“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.”
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 to strategic HRM, are explored and discussed.
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, 1982). 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 resources 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 duplicate, have no direct substitutes and enable companies to pursue opportunities (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 environment. Throughout the text, an attempt is also made to provide definitions of key terms, practical examples and identification of emerging trends or issues.
Before one can discuss strategic human resource management, one should first define the general role of human resource...