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Introduction

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

contribute to the success of organisations.

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 to 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 may 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 identified as a valuable source that can help organisations realise competitive

advantage in the market place .

SHRM has moved traditional HRM from just being perceived as a tool to deal with staff

functions, to being a strategic partner within various departments of organisations such as

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

organisations (Thompson, M., & Heron, P. 2005).

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

capabilities of their employees . These machines need to be operated, maintained and

optimized by employees to ultimately be profitable and productive.

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 firms resources can be defined as those tangible and

intangible assets which are tied semi -;permanently to the firm. Examples of these

resources 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.

For an organisation to achieve sustainable competitive advantage in the marketplace it

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

and react in a dynamic business environment (Beltran-Martin, Roca-Puig, Escrig-Tena, &

Bou-Llusar, 2009).

Unlike resources such as machinery that can be copied , the human capital resource if

managed and developed accordingly, can become a source of sustainable competitive


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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 non 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 innovative 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

employees are rare.

The skills, knowledge and capabilities of the rare employees cannot be bought or easily

recreated making it inimitable , adding even more value 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

heterogeneous resource and capable of sustaining competitive advantage because other

organisations cant develop employees to be exactly the same as those of leading

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

advantage for firms in the long run.

More involvement means that employees have the increased opportunity to participate in

decision making (Barnes, 2001). By empowering employees through higher involvement

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.

Frank (1993) as cited in Jafri (2010) identifies organisational commitment as important

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

performance required. According to Jafri (2010) employees with affective commitment

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

a requirement to gain sustainable competitive advantages within the market place.

The process of innovation that is required by organisations to be competitive in the new

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 expectations. 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 experimenting with new ideas and give employees more freedom

in the decision making process of projects and work tasks.

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

flexibility that is required to compete in the ever changing business environment.

The final outcome of implementing HPWS according to Huselid (1995) might be an

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

workforce of an organisation is capable of performing various different tasks under diver se


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circumstances. The researchers build on this definition by adding that the cost and time

needed to mobilise employees into new tasks are low and this can also be con sidered as

possible advantages of labour flexibility to the firm .

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 organisations 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

outcome for organisations (Pardo & Perlines, 2008)

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, &

Ringdal, 2008)) describes the adoption of an effective combination of HRM practices as

bundles of HRM practices and also mentioned that these bundles are central to the

configurational perspective of SHRM and strategic fit with business strategy.

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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include work/life balance schemes, career development opportunities and remuneration

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

organisational performance because turnover alone poses high replacement costs,

decreases employee morale and the organisation risks the chance of losi ng valuable

institutional knowledge possessed by employees to competing organisations. Acquiring

these talents and retaining them can ultimately lead to firms being innovative, gaining

commitment from employees and becoming flexible in a market place because they retain

and develop these employee capabilities.

Training and development can play a vital role helping organisations obtaining their goals.

According to Aguinis & Kraiger (2009) t raining refers to a systematic approach to learning

and development to improve individual, team, and organizational effectiveness . If the

systematic approach is strategically integrated with organisational strategies , organisations

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 the strategy to achieve this goal by training employees on new design

processes, foreign markets and new technologies.

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

of training such as on -the-job training were positively related to effectiveness and

profitability.


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This is due to the fact that employees learn from each other and the skill level of the firm

increases. As previously mentioned workers become multi -skilled making organisations

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.

Conclusion

In conclusion this essay has looked at how HRM and the various practices such as

recruitment can be integrated into business strategies to potentially create sources of

sustainable competitive advantage in the ever changing business environment of the post

recession economy. HPWS consisting of Bundles 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 reassigned 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

organisation so that these human resources can strategically be used to achieve

organisational goals.


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References

Aguinis, H., & Kraiger, K. (2009). Benefits of Training and Development forIndividuals and Teams, Organizations, and Society. Annual Review of Psychology,60, 451-474.

Barnes, W. F. (2001). The challenge of implementing and sustaining highperformance work systems in the United States: An evolutionary analysis of I/N Tekand Kote. Doctoral dissertation : University of Notre Dame.

Beltran-Martin, I., Roca-Puig, V., Escrig-Tena, A., & Bou-Llusar, J. C. (2009). Internallabour flexibility from a resource-based view approach: definition and proposal of ameasurement scale. International Journal of Human Resource Management, 20(7),1576-1598.

Berg, P., & Velde, M. (2005). Relationships of Functional Flexibility with Individualand Work Factors. Journal of Business & Psychology, 20(1), 111-129.

Bhattacharya, M., Gibson, D. E., & Doty, D. H. (2005). The Effects of Flexibility inEmployee Skills, Employee Behaviors, and Human Resource Practices on FirmPerformance. Journal of Management, 31(4), 622-640.

Bohlander, G., & Snell, S. (2004). Managing human resources (13th ed.). Mason,OH: Thomson/South-Western.

Cappelli, P. (2000). A market-driven approach to retaining talent. Harvard BusinessReview, 8, 103113.

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Gooderham, P., Parry, E., & Ringdal, K. (2008). The impact of bundles of strategichuman resource management practices on the performance of European firms.International Journal of Human Resource Management, 19 (11), 2041-2056.

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Pardo, I. P. a., & Perlines, F. H. (2008). THE RELATIONSHIP BETWEEN HUMANRESOURCES STRATEGIES AND BUSINESS OUTCOMES: A


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Thompson, M., & Heron, P. (2005). Management capability and high performancework organization.International Journal of Human Resource Management, 16(6),1029-1048.

Wernerfelt, B. (1984). "A resource-Based View of the Firm." Strategic ManagementJournal 5(2): 171-180.

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Wright, P. M., McMahan, G. C., & McWilliams, A. (1994). Human Resources andSustained Competitive Advantage: A Resource-Based Perspective. InternationalJournal of Human Resource Management, 5(2), 301-326.

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