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Strategic Human Resource Management (SHRM) has been criticised and it has been said
that Human Resource Management (HRM) practices have no real impact on organisational
outcomes such as performance, quality and profitability . The SHRM view that employees are
resources and in fact might actually be the only real source of sustainable competitive
advantage has also been seen as outrageous. The aim of this essay is to discuss why
SHRM practices and policies , integrated with business strategy , might in fact help
organisations to achieve its strategic goals. Firstly it will discuss how SHRM can fit in with
business strategies to help organisations achieve goals. The essay will then look at High
Performance Work Systems (HPWS) and the outcome cert ain practices associated with
HPWS might have on organisational outcomes. Finally the essay will further discuss various
other HRM practices such as recruitment and retention strategies , and training and
development practices that if integrated and impleme nted with business strategies, might
The competitive global economy of the world has brought various challenges for
organisations to deal with. These challenges include issues such as increased demand for
sustainable and innovative products , and an increase in quality of these service s and
products. These new issues facing organisations also seem to have made the traditional
concept of strategy that relyies on technology, manufacturing plants and access to capital
obsolete. According to Feng-Hui, Tzai-Zang, & Wann-Yin (2010) there is no real consensus
of what strategy is but a widely accepted definition is that strategy is a deliberate set of
actions to achieve competitive advantage, and giving coherent and direction to the
organisation.
In the traditional sense these strategies ha ve been classified by Porter (1985) as cited in
Feng-Hui et al (2010) to be generic strategies and they are cost leadership, focus and
differentiation. To achieve these strategies companies might have t o take actions such as
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obtaining new manufacturing machinery that has lower running cost, more up time and less
break downs to achieve cost leadership strategies. In order to achieve a focus or strategic
scope strategy organisations m ay also obtain customized machines that can produce certain
specialised products that they can u ltimately charge a premium for. But with globalisation
these manufacturing technologies have become widely available and the ease of copying
the products of competitors has increased significantly. Even an organisation such as Apple
with revolutionary products such as the iPad, has its products copied and supplied to the
consumer market by competitors at a reduced cost only weeks after the new product is
launched.
These primitive resources seem to have lost their ability to create sustainable competitive
advantages and firms now need more than just deep pockets and the best manufacturing
plants to be competitive. In the search for new sources of sustainable compet itive advantage
Human Resource Management (HRM), aligned and integrated with business strategy, has
been identif ied as a valuable source that can help organisations realise competitive
SHRM has moved traditional HRM from just being perceived as a tool to deal with staff
marketing, finance and accounting (Feng-Hui, Tzai-Zang, & Wann-Yih, 2010). The
importance and higher levels of performance attached to the role of SHRM practices,
strategically integrated with business strategy , has been verified by both scholars and
To achieve any of the generic strategies as described by Porter (1995) as cited in Feng-Hui
et. al. (2010) and actually create sustainable competitive advantage s for the organisation ,
studies have proven that the integration of HRM practices with business strategies are vital.
An organisation that has implemented a cost leadership strategy and plans to achieve this
by investing in new machinery and re-engineer production processes has to realise that
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organisational success alone does not rest on the newest technology but also on the
Firms implementing a narrow competitive scope strategy within an industry and want to
differentiate their products by quality and design can also not just rely on their machinery
and only a selected few designers. These firms require innovative and flexible employees
that can compete and react to increase d requirements for innovation and creativity that other
firms from around the world are bringing to the competition table.
According to Wernerfelt (1984) a firm¶s resource s can be defined as those tangible and
intangible assets which are tied semi -;permanently to the firm. Examples of these
³resources´ are machinery, efficient procedures and capital. These resources however are
not sustainable because they can easily be imitated or bought by competitors putting firms at
a competitive disadvantage that have spent many years and capital to create these
resources.
requires resources that are unique to the company and is not being used by other
organisations for the implementation of strategies. The Resource Based Vie w (RBV)
perspective of SHRM views employees as internal resources that can provid e the required
sustainable competitive advantages . These human resources have knowledge that cannot
easily be replicated thus adding value to the organisation assisting organisations to compete
Bou-Llusar, 2009).
Unlike resources such as machinery that can be copied , the ³human capital´ resource if
advantage. This is because when managed and developed accordingly and in alignment
with business strategies , the human capital pool of a firm can become rare, valuable,
inimitable and no n substitutable and it is these characteristics that make employees a vital
resource for competing in the new economy (Edwards & Wright, 2001) .
Employees with certain skills, knowledge and capabilities are resources because they add
value to a firm by being able to adapt to market trends an d being innov ative with product
ideas. Wright et al. (1994 ) indicates that these capabilities might be very rare in the huma n
capital pool of an industry making it sought after by various organisations increasing their
value. According to Wright et al. (1994) human capital is derived from the skill and
competency level of employees and the assumption that skills and capabilities are normally
distributed throughout the population , and this means that high quality and competent
The skills, knowledge and capabilities of the rare employees cannot be bought or easily
recreated making it inimitable , adding even more va lue to a firm that employs these
employees. Wright et al (1994) indicates that these quality employees and their abilities
might be imperfectly imitable. This is due to the presen ce of certain factors that helps to form
these employees and their abilities such as historical conditions, casual ambiguity and social
complexity.
These employees and their abilities are also very difficult to be substituted and cannot be
replaced by hiring and training any random employees , thinking that they will deliver exactly
those same capabilities . According to Wright et al (1994) one great advantage of human
resources is the fact that no two people are exactly the same. This make human resources a
competitors.
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Huselid (1995) established that HR policies and practices referred to as High Performance
Work Systems have a positive effect on the outcomes and financial r esult of organisations.
HPWS have also gone by the name of high involvement systems because these HR p olicies
and practices fosters a working environment where emp loyees are more involved and have
more responsibilities in regards to their tasks. According to Bohlander & Snell (2004) HPWS
maximizes employee knowledge, skills, commitment and flexibility. The maximising of these
skills, fostering commitment and creating flexibility help create a sustained competitive
More involvement means that employees have the increased opportunity to participate in
practices the organisation might e nsure the process of continuous process improvement.
The process of continuous improvement can have a direct effect on organisational outcomes
such as productivity, qualit y and service delivery (Wright, 2000) . These outcomes are
achieved because employees are encouraged to use their own expert knowledge of
processes, employees are able to take corrective actions immediately and also employee
involvement creates a feeling of belonging to the company and this increases morale of
employees as individuals and an organisation as a whole . In the end a happy worker is more
likely to be a productive worker that has increased commitment towards the organisation.
because it might help predict certain variables such as absenteeism and performance. Bein g
able to accurately predict these factors can help an organisation to more accurately develop
strategies or new projects because they are in a better position to predict what the time
period might be for a proposed project and even if their employees a re able to deliver the
toward the organisation are deeply eng aged with organisations and these people show
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better performance and also come up with more innovative ideas that are becoming more of
economy is also closely linked to employee commitment. According to Frank (1993) as cited
in Jafri (2010) to achieve innovation certain actions are required, these actions might include
employees looking for new ways of doing thing s, learning from others, challenging current
expectations and ultimately striving to exceed those expectation s. He goes on to explain that
a committed workforce has an active curiosity and willingness to challenge the status quo
and the eagerness to experiment with new methods and strategies. This can be because
HRM practices encourage ex perimenting with new ideas and give employees more freedom
Some more advantages of a committed workforce might include a reduction in staff turnover
because employees are more satisfied with their workplace and have a sense of belonging
to an organisation that values them because of HRM practices . These practices can include
favourable compensation and benefits , and also good work/life balance schemes that
employees can make use of. A committed workforce with the possible capability to deliver
innovative products and services can also help the organisation achieve a greater level of
increased level of flexibility for the organisation. To be able to better discuss the potential
advantages we first have to identify what is meant with flexibility of a firm. Because HPWS
and the RBV theories of SHRM are directly linked to the human factor of organisations , we
will use the term labour flexibility to determine what is meant by the organisational flexibility.
According to Berg & Velde (2005) the term labour flexibility implies that the internal
circumstances. The researchers build on this definition by adding that the cost and time
needed to mobilise e mployees into new tasks are low and this can also be con sidered as
One might consider that a reason SHRM practices can create a source of flexibility for a firm
is partly due to the fact that SHRM in itself is flexible. According to (Bhattacharya, Gibson, &
Doty, 2005)) the flexibility of HRM practices is the extent to which an organisation¶s HRM
practices can be adapted and applied across different situations or across multiple units of
an organisation. This adaptability and flexibility of employees and the organisation as a unit
can well be true ; due to the fact that if one considers the configurational approach to SHRM
practices that is customized to suit specific firm strategies , internal practices and resources
finally achieving both vertical and horizontal fit it is highly likely that flexibility can be a
As discussed previously, HPWS might have various positive outcomes for organisations
such as commitment and flexibility , with each outcome having various possible positive
impacts on business performance. But to achieve HPWS the process has to consist of
various HRM practices that is strategically chosen and implemented with organisational
strategy. The essay will now look at some HRM practices that are bundled together in
alignment with organisational strategies to achieve the desired re sults or business strategies
such as cost leadership or innovation. MacDuffie (1995) as cited in (Gooderham, Parry, &
³bundles´ of HRM practices and also mentioned that these bundles are central to the
Strategic recruitment and retention strategies can equip a firm with human capital resources
and help organisations to retain these employees so that they can contribute to the well-
being of the organisation in the long term . These recruitment and retention strategies might
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strategies that potential and current employees can find favourable. Cappelli (2000)
indicates that the recruitment and retention of top performing human resources do impact on
decreases employee morale and the organisation risks the chance of losi ng valuable
these talents and retaining them can ultimately lead to firms being innovative, gaining
commitment from employees and be coming flexible in a market place because they retain
Training and development can play a vital role helping organisations obtaining their goals.
According to Aguinis & Kraiger (2009) t raining refers to a systematic appr oach to learning
might be able to develop employees so that the organisatio nal strategies are achieved. This
is because when the strategy has been identified, for example that the organisation will be
starting a new product line for a niche market , HR training practices can be designed and
integrated with th e strategy to achieve this goal by training employees on new design
Through training and development programs that are aligned with business a nd
organisational strategies, a workforce can be equiped with skills and knowledge to help the
organisation acheive its strategic goals. Employees can become better problem solvers and
this can lead to time and cost savings. Aguinis & Kraiger (2009) also found that certain types
profitability.
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This is due to the fact that employees learn from each other and the skill level of the firm
flexible in its ability to respond to changes and demands . Training together and learning from
other employees can increase the efficiency of the team, leading to possible innovation and
better problem solving. Training as part of career development can a lso be very beneficial to
organisational outcomes. Employees who fe el valued by being presented with further career
development oppertunities might foster a higher level of commitment to the firm. This , as
previously discussed, means organisations may retain valuable employees and not lose
knowledge to competitors.r
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In conclusion this essay has looked at how HRM and the various practices such as
sustainable competitive advantage in the ever changing business environment of the post
recession economy. HPWS consisting of ³Bundles´ of HRM practices indicates that some
valuable outcomes with long -term strategic benefits might be achieved if the correct fit is
achieved with the strategic direction of an or ganisation. These outcomes may include a firm
fostering better commitment from employees which in itself might have various positive
outcomes such as more innovative employees and reduced tur nover. Flexibility may also be
achieved because employees are multi-skilled and can be re assigned to various duties and
projects in less time and at a reduced cost to the organisation. The employees c an also
adapt to market demands. Other HRM practices such as recruitment, retention and training
also seem to play a big role in acquiring, keeping and developing talent within an
organisational goals.
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References
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Aguinis, H., & Kraiger, K. (2009). Benefits of Training and Development for
Individuals and Teams, Organizations, and Society. r r
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, 451-474.
Beltran-Martin, I., Roca-Puig, V., Escrig-Tena, A., & Bou-Llusar, J. C. (2009). Internal
labour flexibility from a resource -based view approach: definition and proposal of a
measurement scale.
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Berg, P., & Velde, M. (2005). Relationships of Functional Flexibility with Individual
and Work Factors.
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Bhattacharya, M., Gibson, D. E., & Doty, D. H. (2005). The Effects of Flexibility in
Employee Skills, Employee Behaviors, and Human Resource Practices on Firm
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Bohlander, G., & Snell, S. (2004). Managing human resources (13th ed.). Mason,
OH: Thomson/South-Western.
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Thompson, M., & Heron, P. (2005). Management capability and high performance
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