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Essay: The Potential of Strategic Human Resource Management: Exploring How SHRM Contributes to Organisational Performance

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Strategy is concerned with the long-term direction and scope of the organisation, specifically the important issues to be considered going forward (Johnson et al., 2011). The term strategic management is much broader and can be described as a process carried out prior to the creation of a strategy. Strategy and strategic management are distinguishable as the latter involves careful consideration of what must be done before a strategy is implemented (Parnell, 2014). Increased global competition has forced organisations to examine all of its resources in order to gain a competitive advantage in a dynamic business environment. Therefore, attention to the competitive potential of the workforce or the human resource department has increased significantly (Wright and Snell, 1998).

Introduction of Strategic Human Resource Management

The notion of HRM can be regarded as a strategic approach to management that involves the long-term direction of the business and ensuring that it is managed as efficiently as possible while maintaining and meeting the initial strategy. It is influenced by the concepts of strategic management and strategy (Armstrong and Taylor, 2014). There has been growing awareness over the past decade regarding the importance of ‘strategic management’. This has resulted in many organisations becoming more concerned with how its departments contribute to the strategic management process. Similarly, the HRM field has pursued integration with the strategic management process through the development of a new practice known as Strategic Human Resource Management (SHRM) (Wright and McMahan, 1992). SHRM focuses on the development and implementation of HR strategies. Boxhall (1996) described SHRM as interface between HRM and strategic management. In addition to this, Schuler and Jackson (2007) defined SHRM as the fundamental feature that ‘systematically linking people with the firm’ (Armstrong and Taylor, 2014). A strategically effective organisation will allow for a clear direction and purpose to be established. Thus, objectives and goals can be accomplished, while maintaining strategic consistency.

Relationship between business strategy and HRM

Since the birth of SHRM in 1984, there have been a number of studies conducted that sought to explore the link between strategy and human resource management (Çaliskan, 2010). Strategic management within the HRM field attempts to interlink various HRM practices and the company’s business strategies. According to behavioural perspective, HRM practices should be aligned with achieving the business strategy (Lee, Lee and Wu, 2010). The behavioural perspective of HRM is one of several theoretical concepts that help explain why firms operate differently in regards to managing its employees. The theory implies that HRM systems are successful if they are designed with the intent to support the firm’s strategic objectives (Jackson, 2013). There has been an increase in the number of empirical studies that support this perspective, for example Schuler and Jackson (1987). They carried out research into competitive strategy of a firm and how it links to human resource management. Research exploring links between business strategy and HRM practices is ongoing. A more recent study carried out by Buller and McEvoy stated that the literature surrounding this particular topic is still evolving. They argued that although progress has been made and a number of different models have been anticipated, it is essential that a theory-based, multilevel model is created that shows how strategy can be sustainably and successfully implemented through HRM practices (Buller and McEvoy, 2016). A strategy developed by any organisation will have some degree of attention on how competitive they are within their market, and the human resource management field is assumed to be crucial driver to achieving this advantage.

Human Resources as a Source of Competitive Advantage

Firms must acknowledge that in order to achieve and retain a competitive advantage, its human resource department must contribute to and support the business strategy (Wright, 2001). Research conducted by Schuler and Jackson support the view that competitive advantage is crucial to a firm’s growth and sustainability, explaining that one way to do this is through strategic management with particular attention paid to initiative and creativity (Schuler and Jackson, 1987). If a firm seeks to be competitive, its strategic capabilities that contribute to its long-term survival must be assessed. Strategic capability has two major components: resources and competences. Resources refers to physical assets that the organisation owns. Competences concerns itself with the way in which theses resources are used effectively within the business. Drawing on knowledge from the human resource management field, it can be argued that employees are one of the most important resources in a business. Although resources are crucial for an organisation to run efficiently, the emphasis is on how these employees use their experience, skills and knowledge to deploy and perform effectively (Johnson et al., 2011). The field of SHRM is not a direct result of RBV, though it is evident that it has been influential in its development. The reason for this may be due to RBV’s shift away from external factors, such as its position within the market, toward an internal resource focus which could lead to a competitive advantage. With internal resources as a source of competitive advantage now widely acknowledged, HR’s statement is valid that people are strategically essential to the success of an organisation. Given that both HR and SHRM fields are dependent on concepts and theories from strategy literature, it should come as no surprise that RBV must be closely incorporated into SHRM literature (Wright, 2001). Barney (1991), in both his articles, supported the view that competitive advantage was substantial in terms of research into strategic management. He depicted that the resource-based view of the firm could be conceived as the greatest influence for understanding strategic management. Drawing on conclusions from literature surrounding competitive advantage, HRM and strategic management, it is clear that strategic management plays a crucial role within the human resource department. Strategic management and its influence within the HRM department is also assumed to be an important indicator of firm performance.

SHRM and its Impact on Organisational Performance

In an uncertain market, there are intense pressures for firms to outperform its rivals. Investigation into what resources provide sustainability and superior performance has been the primary goal over the past decades for both managers and scholars alike. The human resource department proved to be a key asset of an organisation in order to achieve greater organisational performance that withstands long period of time, or possibly forever. The HRM function has evolved over the years, becoming more strategic in its approach to sharing ideas, perspective and resources with other vital departments including marketing, finance and accounting departments (Lee, Lee and Wu, 2010). It has been claimed that organisations that align their HR and business strategies are more profitable. For this to occur, strategies within the HR department must be recognised and integrated into the business strategy. People working within the business must be included in the delivery of these practices to ensure the business strategy is implemented effectively across the organisation. After an extensive review of the literature, it was identified that three theoretical perspectives exist within the SHRM literature: universalistic, contingency and configurational. The first group known as ‘universalists’ claim that there is a “best practice” approach to SHRM. The assumption is that the implementation of these certain SHRM techniques will likely result in an improved organisational performance. The second group, classified as the contingency approach claims to be effective in aligning HR practices with other functions of the organsations. The overall strategy of an organisation is considered to be the key contingency factor and business performance is supposed to be enhanced when the business strategy and HR are compatible with one another. The third group was recognised as the configurational approach which is considered to be more complex than the other approaches. The main concern acknowledged by this theory is the patterns identified when planning human resource activities are envisioned to increase the probability of an organisation achieving its goals. Depending on how closely aligned HR strategy and business strategy are will affect how closer an organisation is to delivering sustainable improvements in business performance, which will in effect meet the strategic requirements set out by the organisaton. Within all three theoretical perspectives of SHRM a consistent theme emerged that SHRM is linked extensively to organisational performance (Loshali and Krishnan, 2013). Çaliskan (2010) supported the stance put forward by previous literature that there is a fundamental link between HR and organisational performance. In his paper he claimed that this link would enable HR managers to develop practices and activities that will operate efficiently in the hope that it will lead to higher organisational performance.

Case Study Example

The H&M case study examines how strategic management can achieve competitive advantage. After facing challenges by key competitors, H&M have had to evaluate their strategy so that the firm can remain sustainable within the competitive business environment.

H&M pride themselves in being able to successfully establish a strong corporate culture by making sure its employees understand and adopt these values in their job. As H&M rises in popularity, opportunities are made available for employees who wish to challenge themselves culturally by moving to another store, department, role or country. By allowing employees to take responsibility and grow as individuals, H&M align corporate and individual goals with growth strategies that is essential in order to compete in a highly competitive market (Regnér, P. and Emre Yildiz, H., 2017).

A challenge to this view of H&M is evident in the case study ‘H&M’s sustainability strategy’, where it became apparent that the firm does not operate on the premise of promoting worker benefits. This case explored the guarantees H&M could offer, as well as its performance within the market. Although share price increased significantly over a period of a number of years, H&M’s Head of Sustainability insisted that no matter how hard they work, they cannot guarantee the very best conditions for its employees. Evidence exists which portrays H&M negatively, with suggestions being made with regards to poor wages and underprivileged working conditions.

After examining both cases in detail, neither one is conclusive in determining whether H&M is successful in attaining a competitive advantage while encouraging positive relationship with its employees. The first case promotes HR strategies that operate in the interests of its employees, while the second contests this by providing evidence that describes H&M, along with some other prominent stores, as exploiting its workers.

SHRM remains to this day one of the most influential concepts to have emerged in the field of business and management during the past twenty-five years. Through the collaboration of strategic management and HRM, the key resources in the business can be deployed to fulfil the strategies of that organisaton. To achieve competitiveness and perform successfully within a dynamic environment, organsations need to organise its staff to be positively on-board with any decisions it takes that may affect the future of the organisation. For this reason, the human resource management department needs to be one of the core drivers.

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