Human Resource Management (HRM) practices model the building of skills and knowledge across the firm to enhance value as well as unique organizational skills that support competitive advantage and Strategic Human Resource Management (SHRM) as a new paradigm of Human Resource (HR) in a modern firm based on the premise that HR is the most critical resource any firm needs to support itself with as the HR is responsible for managing the other output factors to improve the efficiency of firms (Janssens & Steyaert, 2009). SHRM seeks to create a strategic alignment which is vertically integrated with the firm strategy to ensure continuity between business and HR strategy, so that the latter promotes achievements and helps to define the strategy (Bowen & Ostroff, 2004). SHRM also deals with horizontal integration which aimed at ensuring that the various elements of the HR strategy work together and help each other. Furthermore, SHRM makes strategic decisions to have a major and long-term effect on the firm’s actions and performance by ensuring that the firm has the trained, dedicated and well-motivated workers it requires to accomplish competitive advantage (Lengnick et al., 2009).
Traditional HRM and SHRM Comparison
SHRM is an active mechanism coping with environmental changes. It benefits firms directly and indirectly as it turns passivity into action, explicitly transmits corporate goals and inspires line managers to be involved (Harry & Bazzy, 2017). SHRM affects firm success because it creates systematic unity, a synergy that propels a business forward, allowing the firm to adapt to its environment while going forward. Most high-performance businesses have implemented SHRM steps while low-performance firms on the contrary continued to use traditional methods (Oraman et al., 2011) seen in the table below.
There is a positive relationship between SHRM and firm financial results according to various researchers whereby HR’s strategic focus in high productivity firms was clearly different from that of firms with low productivity (Rogers & Wright, 1998). A good example would be Deloitte that has successfully implemented excellent HR strategy framework that made the company a multinational professional service network corporation it is today. Thus, advances in SHRM thought are discussed through the best fit, best configuration strategies that have a profound effect on the perception of the contribution SHRM can enhance organizational efficiency by increasing competitive advantage and adding value (Venkatraman & Camillius, 1984).
It also becomes clear that, if SHRM is based on biasness to the external environment or on the firm’s internal environment, the significance of SHRM can only be really understood in terms of organizational efficiency, whether it is in terms of economic, increased shareholder and consumer interest as well as increased market share or added value for people through increased employee engagement, knowledge and talent (Gurbuz & Mert, 2011). There is no standardization of SHRM practices and as such researchers prefer to choose a selection of HRM practices based on the theoretical perspective used (Teece et al., 1997). The focus is usually on bundles of HR practices as determinants of organizational success as to the related HR practices. The bundle of HRM practices usually involves team utilization and decentralization, information sharing as well as performance incentives (Buller & McEvoy, 2012).
SHRM has two types of resources whereby the first being the human capital of a firm which revolves around its employees’ knowledge, skills and abilities (Armstrong & Brown, 2019). The task for HR’s strategic decision-makers is to turn human capital into a powerful, unique and hard-to-imitate firm capability. The second resource concerns the systems specifically HR policies and practices of a firm which serves to support human capital growth (Nyberg et al., 2014). The problem with this resource involves the selecting of right cost-effective bundle to help employees work best. SHRM is formed by four major obstacles or overarching objectives with the use of these two types of resources (Offstein et al., 2005).
The first challenge is to draw on the company’s employees’ analytical and skill-based abilities as well as the use of these expertise and skills to the best benefit of the firm (Chen & Huang, 2009). Hence, it could be understood that the way employees are utilised as a source of human resources and the credibility of transforming this resource into a firm ability that generates competitive advantage is the core of SHRM research. The second challenge is to turn HR resources of a firm or its package of HR initiatives and programs into a source of competitive advantage typically by developing procedures that enables the value appreciation of the capital investment of a business (Noe et al., 2007). The third and overlapping task is to decide how the HR strategies of a business will work together to help the overall firm strategy. Key to this challenge is to consider the “Black box” of Investment Return (ROI) in HR programs, focused on the overall short-term and long-term financially dependent trade-offs that need to be taken into account (Messersmith et al., 2011). The final challenge is to apply new methods to assist in strategic decision-making such as metrics and analytics (King & Zeithami, 2001).
SHRM should strive to find an acceptable compromise between the hard and soft approach. In accomplishing goals, firms must ensure that they have the required resources to do so and make effective use of them (Hendry & Pettigrew, 2009). Unfortunately, the assumption that workers are valuable assets is seldom translated into practice. However, HRM-related policies are often adopted for expediency purposes rather than any genuine conviction in their values. Most free-market firms believe economic pressures make it difficult to contribute to their employees (Poole & Mansfield, 2014). HRM is concentrated on cost-cutting in those firms. Tension arises from the inherent inconsistency between HRM values such as promoting long-term employee commitment and cost-effectiveness in the short term (Jackson et al., 2012). Yet the human factors should also be taken into account in the soft strategic HRM setting as well. Firms should prepare individuals in mind, taking into account all stakeholders of the firm’s expectations and ambitions. Increasingly, many firms are seeking competitive advantage with the intention of acquiring this competitive edge with HR aiming at cost reduction, creativity and quality enhancement (Leana et al., 2010).
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