link between strategies Essay
link between strategies
The Business is shaping to be highly unpredictable, challenging and innovative by the passing day. Organizations face complex environment for which they need to formulate complex and full proof strategies to ensure competitive advantage, profit maximization and cost minimization, for which they need to adapt strategic approaches, theories and models. However, the role of theory is not always significant in scrutinizing the human resource(HR) strategy and the strategic plans. However, depending on the organizational strategy, HR strategies can be matched. This critique thoroughly discusses the linkages between Business strategies and the Human Resource Management (HRM) and their relevance in the dynamic environment.
Strategic management is defined as the set of managerial decisions and actions that determine the long run performance of a corporation.(Hills and Jones,2001) Moreover, strategy is an action a company takes to attain superior performance.(Wheelan and Hunger, 1995) Strategic human resource management is ‘the process of linking HR practices to business strategy’(Ulrich,1997) To maintain the hierarchy in the market, organizations need to constantly formulate strategies to meet the customer requirements. There are various theories that have been formulated for firms to manage complex and problematic environment. These theories are broken down into two models; internal model which includes the Resource Based View ( RBV) and external based model formulated by Whittington (2001); which include Classical, Evolutionary, Processual and Systemic approaches.
Due to the increasing value and appreciation of individuals as one of the major competitive advantage for organizations, there have been strong efforts to develop HRM. Beer et al suggest that ‘An organization’s HRM policies and practices must fit with its strategy in its competitive environment and with the immediate business conditions that it faces’ (Beer et al., 1984, p. 25). This is accomplished by applying different strategies which include two main models namely; ‘Best practice’ or Universalism’ and Best Fit’ or contingency’ or Matching model’. Strategic integration is used as one of the means to explore possible links between different approaches to strategy and HRM. So far, it has been recognized as a two-way process, where HRM informs the nature of organizational strategy as well as being informed by it; that is full integration. Alternatively, it may be a one- way process where organizational strategy informs HRM without being informed by it in any intended or planned way; that is partial integration .(Millmore et al, 2007)
Classical approach follows clear, rational, deliberate, linear, logical, and top-down approach to formulating strategy. (Millmore et. al, 2007) According to Sloan(1963), The long term aim of the approach is clearly profit maximization. For this approach, classicists choose best fit strategy and create a match between organization’s internal resources and the opportunities available in the external environment to achieve competitive advantage; its main goal. However, since the approach is subjective, the process of strategy development is affected by political, cultural and capability factors which need a complex model that clearly suggest the relationship between strategy making and HRM to represent such linkages in reality. (Millmore et. al, 2007)
Looking at evolutionary approach, markets are highly unpredictable and hence the role of this strategy is to respond to the environment for survival and profit. To state an example, Sony released over 100 different versions of portable cassette player in 1980s and allowed the market to decide which would survive and removed the rest as a result of market failure.( Richard Whittington, 2007) Such conditions lead to strategic conservatism, where organizational efforts are focused on the basics of production, to minimize costs, sought operating efficiency, impose tight control and performance monitoring.
Therefore, this strategy stresses on environmental determinism due to which, matching model is deemed to be most appropriate for such organizations. It is believed that this approach can be seen as strategically integrated only in relation to the strategic imperative to control costs. SHRM requires a wider remit where emphasis is placed on developing and integrating the ‘human’ side as opposed to the ‘resource utilisation’ aspect.( Storey, 1989)
Processual approach emphasizes strategy making as an adaptive and emergent process driven by organizational learning . It is believed that decision- makers lack the ability to act with pure reason and only a few factors affecting a decision can be dealt with, this limitation of human cognition is known as bounded rationality. ( Simon, 1991) The actual scenario of the market is unpredictable and hence managers develop imperfect representations of complicated world which helps strategists to trouble shoot problems and aim on sufficient profit rather than maximizing profit. Mintzberg(1979) believes that the development of emergent strategies in organizations is based on learning. This needs to be recognized and supported through HR strategies.
Systemic approach recognizes that strategy and strategy making will be affected by the social and cultural system within which this occurs. To state an example, multinational organizations need to be aware of the cultural system in the host country to formulate achievable organizational strategies. This suggests that HR strategy and its integration into organizational strategy will vary, underpinned by societal values. Another example mentioned by Whittington, tells us about the series of conglomerates developed in South Korea which characterized small and family owned businesses nearby Taiwan. This suggests that HR strategy need to be conceived and integrated into Organizational strategy to avoid non conceptualization of HRM.
Resource- based view is popularly associated with the work of Prahalad and Hamel( 1994). They argue that competitive advantage stems, from building ‘core competencies’ which are superior to those of rivals, over a long run. In a nutshell, they assert that it is a firms’ ability to learn faster and apply its learning more effectively than its rivals, which gives it competitive advantage. Different types of link have been identified between RBV and HRM. To start with, Resource Based Theory (RBT) sees resources and capabilities as the principal source of competitive advantage, which gives HR a central position to realize this.
According to RBT, capabilities need to be built or developed rather than being bought.( Teece et al.1997) Therefore the management seeks to improve the utilization of an existing capabilities , particularly in a situation of rapid change. Another link between HRM and RBT is related to the potential contribution of human resource policies or strategies.HR strategies are important in developing an organisation’s capabilities.HR practices related to recruitment and selection, managing performance, training and development and reward can be designed to attract, develop and retain high quality employees.
Hence, it can be concluded that the linkages completely depend on the organization size, social and culture and the dynamic environment. It is seen that the resources need to strategically formulated to enhance organizational capabilities and competitive advantage of the firm. Indeed there are no clear linkages but the performance and effects are visible if not accomplished.
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