There has been much debate on the term strategic human resource management (SHRM) and until now, there is no fixed definition for SHRM. According to Wright and McMahan (1992), SHRM can be defined as “the pattern of planned HR deployments and activities intended to enable a firm to achieve its goals”. Similarly, Wright and Snell (1991) regard SHRM as “organisational systems designed to achieve sustainable competitive advantage through people”. Ulrich and Lake (1991) on the other hand, has described SHRM as a process of linking HR practices to business strategy. SHRM can also be defined as the linkage of HR functions with strategic goals and organisational objectives to improve business performance and cultivate an organisational culture that fosters innovation and flexibility (Truss & Gratton, 1994). As the term remains unclear, it could be said that scholars agree on a central element of SHRM which is that SHRM involves designing and implementing a set of internally consistent policies and practices so as to ensure that the firm’s human capital contributes to achieving its business objectives (Jackson & Schuler, 1995). However, important questions remain including whether SHRM guarantees positive firm performance outcome, the effect of different levels of SHRM implementation on firm performance and the influence of the market environment in moderating the relationship between SHRM and firm performance. This report will discuss the key issues concerning the effectiveness and likely consequences of a SHRM approach, including the potential performance benefits and how organisational performance can be improved through the SHRM approach. Two strategic concerns which HRM should take into account are sustainable competitive advantage and the viability of the firm. Accordingly, firms must consider whether the HRM approach in which they adopt is effective so as to achieve sustainable competitive advantage and viability.
Macro Analysis of SHRM (External)
It could be said that traditional sources of competitive advantage such as technology, patents and economies of scale are no longer appropriate sources of competitive advantage for firms in today’s highly competitive environment. Rapid environmental change, globalisation, competition to provide innovative products and services, changing customer and investor demands have become the standard background for organisations (Ulrich & Lake, 1990). To compete effectively, firms must constantly improve their performance by reducing costs, enhancing quality, and differentiating their products and services. Recent studies have examined SHRM as a means of enhancing organisational competitive advantage. The underlying assumption of SHRM is that firm performance is influenced by a set of HRM practices (Huselid, 1995).
Micro Analysis of SHRM (Internal)
Prior to SHRM, most firms adopt the traditional HRM approach which includes traditional HRM activities such as recruiting, selection, performance measurement, training and the administration of compensation and benefits. However, as mentioned earlier, the traditional HRM approach no longer provides sustainable competitive advantage as there is a need for human resource managers to move beyond HR's traditional performance management approaches and partner with line managers to remove barriers to exceptional employee performance that exist in organizational work environments. It could be argued that for firms to improve firm performance and gain sustainable competitive advantage, the firm’s HR must focus on a new set of priorities. These priorities are more business and strategic oriented and less oriented towards traditional HR functions. In contrast to traditional HRM activities, strategic HRM activities are relatively recent innovations which involve team-based job designs, flexible workforces, quality improvement practices, employee empowerment and incentive compensation. SHRM was designed to diagnose firm strategic needs...