Mn50332 - Strategy And Hrm Retrieval Coursework

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Strategy and HRM

1 Introduction

Rapid environmental change, globalization, competition to provide innovative products and services, changing customer and investor demands have become the standard backdrop for organizations. To compete effectively, firms must constantly improve their performance by reducing costs, enhancing quality, and differentiating their products and services. Recent studies have examined strategic human resource management (SHRM) as a means of enhancing organizational competitive advantage. Scholars and practitioners have widely adopted this approach to organization strategy planning. The underlying assumption of SHRM is that firm performance is influenced by a set of HRM practices. This assumption has been supported by recent empirical evidence (Arthur, 1994; Huselid, 1995; MacDuffie, 1995). However, important questions remain, including whether SHRM guarantees positive firm performance outcome, the effect of different levels of SHRM implementation on firm performance, and the influence of the market environment in moderating the relationship between SHRM and firm performance.

A critical unresolved debate involved whether a universally superior approach existed for managing human resources. Some scholars suggested that such an approach existed (Huselid and Becker, 1996; Pfeffer, 1998). Meanwhile, others noted that the effectiveness of human resource management practices depends on the specific organizational and environmental context (Mayer et al., 1993; Venkatraman, 1989). Accordingly, a better understanding of the role of the implementation of human resources management in creating and sustaining organizational performance and competitive advantage should be achieved through further theoretical development and empirical evidence.

2 Theoretical background and hypothesis

2.1. SHRM

Recent theoretical works on business strategy have indicated that firm competitive advantage could be generated from firm human resources (HR). According to the resource-based view (Barney, 1986), the firm could develop sustained competitive advantage through creating value in a manner that is rare and difficult for competitors to imitate. Traditional sources of competitive advantage, such as natural resources, technology and economics of scale have become increasingly easy to imitate. The concept of HR as a strategic asset has implications for this issue. HR is an invisible asset that creates value when it is embedded in the operational system in a manner that enhances firm ability to deal with a turbulent environment.

2.2. Development of SHRM

SHRM has grown considerably in the last 15 years. Schuler et al. (2001) described the evolution of SHRM from personnel management in terms of a two-phased transformation, first from personnel management to traditional human resource management (THRM), and then from THRM to SHRM.

To improve firm performance and create firm competitive advantage, firm HR must focus on a new set of priorities. These new priorities are more business and strategic oriented and less oriented towards traditional HR functions such as staffing, training, appraisal and compensation. Strategic priorities include team-based job designs, flexible workforces, quality improvement practices, employee empowerment and incentive compensation. SHRM was designed to diagnose firm strategic needs and planned talent development which is required to implement a competitive strategy and achieve operational goals (Huselid et al., 1997).

2.3. Definition of SHRM

Despite the increasing attention paid to SHRM, the ...
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