The objective of this report is to focus on the concept of ‘Strategic HRM and Performance” and first examines in more detail some of the more current status of theoretical development and perspectives underpinning HRM and the emergence of Strategic HRM, followed by a critical review on the evidence based around what impact it has had in practice in terms of promoting and enhancing business performance. While we cannot ignore the importance of HRM theories in today’s management context, this paper explores whether these theories works well in practice.
The key purpose of HRM is to enable management to enhance the individual and collective contributions of people to the short and long term success of the enterprise. (Personnel Management Lead Body, 1993) The emphasis on resources rather than cost as the source of competitive advantage means that strategy and HRM must be integrated. The workplace is in a constant state of change resulting from ongoing developments in technology and innovation and increasing economic, social and political pressures. This poses new and complex challenges for the human resources function within organisations. The role of Human Resource Management (HRM) is increasingly being scrutinised as it is acknowledged that through their human resources, organisations can find a sustainable source of competitive advantage. (Hathorn, 2012: 3). The concept of HRM first emerged in the early 1980s from the United States and many models have since been developed intimating a direct link between human resource practices and business performance. (Katou and Budhwar, 2006: 1223). HRM is essentially concerned with managing ‘human capital’ and involves the application of a comprehensive and coherent approach to the employment and development of people (Armstrong, 2012: 1). Whilst the link between HRM and performance has been the focus of much attention (Stavrou, Brewster and Charalambous, 2010: 933), the empirical evidence around how this works in practice, is very varied. This ranges from a positive relationship with all human resource practices, to a complete lack of, or even a negative correlation. (De Menezes, Wood and Gelade, 2010: 456). With this in mind, this paper aims to assess to what extent the theory and aspirations of HRM work in practice through exploring its connection with organisational performance. HRM is hypothesized to fulfill employees’ needs which in turn enhances favourable attitudes (Marescaux, De Winne and Sels, 2010: 3) and subsequently improves organisational performance (Edgar & Geare, 2005: 534; Kuvaas, 2008: 1). Human resource practices are also in theory seen as contributing towards positive exchange relationships between the employee and the employer where the individual needs of workers are considered and addressed. In return, employees reciprocate with positive behaviours which in turn lead to better outcomes for the organization. (Gould-Williams and Davies, 2005: 1).
Strategic HRM and Performance:
The people in an organization are considered to be one of the most valuable resources of today’s firms. Other resources such as brands, products, processes, technological advancement, economies of scale can still provide a competitive advantage but an organisation’s human capital are more vital for its sustainability. The idea that an organisation’s Human Resource can play a strategic role in determining its success has led to the development of a field of research commonly referred to as Strategic Human Resource Management. The understanding of the causal relationship between HR and organisational performance helps HR managers to design policies that will bring forth better operational efficiency to achieve higher organizational performance. The emergence of ‘strategic’ HRM represents a paradigm shift from the traditional HRM models. It is concerned more specifically with the relationship between HRM and the strategic context. (Wood, Holman and Stride,...
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