A Critical Review of the Approaches to SHRM

The concept of Strategic Human Resource management has been studied over the years by academics and there have been a variation on the issues of its definition and relationships with other aspects of business planning and strategy. Bratton & Gold (2007) defined strategic human resource management as “the process of linking the human resource function with strategic objectives of the organisation in order to improve performance”. In general terms, SHRM is the integration of human resource activities and policies with defined strategic organisational goals all for the purpose of achieving and sustaining quality performance output by the organisation. It is important to note that the aim of SHRM is to procreate strategic quality by making sure the organisation possesses the skilled, committed and well-motivated employees it needs to achieve sustained competitive advantage.

There are four major approaches/models to be analyzed for the purpose of this study. These approaches are Best practice model, Best fit model, Resource-based model and Integrative model. These models are employed by various organizations to attain competitive advantage. This essay seeks to examine the four models of SHRM, their implications on a firm’s performance and suggest the right approach that can help achieve competitive advantage.

Literature Review

Best-practice/Universal approach can be regarded as the simplest approach to analysing HR strategies. It argues that there is an exact set of human resource practices that can be applied in any organisational context and the application of these practices can increase an organisation’s performance and help to attain competitive advantage. It focuses mainly on certain practices oriented to reinforce employees’ abilities. These practices include variable compensation (Gerhat & Milkovich, 1990), certain methods of recruitment and selection (Terpstra & Rozell, 1993), comprehensive training (Russell et al., 1985) or performance appraisal (Borman, 1991). Pfeffer (1994, 1998) asserted that there is a link between HR practices and competitive advantage and that this applies to all organisations and industries irrespective of their context. He outlined seven (7) practices that an organisation should adopt and this was the basis for analysing his framework. His framework interpreted that one particular employment practices is likely to offer sustained competitive advantage than the others. In other words, he placed more emphasis on adopting high cost and high-skill employment policies. This can also be regarded as high commitment HR. The practices that should be applied by firms include; employment security, selective hiring, self-managed teams and decentralised decision-making, comparatively high compensation, extensive training, low status distinctions and barriers, extensive sharing of financial and performance information. The application of these practices emphasises more on people as the main resource in a firm there for a firm must integrate people with the HR practices. The aim of this high commitment HR is directed managers and how they should adopt these practices. It is important for every manager to motivate the employees of the firm based on their individual contributions, this helps encouraging the employees to want to work harder and this is beneficial to the individual as well as the organisation. More also, employment security should be encouraged. This is because it reduces the risk of laying off employees and this can be related to cost and competitors. Laying off employees can be a risk on the part of the firm especially if a lot has been invested on hiring and training, this gives room for competitors to employ such employee and this may have a negative effect on the firm in question. In addition, the issue of team work is also an important part of HR policies because employees who work in group tend to report higher levels of satisfaction than their fellow counterparts. A good real life example is the case of the Air National [in Bratton & Gold, 2007, pp 69] and how it used HR strategy to sustain competitive advantage. It emphasized on employee empowerment and commitment. As their CEO, Clive Warren stated in a television interview, ”in an industry like ours, where there are no assembly lines or robots, people are our most important asset and our long term survival depends upon how they work as part of a team”.

In summary, the implication of this model is that the HR practices complement one another. Though it has its limitations but this model actually exposed HR practices to scholars which have generated the development of new frameworks and theories based on the review of this practice. More also, the various HR practices enhances employee ability and knowledge through good training and this is really relevant to any firm or organisation. For example, extensive training of employees can be beneficial to the firm because empowerment of employees can foster creativity and innovation. It also motivates desired behaviours of employees through strong incentives. Finally, it encourages open communication where employees’ ideas and contributions are encouraged.

Furthermore, there are various limitations of this model. It lacks solid theoretical foundation and it also does not state who the practice is for (best practices for whom? Employees? Managers? Organisations? Societies?) (Syed, 2010). It is also difficult to implement

In contrast, the best-fit/contingency approach focuses more on the importance of the suitability of the human resource (HR) strategies to the different circumstances of the entire organisation in conjunction with culture, operational processes as well as external environment. This model argues that the firm should know what is applicable in general terms and what lessons can be learnt to be adopted in order to fit its strategic and operational requirements. This simply implies that a particular set of HR practices can yield better performance if they are matched with specific objectives, conditions and strategic interests i.e. a particular set of HR practices is dependent on an organisation’s strategy. (Schuler & Jackson, 1987, in M.L. Lengnick-Hall et al., 2009, human resource management review, 19,) asserted that ‘different strategy types (cost reduction, quality improvement and innovation) require different types of employee role behaviours, which are specified’. They further argued that once the desired employee role behaviours have been identified to fit the strategy, HR practices should be used to ensure those behaviours take place. This model can also be related to the behavioural perspective theory which argues that employee behaviour is the go-between between organisational strategy and performance. This is based on the assumption that the goal of a firm’s HR practices is to evoke and control employee attitudes and behaviours that would be effective for the organisation. These specific attitudes and behaviours differ depending on the various characteristics of organisations and their strategies. This means the differences in role behaviours required by the organisation’s strategy would also require different HR practices to elicit and reinforce those behaviours. According to Schuler & Jackson (1987), “employee role behaviours are instrumental in the implementation of the competitive strategies”.

Furthermore, the best fit approach highlights the notion of fit (external and internal) which (Lengnick-Hall & Lengnick-Hall, 1988, in M.L. Lengnick-Hall et al., 2009, human resource management review, 19) posited that there is need for a fit between an organisation’s business strategy and its HR strategy for HR to affect strategy. However, during their assertion on the importance of fit, it was observed that fit is not always desirable especially in times of change. They further suggested that fit should be considered the opposite end of the continuum from flexibility and that firms should clearly choose a position along the continuum to correspond exactly with their assessment of upcoming competitive conditions. Additionally, they proposed a reciprocal interdependence between strategy and HR whereby they suggested that HR should be considered in both strategy formulation as well as strategy implementation. In the same vein, (Baird & Meshoulam, 1988, in M.L. Lengnick-Hall et al., 2009, human resource management review, 19) further expanded the notion of fit to combine both the external and internal components. The external fit is basically aligning a firm’s HR practices with its strategy while the internal fit is aligning a firm’s HR practices with one another i.e. a consistency between the set of HR practices. Additionally, they proposed that the fit between HR practices and strategy will change as an organisation advances through its life cycle stages. A good real life example is Tesco they adjusted their form of strategy by creating Tesco online shopping where their customers started ordering groceries online. This strategy was unique alone to them and they attained competitive advantage. Another example is the steel mini mills in the USA. They integrate HR strategy with business strategy where the product development (creativity, risk oriented, and cooperative behaviour) is integrated with HR practices (select highly skilled, minimal controls, invest in training, appraise long-term, IT systems in place, economy of scope, Just-in-time, integrate product with workforce).

In addition, further researches were done based on the concepts of fit and flexibility proposed by (Lengnick-Hall & Lengnick-Hall, Wright & Snell 1998, in M.L. Lengnick-Hall et al., 2009, human resource management review, 19) added to the concept of fit and flexibility by asserting that strategy should fit with three generic conceptual variables which are HR practices, employee skills, and employee behaviours. They defined flexibility as the extent to which the firm’s HR possess skills and behavioural technique that can give a firm options for pursuing strategic alternatives in the firm’s competitive environment, as well as the extent to which necessary HR practices can be identified, developed, and implemented quickly to maximize the flexibilities existing in those HR. Similarly, (de Pablos 2005, in M.L. Lengnick-Hall et al., 2009, human resource management review, 19) argued that organisational flexibility and fit must be achieved simultaneously in order to create a sustainable competitive advantage.

In summary, the best fit approach is of the assumption that the HR strategy becomes more efficient when it is linked to its surrounding context or environment of business. A limitation to this approach is that there is no focus on the exact aspect of business strategy that helps in deciding how to adapt the HR practices. Another area of disadvantage of this model is in the external fit concept. The external focuses more on the cost reduction, quality enhancement and innovation hereby neglecting the interests of employees. Finally, the last limitation of this model is the inability of the fit system to be flexible in structure. This implies that the structure cannot adapt to change (Becker & Gerhart, 1996, in M.L. Lengnick-Hall et al., 2009, human resource management review, 19).

Resource based model argues that the sustainable competitive advantage of a firm is as a result of the effective management of the firm’s resources. These resources are identified as tangible (financial, technological, physical, human) and intangible (brand name, reputation, know-how). This model argues that the influence of distinctive competence of a firm relies on how unique and valuable its resources are i.e. the resources should be rare and must have worth. Furthermore, the model posits that for a firm to achieve competitive advantage, it must continually adapt to the changes in external trends, internal capabilities and must effectively formulate, implement and evaluate the strategy that capitalizes on the factors mentioned.

Furthermore, (Barney, 1991, in Val et al., 2007, vol 31) identified four characteristics of advantage creating resources which were value, rareness, inimitability and non-substitutability. All these characteristics should be possessed by a firm if it is to achieve distinctive competence. The resources of the firm should possess high value in the sense that the strategic resources should have a high sense of what and also add value to the organisation. In the same vein, the resources must be very scarce, should not be found anywhere and this can help in distinguishing a firm that has the potential of attaining competitive advantage and those that cannot. Organisations can share the same HR practices but they can never have the same experience when those practices are implemented. It is very important for organisations to have resources that cannot be reproduced or imitated and this makes the firm stand out from its competitors. Finally, the resources should not be substitutable if the firm is to stand out from its competitors. All these strategic assets are very crucial if any firm is to achieve a sustained competitive advantage.

A good real life example is the case study of [Nordstrom retailers (US), in Syed, 2010]. Their HR strategy focused on the investment in recruiting and retaining young college educated sales clerks that desired a career in retailing. This strategy helped to enhance and develop these individuals by expanding their horizon and this can of asset can be a threat to other competitors. In addition, the key to their competitive advantage was their focus on individual salespersons. Similarly, they also employed a highly incentive-based reward system. Overall, the organisation maintains the highest sales per square feet in the United States of any other retailer (Barney & Wright, 1998, in Syed, 2010).

In summary, the resource based model highlighted that competitive advantage depends an organisations strategic assets. One limitation with this model is that it does specify how the resources cannot be imitated.

Integrative model is much more realistic because it is much more practical. This model is the integration of the control based and resource based model whereby one model focuses on corporate strategy and the other reward-effort exchange (Bamberger & Meshoulam, 2000, in Bratton & Gold, 2007). This model focuses on two main dimensions of HR strategy which are ‘acquisition and development’ and ‘locus of control’. The acquisition and development involves either a high investment in training of the workers or buying of the workers from the external labour market (Rousseau, 1995, in Bratton & Gold, 2007). On the other hand, locust of control has to do with monitoring and control of the workers. This model recognises that the implementation of policy may differ from intention and stresses the importance of planning well.

In summary, this model tends to link descriptive approach to corporate approach. The short-coming of this model is that it functions reactively rather than proactively. This model has no future because it focuses on ‘doing’ rather than ‘forecasting’.

Conclusion

Having examined the four approaches, it can be concluded that best fit approach is more appropriate and efficient for an organisation to attain a sustained competitive advantage and this is because there is a connection between competitive advantage, employee behaviours and HR practices.

In recommendation, it is important for managers to align the HR strategy of the firm with business strategy in order to attain competitive advantage. Also the interest of employees should be considered, the employees’ interest should be aligned with the interest of the firm. In addition, critical research should be done on the theories of SHRM because they really lack practical evidence.