
cell phones, internet, etc.

While globalization is increasing in terms of its degree, there is a controversy

about the level of globalization achieved. Globalization, mediated through a variety
of intensifying flows that are not limited to goods and capital but include information,
 3

human mobility, diffusion of ideas and norms, this multidimensional process creates
complex, interlinked ties and relations between economies, societies and countries.

Objectives

1. To understand the relevance of global competitiveness with human resource

management practices.

2. To study the effect of strategic human resource management practices on global

competitiveness.

3. To explain the meaning of strategic management.

4. To describe the three levels of strategy formulation and comment on the links
between business strategy and human resource management (HRM).

5. To explain three models of human resources (HR) strategy: control, resource and
integrative.

Methodology

Gaining the Competitive Edge through Strategic Human Resource Management

In order to be successful, it is essential to recognize the need to adapt to the

ever-rapidly changing ways to do business in the global environment. Thus, seek to
build competitive advantages around the core competencies of the organization, while
also reducing costs to conduct business. These organizations also understand that
doing the best that they do is not always enough to be on top. In order to keep the
competitive position in the domestic market, they will need to acquire knowledge of
other key competitors in the global marketplace. They need to stay informed of other
domestic and foreign competitor's potential strategies, as well as their competitor's
strengths and weaknesses. The term strategy ‘is widely used in and presupposes
importance. In the words of the Oxford Concise Dictionary, strategy means
generalship’. Thus, strategy is associated with the long-term decisions taken at the top
of the enterprise. Human resource management includes conducting job analyses,
planning personnel needs, recruiting the right people for the job, orienting and
training, managing wages and salaries, providing benefits and incentives, evaluating
performance, resolving disputes, and communicating with all employees at all levels.
 4

Therefore, Strategic HRM defines the organization’s intentions and plans on

how its business goals should be achieved through people. It is based on three
propositions: first, that human capital is a major source of competitive advantage;
second, that it is people who implement the strategic plan; and, third, that a systematic
approach should be adopted for defining where the organization wants to go.

Global Competitiveness

In recent years, the concept of competitiveness has emerged as a new

paradigm in economic development. Competitiveness captures the awareness of both
the limitations and challenges posed by global competition, at a time when effective
government action is constrained by budgetary constraints and the private sector faces
significant barriers to competing in domestic and international markets. The Global
Competitiveness Report of the World Economic Forum defines competitiveness as
"the set of institutions, policies, and factors that determine the level of productivity of
a country". The term is also used to refer in a broader sense to the economic
competitiveness of countries, regions or cities. The term is also used to refer in a
broader sense to the economic competitiveness of countries, regions or cities.
Recently, countries are increasingly looking at their competitiveness on global
markets. Similarly, it is necessary for the human resource of a country to be so that
they can efficiently work towards the growth of the economy of their country.

Global competitiveness is a phenomenon that every developing country has to

experience in today’s world. The definition of global competitiveness given by the
European commission is “The ability of an economy to provide its population with
high and rising standards of living and high rates of employment on a sustainable
basis”. Therefore, all growing companies that have to ensure that they are profitable
need to maintain a competitive edge over their competitors not just in the local market
but in the global market as well. Most of the changes ad complexities that
organizations face in a marketplace are due to the varying effects of global
competitiveness, a winner organization is one who is able to use these changes and
convert them into advantages. There is a strong interconnection between the
consumer’s perception of the organization and global competitiveness. Consumers
usually keep a close watch on how their favorite brands perform and adapt the
variations caused by global competitiveness and accordingly either change their
 5

perception or maintain the same. Organizations therefore need to be constantly aware

and vigilant of the changes and effects of global competition.

Levels of Global Competition

Understanding the differences across these categories is helpful to

understanding the role of human resources in global competition and the need for
human resource management (HRM) systems commensurate with the rigors of global
competition.

1. Domestic: Most companies begin by operating within a domestic marketplace.

This entails having all of the firm's facilities, employees, and customers within
the boundaries of one country. While employees may differ to some extent in
terms of their regional or ethnic cultural orientations, the pool of employees is
relatively homogeneous. Thus, it is important to note that firms functioning at
the domestic level of participation face an environment very similar with
regard to culture, human capital, political/legal systems, and economic
systems, although some variation might be observed across states and
geographical areas.
2. International: As domestic markets become saturated, firms often seek other
markets for their products. These firms tend to regard their international
markets as simple extensions of their domestic operations. This usually
requires entering international markets, initially by exporting products, but
ultimately by building production facilities in other countries. An international
firm that is essentially a collection of relatively independent operating
subsidiaries is also termed a multidomestic firm. The decision to participate in
international competition raises a host of human resource issues. One
consideration is whether a particular location provides an environment where
human resources can be successfully acquired and managed.
3. Multinational: Whereas international firms build one or a few facilities in
another country, firms become multinational when they build facilities in a
number of different countries, attempting to capitalize on lower production
and distribution costs associated with different locations. Multinational firms
are sometimes referred to as global because they tend to view the world as a
single market and strive to provide standardized goods or services to meet the
 6

needs of all markets simultaneously. The lower production costs are gained by
shifting production from higher cost locations to the lower-cost locations. The
HRM problems faced by multinational companies are similar to those faced by
international companies, only magnified. Instead of having to consider only
one or two countries' cultural, human capital, legal, and economic systems, the
multinational company must address these differences for a large number of
countries.
4. Transnational: Many researchers now propose a fourth level of integration:
transnational organizations. Transnational organizations compete on state-of
the-art, top-quality products and services and do so with the lowest costs
possible. They try to combine the advantages of global-scale efficiencies (like
a multinational firm) with those of local responsiveness (like an international
firm). Whereas multinational companies focusing on economies of scale
attempt to develop identical products distributed worldwide, transnational
companies increasingly focus on economies of scope and emphasize flexibility
and mass customization of products to meet the needs of particular clients.
Multinational firms are usually driven to locate facilities in a particular
country as a means of reaching that country's market or as a means to
achieving lower production costs, and then must "deal with" the differences
across countries. Transnational firms, on the other hand, choose to locate
facilities based on the ability to effectively. efficiently, and flexibly produce a
product or service, and to create synergies through the cultural differences.
Production and research and development that benefit from uniform standards
and scale economies tend to be centralized, whereas marketing and HRM tend
to be decentralized to take advantage of local cultural differences

Strategic Management

The word ‘strategy’, deriving from the Greek noun strategus, meaning
‘commander in chief’, was first used in the English language in 1656. The
development and usage of the word suggests that it is composed of stratos (army) and
agein (to lead). In a management context, the word ‘strategy’ has now replaced the
more traditional term – ‘long-term planning’ – to denote a specific pattern of
decisions and actions undertaken by the upper echelon of the organization in order to
accomplish performance goals. Strategic management is considered to be a
 7

continuous activity that requires a constant adjustment of three major interdependent

poles: the values of senior management, the environment, and the resources available.

Strategic Human Resource Management (SHRM)

The SHRM literature is rooted in ‘manpower’ planning, but it was the work of
influential management gurus, affirming the importance of the effective management
of people as a source of competitive advantage, that encouraged academics to develop
frameworks emphasizing the strategic role of the HR function and attaching the prefix
‘strategic’ to the term ‘human resource management’. Interest among academics and
practitioners in linking the strategy concept to HRM can be explained from both the
‘rational choice’ and the ‘constituency-based’ perspective. There is a managerial logic
in focusing attention on people’s skills and intellectual assets to provide a major
competitive advantage when technological superiority, even once achieved, will
quickly erode. From a ‘constituency-based’ perspective, it is argued that HR
academics and HR practitioners have embraced SHRM as a means of securing greater
respect for HRM as a field of study and, in the case of HR managers, of appearing
more ‘strategic’, thereby enhancing their status within organizations

Human Resource Strategy Models

This section examines the link between organization/business strategy and HR

strategy. ‘Human resource strategies’ are here taken to mean the patterns of decisions
regarding HR policies and practices used by management to design work and select,
train and develop, appraise, motivate and control workers. Studying HR strategies in
terms of typologies is appealing to academics because conceptual frameworks or
models give HR researchers the ability to compare and contrast the different
configurations or clusters of HR practices and further develop and test theory. This
sociologist built his theory through the use of abstractions he called ‘ideal types’.
Weber warned, however, that these abstractions or ideal types never actually exist in
the real world; they are simply useful fictions to help us understand the more complex
and messy realities found in work organizations. The same is true of HR typologies –
they are abstractions that do not necessarily exist in the workplace, but they help the
student of management to understand the nature of HR strategies. Since the early
1990s, academics have proposed at least three models to differentiate between ‘ideal
types’ of HR strategies. The first model examined here, the control-based model, is
 8

grounded in the way in which management attempts to monitor and control employee
role performance. The second model, the resource-based model, is grounded in the
nature of the employer–employee exchange and, more specifically, in the set of
employee attitudes, in behaviors and in the quality of the manager–subordinate
relationship. A third approach creates an integrative model that combines resource-
based and control-based typologies.

The control-based model

The first approach to modelling different types of HR strategy is based on the

nature Strategic Human Resource Management 49 of workplace control and more
specifically on managerial behavior to direct and monitor employee role performance.
According to this perspective, management structures and HR strategy are
instruments and techniques to control all aspects of work to secure a high level of
labor productivity and a corresponding level of profitability. This focus on monitoring
and controlling employee behavior as a basis for distinguishing different HR
strategies has its roots in the study of ‘labor process’ by industrial sociologists. The
starting point for this framework is Marx’s analysis of the capitalist labor process and
what he referred to as the ‘transformation of labor power into labor’. Put simply,
when organizations hire people, they have only a potential or capacity to work. To
ensure that each worker exercises his or her full capacity, managers must organize the
tasks, space, movement and time within which workers operate. But workers have
divergent interests in terms of pace of work, rewards and job security, and engage in
formal (trade unions) and informal (restrictions of output or sabotage) behaviors to
counteract management job controls. Workers’ own counter management behavior
then causes managers to control and discipline the interior of the organization. An
early system of individual control by employers exercising direct authority was
replaced by more complex structural forms of control: bureaucratic control and
technical control. Bureaucratic control includes written rules and procedures covering
work. Technical control includes machinery or systems – assembly line, surveillance
cameras – that set the pace of work or monitor employees’ behavior in the workplace.

The resource-based model

This second approach to developing typologies of HR strategy is grounded in

the nature of the reward–effort exchange and, more specifically, the degree to which
 9

managers view their human resources as an asset as opposed to a variable cost.

Superior performance through workers is underscored when advanced technology and
other inanimate resources are readily available to competing firms. The sum of
people’s knowledge and expertise, and social relationships, has the potential to
provide non-substitutable capabilities that serve as a source of competitive advantage.
The various perspectives on resource-based HRM models raise questions about the
inextricable connection between work-related learning, the ‘mobilization of employee
consent’ through learning strategies and competitive advantage. Given the upsurge of
interest in resource-based models, and in particular the new workplace learning
discourse, we need to examine this model in some detail. The resource-based
approach exploits the distinctive competencies of a work organization: its resources
and capabilities. An organization’s resources can be divided into tangible (financial,
technological, physical and human) and intangible (brand-name, reputation and know-
how) resources. To give rise to a distinctive competency, an organization’s resources
must be both unique and valuable. By capabilities, we mean the collective skills
possessed by the organization to coordinate effectively the resources. According to
strategic management theorists, the distinction between resources and capabilities is
critical to understanding what generates a distinctive competency .It is important to
recognize that a firm may not need a uniquely endowed workforce to establish a
distinctive competency as long as it has managerial capabilities that no competitor
possesses. This observation may explain why an organization adopts one of the
control-based HR strategies.

The integrative model

Bamberger and Meshoulam (2000) integrate the two main models of HR

strategy, one focusing on the strategy’s underlying logic of managerial control, the
other focusing on the reward–effort exchange. Arguing that neither of the two
dichotomous approaches (control- and resource-based models) provides a framework
able to encompass the ebb and flow of the intensity and direction of HR strategy, they
build a model that characterizes the two main dimensions of HR strategy as involving
‘acquisition and development’ and the ‘locus of control’. Acquisition and
development are concerned with the extent to which the HR strategy develops internal
human capital as opposed to the external recruitment of human capital. In other
words, organizations can lean more towards ‘making’ their workers (high investment
 10

in training) or more towards ‘buying’ their workers from the external labour market.
Bamberger and Meshoulam (2000) call this the ‘make-or-buy’ aspect of HR strategy.
Locus of control is concerned with the degree to which HR strategy focuses on
monitoring employees’ compliance with process-based standards as opposed to
developing a psychological contract that nurtures social relationships, encourages
mutual trust and respect, and controls the focus on the outcomes (ends) themselves.
This strand of thinking in HR strategy can be traced back to the ideas of Walton
(1987), who made a distinction between commitment and control strategies
(Hutchinson et al., 2000).

International and Comparative Strategic Human Resource Management

The assumption that SHRM is a strategically driven management process

points to its international potentialities. The employment relationship is shaped by
national systems of employment legislation and the cultural contexts in which it
operates. Thus, as the world of business is becoming more globalized, variations in
national regulatory systems, labour markets and institutional and cultural contexts are
likely to constrain or shape any tendency towards ‘convergence’ or a ‘universal’
model of best HRM practice. This section addresses aspects of the international scene
to help us place the discourse on the SHRM model into a wider global context. In
doing so, we make a distinction between international HRM and comparative HRM.
The subject matter of the former revolves around the issues and problems associated
with the globalization of capitalism. Comparative HRM, on the other hand, focuses on
providing insights into the nature of, and reasons for, differences in HR practices
across national boundaries.

HR Practices implemented in Companies to promote Global Competitiveness

Many companies’ HR department have realized the need to be strong and

ready to help the company move forward in the case of global competition. The HR
department being responsible for an organization’s most valuable asset i.e. its
employees, need to always be up to date. In the past many Indian industries focused
their management practices completely on the industrial policy factors but in the last
decade it has been seen that there is a wide competition from foreign markets due to
which all the management functions of the organization is to not only focus on the
industrial policies but side by side tackle the competition. According to (organizations
 11

usually follow the following practices to promote the global competitiveness among
the employees within the organization.

Talent Management

It is a practice where the HR department ensures that the organization has a

wide pool of diverse employees through the method of recruitment, selection and
succession planning. Once the organization has this pool of employees, they next
focus on training and development for these employees thus providing them
satisfaction and maintaining the edge they require. Another example of how
organizations deal with talent management is that of IBM. It conducts research within
the organization to find for the most outstanding leaders within the organization, thus
ensuring that they are ready with employees who are capable to deal with changes as
and when required.

Performance Management

This practice focuses on the rewards, appraisals and aligning the workforce to
the required standards of performance. This practice is conducted through evaluations
to check the gaps between the actual work and the work required. Pay is used as a
major tool to ensure that work is done to fill the performance gap. This pay is in terms
of rewards, bonuses and appraisals. IKEA is a very good example for the same the
company uses pay to create a linkage between the organization objectives and the
individual goals to create the required performance.

Organization Culture

When an organization instills within its culture the acceptance of changes and
competition the employees automatically are accustomed to this change and are able
to adapt. This starts from the very beginning stage of recruitment where the
organizations make it clear to the candidates for employment about what skills and
attitude they are required to possess. Many big companies like Oracle, BAE Systems,
Shell, KPMG, GlaxoSmithKline or Matsushita strongly encourage an organization
culture that does not only focus on short term financial performance but on the aspects
of achievement of a long-term goal.
 12

Global Human Resource

This HR practice focuses on the function of the HR department to develop a

global strategy for the organization and its employees. A very true example of this
practice is that of P&G they have been able to develop a global strategy with the help
of various global expertise groups. This strategy has helped them a lot in doing
business across national boundaries.

Importance of linking Strategic HRM and Global Competitiveness

Studies have shown that the role of the human resources department within an
organization is extremely crucial for both the survival and the maintaining of a
competitive edge. Every organization comes up with its own strategy to conduct its
business this strategy is unique depending completely on the organization’s
competencies, requirements and circumstances once the strategy is made it depends
solely on the HR department to help in its implementation in terms of getting the
organizations employees aligned with the developed strategy. The paper by Michael
Poole smartly speaks about a phase two market orientation of entrance of completion
into the market, the two phases being growth and internationalization .Through his
paper he provides a very smart and real idea about how these two phases or aspects,
growth and internationalization put a huge pressure on the HR department within the
organization: The department has to constantly be on their feet to keep working with
the employees and motivating them to stay stable during any kind of change caused
due to global competition. An organization has gone through a constant evolution in
the past years and in the present day it faces open markets and vast competition, this
then requires the HR department to act as the companies back bone and help to ensure
that the company, with its employees is able to get through these changes
successfully. Therefore, the importance of linking the HRM with global
competitiveness is very important.

Importance of Strategic Human Resource Management

Strategic HR Practice Benefits/Importance

Attracting, maintaining, This practice enables the organization to attract the
developing and retaining right kind of people in correct quantity for a specific
high quality personnel job. It helps retain the existing employees by
 13

keeping them satisfied and happy with the

organization. It saves the cost of recruiting new
employees and paying salary to surplus employees.
It helps in developing the skills of employees and
training them so that they can perform their
functions efficiently.
Job and work design This practice makes the job interesting to keep the
employees engaged. It gives them more autonomy to
make decisions within their power and provides
flexibility. This gives them a greater sense of
authority and enhances job satisfaction encouraging
high performance and productivity.
Learning and development This practice develops an environment that
facilitates learning. It helps employees to enlarge
their skill base and increase competence level of
employees through various techniques of self-
management, training, mentoring and coaching.
Talent management This practice deals with acquiring, developing and
maintaining talented personnel. It meets with the
organization’s present and future requirement of
talent.
Working environment A working environment with job security, work life
balance, managing diversity, core values and other
elements which make it flexible and makes the
organization a great place to work.
Reward management This practice deals with developing employee
motivation, keeping them engaged and committed to
their job so they perform well by rewarding them
according to their contribution.
Managing knowledge and It ensures that important information is retained. It
intellectual capital provides learning opportunities and focuses on
organizational as well as individual learning. It
enables sharing of knowledge in a systematic way. It
 14

also helps to improve the flow of information,

knowledge and learning in and organization.
Strategic HRM helps in linking the personal goals of employees with that of
organization so that the employees while working to achieve the goals of the
organization fulfill their personal goals and be satisfied. It enables better cooperation
and coordination in the system of organization. It reduces the impacts of adverse
conditions and enables effective allocation of time and resources to various
opportunities identified. It makes the organization more flexible and accepting of
change.

Expective Outcomes

 Effectively manage and plan key human resource functions within

organization.
 Contribute to employee performance management and organizational
effectiveness.
 Identify the benefits of a geographically dispersed workforce.

Discussion and Conclusion

Globalization has enabled the companies to expand and establish themselves

worldwide. Formulating strategies in advance and abiding by them gives a
competitive advantage to the companies which makes their place in the market and
helps them to survive. With increasing competition from other companies and firms in
the era of globalization, it is not easy to attract, maintain and retain talented and
competent human capital for the companies. Following strategic human resource
practices enables companies to perform their human resource function aptly. Different
companies follow different strategic human resource practices to depending on their
goals and objectives and to distinguish themselves from other companies in their
human resource function. It is extremely important for companies to be competitive in
order to survive the current scenario and hence the companies should follow strategic
human resource practices to keep their employees satisfied as they are the most
valuable assets to a company. Gradually strategic HRM is gaining importance in its
knowledge and application and is being widely adopted by companies all over the
world.
 15

References

[1] Adler, N., & Ghadar, F. (1990). Strategic human resource management: a global
perspective (pp. 235-260).

[2] Bowen, D. E., & Ostroff, C. (2004). Understanding HRM–firm performance

linkages: The role of the “strength” of the HRM system. Academy of management
review, 29(2), 203-221.

[3] Clark, W. C. (2000). Environmental globalization. Governance in a globalizing

world, 86.

[4] Chandra, P., & Shukla, P. R. (1994). Manufacturing Excellence and Global
Competitiveness: challenges and opportunities for Indian industries. Economic and
Political weekly, M2-M11.

[5] Djogo, M., & Stanisic, N. (2016). Is the Global Competitiveness Report the right
measure of macroeconomic competitiveness? Zbornik radova Ekonomskog fakulteta
u Rijeci: časopiszaekonomskuteorijuipraksu, 34(1), 91-117.

[6] Levy, O., Beechler, S., Taylor, S., & Boyacigiller, N. A. (2007). What we talk
about when we talk about global mindset’: Managerial cognition in multinational
corporations. Journal of International Business Studies, 38(2), 231-258.

[7] Muscalu, E. (2014). Organizational culture change in the organization. Land

Forces Academy Review, 19(4), 392.

[8] Oana, D. U. R. A. L. I. A. (2016). Consumer Perception of Competitiveness–

Theoretical Instrumental Approach. Studies in Business and Economics, 11(1), 45-
53. [9] Panackal, N., & Singh, A. Talent Management-A challenge for Indian
 16

Industries. [10] Stahl, G., Björkman, I., Farndale, E., Morris, S. S., Paauwe, J., Stiles,
P., Wright, P. (2012). Six principles of effective global talent management. Sloan
Management Review, 53(2), 25-42.