Strategic Human Resource Management Essay
Strategic Human Resource Management
Resource Based View (RBV) has instigated a paradigm for theoretically analysing organisational sustainable competitive advantage. Strategic managers use RBV to assist in making directional decisions which must take into consideration the strategic management process, organisational climate, strategic liabilities and assets, dynamic capabilities and core competencies. The VRIO model will be discussed to assess how strong an organisations competitive advantage is. RBV encounters a level of criticized shortfalls which will be discussed and alternative organisational performance models which can be used in addition to RBV for assisting in strategic decision making. Sustaining a competitive advantage in any industry proves itself to be a challenging task to strategists.
Barney (1991) initiated a fundamental theoretical start to the understanding of how organisations are able to have a sustained competitive advantage. The paradigm developed is now known as RBV. Strategic Human Resource Management (SHRM) use this concept to assist in understanding the influencing factors to develop the competitive advantage which provides analytical information which is used to make internal strategic decisions (Arend, 2008). RBV for sustainable competitive advantage has the composition of following terms; Value, Rareness, Imperfect Imitability and Substitutability (Barney, 1991) see Figure 1 below for the integrated model.
Barney’s model has impacted on the field of HRM in two important ways; RBV’s influence has been instrumental in establishing a macro perspective in the field of HRM research(Snell et al., 2001b). Secondly, RBV has provided a theoretical and contextual framework which has previously been criticized for being non-theoretical and overly applied in practice (Snell et al., 2001a).
Figure 1: Relationship model for achieving sustained competitive advantage (Barney, 1991) The strategic management model as seen below in Figure 2 identifies key integration points with HR practices. HR management is one of the key factors for the success of the strategic model as the HRM practices lead to employees knowledge, skills and abilities to derive a higher firm performance overall (Bowen and Ostroff, 2004).
Figure 2: The strategic management process (Noe and et.al., 1998) RBV provides an understanding to SHRM as to what areas of the business require focus by the resources. Bowen (Bowen and Ostroff, 2004) discusses how firms develop employees skills, knowledge and motivation levels so they are directly in line with the aims of strategic management. The existence of the SHRM direction is known as the organisational climate which is made up of; practices, policies, procedures, routines, employees perception, interpretability and understanding of what behaviours are expected and rewarded within an organisation (Bowen and Ostroff, 2004). SHRM use theories such as RBV to analyse the company’s performance and position then manipulate the organisational climate as a directional tool to assist the company in meeting desired strategic goals.
Bowen (2004) discusses SHRM systems must ensure the design approach taken considers the employee and focuses on a sustainable organisational competitive advantage. The SHRM system must ensure the approach taken is; visible, understandable, legitimate authority, relevant, consistent, instrumental, valid, employee consensus, agreed and fair. If the SHRM take an approach which clearly analyses all items and are well thought out and implemented within the HRM system successfully, and are in line with RBV then sustainable competitive advantage will be imminent Arend (2008) undertook an empirical study to analyse what the primary human resource strategic decision making liabilities and assets which affect companies the most. It was concluded that the top 5 strategic liabilities and assets are as follows:
1| Bad Management| Strong Brand|
2| Bad Strategy| Good customer service|
3| Financial problems| Specialized knowledge|
4| Bad acquisition execution| Product differentiation|
5| Fraud| Good executives|
Through understanding the major strategic factors which directly affect business resources decisions, companies are able to concentrate in ensuring business decision making can be further analysed to ensure incorrect decisions are not made. A second key component to understanding the strategic liabilities and assets is the ability to be able to assess competitors in ensuring your company’s decision is not second to the competitor. Analysis models such as the RBV are used in this instance to provide analytical information regarding your company in juxtaposition to your competitors which assists in making strategic decisions. Zubac et. Al. (2009) discusses dynamic capabilities as a key possession which a company must have to be able to adapt to various changes to the company. Factors affecting the company could be; external, internal, macro and micro etc. These factors must continually be adapted to for a company to have a long term competitive advantage.
For example in the early 1990’s, IBM employed 400 strategic planners whose primary role was to continually assess and assist general managers and provide analytical information when required. The strategic planning team was continually able to offer ways for technological advancements which were in line with the business needs to ensure the dynamic adjustments are made in a timely manner (Harreld, 2006). Zubac (2009) has developed a model which describes the integration of an organisations core competency and its various resources. SHRM are able to make more informed decisions when they are able to understand the relating business components and the connection of each, Figure 3 below shows the different resource types and their interrelationships.
Figure 3: The different resource types and their interrelationships (Zubac et al., 2009) Wright (2001) discusses an empirical study undertaken on various NCAA men’s basketball teams using the RBV framework. Through the strategic level implementation of the framework found there was a clear increase in performance and an outperformance in coaching strategy with the teams who implemented the RBV framework when juxtaposed to the teams which did not implement RBV. Further to Barney’s model created in 1991 relating to the factors influencing a sustainable competitive advantage a new model has been developed.
The model revolves around, Value, Rarity, Difficulty to Imitate, Organisation (VRIO) see Figure 4 below. This VRIO model analysis is used by strategic managers to determine their current organisational performance to assess the level of competitive advantage. When implementing the VRIO framework into real life examples, the success of the McDonalds franchise becomes imminent. McDonalds has a proven history record of being the top competitor in the fast food industry, their products are; valuable, rare, difficult to imitate and the organisation has a high level of organisation. With the highly evident level of sustainable advantage McDonalds will continue to be the leader of fast food throughout the world.
Figure 4: RBV VRIO analysis for competitive advantage (Iraindota, 2012) RBV as discussed in Wrights (Wright, 2001) article it suggests the development of a good product idea is not just derived solely from the individuals. Company’s idea creation is imbedded within the SHRM policies and procedures; therefore the integration of all core competencies of a company is the creator of products in the RBV model. The RBV model does have some areas of the SHRM scope which are not necessarily entirely covered. Since Barney (1991) wrote his first article on RBV which conceptualised the theory, it has been continually criticised. SHRM must be vigilant to the surrounding competitors and the environment which they are operating in. SHRM must ensure that the human capital employed is in line with what the company requires.
For companies to maintain a sustainable organisational competitive advantage it is imperative the synergy within the actual resources meets the organisational requirements. SHRM must not entirely rely on the RBV model for organisational performance, because the model does not sufficiently recognise judgement and psychological requirements of human capital which individuals play for the development of organisational value assessment and creation (Kraaijenbrink et al., 2009). The RBV is found to subjectively have a clear failure in acknowledging the value of all organisational human capital. SHRM must ensure that with the implementation of RBV, the managerial resources sector must be analysed in further details before relying on Barneys (1991) theory for organisational competitive advantage (Kraaijenbrink et al., 2009).
Further to the criticised views of the RBV paradigm, alternative HR theories used in conjunction with RBV may provide an increase probability and reduced risk for organisational performance to be maintained. Additional strategic analytical tools and theories provide strategists with the ability to be able to make more informed decisions whilst identifying potential risks. Market Based View (MBV) analysis focuses on the traditional market economy relating to the physical capital of an organisation. When the use of both MBV and RBV are used simultaneously they provide a broader knowledge base field for SHRM to be able to make superior strategic decisions (Galabova and Ahonen, 2011). Additional models such as Porters 5 Forces and the Lynch view also are to be considered when assessing an organisations performance for a sustained advantage.
The results of the analysis of the alternative models should not be discounted by strategists as all theories cover separable portions of SHRM. The Resource Based View which was conceptualised by Barney in 1991 started a revelation to the field of Human Resource Management and the correlation to sustainable organisational performance. Since 1991 SHRM decision making models have continually been evolving and greater knowledge and experience is being developed in this field which is assisting organisations strategic managers to be greater equip with analytical tools to assist in decision making.
AREND, R. J. 2008. Differences in RBV strategic factors and the need to consider opposing factors in turnaround outcomes. Managerial and Decision Economics, 29, 337-355. BARNEY, J. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management, 17, 99-120. BOWEN, D. & OSTROFF, C. 2004. understanding HRM firm performance linkages_the role of the strength of the HRM system. Acadeemy of Management 29, 203-221. GALABOVA, L. & AHONEN, G. 2011. Is intellectual capital-based strategy market-based or resource-based?: On sustainable strategy in a knowledge-based economy. Journal of Human Resource Costing & Accounting, 15, 313-327. HARRELD, B. 2006. dynamic capabilities at IBM driving stratefy into action. IRAINDOTA. 2012. VRIO framework [Online]. Available: http://iraindota.wikispaces.com/VROI+framework [Accessed]. KRAAIJENBRINK, J., SPENDER, J. C. & GROEN, A. J. 2009. The Resource-Based View: A Review and Assessment of Its Critiques. Journal of Management, 36, 349-372. NOE, R. & ET.AL. 1998. Human Resource Managment Irwin McGraw-Hill.
SNELL, S. A., SHADUR, M. A. & WRIGHT, P. M. 2001a. the era of our ways. in M.A, R.E Freeman, & J.S Harrision. Hanbook of strategic management 627-629. SNELL, S. A., STUEBER, D. & LEPAK, D. P. 2001b. Virtual HR Departments: Getting out of the middle. In: Roberts L. Heneman & David B. Greenberger. Human resource managent in virtual organizations. WRIGHT, P. M. 2001. Human resources and the resource based view of the firm. Journal of Management, 27, 701-721. ZUBAC, A., HUBBARD, G. & JOHNSON, L. W. 2009. The RBV and value creation: a managerial perspective. European Business Review, 22, 515-538.