Strategic Human Resource Management
2012 - Assignment 1
Topic 2: The Resource Based View of the firm is the dominant theory in strategic HRM. Critically discuss its contribution in the explanation of the proposed link between HRM strategy design and organisation performance.
Resource Based View (RBV) has instigated a paradigm for theoretically analysing organisational sustainable competitive advantage. Strategic managers use RBV to assist in making directional decisions which must take into consideration the strategic management process, organisational climate, strategic liabilities and assets, dynamic capabilities and core competencies. The VRIO model will be discussed to assess how strong an organisations competitive advantage is. RBV encounters a level of criticized shortfalls which will be discussed and alternative organisational performance models which can be used in addition to RBV for assisting in strategic decision making. Sustaining a competitive advantage in any industry proves itself to be a challenging task to strategists. Barney (1991) initiated a fundamental theoretical start to the understanding of how organisations are able to have a sustained competitive advantage. The paradigm developed is now known as RBV. Strategic Human Resource Management (SHRM) use this concept to assist in understanding the influencing factors to develop the competitive advantage which provides analytical information which is used to make internal strategic decisions (Arend, 2008). RBV for sustainable competitive advantage has the composition of following terms; Value, Rareness, Imperfect Imitability and Substitutability (Barney, 1991) see Figure 1 below for the integrated model. Barney’s model has impacted on the field of HRM in two important ways; RBV’s influence has been instrumental in establishing a macro perspective in the field of HRM research(Snell et al., 2001b). Secondly, RBV has provided a theoretical and contextual framework which has previously been criticized for being non-theoretical and overly applied in practice (Snell et al., 2001a).
Figure 1: Relationship model for achieving sustained competitive advantage (Barney, 1991) The strategic management model as seen below in Figure 2 identifies key integration points with HR practices. HR management is one of the key factors for the success of the strategic model as the HRM practices lead to employees knowledge, skills and abilities to derive a higher firm performance overall (Bowen and Ostroff, 2004).
Figure 2: The strategic management process (Noe and et.al., 1998) RBV provides an understanding to SHRM as to what areas of the business require focus by the resources. Bowen (Bowen and Ostroff, 2004) discusses how firms develop employees skills, knowledge and motivation levels so they are directly in line with the aims of strategic management. The existence of the SHRM direction is known as the organisational climate which is made up of; practices, policies, procedures, routines, employees perception, interpretability and understanding of what behaviours are expected and rewarded within an organisation (Bowen and Ostroff, 2004). SHRM use theories such as RBV to analyse the company’s performance and position then manipulate the organisational climate as a directional tool to assist the company in meeting desired strategic goals. Bowen (2004) discusses SHRM systems must ensure the design approach taken considers the employee and focuses on a sustainable organisational competitive advantage. The SHRM system must ensure the approach taken is; visible, understandable, legitimate authority, relevant, consistent, instrumental, valid, employee consensus, agreed and fair. If the SHRM take an approach which clearly analyses all items and are well thought out and implemented within the HRM system successfully, and are in line with RBV then sustainable competitive advantage will be imminent Arend (2008) undertook an empirical study to analyse what...
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