Resource-Based View Approach to HRM - Essay Example

Resource Based View Approach to HRM Introduction Resource based view approach to human resource management entails a focus on resources as a strategy to improve an organisation’s performance. For instance, where an organisation’s resources can exhibit VRIO attributes, then these resources places the organisation in a vantage point in terms of gaining and sustaining a competitive edge in the business environment (Lockett & Thompson 2001, p.724). An emphasis on RBV entails looking at the internal resources that can help such a firm gain a competitive edge. The proponents of RBV note that using the existing resources within an organisation and in a new way instead of acquiring new skills for each new opportunity that presents itself in the business environment is ideal to improving organisational performance. Where organisations focus on RBV approach, resources are ideal in enabling the organisation to achieve better performance. In applying RBV approach, two types of resources are available for organisation to use to exploit opportunities in the business environment; this includes the tangible and intangible resources. However, tangible resources can be accessed easily in the market and as such; they bring little advantage for organisations when considered in the long-term basis since competitors can acquire the same resources. On the other hand, intangible resources denote resources that are not physical and those that are at the disposal of the organisation to use in improving performance. For instance, an organisation can use brand name or trademark to create uniqueness over competitors (Wright, Dunford & Snell, p.711). In essence, it is impossible for competitors to buy brand reputation of other firms in an attempt to improve their competitive nature in the business environment. Conversely, while RBV aid in improving an organisation’s competitive edge, it has to be noted that for such goal to be realised, the approach has to consider two critical assumptions that include heterogeneity and immobility (Colbert 2004, p.351). This paper examines how RBV approach to human resource management can help or fail to produce the performance outcomes that an organisation requires. How RBV approach to human resource management helps to produce performance outcomes that an organisation requires RBV approach to human resource management proposes the view that various resources within an organisation are the key to realising positive outcomes and this includes human capital or resources. These internal resources are also viewed as important in providing an organisation the required competitive advantage in the business environment. This is because when resources within an organisation are properly utilised, they tend to produce valuable, unique and inimitable outcomes and this not only improve performance, but the competitiveness of an organisation (Priem & Butler 2001, p.23). While focusing on human resource or capital, RBV helps organisation to focus attention on experience, skills and risk taking propensity of the personnel within the organisation with the aim of improving performance. As such, and through embracing a RBV approach, organisations can become competitive by establishing human resource that is more adaptable compared to rivals. In essence, employing RBV approach allows the management to identify unique talents in its human capital such as adaptability, innovativeness and superior performance as tenets for delivering quality services to customers (Ferguson & Reio 2010, p.484). Further, RBV approach also aids in the effective management of personnel and development of HR practices that creates “human process advantage”. RBV approach further enhances performance outcomes by improving talent, knowledge and human capital management. As a result, RBV help organisations to develop a unifying framework in terms of SHRM (strategic human resource management), which is the key in improving performance and sustaining an organisation’s competitive nature. Embracing RBV approach allows organisation to establish themselves in a more intelligent and adaptable manner compared to competitors. The productivity of an organisation is improved by hiring and nurturing personnel where, their skill base is extended by this approach. In the business environment, knowledge is an important component in gaining advantage and in particular, for firms that sell ideas and relationships (Wernerfelt 2013, p.637). According to Becker and Huselid (2006, p.904), RBV approach plays a role in challenging organisations to develop human resource capabilities and come up with strategies of retaining a talented workforce. Through a resource based view approach, organisations can develop a number of features that enhance inimitability and high performance strategies. This involves, relying on RBV to establish policies over time, which competitors cannot access easily in the market. This provides firms with a differentiation strategy and enables the firm to remain at the helm in terms of performance and service delivery. This approach is also the key in producing performance outcomes because of a focus on causal ambiguity associated with a number of interrelationships within the system that cannot be observed from outside the organisation. For instance, a firm can form its HRM in a manner not observable from outside, which makes imitation by competitors more difficult and acts as a differentiation strategy. A focus on the personnel as key to the success of an organisation contributes to the efficient utilisation of HRM issues. For instance, concepts such as knowledge, leadership, capabilities and learning organisations provide an understanding of human resources and strategy issues. RBV approach allows organisations to explore various business strategies and the related behaviours or attitudes of employees in achieving better results when it comes to performance outcomes (Armstrong & Shimizu 2007, p.962). While individual practices adopted by the human resource management can be imitable, RBV creates an environment that focuses on resource structures and routines that organisations develop over time. Such systems or routines are often identified with a particular organisation and plays a role in the development of specific human resource skills. As such, RBV helps in producing performance outcomes by shifting from external factors that include a firm’s position, to internal resources. Internally, RBV can produce performance outcomes by exploiting the resources that are under the control of the organisation, contrary to external resources that are not under the control of the organisation (Saqib 2013, p.48). In the contemporary business environment, internal resources can also be used to gain competitive advantage since individuals within an organisation are strategically placed to improve the performance outcomes of an organisation. RBV further places emphasis on collective learning within the organisation setting which is important in coordinating diverse production capabilities or skills and integrating various technologies that involves the personnel in the organisation. For instance, competencies or capabilities of an organisation can be enhanced by engaging the personnel more and this result in superior performance outcomes (Barney 2001, p.52). This approach allows the management in an organisation to align skills with the systems, structure and organisational processes that are seen as valuable in gaining competitive advantage in the market. On another note, since innovation is important in improving performance outcomes, the organisations with an emphasis on RBV are better placed to realise long-term growth (Hubbard & Zubac 2010, p.518). The business environment today is increasingly globalised in addition to competition and constant changes in technology. As such, innovation plays an important role in enabling organisations to remain relevant in the market. In addition, organisations also have to compete in terms of cost, quality, marketing and producing innovative products. This means that an emphasis on RBV would allow organisations to focus on the internal resources to improve their production capabilities in a competitive market. In this sense, the management can develop a plan aimed at improving the knowledge base of its employees and adopting a change management process aimed at improving performance (Friedmann & Holtbrugge 2010, p.441). As an emerging criterion in the RBV approach, innovation plays an important role in meeting customer expectations by improving the employees’ capabilities to be innovative and develop unique products that fetch competitive prices. Innovation as embraced in the RBV approach acts as a driving force for organisations to realise a sustainable competitive edge (Srivastava, Fahey & Kurt 2001, p.801). As described by Michalisin, Karau and Tongpong (2004, p.128), in a dynamic business environment, challenges exist in terms of market position and this requires innovations. As such, competing in a competitive market require organisations to develop new sources that facilitate competitive advantage. Boyd and Bergh (2010, p.605) note that, for purposes of realising good performance, organisations need to utilise a RBV approach since this approach, underlines the internal resources of a firm and suitable for developing a strategy to achieve positive outcomes. RBV is important in enabling organisation to develop precarious structures and capabilities that are considered inelastic in supply (Kleinaltenkamp et al., 2012, p.203). This creates uniqueness for organisations in terms of realising performance outcomes with their internal strategies. Further, in terms of RBV producing performance outcomes, it plays an important role in identifying an organisation’s strategic resources that can be utilised to achieve success (Wu 2010, p.30). Conversely, managers of organisations are also in a position to exploit the RBV approach in discovering deficient resources and look for alternative resources to improve performance (Tarek & Trott 2014, p.132). During the change management process, RBV is the key in assessing the organisation’s internal resource base. Since change process is affected by the management to improve performance, there is need to take stock of the organisation’s resource base and whether they can improve performance outcome. This assessment allows the management to come up with appropriate decisions regarding how the internal resources that include human capital can be utilised to improve performance outcomes (Barney, Wright & Ketchen 2001, p.635). For instance, the strategies that most organisations use are often implemented efficiently through an RBV approach. This is because taking stock of the internal resources allows the organisation to identify its strength and weaknesses (Seigyoung & Bulent 2009, p.762). This enables the management to develop mitigation measures to ensure their firm remain relevant in a competitive business environment. For example, where the firm lags behind in terms of creativity, the management can use RBV to figure out how to improve creativity that can lead to positive outcome. This may involve improving the firm’s R&D capabilities to enhance innovation among the workers, which is important in improving performance, productivity and quality of products or services provided by an organisation (Ordonez & Lytras 2008, p.51). How RBV approach to human resource management fails to produce performance outcomes that an organisation requires While RBV approach to human resource management plays an important role in utilising the internal resource to gain competitive advantage in the market, it also has its challenges in terms of failing to produce performance outcomes required in an organisation (Kraaijenbrink & Spender 2010, p.351). This approach is to an extent considered unsuccessful in terms of failing to provide operational validity. This is because while the approach focuses on meeting the VRIN/O criteria, it lacks the managerial implications. For instance, it does not provide an explanation regarding how managers can utilise the model to improve performance outcomes (O’Riordan 2006, p.42). Further, this approach also denotes infinite regress because of firms possessing particular capabilities that they are not able to exploit efficiently. This creates a situation where a firm is overtaken by a competitor who can utilize such a capability more effectively (Arend 2008, p.351). Applicability of RBV approach also appears to be too limited since it is almost impossible to use this approach with smaller firms due to scarcity of resources. This explains the failure to produce performance outcomes required by a firm especially where the internal resources tend to be static. As such, the approach can produce positive outcome only if a firm already has at its disposal the VRIN resources that provides vantage point to acquire additional resources that can improve their competitive advantage (Nemati et al 2010, p.110). On another note, applying a RBV approach in producing performance outcomes will require the organisation to retain highly skilled personnel and this means the firm has to improve financial incentives offered to such employees as a way of preventing them from shifting to rival firms who can afford their needs. This often affects negatively for organisations with limited resources trying to apply the RBV approach to realise success in a competitive business environment. Human capital is an important resource in applying the RBV approach; however, its success depends on how the management can motivate personnel to improve performance outcome required by the organisation. As such, the dependency on highly skilled labour in realising performance outcome is dictated by the nature of resources that an organisation has in its disposal to improve performance (Molina-Azorin 2007, p.47). However, investing heavily on highly skilled human capital has a negative impact on a firm’s resources because it is not cost effective where such a strategy fails to yield result in a competitive business environment. Further, RVB fails to produce performance outcomes required by organisations because it tends to neglect the factors creating similarities among competitors (Molina-Azorin 2007, p.52). With RBV, the focus is entirely on the internal environment while ignoring the external context of the organisation. This leads to a situation where the approach is only ideal when the external environment appears to be less predictable. With regard to realising SCA (Sustained Competitive Advantage), this is often a challenge in terms of preventing rivals from imitating or eliminating an organisation’s SCA. As such, achieving success with SCA is a problem for most organisations because of the constant changes in the business environment. This means that the skills and resources that an organisation use to achieve SCA has to change from time to time and this only create a temporary advantage (Molina-Azorin 2007, p.56). Sjoerd (2008, p.826), posit that organisations using the RBV approach can only sustain a competitive advantage where dynamic capabilities and organisational learning are present. This dynamic level enables organisations to be flexible and adapt quickly than its rivals. On the other hand, “spillovers” also tend to impact negatively on inimitability and is caused by organisation’s openness with their strategic information regarding the process involved in their production and services. This forces organisations to keep engaging in innovation as a result of their revenue affected by constant exposure to new rivals or substitute products (Sjoerd 2008, p.828). In this regard, achieving success with RBV approach sometimes faces challenge because the approach does not provide certainty in realising a long-term SCA for organisations. However, performance outcomes associated with RBV are still realisable in the short run. In a globalised business environment, the management often face a challenge in coming up with practical ways of hastening innovation, minimising imitation and overcoming the market’s own “natural” timing. In times of economic difficulties, this approach may pose a challenge for organisations in an attempt to meet the VRIO framework or criteria. This is because hard economic times cause constraints to an organisation’s internal resources and capabilities (Cao, Nigel & Finlay 2014, p.89). As a result, producing performance outcomes by relying on RBV may fail in instances where the organisation is affected negatively by harsh economic times. Harsh economic times may force the management to cut down on some of its internal resources and this can affect the goal of realising SCA in the market (Cao, Nigel & Finlay 2014, p.89). While RBV plays an important role in enabling firms to realise a strategic advantage, how the management applies the VRIN/O is vital in achieving performance outcomes. However, in some cases, the VRIN/O tends to be insufficient for firms to gain strategic advantage in the business environment. Applying this approach can be insignificant especially for organisations that have never tested the model in their strategic plan. For instance, the management may lack experience regarding other factors needed to implement a successful RBV approach to achieve SCA. Possessing resources alone does not guarantee SCA, but also a consideration of other factors such as uncertainty or immobility seen as the key tenets to create SCA. For example, the management of an organisation can avoid failure with a RBV approach through a focus on resource specify, innovation and value uncertainty (Doherty & Gannon 2012, p.531). RBV can also fail where this approach tends to narrow entrepreneurs or managers attributes such as accessing vital information regarding the future value of resources. On the same note, RBV tends to disregard individual judgment and in particular, that of managers. This has an effect on the decision that the management make in terms of how to utilise internal resources to achieve SCA. The SCA’s locus depends on individual characteristics and that of teams, but not the resources or market dynamics. In order for organisations to achieve strategic advantage, there is need to integrate resources and managerial capabilities as a way of exploiting the existing opportunities and to produce performance outcomes (Connor 2002, p.311). Conclusion Resource based view approach in human resource management plays an important role in ensuring organisations adapt unique strategies aimed at realising SCA. However, organisations applying this approach can only achieve success by meeting certain conditions associated with RBV approach such as the VRIN/O criteria. While this criterion is vital in complementing a RBV approach, it is important for the management to consider other factors that have influence on organisation’s performance. 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