role of strategic HRM in contributing to sustained competitive advantage

If the market world becomes more complex and volatile, the level of competition rises, and companies can only succeed by creating and maintaining appropriate competitive advantages. When used correctly, organizational human capital can provide organisations with significant comparative advantages. A great deal of research has been done into how companies should leverage their capital to achieve a competitive edge, which has resulted in the introduction of concepts like strategic human resource management. Strategic human resource management allows firms to gain sustainable competitive advantages through effective recruiting, training, compensation, and appraisal programs which add value, rarity, innovation, dynamic capabilities, flexibility, efficiency, and effectiveness of organizational performance.

Literature Review

Recent researches on strategic human resource management majorly concentrate on issues concerning the management of people as integrated into the corporate level. This tends to critique past studies which majorly concerned with the study of human resource management as independent and partial from other strategies and policies of a firm. A lot of benefits arise from the integration of HRM into other organizational strategies because they lead to a sustained superior performance and competitive advantage s of a firm which is usually established through a combination of different factors such as human resource and the environment, accuracy of the strategy, and the capability of an organization to respond to all threats and opportunities emanating from its internal and external environment.

Strategic human resource describes the management of human resources as planned deployed of human resources and activities to enable an organization to achieve its strategic goals. The implication of this definition is that there are two assumptions involved; first, organizations have capabilities to impact their firm-level outcomes by properly using their human resources (Kramar, 2014). Second, the HRM cannot work in solitude but must work in combination with other organizational activities to impact the strategic level of a firm. A lot of research has indicated that HRM activities have an impact on organizational performance. Jiang et al. (2012) examined some of the competitive advantages which arise from strategic human resource management activities and discovered that they include work-life balance, global competition, high performance and high involvement work systems, shortening of the business cycle, technological advances, and manufacturing to a knowledge-based economy. To achieve these competitive advantages, organizations are forced to find ways they can achieve these objectives.

The historical perception of human resource management should have been concerned with activities such as selection, compensation, training, appraisal, and recruitment. Previous research has studied the HR functional activities as ends to themselves. However, following the rise of concepts such as strategic management, more attention was given to how firms can strategically compete through their human resources. Subsequent research such as those of Kehoe and Wright (2013) later discovered that HR functions such as compensation and employee training could be strategically aligned with the organizational objectives to facilitate and expedite the achievement of business goals.

Literature provides two primary approaches to a strategic human resource to gaining and sustaining competitive advantages. According to Huselid and Becker (2011), the outside-in and the inside-out approaches to strategic human resource management can help to explain how firms can gain and sustain competitive advantages. The outside-in approach focuses on the external environment and the analysis of business problems. It includes the analysis of industry structure, consumers, and competition as well as other issues which affect human resource management. The inside-out approach, on the other hand, aims to overcome the arising business problems. According to Inyang (2010), the inside-out approach to SHRM provides an alternative approach to Resource-Based View (RBV) theory. This helps in defining the integration process which occurs between business policies and the human resource strategies. The RBV approach puts more emphasis on the significance of the capabilities and resources of a firm so that a firm can achieve and sustain its competitive advantages. The proponents of the inside-out approach to strategic HRM argue that it puts more emphasis on the internal capabilities and organization’s core competencies to create sustainable competitive advantages (Wei, Liu, and Herndon, 2011). The resource-based view of the strategic human resource is important because it has emphasized the role human resources play in achieving and defending a firm’s competitive advantages. The primary assertion of the RBV for sustainable competitive advantage, according to Guest (2011), is that organizational resources can fuse into a heterogeneous bundle which can then form the basis of an organization’s production process that is different from what its competitors. Through this heterogeneity of resources including human resources, makes an organization attain capabilities which makes it more efficient and bigger opportunities for the firm. It also enables firms to offer better quality services which can lead to the improvement of organizational performance and a hence a sustainable competitive advantage.

Gurbuz and Mert (2011) examined how strategic human resources lead to the development of dynamic capabilities which enable firms to gain and sustain their competitive advantages. The RBV makes organizations more flexible, and this flexibility allows organizations to mediate between their organizational performance and high-performance work systems. It can be argued, therefore, that the HR flexibility or the dynamic capabilities adjusted with the dynamics of the environment help to determine the performance level of a firm. Daley (2012) on the other hand examined the theoretical meanings of the dynamic capability concepts and found that it can be viewed from three primary components. These include HR practices, employee behavior, and employee skills. The flexibility of employee skill describes the number of alternatives which can be applied by an organization and how employees are having different skills can be quickly rehired. The employee behavior flexibility enables employees to adapt and behave with specific demands and firm situation (Posthuma, Campion, Masimova, & Campion, 2013). The HR flexibility enables the HR managers to produce policies which can help to solve problems emanating from different situations.

The RBV approach provides a rational and theoretical basis upon which a firm can use its human resources as one of its most important strategic assets. However, the resource-based view to the strategic human resource can be considered as a static equilibrium because it is incapable of providing the sustainable indicators of success for organizations in a business environment which is dynamic and constantly changing (Sudin, 2011). According to the resource-based approach to strategic human resource management is more focused on making organizational resource non-imitable, valuable, and non-substitutable. When HRM functions work in combinations the organization strategy, they lead to a sustainable competitive advantage.

Chadwick, Super, and Kwon (2015) examined how firms can obtain sustainable competitive advantages and discovered that one way is how a firm is capable of using its resources. These resources include labor, technology, and capital. This implied that the sustainable competitive advantages of any firm depend on how well a firm can increase and develop its members’ competencies. Since the early 1970s, there have been a lot of researchers on HTM competencies. Campbell, Coff, and Kryscynski (2012) in 1973 noted that having proper behavioral traits as well as individual characteristics were more important than using intelligence test while explaining which individuals needed to be hired. Chuang and Liao (2010) in 1982 followed this assumption closely by contending that the competency of the managers was important in determining the competencies of human resources. The significance of competencies cannot be wised away, but its long-term implementation and subsequent success in making an organization gain a sustainable competitive advantage cannot be realized until it is blended in the strategic human resource management. This, in turn, requires the HR to be able to establish an effective system which can support and direct creativity, competency, and innovativeness of the employees.

Past studies about organizational employees and source of sustained competitive advantage reaffirmed that organizations could achieve competitive advantage through their human resources. According to Çalişkan (2010), given the significance of people in organizations, the majority of strategic human resource departments concentrate on the management of capabilities and competencies of this human capital as their primary goals. However, these forward-looking and strategic operations have sharp contrast with the more bureaucratic, traditional human resource departments which

App, Merk, and Büttgen (2012) examined the features of a strategic HR department and discovered that they are future-oriented in a way which is consistent with the business plan of the organization. The strategic HR departments tend to employ progressive HR practices which emphasize knowledge, abilities, and skills required for future and then design staffing practices, appraisal, compensation, and incentive practices which aim to meet those needs. According to McWilliams and Siegel (2011), these strategic HR practices are collectively known as ‘high-performance work practices’ which can fit together to meet the future needs and strategic human support for the high-commitment and performance employees. This way, Barney, Ketchen Jr, and Wright (2011) argue, can make an organization achieve a sustainable competitive advantage.

Love and Singh (2011) examined the ways through which organizations can use their strategic HR practices to achieve and maintain high commitment and high performance among their employees and ultimately organizational effectiveness. It was discovered that strategic human resource management practices might include promoting the credibility of organization with the employees, encouraging participative management and employee involvement programs, encouraging mutual trust and commitment, focusing on high achievement, and developing an entrepreneurial approach to management. All these practices, according to Andersén (2010), create an organizational culture which encourages the individual employees to be more adaptive, successful, and competitive. All of these are important sustainable competitive advantages for the organizations which use strategic human resource management practices. Wright and McMahan (2011) examined the relationship between high-performance work systems and the effectiveness of organizations and discovered that the presence of a strategic human resource practice, for example, is related to higher quality and higher productivity in the automotive assembly plants. Buller and McEvoy (2012) on the other hand discovered that the presence of a strategic staffing practice is positively related to the annual profit of organizations as well as the growth of an organization. Finally, while studying the relationship between high-performance work practices and organizational performance, Martín Alcázar, Miguel Romero Fernández, and Sánchez Gardey (2013) discovered that there is a positive relationship between the high-performance practices and low employee turnover rates as well as improved corporate financial performance, all of which can lead to sustained competitive advantages.

For human resources to be considered as a source of competitive advantage, they must be of value to an organization. Berger & Berger (2010) examined the Human Capital Theory to discover the conditions which make human value creation possible. It was discovered that under conditions where the demand and supply of labour is homogenous, no variance can be realized in an individual contribution to a firm. It makes no sense, therefore, to invest in human assets. However, when the demand and supply of human labour are heterogeneous, then there is a variance which makes the contribution of an individual to a firm more valuable. For a resource to be a source of competitive advantage, it must be rare. Strategic human resource management enables organizations to recruit human resources with rare talents and skills, and this makes them have an important source of competitive advantage.

Performance management has also been examined with regards to how it creates a sustainable competitive advantage. According to Boxall and Purcell (2011), strategic management is one of the strategic issues performed in human resource management. It enables the HR to streamline the employee activities with those of the organization. The information from performance assessment enables the management to make decisions which relate to succession planning, employee training, career development, and compensation (Martin, Gollan, & Grigg, 2011). All these are related to employee satisfaction and organizational development which achieves organizational competitive advantages.

Since sustainability is futuristic, questions may arise concerning the future of strategic HRM and its ability to produce sustainable competitive advantages. What is the future of strategic human resource management in ensuring that organizations gain and sustain their competitive advantages? What will be the new practices and policies under strategic human resources that will ensure that organizational competitive advantages are sustainable? How effective will strategic human resources are when integrated with other functions to produce sustainable competitive advantages? These are some of the questions which need further research.

Conclusion

As the business environment becomes more competitive, dynamic, and highly unpredictable, Strategic HR makes organizations gain and sustain their competitive advantages. This may happen through effective performance of HR functions including programs in recruiting, training, appraising, and compensation that aim to give organizations added value, rarity, flexibility, efficiency, effectiveness, and dynamic capabilities. Due to the importance of human resources in the organizations, strategic HRM enables organizations to develop human resources that are knowledgeable, able, and skilled. The ability to retain such a workforce is what makes the competitive advantages they provide more sustainable. Further research should be aimed at determining the future strategic HHR practices and policies required to obtain and sustain competitive advantages.

References

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