Strategic Human Resource Management for Competitive Advantage - Essay Example

Running head: Strategic Human Resource Management Strategic Human Resource Management Name Course Lecturer Date Abstract Globalization of business operations has transformed competition trends and resources. It is now more imperative than previous times that organizations bank on and develop strategically inimitable competitive advantage. Human resources offer an inimitable opportunity to ensconce competitiveness in a highly dynamic environment. Strategic human resource management (SHRM) is a conceptual and empirical approach in managing human resource that entrenches integration to organizational strategies and objectives. This paper ascertains that sustained competitive advantage can be achieved by organizations developing and implementing organization-specific SHRM practices. Firms can achieve sustained competitive advantage by adopting a proven design of strategic human resource management practices Globalization is a phenomenon that has received a significant portion of attention in many disciplines with regard to change it is associated with it. More specifically, there has been attention to how globalization has changed business competition trends. Essentially, firms are now concentrating on enhancing the internal environmental factors such as resources and organizational capacities. Such factors include the role of human resources (HR) as a competitive advantage factor. Researchers have indicated the potential in HR as a competitive advantage with its uniqueness as an underlying assumption (Akhtar et al., 2008; Dimba & K'Obonyo, 2009). In view of the cited advantages, organizations have innovated HR management practices. Such include strategic human resource management (SHRM). This refers to an approach in HR strategic management along organizational strategies and the future direction. SHRM processes entrench a stream of decisions which are impactful and forming a pattern by which an organization manages HR or draws HR strategies. While SHRM has been cited as beneficial, there is literature indicating that the benefits are indirect. It has been cited as influencing organizational resources, which, in-turn, form a competitive advantage. This paper explores how organizations can get competitive be adopting SHRM practices. It makes reference to models and practices in the empirical literature to draw its conclusions. SHRM for Competitive Advantage In the advent of the new globalized business context, the HR function has gained a more strategic importance in overall organizational strategy- in planning, implementation and evaluation. HR managers have also gained in the value of participation entrenching the need for HR to evolve into strategic business partners. As such, SHRM is now considered a core organizational approach in enabling organizations adapt to the new role of HR. SHRM practices have been described as being macro-oriented, long-term based and proactive in viewing HR as investments. As such, the focus of SHRM is linking the HR to organizational performance by aligning it to organizational strategy in view of drawing competitive advantage (Miśra, 2009). From a theoretical point of view, the tenets of SHRM have been on models such as resource-based theory and behavioural theory. By the former, valuable resources form the basis of sustained superior performance. As such, competitive advantage can only be sustainably created by enhancing the value of what competitors cannot easily replicate (Miśra, 2009; Townsend, 2008). HR systems provide an avenue for management to develop firm-specific competencies. HR centrality is accounted for on the basis that contemporary globalized business environments challenge organizations to expand market globally, develop and use innovative technologies, manage change while growing revenue over reduced costs and grow their productivity. The competitive advantage associated with HR in enhancing the aforementioned is in its inimitability (Bučiūniene & Kazlauskaite, 2008). The inimitability is developed by enhancing the systems’ capacities for mobilization of innovative competencies (Çaliskan, 2010). The managerial focus is enhancing skills and intellectual capacities so they will provide sustainable competitive advantage in the face of inevitable erosion of technological supremacy. HR has a capacity to withstand the test of obsolete, and a capacity of high transferability across markets, technology change and products. This corroborates suggestions in literature that SHRM may not have a direct impact on performance, but rather enhances the value of HR in organizational performance. Becker & Huselid (2006) indicates that organizational strategic objectives influence HR systems, which consequently influences work design, skill level and motivation. These have a direct impact on productivity, quality and effort and eventually on overall organizational competitiveness. SHRM presents a paradigm shift from the traditional administrative human resource management (HRM) to a practice in which HRM is a strategic business partner. SHRM enhances the competitive advantage by empowering the capacities of HR and also by enabling organizational leadership plan human capital functions. According to Iyang (2007), “critical organizational capabilities are sine qua non”pp.25. This presents the main belief of SHRM proponents. As such, SHRM practices entrench on establishing greater HR flexibility planning and utilization, all geared towards achieving a competitive advantage. In this endeavor, SHRM is profiled as energized by two orientations. Firstly, it is emphatic on organizational performance, rather than just individual performance in traditional HRM. This implies that management focus is hardly on operational efficiency of the HR function, but on holistic organizational efficiency. Secondly, it is energized by the emphasis on establishing business solutions from integrated HRM systems rather than on an isolated HR function (Becker & Huselid, 2006). These orientations characterize SHRM as being a systematic approach that extends past human capital management to integration of HR factors to organizational strategy. Essentially, the aforementioned extension is based on the tenet of integration. In Andersen et al., (2007), SHRM is defined as the pattern in which HR deployments and activities are planned and implemented with a focus on organizational performance. This implies on the role of SHRM in vertically integrating HR to organizational goals and horizontally linking various HR roles to each other for a systemic HRM. With regard to this, Armstrong (2012) suggests that SHRM is solely concerned with integration and adaptation providing both the vertical and horizontal fits and adjusting HR practices. This role significantly builds on HRM contingency and configurational perspectives. The contingency perspective underlines that HR policies must be aligned to other organizational aspects - vertical fit. This fit is emphatic on the overall organizational strategy moderating between HRM and performance of the organization. The configurational perspective emphasises on the value of having a pattern of HR practices and how this pattern relates to overall organizational performance. In Andersen et al. (2007) this integration was cited as resulting in increased competence, and cost effectiveness due to congruence of organizational systems. By integrating and involving HR managers in strategic decisions with other senior managers, organizations stand a chance of gaining from more aligned HR goals, strategies, practices and philosophies. In addition, this involvement also provides vital communications and interactive knowledge management channel. The interactional channel is a demonstration of the extent of the systemic congruence. It also characterizes modern organizations, which are knowledge-based and ideal for SHRM practices. According to Iyang (2007), the congruence between HR practices and overall business strategy enhances the opportunity of an organization to grow the bottom line performance and competitiveness (Price, 2011). There is a substantial amount of literature that establishes empirical and conceptual relationship between SHRM and firm performance (Ngo et al., 2008; Bučiūniene & Kazlauskaite, 2008; Andersen et al., 2007). Specifically, SHRM has been associated with enhanced operational and financial performance. This enhancement has to do with the synergistic outcome of the integration-alignment arrangement. In Huselid & Becker (2011), literature associates competitive advantage of SHRM with the ability of management to integrate SHRM macro and micro domains. These domains focus on developing a differentiated HR system that is founded on the tenets of establishing strategic capabilities and jobs. In this differentiation, it is imperative that HR procurement systems are aligned to organizational HR competitive advantage, that reward systems reflect strategic implementation success, and that HR development is based on articulate objectives and performance management systems. This approach bridges between two conflicting aspects in literature as to what leads to competitive advantage: HR uniqueness and value, and effective management (Bučiūniene & Kazlauskaite, 2008). With regard to effective management, literature has linked SHRM practices with improvements in employee relations. If properly implemented, SHRM approaches should create an accommodating organizational climate and social atmosphere (Ngo et al., 2008). In such an atmosphere, employees can relate well with the organization and its objectives. It is vital that employees feel a sense of belongingness especially in today’s knowledge-based business environment. This promotes participation, effort discretion and communication. Integration and involvement in organizational strategies provides an appropriate opportunity for this. In order to relate the two integration orientations appropriately, it is imperative that the SHRM function understands the influence of the socio-political milieu of the organization. This is both intra- and extra-organizational milieus. With regard to the intra Dávila & Elvira (2009), two elements, which manager must strike a balance in between: organizational objectives and collaborative relationships. Organizational objectives have a moderator role and facilitate how HRM practices are conceptualized and configured for organizational performance. Collaborative relationships refer to the quality of interaction among HRM professionals, employees and other line managers to ensure the alignment-integration of strategic business partners. These relationships should be taken beyond just the strategic planning role to implementation. As Armstrong (2011) suggests, SHRM should be concerned with the strategic behavior of the HR function. Whereas all knowledge-based organizations have a potential to benefit from SHRM, there are variations of the extents of these benefits due to inconsistencies over the strategic role of the HR function. The inconsistencies are related to imbalances between the transactional HR and integrated strategic roles. Literature cites low capacity as being attributable to the inconsistency. SHRM practices enhance employee capacity to the expected tasks. In Andersen et al (2007), the study cited insufficient empowering of the line HR function with reference to training. Averting this requires engagements such as training, career ladders, performance appraisal, increased participation, challenging yet rewarding jobs and personal development. Becker & Huselid (2006) corroborates this with a suggestion that the challenge can benefit from a more intentional and fuller integration of the macro and micro domains. Conclusion and Recommendations Essentially, SHRM is an approach in which HR strategies are developed and implemented with integration to business strategies. It is both a conceptual and empirical area in which there is growing literature relating it to organizational performance in various aspects. Whereas SHRM may not have a direct impact on performance, it is its indirect impact through enhanced HR practices that have continued to receive attention. HR presents an organization with a most inimitable resource by which to enhance its organizational competitiveness advantage. HR is the only resource that demonstrates significant flexibility over markets, technological changes and products, and that faces off the test of time obsoleteness. As such, it is imperative that organizations demonstrate the ability to manage the resource capacity as a basis for competitive advantage. Integration into the overall organization- SHRM has been cited as central way of growing the advantage. SHRM has been conceptually and empirically linked to performance with respect to financial growth, operational effectiveness, employment relations, knowledge management and innovation performance. However, these benefits are often not accrued some organizations. The challenge with these organizations is in implementation and practically integrating the macro and micro domains of SHRM. There are also challenges as regarding the HR professional ability to balance between their strategic and transactional roles, and to understand the organizational milieu. This paper recommends that organizations need focused SHRM leadership to overcome the challenges. In addition, it is vital that management does not treat SHRM as a generic approach, but rather one that requires adoption in the lines of organizational specificity. References Akhtar, S., Ding, D., & Ge, G. (2008). Strategic HRM practices and their impact on company performance in Chinese enterprises. Human Resource Management, 47 (1), 15-32. Andersen, K., Cooper, B., & Zhu, C. (2007). The effect of SHRM practices on perceived firm financial performance: Some initial evidence from Australia. Asia Pacific Journal of Human Resources, 45 (2), 168-179. Armstrong, M. (2011). Armstrong's handbook of strategic human resource management (5th Ed). London: Kogan. Armstrong, M. (2012). Armstrong's handbook of human resource management practice (12th Ed). London: Kogan Page. Becker, B., & Huselid, M. (2006). Strategic human resources management: Where do we go from here? . Journal of management, 32 (6), 898-925. Bučiūniene, I., & Kazlauskaite, R. (2008). 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