Human Resource Management Review 15 (2005) 200 – 213

www.socscinet.com/bam/humres

The vital role of strategy in strategic human

resource management education
Clint Chadwick *
Institute of Labor and Industrial Relations, University of Illinois at Urbana-Champaign, 504 E. Armory Ave., Champaign,
IL 61820-6221, United States

Abstract

An informal survey of syllabi available on the Internet suggests that firm strategy has generally received inadequate treatment in
strategic human resource management (SHRM) courses. This weakness reflects limitations in the SHRM research stream and it
makes SHRM education unnecessarily narrow. In order to produce effective SHRM practitioners, strategy must become a central
component of SHRM courses on an equal footing with HRM. This paper describes the advantages of doing so and offers some
practical suggestions about how SHRM course instructors can begin infusing strategy into their SHRM courses.
D 2005 Elsevier Inc. All rights reserved.

Keywords: SHRM; Human resource; Strategy

Strategic human resource management (SHRM) has received a great deal of attention in recent years, most notably
in the fields of human resource management (HRM), organizational behavior, and industrial relations. SHRM
research is distinguished from traditional HRM by two key characteristics: 1) an organizational system level approach
to HRM, and 2) a concern with the effects of HRM on firm performance. The concept of firm strategy is often though
not necessarily included in SHRM research, as well. Nevertheless, firm strategy has generally received inadequate and
superficial treatment in SHRM education, a limitation that makes SHRM teaching unnecessarily narrow and reflects
weaknesses in the SHRM research stream itself (cf. Chadwick & Cappelli, 1999). For SHRM courses to produce
effective SHRM practitioners, strategy must become a central component of SHRM courses on an equal footing with
HRM.
As SHRM research has progressed, SHRM courses have become part of many undergraduate and graduate
programs’ curricula. As a rough assessment of the ways that strategy is treated in such courses, I conducted an
informal review of many available SHRM syllabi, drawing a sample of convenience from responses to a request for
syllabi on the Academy of Management’s HR Division listserve and from a search of SHRM syllabi posted on the
Internet. I included undergraduate and graduate syllabi from any part of academe as long as enough detail about
course content was present for coding. For comparability, I excluded SHRM syllabi for doctoral classes or for classes
outside the United States and Canada. Most syllabi were current as of the 2004–2005 academic year and none were

* Tel.: +1 217 333 1064; fax: +1 217 244 9290.

E-mail address: cchadwic@ilir.uiuc.edu.
URL: http://www.ilir.uiuc.edu/faculty/chadwick.html.

1053-4822/$ - see front matter D 2005 Elsevier Inc. All rights reserved.
doi:10.1016/j.hrmr.2005.11.003
 C. Chadwick / Human Resource Management Review 15 (2005) 200–213 201

older than five years. A total of 36 syllabi were coded across 34 different universities; 21 syllabi were from business
or industrial relations programs. Of these 36 courses, nine explicitly used the SHRM label in the course title.
The available information in this survey is incomplete and there is little I can say about sample bias, so any
conclusions here are impressionistic at best. Nevertheless, it is interesting to note that none of the courses surveyed
explicitly required training in strategy as a prerequisite and only three courses devoted significant amounts of course
time (i.e., more than a session or two) to teaching strategy. Far and away, the modal approach to designing these
courses is for instructors to break them into two parts (similar to the hypothetical course described in the lefthand
column in Table 1). The first part is an introduction to the new, strategic role of HRM in two to three initial sessions.
The second part of these courses is a review of the various traditional Human Resource (HR) functions (e.g., training
and development, selection, compensation, job analysis and design), showing how each is practiced differently if it is
approached from a strategic perspective (an ironic contrast to the SHRM orientation toward treating HR systems
holistically). Only four of the 36 courses reviewed broke from this approach to teach SHRM in a different way; all of
these four courses included SHRM in their course titles. Though clearly not conclusive, the results of this survey
suggest that strategy may receive little explicit attention in many SHRM courses.
While this approach to SHRM course design serves the immediate purpose of invigorating traditional HR topics
with a bottom line perspective, there are advantages to employing a broader approach to teaching SHRM that
explicitly employs strategy on its own terms rather than as an adjunct to HRM. This becomes more apparent when we
consider the role that strategy plays in SHRM generally.

1. Why strategy matters in SHRM education

As Chadwick and Cappelli (1999) have pointed out, there are a number of different roles that strategy can play in
SHRM research. Correspondingly, strategy can also play these roles in SHRM education. First, strategic HRM can
refer to attempts to link human resource activities with bottom line, firm level performance measures. This can be
done either for an individual HR practice (e.g., utility analysis of a training program) or, more in keeping with the
orientation of SHRM research, it can be done by incorporating multiple HR activities into an HR system on the firm
level (e.g., Huselid, 1995). In either event, this type of SHRM research does not explicitly utilize operationalizations
of strategy, and it has dominated the early empirical SHRM literature. Work from this type of SHRM can be seen as

Table 1
Comparing the topics addressed in two kinds of SHRM courses
Typical SHRM course Strategy-infused SHRM course
Week 1 Does Human Resource Management What does it mean to be strategic
affect organizational performance? about HRM?
Week 2 Human capital, the Resource-based Foundational concerns: strategic adaptability,
view of the firm, and organizational performance managerial discretion, and the determinants
of HR systems
Week 3 Aligning HR with business strategy: Why should we believe that human assets
external fit and generic strategy typologies have strategic value?
Week 4 Change management and SHRM Why should we believe that human resource
management has strategic value?
Week 5 SHRM and work organization and job design Internal and external fit in SHRM systems
Week 6 SHRM and recruiting and selection The research evidence for the strategic
effectiveness of HR systems
Week 7 SHRM and diversity in the workplace The strategic uses of participative management
Week 8 SHRM and training and development Enabling strategy: strategic uses of
change management
Week 9 Legal environment of SHRM Strategic renewal: downsizing, mergers
and acquisitions, and restructuring
Week 10 SHRM and collective bargaining Multi-national SHRM
Week 11 SHRM and socialization and career management Crafting strategic HR systems/
SHRM measurement
Week 12 SHRM and performance appraisal The role of formal HRM under SHRM
Week 13 SHRM and compensation and benefits Is SHRM in the interests of workers?
Week 14 International SHRM Integrative in-class case exercise
202 C. Chadwick / Human Resource Management Review 15 (2005) 200–213

efficiency studies examining whether firms’ effectiveness in managing the human resource function is related to firm
performance—what Porter (1996) describes as boperational effectivenessQ. However, the traditional goal in strategy
has been to explain sustainable competitive advantage, a considerably more challenging and elusive concept that
requires operationalizations of strategy, as I argue below. Operational effectiveness is a complement to sustainable
competitive advantage (Porter, 1996).
A second approach to SHRM focuses on identifying how strategy influences the composition of organizations’ HR
systems (e.g., Jackson, Shuler, & Rivero, 1989). Empirical SHRM research in this area has been generally hampered
by a lack of significant results. Consequently, most of the published literature on this topic is theoretic in nature. In a
third approach, SHRM research can address how the interactions between strategy and HR systems influence firm
performance. Both of these latter types of SHRM research explicitly feature firm strategy in their models.
Most of the existing SHRM courses described above emphasize the first two of these points of view, which have
also, not coincidentally, received the bulk of SHRM researchers’ attention. In both roles, simplistic summaries of firm
strategy have heretofore been more than sufficient. For example, while strategy theories like the Resource-based view
of the firm (RBV) are part of the curriculum in such SHRM courses, they serve chiefly as a loose rationale for
examining HRM’s bottom line effects. The other common use of strategy in these courses is in prescriptive, theoretic
configurations of generic strategies and HR practices (e.g., Miles & Snow’s well-known typology (1984)). Still other,
less sophisticated commonly used definitions of the term bstrategicQ in SHRM courses equate SHRM with long term
HR planning, so-called high performance work systems (HPWS), HR best practices, or plans for increasing the
influence of the formal HR function within firms.
However, emerging SHRM research is increasingly pushing past simply demonstrating that HRM and firm
performance are related toward more detailed causal models that explain when, where, and why specific types of
employee knowledge, skills, abilities, and activities influence firm performance (e.g., Lepak & Snell, 1999). Strategy
describes how firms achieve competitive advantage, which in turn drives firm performance. Hence, adequately
answering more detailed questions about how HRM affects firm performance increasingly requires descriptions of the
mechanisms driving competitive advantage from the strategy field, placing current research more and more within the
third stream of SHRM discussed above, where the interaction of firm strategy and HRM influences firm performance.
In a similar way, the usual approaches to SHRM education are sufficient if the aim is simply to show that HRM
and firm performance are related or if general prescriptions for HR system design are to be derived from strategy
typologies, but are inadequate if SHRM courses are to help students address sustainable competitive advantage
through people in ways that are more customized to the context of a firm. Thus, in the same way that students with
little or no background in HRM will struggle to understand and practice strategic HRM, students with an insufficient
understanding of strategy will be disadvantaged as practitioners of the more complex forms of SHRM that are
emerging because the latter draw more extensively on tools and concepts from strategy. Consequently, the need for
SHRM educators to deepen their treatments of strategy is growing.

2. How more thorough treatments of strategy can enhance SHRM courses

On a directly practical level, it behooves SHRM instructors to ensure that their students are well versed in various
forms of strategy so that the SHRM practitioners they train will speak a common language about firm performance
with other strategic actors. If HR managers wish to convince line managers, for example, to embrace a SHRM
initiative, they will need to be well acquainted with the strengths and weaknesses of the strategy approaches that these
managers employ, even if those approaches, such as the Boston Consulting Group’s growth-share matrix, have fallen
out of favor among most strategy academics. Without a thorough grounding in different strategic approaches, the
SHRM practitioners being produced in today’s courses may not have the ability to persuasively articulate a case for a
SHRM intervention. (A similar argument might be made for training SHRM practitioners in the language and
concepts of other business school disciplines, such as marketing and operations.)

2.1. Helping students tie HRM to the competitive advantage of firms

A more important reason for strategy to be included in SHRM courses is that training in strategy helps students to
better decipher how firms create value for stakeholders in a particular business, a precondition for successfully
applying HRM to achieving sustainable competitive advantage for firms. In other words, SHRM students need to not
 C. Chadwick / Human Resource Management Review 15 (2005) 200–213 203

only be conversant in strategy terminology, but also able to integrate strategy frameworks with HRM in order to create
insightful prescriptions for their firms’ strategic choices concerning HR. Hence, strategy must also be integrated with
HRM in the ways in which SHRM courses are taught. Otherwise, the solutions that students will devise to
organizational dilemmas will tend to center on operational effectiveness issues per traditional HRM. In contrast, a
more strategic approach will usually address the same HR issues, activities, and functions, but on an HR system level
and with strong explicit linkages to a firm’s value creation process. This makes student recommendations for action
simultaneously broader, more precise, and more effective.
An illustration of these different approaches is a case concerning a rural Alabama bank, Farmers’ Exchange Bank
(FEB), which had traditionally based its competitive advantage on exceptional service to a loyal group of customers
(see Anthony, Perrewe, & Kacmar, 1996: 104–106). After FEB established a second branch in a neighboring
community, the bank ran into serious operational difficulties, including rising loan defaults and demand for banking
services that outstripped FEB’s ability to meet it. Farmer’s Exchange Bank took various short-term steps to mitigate
these problems, such as planning to hire more staff, particularly new loan officers, cutting back on new business at the
new branch, and establishing more formal departmentalization. Students with an operational effectiveness approach to
the case will focus on such issues, though they may add a veneer of strategy to the discussion by describing how
removing these inefficiencies in FEB’s HR system will reduce costs.
In contrast, students taking a more strategic approach to this case will start by delving deeply into this bank’s
differentiating characteristic, customer service, and connecting that characteristic with FEB’s value-creating processes
and its competitive environment, thus describing FEB’s approach to creating sustainable competitive advantage in
detail. For example, a thorough examination of FEB makes it apparent that the bank’s competitive advantage does not
lie with generic customer service, but in a kind of long term relationship with customers that enhances FEB’s
knowledge of its customer base. This knowledge, in turn, makes such processes as assessing risk for loan officers
more effective.
This detailed examination of FEB’s value creation processes is the root of the strategic approach’s greater
precision, which is expressed in more exact recommendations for action. For example, a student writing about this
case could make recommendations for hiring more personnel and redesigning jobs just as she would if she were
focused on operational effectiveness, but by starting with a detailed analysis of the firm’s competitive positioning
from a strategy point of view, she can specify in greater detail what these positions’ new job descriptions will look
like, what new organizational structures will be required, what kinds of employee skills should be purchased from the
labor market, and what employee skills should be created internally through training in order to create a stronger
competitive position for FEB. For example, a job specification for new personnel in the second branch could include
pre-existing relationships of trust with members of the community in which this branch is located, facilitating the
creation of the long-term relationships with customers that has been the key to FEB’s competitive advantage. Thus,
with a strategic approach, students’ questions and answers are more effective because they are both broader in the
issues that are brought into their analyses and more precise in their prescriptions for action.

2.2. Opening students to more expansive conceptions of SHRM

Relatedly, training in strategy can open students to more expansive conceptions of SHRM that can be applied in a
greater variety of contexts. As I noted above, many SHRM courses to date have emphasized just a few forms of
strategy, primarily the Resource-based view of the firm (RBV) and the generic typologies of Miles and Snow (1984)
and of Porter (1980) because these forms of strategy have received the lion’s share of attention in the published
research. This can give rise to unnecessarily narrow descriptions of SHRM. Consider, for example, the way in which a
definition of SHRM as being equivalent to commitment-based or bhigh performanceQ work systems (a view that is
receiving some criticism in SHRM research), could address how HR activities impact firm performance in an industry
such as investment banking, where individual-level productivity is regularly measured and rewarded, key clients have
more allegiance to bankers than to firms, and industry norms place a low premium on employee loyalty to the firm,
characteristics that are directly at odds with the usual descriptions of HPWS. A broader definition of SHRM that
encompasses other forms of strategy might suggest more applicable forms of SHRM for this context. Game theory,
for instance, could begin to explain the complex patterns of competition and cooperation that evolve between
investment banks and individual bankers as they create value for customers and bargain over the distribution of rents
(cf. Brandenburger & Nalebuff, 1995). Real options theory (cf. Bhattacharya & Doty, 2001) might begin to explain
204 C. Chadwick / Human Resource Management Review 15 (2005) 200–213

how strategic concerns shape investment banks’ recruiting and retention activities by describing where and how firms
could hedge the risk of key bankers being lured away by competitors.
In short, limited views of strategy lead to constricted definitions of SHRM, which in turn generate constrained
views of SHRM’s applicability. To illustrate this point, Table 2 presents summaries of the various strategy bschools of
thoughtQ that Mintzberg described in a 1990 review. The forms of strategy that are included in a typical SHRM course
as described above are bolded in the table, which shows that descriptive forms of strategy have rarely had much of a
place in SHRM education. This is unfortunate, since descriptive forms of strategy delineate the internal causal
mechanisms driving firms’ competitive advantages and thus are particularly useful for generating the more complex
causal models of firm performance that SHRM researchers and practitioners are now striving to achieve.

3. The nature of strategy education

These different strategic perspectives and others not listed in Table 2 will only enter into SHRM courses, however,
if strategy is treated as a co-equal foundation with HRM for SHRM rather than as a subsidiary influence that can be
encapsulated in one or two simple ways. If strategy were easily codified, then SHRM students could be quickly
brought up to speed on strategy in a class session or two and most course time could be devoted to SHRM
applications. This is the implicit assumption in the usual approach to SHRM course design discussed above.
However, this assumption is unlikely to be a valid one. Strategy is a broadly inclusive label that is more indicative
of a general approach to defining firm performance dilemmas than it is a neatly packaged set of prescriptions for
managerial practice (Greiner, Bhambri, & Cummings, 2003).
Of course, for SHRM courses that are primarily oriented toward operational effectiveness, these issues are not
particularly important. However, strategy’s characteristics pose a significant challenge for SHRM education that
follows the shift of research and practice into the third type of SHRM discussed above, where interactions with firms’
strategies profoundly affect the relationships that HR systems have with firm performance. Strategy education is
shaped by the field’s inherent complexity, and there are few shortcuts. Strategy practitioners tend to be eclectic in
practice, drawing from multiple theoretic schools of thought (Mintzberg, 1990) and customizing solutions to the
specifics of various contingencies. Moreover, the strategy field’s emphasis on firm differences is directly contrary to
the universalistic, bsingle recipeQ viewpoint epitomized by the best practices approach (Nelson, 1991; Porter, 1996).
This makes prescriptions of common solutions that apply to standard strategic challenges nearly impossible to
achieve. While this circumstance is by no means unique in the managerial sciences, perhaps nowhere is there a greater
lack of easily determined prescriptions for action than in strategy. Instead, consensus in the strategy field revolves
around a set of basic questions concerning firm heterogeneity (cf. Rumelt, Schendel, & Teece, 1994), such as: Why do

Table 2
Strategy schools of thought
Strategy school View of the strategy process Central actors Best situation
Prescriptive schools
Design Conceptual bArchitectQ Simple, stable, predictable, integrated
(usually CEO)
Planning Formal Planners Simple, stable, predictable, ideally controllable
Positioning Analytical Analysts Simple, stable, predictable and controllable, mature
and structured

Descriptive schools
Entrepreneurial Visionary Leader Dynamic but simple
Cognitive Mental Brain Individual
Learning Emergent Whoever can learn Complex, dynamic, unpredictable, ideally novel
Political Power Whoever has power Divisive, malevolent (micro), controllable (macro)
Cultural Ideological Collectivity Passive
Environmental Passive Environment When environment has strong effects

Integrative schools
Configurational Episodic Everyone Any
Note: Adapted from Mintzberg, 1990, pp. 192–197. Strategy schools that receive attention in a typical SHRM course are bolded.
 C. Chadwick / Human Resource Management Review 15 (2005) 200–213 205

we see variations in firm characteristics, and how do they matter for firm performance? What determines the behavior
of firms? and How do managerial choices help determine firm performance?
In other words, there is little received wisdom in strategy that can be neatly packaged for and directly
applied by someone who has not internalized the strategy paradigm. Indeed, in business schools, strategy
courses have traditionally been seen as integrative courses where various business functions are brought together
in a holistic examination of the roots of firm performance (Greiner et al., 2003)1. For these reasons, strategy
instructors spend great amounts of time in honing students’ analytic capabilities and in moving students down
Bloom’s learning taxonomy (Bloom, 1956) from simple memorization and recitation toward complex analysis,
synthesis, and evaluation skills. Training in this kind of applied knowledge must necessarily include large amounts of
practice, which is one reason why strategy courses in business schools tend to use case studies and activities
extensively (Greiner et al., 2003).

4. Recommendations for SHRM education

Accordingly, the broader inclusion of strategy in SHRM courses may demand changes both in topics covered and
in the way those topics are taught, with an increased emphasis on experiential and action learning. Obvious examples
of the latter are the extensive use of SHRM cases and exercises. Another way to help students internalize the SHRM
perspective is to explicitly contrast it with the approaches taken in its base disciplines, strategy and HRM. For
example, SHRM instructors could use a traditional HR case that was taught in a prerequisite HRM class and lead
students through the case from a SHRM perspective, as was illustrated above. Another way to develop students’
knowledge of SHRM is to use a detailed case or project throughout the course, with course materials and activities
continuously referring back to and shedding new light on this overarching project. The epitome of active learning
would be for student teams to deliver a SHRM consulting project to a corporate customer in the local community,
perhaps as the second semester in a two-semester SHRM sequence.
To illustrate more specifically how greater attention to strategy would change SHRM courses, note the differences
in the lists of topics covered in the two hypothetical courses described in Table 1. The typical SHRM course moves
fairly quickly into applying strategic thinking to traditional HR topics, while the strategy-infused course spends a
great deal more time on foundational concepts concerning the acquisition and perpetuation of competitive advantage
through human resources. For example, in Week Two, students in the typical SHRM course are exploring a specific
kind of internally oriented strategy, the RBV. Week Three in this course concerns HR systems’ fit with key external
factors, particularly firm strategy. Also, students are introduced to generic typologies and to the specific configura-
tions of strategies and HR systems that the authors of these typologies suggest. The remaining sessions of this SHRM
course address how SHRM concepts are applied to traditionally defined HR functions, taken one at a time. As
described above, this appears to be a common approach to SHRM course design.
On the other hand, in the strategy-infused course students explore key strategy issues and link these topics to
HRM, enhancing students’ understanding of HRM’s role in creating competitive advantage. For instance, the topic in
Week Two of the strategy-infused course is managerial discretion, the ability of firm actors to shape firm
characteristics and actions. This sets the stage for considering how much firm actors can influence firm performance
through their decisions about HRM and contrasts with the hyper-rational, high managerial discretion bias that has
suffused SHRM teaching and research to date (Boxall, 1992). Moreover, the differences between these two courses
should extend not just to the topics covered in each, but to the ways in which the same topics are approached, as the
description of the Farmer’s Exchange Bank case above illustrated.
Of course, Table 1 is an illustration of pure types rather than a prescription. However, the course in the right hand
column of Table 1 is more likely to produce students capable of analyzing organizations’ value-creation structures and
molding organization-level HR systems to complement them because these students have received specific training in
both topics. Subsequently, the application of these concepts to various traditional HRM functions will be something
that students can begin to work out for themselves as part of their efforts to strategically optimize an HR system.

1
Consequently, it was once common for strategy courses to be taught toward the latter end of a graduate or undergraduate program of study,
though now strategy courses are often taught much earlier in students’ academic careers. The emphasis on integrating such business functions as
marketing, operations, and human resource management remains.
206 C. Chadwick / Human Resource Management Review 15 (2005) 200–213

Moreover, the approach in the strategy-infused SHRM course reduces the risk that the typical SHRM course runs of
becoming a traditional survey of traditional HR topics. Instead, the focus remains firmly centered on the strategic
forms of HRM.

4.1. The problems of materials and expertise

One obstacle to bringing strategy more strongly into SHRM courses is a dearth of instructional materials that
emphasize strategy integrated with HRM. As I noted above, the ways in which firm strategy is being used in SHRM
research are still developing past a narrow set of topics such as participative management and high performance work
systems towards broader, more strategically minded definitions of SHRM. This has made it difficult for SHRM
instructors to give their students a comprehensive view of how various types of strategy apply to SHRM because the
majority of these perspectives have not yet found expression in the research. Relatedly, the cases, articles, and texts
that are available to SHRM instructors have tended to employ a constricted set of strategy concepts drawing from
limited definitions of SHRM. Thus, there may be instances where SHRM instructors who would like to bring strategy
more strongly into their courses are hampered by the lack of suitable materials.
Perhaps a bigger obstacle is the knowledge and experiences of SHRM instructors. Strategic Human Resource
Management has been embraced primarily by HR, industrial relations, and organizational behavior scholars.
Therefore, the majority of SHRM course instructors to date have had little formal training in strategy concepts
(Chadwick & Cappelli, 1999). Thus, sophisticated treatments of strategy may have been omitted from SHRM courses
because instructors either did not see a bigger role for strategy concepts or because they have not felt experienced
enough to teach them. Because the practice of strategy is eclectic and contains large shares of tacit skill—it is a
paradigm as much as a body of knowledge—SHRM instructors will become effective at teaching the newer, more
complex forms of SHRM only as quickly as they internalize strategy themselves, independent of the quality of SHRM
research and course materials. As they do so, their view of SHRM, along with their students’ views, should widen and
deepen in ways that enhance the quality of SHRM education. Alternatively, gaps in the knowledge bases of SHRM
instructors can be amended by creatively complementing SHRM instructors’ knowledge, skills, and abilities with
those of strategy scholars. For example, SHRM courses that are taught jointly by strategy and HRM faculty would
most likely give much greater weight to the strategy side of SHRM education.
A similar argument can be made for thoroughly training instructors and students in the other SHRM knowledge
base, traditional HRM. While a solid background in HRM is an essential prerequisite to effectiveness in a SHRM
course, this gap in all probability occurs less often because many SHRM courses are taught by HR-oriented faculty in
programs that also offer traditional HRM courses. In both cases, strategy and HRM, the essential knowledge in these
areas will need to be either a required prerequisite or included at length in SHRM courses themselves in order for
students to have a foundation for integrating strategy and HRM. To tap into the full power of the strategy and HRM
combination, students’ training in strategy will need to address both general content knowledge and the specific
application of strategy to the theory and practice of SHRM.

5. Getting started: applying strategy concepts to SHRM topics

How could instructors begin today to integrate strategy into their SHRM courses? The answer to this question is
properly the subject of a book rather than a journal article, but here I offer a few ideas that I have found to be effective
in my own SHRM course as a starting point. The topics I review here include fundamental issues that underpin the
strategy paradigm, some key questions and bmythsQ about SHRM that instructors can use pedagogically to focus
students on these issues, and a review of some of the materials that I use to teach specific SHRM concepts.

5.1. Fundamental issues

As noted above, strategy concerns not only specific analytic tools and concepts, but also more basic questions and
issues that under gird the strategy paradigm, chief of which is the relentless pursuit of sustainable competitive
advantage (SCA). Sustainable competitive advantage is distinct from efficiency, or what Porter (1996) calls
operational effectiveness. Increases in operational effectiveness mean that a firm has become better at performing
value-creating activities that are relatively common amongst competitors. Because operational effectiveness concerns
 C. Chadwick / Human Resource Management Review 15 (2005) 200–213 207

processes that are undifferentiated across comparable competitors, the upper limit to operational effectiveness efforts
is competitive parity. In other words, competitive disadvantage can flow from doing what one’s competitors do less
efficiently, and eliminating such disadvantages is the focus of operational effectiveness. For example, total quality
management (TQM) programs, with their emphasis on continuous improvement in production processes, target
operational effectiveness. Similarly, benchmarking and the diffusion of best practices in HRM, which are quite
popular among HRM practitioners, can at best lead to competitive parity because they are not aimed at differentiation.
In contrast, SCA stems from differentiation in characteristics that are valuable to customers, even if this
differentiation creates a cost advantage for the firm. It is common for students unfamiliar with strategy to assume
that eliminating the causes of failure (operational effectiveness) will lead to SCA, but the pursuit of operational
effectiveness and SCA are qualitatively different, though potentially complementary, processes. One way to illustrate
the difference between operational effectiveness and SCA for students to consider the example of a losing football
team. There may be many reasons why a football team that does not execute well will bgive games awayQ to their
opponents through turning over the ball, not managing the clock well, missing defensive assignments, etc. However,
if this team managed to eliminate all such mistakes, it does not necessarily follow that it will win a league
championship. Rather, the team’s newfound effectiveness at basic issues needs to be coupled with such differentiating
characteristics as superior talent, better game planning, innovative offensive or defensive schemes, and the like. These
latter, relatively rare differences drive SCA for football teams. Similarly, the strategic management of human
resources in firms must contribute to such differentiation.
In fact, strategy as an academic discipline can be thought of as the study of the origins and consequences of firm
heterogeneity. This contrasts with traditional economic descriptions of competition, which considered cross-firm
heterogeneity (except for firm size) to be inconsequential to competition within a particular industry because all firms
were depicted as having the same production function (Nelson, 1991). These economic depictions rest on simplifying
assumptions that lead to optimal choice among such rational actors as corporate managers. However, optimal choice
is not possible in a world of bounded rationality and limited resources, which make it impossible to determine the full
menu of options facing an organization along with the full benefits and drawbacks of such options. As March and
Simon described some time ago, these conditions lead organizational actors to engage in satisficing (March and
Simon, 1958). In other words, strategic actors make their choices based on probabilities rather than certainties. Hence,
some actors, for a variety of reasons including superior information and luck (Barney, 1986), will make better choices
than others concerning fundamental competitive issues, and accordingly the firm-level heterogeneity that arises from
such choices can drive significant differences in performance across comparable firms. The ability of organizational
actors to operationalize such choices as differences in their firm’s activities and characteristics (intentionality or
managerial discretion) are essential to achieving SCA, as well.
In sum, a list of basic concepts that are integral to the strategy paradigm includes operational effectiveness versus
SCA, firm-level heterogeneity (or differentiation), strategic choice and intentionality (or managerial discretion), and,
though not mentioned above, the search for causal mechanisms linking firm heterogeneity and SCA. Different stances
on these related issues create the various strategy schools of thought listed in Table 2.

5.2. SHRM questions and myths

The fundamental issues discussed above can be distilled into a series of thought questions that a SHRM instructor
can use to focus students’ analyses across a variety of strategic tools and particular cases. These questions include:

! If this HR program were wildly successful, would any of our customers notice?2
! Why do customers come to us instead of our competitors?
! What does this firm activity do to drive financial performance?
! What product is this firm really selling, and is it/can it be differentiated?
! How can this firm’s strategic capabilities be leveraged across a new line of business?
! How can human resources differentiate the firm with respect to the value creation process in this business?

2
My thanks to Tony Rucci for this insightful question.
208 C. Chadwick / Human Resource Management Review 15 (2005) 200–213

Nuanced answers to these questions indicate that students have evaluated the strategic issues in a case appropri-
ately. As the Farmer’s Exchange Bank case described above illustrates, the more precise students’ answers are to these
questions, the more likely they will be able to recommend specific HRM policies and practices that can strategically
differentiate the firm.
Another way to emphasize the strategy paradigm to SHRM course students is to work through the following list of
common myths or misconceptions about SHRM. For each myth, I summarize the discussion points that I use with
students in parenthetical comments that immediately follow.

! Strategic HRM = Strategy for the HR function (Strategic HRM concerns the strategic use of human resources
within the firm by many actors. Strategy for the HR function is a political, resource allocation game that is
distinctly different.)
! The importance of human resources to firm performance = importance of the formal HR function (Related to the
above point, many of the most important strategic actions with respect to human resources are taken by
organizational actors outside the formal HR function. The most important strategic HR managers in a firm are
often line managers.)
! It’s been proven that HRM leads to greater firm performance (Strategic HRM is not simply a case that bmore HR is
betterQ. Empirically, that may be true for some HR policies and practices, but if so, those are best practices and thus
not places for firms to secure SCA. What has been most often demonstrated in the research is that some HR
policies and practices can lead to superior firm performance in some contexts. The proper question from a strategic
point of view is, bWhat kind of HR system does this firm need to achieve SCA, given its endowment of resources,
capabilities and the like?Q)
! Avoiding failure = sustainable competitive advantage (These are qualitatively different processes, as discussed
earlier in this paper.)
! SHRM = HRM linked to the bottom line (Measures that link HRM to financial outcomes are vital to helping
organizational actors make more informed SHRM decisions, but this alone isn’t strategy, it’s measurement.)

5.3. SHRM materials

Lastly, to help with the dearth of good SHRM course materials mentioned above, I describe a few of the materials
and activities that I regularly use in my SHRM course to bring strategy concepts to life with respect to HRM. To
illustrate one way in which these materials might be assembled within a SHRM course, I have provided my course
syllabus’ schedule and list of readings in Appendix A. (Note that because strategy isn’t formally taught anywhere else
in the graduate program in which I teach SHRM, the first part of this course gives students those fundamentals.)
Concurrent with the uses of these materials, I emphasize to students that SHRM concerns HR systems more than
individual policies and practices and is aimed at firm-level outcomes rather than those for individuals or small groups.

! For example, the Dough Pineapple case can be used to demonstrate how broad definitions of SHRM are helpful.
Here, a firm producing an agricultural commodity (pineapple) has created a high involvement/participative work
system for its full time workers, many of whom are arguably doing low skilled jobs where they are easily
replaceable. Students tend to first focus on operational effectiveness issues that involve trying to fix the high
involvement work system, but an evaluation of the firm as a business suggests that efforts to retain the large
majority of this firm’s workers through such a system are strategically inappropriate.
! To illustrate the futility of best practices and benchmarking without deep analysis of causal mechanisms, have all
students in the class stand and simultaneously flip a coin. Then arbitrarily ask students with either a heads or tails
result to sit. Have the remaining students flip their coins and again ask those with either heads or tails to sit. Repeat
this until only one student remains standing. Then suggest to the class that they should study this student’s
attributes and bapproaches to coin flippingQ and emulate those bbest practicesQ to achieve SCA in coin flipping.3
! The Rob Waldron case demonstrates many of the practical issues in implementing participative work systems. His
firm, Score!, uses Ivy League university graduates to tutor students after school in California. The SHRM issue in

3
My gratitude to Jay Barney for this exercise.
 C. Chadwick / Human Resource Management Review 15 (2005) 200–213 209

the case isn’t about the mechanics of participative work systems, but about whether expansion of the business is
possible because the supply of Ivy Leaguers willing to work for Score! is relatively low. This focuses students on
their strategic analysis, particularly on the question of what Score! is really selling to parents. Is it tutoring or role
modeling with Ivy Leaguers?
! To help students determine whether an issue concerns operational effectiveness or SCA, I ask them to decide
what the impact would be of taking the firm from mediocrity to average on this issue compared the impact of
taking the firm from average to exceptional. For example, in the Portman Hotel case, it’s clear that the firm
has many inefficiencies that require correction. A strategic analysis of the Portman’s business model helps
students prioritize the activities where the Portman needs to be excellent because they are at the heart of the
firm’s approach to SCA and which where simple adequacy is suitable.

In conclusion, it’s clear that none of these suggestions are quick fixes and that they might require some
SHRM instructors as well as students to develop new competencies. The advantages of this pursuit are that new,
more valuable competencies may be created within students, SHRM practice in the field may become more
sophisticated and valuable for firms, and SHRM course instructors may gain insight into how perspectives from
strategy can enhance their research. Like SHRM itself, these suggestions require a good understanding of two
contrasting base disciplines, HRM and strategy. The synergistic advantages of this combination will come to
SHRM when instructors, students, and practitioners are thoroughly established in each of these base areas of
knowledge and also acquire expertise in how to effectively integrate strategy and HRM into something new and
different from those bases, and this starts in the classroom.

Acknowledgement

This paper has benefited from the helpful contributions of Ruth Aguilera, Jennifer Elliott, Brian Houska, Steve
Malia, Joseph Martocchio, and three anonymous reviewers. I express my appreciation.

Appendix A. Sample of a strategy-infused SHRM course schedule

Class sessions will generally be divided into two parts, one emphasizing concepts from the readings and the other
involving a case discussion, activity, conceptual sub-topic, or discussion of the course’s major written assignments.
Thursday, August 25: What does it mean to be strategic about HRM?
A. Ch. 1 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, pp. 1–13.
Pages: 13
Activity: What is strategy?
Video: bThe Best Stuff Q
Thursday, September 1: Can organizational actors really get HR systems to to what they want them to do?
A. Kroll, Mark J., Leslie A. Toombs, and Peter Wright. 2000. Napoleon’s tragic march home from Moscow:
Lessons in hubris. Academy of Management Executive, 14(1): 117–128.
B. Nelson, Richard R. 1991. Why do firms differ, and how does it matter? Strategic Management Journal, 12:
61–72.
C. Schuler, Randall S., and Susan E. Jackson. 1987. Linking competitive strategies with human resource
management practices. Academy of Management Executive, 1 (3): 207–217.
D. Sull, Donald N. 1999. Why good companies go bad. Harvard Business Review, July–August: 42–52.
Pages: 46
Case: National Bank (distributed in class on 8/25)
Response paper questions: In light of the readings and your experience, what are the most powerful
determinants of the HR practices in organizations’ HR systems? Can managers really be intentionally strategic
about HRM? How strong is managerial discretion at National Bank, and how does this compare to other
firms?
Thursday, September 8: How do the traditional strategy tools work?
A. Ch. 6 from Bartol and Martin, Management, pp. 166–193.
B. Ghemawat, Pankaj. 1986. Sustainable advantage. Harvard Business Review, 53–58.
210 C. Chadwick / Human Resource Management Review 15 (2005) 200–213

C. Greenberg, Herb. 2002. The buy-dem-up boondoggle. Fortune, July 22: 210.
D. Porter, Michael E. 1996. What is strategy? Harvard Business Review, November–December: 61–78.
Pages: 52
Case: Blockbuster Entertainment Corporation (Hitt, Ireland, and Hoskisson, pp. 413–424)
Response paper question: Critique one of these strategy tools in light of HR/IR’s concerns with employees: Are
these good tools for use in HR/IR?
Thursday, September 15: What are the emergent and internally oriented strategy tools?
A. Brown, Eryn. 2001. Who’s afraid of e-books? Fortune, Feb. 5: 159–162.
B. Pascale, Richard T. 1996. The Honda effect. California Management Review, 38(4): 80–90.
C. Collis, David J., and Cynthia A. Montgomery. 1995. Competing on resources: Strategy in the 1990s. Harvard
Business Review, 73: 118–128.
D. Hamel, Gary. 2001. Edison’s curse. Fortune, March 5: 175–178.
E. Starbuck, William H. 1992. Strategizing in the real world. International Journal of Technology Management,
Special Publication on Technological Foundations of Strategic Management, 8(1/2): 77–85.
F. Useem, Jerry. 2001. Conquering vertical limits. Fortune, Feb. 19: 84–96.
G. Useem, Michael, and Jerry Useem. 2003. The board that conquered Everest. Fortune, Oct. 27: 73–74.
H. Weick, Karl E. 1987. Substitutes for strategy. In D.J. Teece (ed.), The Competitive Challenge: Strategies for
Industrial Innovation and Renewal, pp. 221–232. Cambridge, MA.
I. Welch, Jack. 2005. It’s all in the sauce. Fortune, April 18: 138–144.
Pages: 60
Response paper questions: What’s the value of benchmarking and best practices? How long does this value last?
Thursday, September 22: Game theory, real options, flexibility, dynamic capabilities, innovation, and
knowledge management
A. Amram, Martha, and Nalin Kulatilaka. 1999. Disciplined decisions: Aligning strategy with the financial
markets. Harvard Business Review, 77(1): 95–104.
B. Brandenburger, Adam M., and Barry J. Nalebuff. 1995. The right game: Use game theory to shape strategy.
Harvard Business Review, July–Aug.: 57–71.
C. Ghemawat, Pankaj, and Patricio del Sol. 1998. Commitment versus flexibility? California Management Review,
40(4): 26–42.
D. Hamel, Gary. 2001. Innovation’s new math. Fortune, July 9: 130–132.
E. Kirkpatrick, David. 2004. Big-league R and D gets its own eBay. Fortune,
F. Lubit, Roy. 2001. Tacit knowledge and knowledge management: The keys to sustainable advantage. Organi-
zational Dynamics, 29(4): 164–178.
Pages: 70
Response paper questions: How would you apply one of these tools to Strategic HR? These readings point to
different ways to define a firm. Are they better or worse than the more traditional definitions we’ve been studying, or
complementary?
Thursday, September 29: Why should we believe that human resources have strategic value?
A. Ch. 4 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, pp. 62–91.
B. Ch. 5 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, pp. 95–113.
C. Cappelli, Peter, and Crocker-Hefter, Anne. 1996. Distinctive human resources are firm’s core competencies.
Organizational Dynamics, 24(3): 7–22.
D. Caudron, Shari. 1999. The hard case for soft skills. Workforce, 78(7): 60–66.
E. Schrage, Michael. 2001. Shadow bosses. Fortune, Oct. 1: 178.
F. Stewart, Thomas. 1998. Knowledge, the appreciating commodity. Fortune, October 12: 199–200.
Pages: 85
Case: Levi Strauss (two different journal articles).
Response paper questions: What went wrong at Levi-Strauss? Does this example tell you anything about how
human resources affect firm competitiveness?
Thursday, October 6: How should HR systems bfitQ internally and externally?
A. Ch. 2 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, pp. 16–34.
B. Ch. 3 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, 38 –58.
 C. Chadwick / Human Resource Management Review 15 (2005) 200–213 211

C. Broedling, Laurie A. 1999. Applying a systems approach to human resourcemanagement. Human Resource
Management, 38(3): 269–278.
Pages: 50
Case: Dough Pineapple (Schuler and Jackson, pp. 533–534)
Response paper questions: Fit between which specific HR practices would be most important to an HR system’s
effectiveness? (i.e., what do you absolutely have to get right?)
Thursday, October 13: How has participative management transformed U.S. employment systems?
A. Ch. 8 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, pp. 167–185.
B. Ch. 9 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, pp. 189–205.
C. Argyris, Chris. 1998. Empowerment: The emperor’s new clothes. Harvard Business Review, May–June:
98–105.
D. Collins, Denis. 1995. Death of a gainsharing plan: Power politics and participatory management. Organiza-
tional Dynamics, 24(1): 23–37.
E. Excerpts from Sinclair, Amanda. 1992. The tyranny of a team ideology. Organization Studies, 611–626.
Pages: 71
Case: Rob Waldron at SCORE! Educational Centers, HBS case 9-400-040
Response paper question: How can management make employee participation attractive to employees?
Thursday, October 20: What is the evidence for the strategic effectiveness of HR systems?
A. Dyer, Lee, and Todd Reeves. 1995. Human resource strategies and firm performance: What do we know and
where do we need to go? The International Journal of Human Resource Management, 6(3): 656–70.
B. Wright, Patrick M. 2003. Demonstrating causation: The key to next generation Strategic Human Resource
Management research. Perspectives on Work, 7(1): 13–15.
C. Wright, Patrick M., and Timothy M. Gardner. 2003. The Human Resource-firm performance relationship:
Methodological and theoretical challenges. Ch. 16 in Holman, Wall, Clegg, Sparrow, and Howard (eds.), The New
Workplace: A Guide to the Human Impact of Modern Working Practices, pp. 311–328.
D. Wright, Patrick M. 1998. Strategy-HR fit: Does it really matter? Human Resource Planning, 21(4): 56–57.
Pages: 33
***First Case Write-up Due-Farmers’ Exchange Bank***
Response paper questions: What do these systems have in common, if anything? Are they bprogressiveQ?
Thursday, October 27: Is there a smart way to approach strategic renewal?
A. Ch. 17 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps, pp. 421–440.
B. Chaudhuri, Saikat, and Behnam Tabrizi. 1999. Capturing the real value in high-tech acquisitions. Harvard
Business Review, Sept.–Oct.: 123–130.
C. Copeland, Tom. 2000. Cutting costs without drawing blood. Harvard Business Review, Sept.–Oct.: 155–164.
D. Hammer, M. 1990. Reengineering work: Don’t automate, obliterate. Harvard Business Review, July–August,
104–112.
E. Kim, W. Chan, and Renee Mauborgne. 1997. Fair process: Managing in the knowledge economy. Harvard
Business Review, July–Aug.: 65–75.
F. Kuttner, Robert. 1993. Talking marriage and thinking one-night stand. Business Week, Oct. 18: 16.
G. Lavelle, Louis. 2000. bCorporate liposuctionQ can have nasty side effects. Business Week, July 17: 74–76.
H. Rousseau, Denise M. 1996. Changing the deal while keeping the people. Academy of Management Executive,
10(1): 50–58.
Pages: 63
Case: Light, David A. 2001. Who goes, who stays? Harvard Business Review, Jan.: 35–44.
Response paper questions: Is there a smart way to approach downsizing if you have to do it? How might taking a
view of employees as strategic resources change organizations’ approaches to downsizing?
Thursday, November 3: How are we doing? Critiquing applications of strategy to HRM from popular
journals
A. Anonymous. 2000. Business ethics: Doing well by doing good. The Economist, April 22: 65–67.
B. Brady, Diane. 2000. Why service stinks. Business Week, Oct. 23: 118–128.
C. Cappelli, Peter. 2000. A market-driven approach to retaining talent. Harvard Business Review, 78(1):
103–111.
212 C. Chadwick / Human Resource Management Review 15 (2005) 200–213

D. Cox, Taylor H., and Stacy Blake. 1991. Managing cultural diversity:Implications for organizational compet-
itiveness. Academy of Management Executive, 5(3): 45–56.
E. Gladwell, Malcolm. 2002. The talent myth. The New Yorker, July 22: 28–33.
F. Muller, Joann. 2000. A Ford redesign. Business Week, Nov. 13: 78–88.
G. Pfeffer, Jeffrey. 1998. Six dangerous myths about pay. Harvard Business Review, May–June: 109–119.
Pages: 54
Response paper questions: Evaluate one of these articles’ arguments. Is it a good use of strategy applied to HRM?
Why or why not?
Thursday, November 10: What should the role of formal HRM be in a strategic world?
A. Ch. 20 in Strategic Human Resources: Frameworks for General Managers by Baron and Kreps,
pp. 503–534.
B. Joinson, Carla. 1999. Changing shapes. HR Magazine, March: 41–48.
C. Stewart, Thomas. 1996. Taking on the last bureaucracy. Fortune, Jan. 15: 105–108.
D. Stewart, Thomas. 1996. Human resources bites back. Fortune, May 13: 175–176.
E. Ulrich, Dave. 1998. A new mandate for Human Resources. Harvard Business Review, Jan.–Feb.: 124–134.
F. Wells, Susan. From HR to the top. HRMagazine, June: 46–49.
Pages: 58
Case: Galford, Robert. 1998. Why doesn’t this HR department get any respect? Harvard Business Review, March–
April, 24–39.
Response paper question: Under what circumstances does a formal HR Dept. add value to organizations?
Thursday, November 17: Can you be strategic about multi-national HRM?
A. Ch. 1 from Dowling, Peter J., Randall S. Schuler, and Denice E. Welch. 1994. International dimensions of
human resource management, 2nd edition, pp. 1–18.
B. Stroh and Caligiuri. 1998. Increasing global competitiveness through effective people management. Journal of
World Business, 33(1): 1–16.
C. Von Glinow, Mary Ann. 1993. Diagnosing bbest practiceQ in human resource management practices. Research
in Personnel and Human Resources Management, Supplement 3: 95–111.
Pages: 51
Case: Philip Morris GMBH A and B, Darden cases UVA-OM-0786 and 0787
***Second Case Write-up Due-Portman Hotel***
Response paper question: Is SHRM really that different in multi-national contexts?
Thursday, November 24: Thanksgiving Break
Thursday, December 1: How do you craft and evaluate a strategic HR initiative?
A. Boudreau, John W., and Peter M. Ramstad. 2002. Strategic HRM measurement in the 21st century: From
justifying HR to strategic talent leadership. Cornell University, Center for Advanced Human Resource Studies,
Working Paper 02–15.
B. Grossman, Robert J. 2005. Blind investment. HRMagazine, Jan.: 40–47.
C. Kaplan, Robert S., and David P. Norton. 2000. Having trouble with your strategy? Then map it. Harvard
Business Review, Sept.–Oct.: 3–11.
D. Pfeffer, Jeffrey. 1997. Pitfalls on the road to measurement: The dangerous liaison of human resources with the
ideas of accounting and finance. Human Resource Management, 36(3): 357–365.
E. Rucci, Anthony J., Steven P. Kirn, and Richard T. Quinn. 1998. The employee-customer profit chain at Sears.
Harvard Business Review, Jan.–Feb.: 82–97.
F. Stewart, Thomas A. 2001. Accounting gets radical. Fortune, April 16: 184–194.
Pages: 65
Response paper question: What is the role of measurement in Strategic HR?
Thursday, December 8: Is SHRM in employees’ interests?
A. Anonymous. 2004. The lunatic you work for. The Economist, May 8: 64.
B. Handy, Charles. 2001. Toqueville revisited: The meaning of American prosperity. Harvard Business Review,
Jan.: 5–11.
C. Kochan, Thomas. 1997. Rebalancing the role of human resources. Human Resource Management, 36(1):
121–128.
 C. Chadwick / Human Resource Management Review 15 (2005) 200–213 213

D. O’Reilly, Brian. 1994. The new deal: What companies and employees owe one another. Fortune, June 13:
44–52.
E. Osterman, Paul. 2000. Do workplace innovations work for employees? Perspectives on Work, 4(1): 27–28.
F. Schrage, Michael. 2001. Whip your thoroughbreds. Fortune, Nov. 12.: 228.
G. Strauss, George. 1995. Is the New Deal system collapsing? With what might it be replaced? Industrial
Relations, 34(3): 329–347.
Pages: 46
Case: Von Hoffman, Constantine. 1998. Does this company need a union? Harvard Business Review, May–June:
24–36.
Response paper question: Does SHRM adequately address the needs of workers?

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