The human resource can bring in competitive advantage for a firm in this rapidly changing environment which is characterized, among others, by stiff competitiveness in the market. The strategic human resource management (SHRM) concepts that have come up in last two and half decade emphasize the importance of human resource linked with the business objectives. The SHRM improves employee performance as well as creates a productive culture, which is responsible for producing competitive advantage for a firm in specified market. It has been found out that a strong and productive culture generally improves performance, which in turn catalyses competitive edge for a firm.
The economic environment is changing rapidly throughout the world in the form of change in demands pertaining to investor and consumer, increase in product-market competition, and globalization. The performance improvement along with improvement in the quality of services or products, productivity, cost reduction and innovation must be continuous for the firms to compete in this environment (Johnason, 2009).
The importance of linking the business objectives and goals with human resource goals is called strategic human resource management (SHRM), which improves the revenue stream and bottom line of a company with improved employee performances and creation of a productive culture, which in turn produces sustainable competitive advantage for an organization (Johnason, 2009).
A critical analysis of SHRM can be invaluable to the investors as well as the chief executives and startup promoters. The insights gained from this paper can be implemented in their respective companies so that their bottom line and revenue increases.
The structure of the paper begins with discussing the concept of SHRM, followed by organizational culture and performance impacted by SHRM and how culture and performance creates competitive edge for a firm.
Strategic Role of HRM
The HRM functions have the endeavor of consistently justifying its organizational position. The organizations are possessed with sufficient budget when it is doing well financially. During this time justifications for the budgets are easy to provide leading to expenses on training staffing, rewards and employee involvement. Nonetheless, during the time when the firms are not doing well financially, the HR systems are the first functional area where the cutbacks takes place (Collings and Wood, 2009).
The Strategic Human Resource Management (SHRM) has developed into a subcategory of HRM, where the HR role are explored to buttress the business strategy, so long one opportunity is established in relation to the value that the firm is endowed with (Collings and Wood, 2009).
The SHRM is the harbinger of wide ranging changes that the past two and a half decade has witnessed. These changes have come up with two principal transformations. The first, being that the personnel management field has shifted to the field of human resource management. The second, being that the field of human resource management has shifted to the field of SHRM (Mondy and Wayne, 2014). The first transformation, if incorporated, represents the recognition of the organizational employees as an important assets of the organization and thus, liable for systematic management. The second transformation is based on the prior knowledge base of the discipline. The underlying rationale for the transformation is the need of linking the policies and coordination of the HR functions with organizational needs. It must be ensured that these two practices should not left on their own being insulated from the organizational strategies. The organizational strategies being reflected with these needs makes this HRM transformation known as strategic human resource management.
The concept of SHRM is based on the recognition that effectiveness enhances in the organization HR and HR policies and practices is managed with right amount of people that are motivated to the level required, are competent, and with proper behavior (Mondy and Wayne, 2014).
This indicate that SHRM forms the bulwark to establish integration or links between HR strategy and the way it is implemented and the overall aim and strategy of the business. The management pertaining to the people and the process of an organization should be such that these encourage aims and strategies of business and establishes integrated approach in managing an array of HR functions, such as training, reward and selection that supports each other (Mondy and Wayne, 2014).
The example can be given of United Healthcare Services that is consisting of six businesses that focuses on community, individual, and state healthcare services and plans. The engagement surveys are used by this company in help identifying the changes needed in their practice of human resource. The organization also ensures that there is alignment between the HR practices and the business strategy of the company. A recent survey shows that the understanding of the managers about the job of each employee contributing to the business strategy has been the areas, where improvements are needed. In this context, the United Healthcare Services’ human capital’s vice president started a communication process held monthly with managers regarding the way employees can be engaged with explanation regarding what the employees can be doing in their job to impact positively on the business strategy. The engagement score, as a result, where increases led to higher customer provider satisfaction and increased revenues for the company. Thus linking HR practices pertaining employee activities and employee engagement with business strategy improved the bottom line of the company (United Healthcare Services, 2016).
SHRM can bring about many benefits to a firm, such as:
- Organizational survival and meeting the organizational goal
- The business strategies of an organization can be supported and implemented successfully
- The competitive advantage of an organization is produced and maintained
- Innovation is brought about along with utilization of the organizational potential
- Augment of the strategic options for the organization
- The strategic direction of an organization can be influenced along with participating in the strategic planning
- The synergy between the HR department and line managers is improved (Bennett and Lemoine, 2014)
- SHRM impact on Organizational Performance
The market situation at present is to a large extent is volatile, and individual companies in large numbers are facing such a situation. To produce and maintain competitive advantage in the light of such a situation, the business performance of the organizations must undergo continuous improvement. It is recognized increasingly that achievement of sustainable competitive advantage can be done with the help of human resources (Voorde et al., 2010). For achieving this, larger number of companies has adopted measurement approach in the form of workforce scorecards so that the values can be added with help of the organization’s human resources.
There is growing interest in measurement, which is further enhanced by several research studies indicating a positive relation between the performance of the organization and the HRM (Voorde et al., 2010). Over the last quarter of a century, the management scholars have debated endlessly on the topic of SHRM, which related business goals of a firm with its HRM. The organizations and academics both stress on the reason for better bottom line productivity, which is because of HRM.
The HRM practice is assumed to be dependent on the organizational people forming the basis for the key resources and the organizational performance (O’Sullivan, 2014). Thus, if the HR processes are developed appropriately, then the organization’s performance can be impacted substantially by the HR.
A model has been developed by Guest (2011) that deals with the association existent between the organizational HRM and performance. It cannot be denied that the most important strategic goal in any organization is the wealth maximization of the shareholders and better financial performance. In any case, operational performance of a firm, to a large extent, impacts its financial performance. The operational performance of the firm consists of process, technology and people. For effective communication among the employees of an organization, the technology and the process also need to be effective. The employees of the organization should also have sufficient competence in terms of skills, abilities and knowledge. The competence considered that individual forms another factor for the operational effectiveness in relation to short term quality of products and services. The higher performance can be achieved with improved employee competence, which in turn can be achieved with optimal work environment, performance appraisal, and training and selection.
The Pepsi Co has linked its recruitment and selection with the business goal of higher financial performance. There is challenge attached with the recruitment and selection in a flexible working environment. Employee will shed their traditional mindset in Pepsi; because they have to be at their desk as in all times they are watched in the workforce that is flexible. Thus, Pepsi Co emphasize in finding the right person who can positive affect the productivity and financial performance. There would also be staff turnover, if the employee cannot deliver as per the company expectations (Boudreau and Ramstad, 2009). To find the right person, Pepsi Co should carefully plan, organize, direct and control before the process of interviewing.
- SHRM impact on Organizational Culture
There is scope of HR playing a key role in reinforcing, shaping and changing an organization’s culture. The HR goals being aligned with organizational goals can be affected directly by the organizational culture as organizational culture directly affects the organizational bottom line and organization’s survival (Modaff et al., 2011). The culture’s importance for the organizational success is very high, which thereby serves as the human resource function and its capacity to close gap between the awareness of the culture and human resource planning.
- Organizational culture
The organizational culture can be defined as a system of shared beliefs, values, and assumptions governing the way the employees behave in the organization. There is strong influence of these shared values on the organizational workforce and dictating how they should be acting, dressing and performing in their jobs (Boudreau and Ramstad, 2009). Every organization maintains and develops a unique culture that has been providing boundaries and guidelines for the behaviors of the organization’s members. The organizational culture is comprised of some key traits, ranging high to low in priority. Every organization is endowed with a distinctness of value for each of these traits, which in conjunction provide definition to the unique culture of the organization.
- Effectiveness of organizational culture on the strength of SHRM
The organizational culture has been on the basis of normative glue that helps to protect the effectiveness of the management as a whole that SHRM has brought about. The effective culture is developed by SHRM helping to improve business decisions. The survival of the organizational culture is based upon the differentiation created by the foreign and national culture as a culture management brought about by the HR policies and practices (Islam and Zyphur, 2009). The culture in an organization is developed by SHRM that is impacted by norms, beliefs, and attitudes that creates strong communication amongst the staff.
Over the recent years, organizational culture is increasingly related to SHRM. There are two factors that stand to be very important and a requisite for effective culture management being integrated to structural stability and superior standard which are the traits of organizational culture. There are some traits in relation to the organizational culture that have been established with the set values, beliefs and norms, which help form effective association amongst them (Cappelli and Keller, 2013). The organizational culture is also impacted by racial differences, ethics and different background. The organizational culture that is sync with different background is gifted with common set of values and beliefs affecting the organizational system.
With regards to the organizational performance and sustainability, the set of values, beliefs and norms impose strong effects (Stewart, 2010). The norms of the organizational workforce can be impacting the organization culture with regards to the performance management, which in turn positively impacts the attainment of profitability.
The organizational culture of Pepsi Co is related to improved performance that helps the organization attaining competitive advantages. The Pepsi’s commitment to maximize its HR strengths is done through organization’s culture. An organization’s culture demonstrates the values and tradition and ways with which workers’ performance is defined. In the case of Pepsi Co, encouragement is provided to the employees for focusing on excellence through collaboration. Pepsi Co is one of the biggest Food and Beverage Company worldwide. This enables the company striving for improvement for its workforce (Lukas et al., 2013). It is always necessary in maintaining a culture of high performance in sustaining its market position. The business strategy of Pepsi Co is linked with the organizational culture and adopting the culture as strategic approach in optimizing its performance with strengths of its people being harnessed effectively.
- Competitive advantage through SHRM
- Business performance
The concept of competitive advantage was conceptualized by Michael Porter, who said that competitive advantage is produced when an organization has been successful in creating value for its customers (Porter, 1998). The concept has stressed upon the importance of differentiation, being offered with products and services considered by the public as unique. These products and services targets specific buyer group or product market and must be offered with more efficiency or effectiveness than their competitors.
The resource based views indicated the system of human resources with its contribution of sustaining competitive advantage assisting the development of competency specific to a company (DeGraff, 2010). There have many organizations, where superior performance could have been sustained because of some unique capabilities of its human resource that produces competitive advantage. SHRM has been a major source of competitive advantage as the business goals in relation to the competitive advantage being achievable with improved performance. It has also been strongly advocated that the successes of SHRM are sustainable that cannot be imitated by the competitors easily. The reason behind the successes of SHRM has been the effective human resource management which cannot be made transparent or visible like its source.
In an organization, the real strength is its employees that are decisive in success or failure of the organization. There has been a paradigm shift in terms of sources of competitive advantage. The shift has been to human resources from financial resources. Royal Caribbean Cruise Line has adopted a strategy incorporating sixteen practices of Pfeffer in relation to competitive advantage. The company provides “signing on incentives” for the most important staff members and personal progression and development within the fleet. For instance, the company offers shore leave of one week in gaining intensive safety and health training (Dunham-Potter, 2013). Further, the scores of customer feedback are the key success indicators and the bonus performance has been in relation to privileges, which are the job’s integral part.
In the context of this environment, the wages mostly comes in the form of tips and is dependent on the employees’ competencies, attitudes, and skills and the ability of theirs in generating trust and commitment, communication aspirations and working in complex relationships as well in gaining job satisfaction and repeat custom. Aspiration related to this answer lays competitive strategy and practices of human resource such as managers must be endowed with a vision, respect for individuals, and good communication (Dunham-Potter, 2013). In the Royal Caribbean case, the strategies are not implemented by the department, but more so with a culture that is embracing and thereby, ensuring a competitive edge.
The business performance is improved by HRM and with that achieves the organizational strategic goals for the organization to sustain and gain competitive advantage by doing the followings (Conaty and Charan, 2011).
- Investment in the employees with the introduction and encouragement for the learning process for the enhancement of the capability and alignment of the skills to the organizational needs
- To ensure the identification of the knowledge in relation to the needs of the organization to satisfy the customers and meet the goals by taking steps to acquire and develop its intellectual capital
- The behaviors sought by the organization are defined and valued, rewarded, and encouraged by these behaviors
- Encourage employees to engage wholeheartedly when they work for the organization
- To gain the employee commitments with respect to the organizational mission and values
- Organization’s culture
The organizational culture is reflected by the management of the people. SHRM, in relation to the culture, is a series of plans and intensions as to how the goals pertaining to its employees can be achieved by the organization (Martin and Frost, 2011). The effective organizational culture ensures competitive edge with the motivation, commitment, and the skills of the employees.
In the context of the business culture of Toyota, when the organization published ‘The Toyota Way’ (2004), it became one of the worldwide bestsellers as it delved into the aspects of culture and management philosophy and thereby boasting and supporting the instruments and techniques that induces the continuous improvements and lean manufacturing as the system’s integrated part. A culture is developed in Toyota, which encourages the right quality the first time alongside the leadership growth within the system. With this culture, Toyota has differentiated the brand with trust and quality and thereby, producing competitive advantage in the market.
The organizational human resource has a high association with the results of the organization. To achieve the organizational goals and objectives, it is important that the organization links the business objectives and the strategic goals with human resource goals. Therefore, the concept held previously that human resource management is administrative in nature and a mere expense for the company no longer holds true. This concept is replaced by the human resource’s strategic position having direct connection with the bottom line and financial performance of an organization. This association of human resource with overall organizational performance resulted in HR managers to design programs that link the HR and organizational goals for better performance of the organization, leading to better results. The better performance, in turn, helps the organizations achieving competitive advantage.
The organizational culture is made up of different set of values and beliefs impacting the employee performances that in turn is related to the organizational performances. The joint relationship can be internalized with the help of organizational culture leading to more efficient organizational process. The job performance in an organization is to a large extent being impacted by the culture of the organization that improves productivity. The organizational norms and values have been on the basis of several cultural influences in relation to the management of human resource. The organizations with a strong culture allow effective management of its human resource. The optimal use of human resource in an organization if carried out with the help of same cultural association creates positive development for the organization. The culture of an organization, on the basis of certain specific condition, improves the organizational performance and creates competitive advantage. The culture can also bring about stronger commitment from the employees as well as group efficiency that lead to improvement in performance based on the stability of the organization.
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