Matching human resource management strategy with competitive strategy to enhance firm performance

Matching human resource management strategy with competitive strategy to enhance firm performance betterIt is state that ‘The fundamental premise is that business performance will be better when there is an alignment between competitive strategy and the management of core operating workers inside the business.’the hypothesis that firms which align their HRM practices with their business competitive strategy will achieve superior outcomes. (Becker and Huselid, 1998; Dyer and Reeves, 1995; and Guest, 1997) No matter how, according to Martell & Carroll (1995) point out that nowadays, it is a common belief in the business that the human resources of an organization can be a source of competitive advantage, provided that the policies for managing people were integrated with strategic business planning and organizational culture. In fact, Employee creates an important source of competitive advantage for firms (Barney & Elmes, 1997). Therefore, it is important that firm adopts human resource management (HRM) practices that make best use of its employees. In context of this essay gave clear practical examples of such a link the …does‟ part of question which include supporting or rejecting the positive and/or the negatives. And also, then got stuck in tothe …should‟ part of the question s often noting the critical difference between competitive strategy and business strategy and their implications.The HR Management system might affect firm performance as well as the necessary conditions for there systems to have a strategic impact. The behavioral perspective (Johnson, 1987) suggests that an effective HR management system will acquire, develop and motivate the behaviors necessary to enhance firm performance (Bailey, 1993; Johnson, 1987; Purcell, 1999; Schuler & Jackson, 2000). Complementary work argues that HR management systems provide additional value when they are purposively designed to be internally consistent and are thereafter linked with firm competitive strategy (Mueller, 1996). In essence, prior theoretical work in this area concludes that competitive advantage is in part a produce of HR management systems that elicit employee behaviors consistent with the firm‟s broader strategic and environmental contingencies (Schuler & Jackson, 2000).To review of the literature indicates that an alignment between HRM and competitive strategy have positive different effects on the performance of business. As according to Schuler and Jackson (1987) were able to renew that there has different competitive strategies imply the need for different kinds of employee behavior, and different kinds of employee behavior reflect different types of HRM demand, especially between …differentiators‟ and …cost leaders‟. However, Schuler and Jackson‟s model state that ifmanagement chooses a competitive strategy of differentiation through product innovation; this would call for high levels of creative, risk-orientated and cooperative behavior. The company‟s HR practices would therefore need to emphasis selecting highly skilled individuals, giving employees more discretion, using minimal controls, making greater investment in human resources, providing more resource for experimentation, allowing and even rewarding failure and appraising performance for its long run implications. For example, the impact of different approaches to HRM on the productivity in steel mini mills in USA. This showed that the mills with commitment systems had higher productivity, low scrap rates, and lower employee turnover than those with control systems. In addition, human resource systems have moderated the relationship between turnover and manufacturing performance. On the other hand if management wants to pursue cost leadership, Schuler and Jackson‟s model suggests designing jobs which are fairly repetitive, training workers as little as is practical, cutting staff numbers to the minimum and rewarding high output and predictable behavior. (Boxall and Purcell 2003: 53-4)Management chooses whatever a business performance model is a very seemingly clear divide between competitive strategies and their implications for HRM, and for ethics. It is really only through sector level research that we can get to grips with competitive strategy and HRM. For example, in the clothing industry, the distinction is between the progressive bundle system, essentially a traditional Tayloristicassembly line type of production system, and the modular system, a type of cellular manufacturing, TQM and work transformation. The latter produces higher quality, faster turnaround and in some cases lowers cost. (Bailey, 1999: 31-32) Why do so few manufacturers adopt it? According to Appelbaum, Bailey and Berg (2000) point out that “…without getting distracted by the diffusion debate the focus here is on competitive strategy.”(pp.23) they also mentions that in essence, early implementers of the modular system were often unsuccessful. Later, strategic coalitions between HRM, operations management, information systems and supply chain management came together to link modular production to …lean retailing‟ pushed by major customers, like Wal-Mart. The essential requirement was for a three day turnaround, compared with around three weeks under the progressive bundle system.The critical point, however, is what particular markets are being served by the clothing manufacturers? The highly successful Spanish ladies fashion retailer, Zara, is a good example. Here rapid changes in fashion, often with unpredictable demand (thus ruling out warehousing and extended shelf life) requires fast response from manufacturers located near retailers‟ distribution depots, with integrated It systems (the EPOS system of bar codes) providing rapid response on data on demand linked to supply. Meanwhile, the closure of clothing plants in Europe and North America is indicative of another trend. In commodity, non fashion clothing, there is little need for a fast turnaround. Cost pressures are paramount and low wage countries in thedeveloping world become increasingly attractive. (Wright, Gardner and Moynihan, 2003) Furthermore, Clothing is a labor intensive industry. The progressive bundle system is more appropriate where cost minimization is essential for viability and survival, let alone achieving competitive advantage. However, there is a no idea of studies of HRM in the clothing industry in developing countries but work by Wilkinson and his colleagues (2001) in the Japan and Malaysia electronics industry is instructive, noting the street Tayloristic, short job cycle time, work in the latter country with its concomitant control based HR systems. If it is serious about studying the links between strategy and HRM it really ought to be doing much more comparative research across the range of competitive conditions in a sector globally. This would also have to include studies along the supply chain as well as end market. (Kinnie and Swart, 2003:14)Another example of the link between HRM and competitive strategy, it is can be usefully taken from call centers which continue to grow rapidly in developing countries like India with a ready supply of well educated and cheap labor. However, the growth continues in developed nations too, as technology, consumer preferences and the opportunity to reduce costs coincide. One of the interesting features of call centre, for our purposes, is how early studies tended to lump all such centre together under the rubric of …the dark satanic mills of the late 20th century‟ and Panoptican controls (Fernie and Metcalf 1998; Bain and Taylor 2000). Here, markets seen in therelationship with customers (from transactional to relation) is matched with HRM practices from cost minimization to high commitment management. We could use the same terms …transactional‟ and …relational‟in HR too, since they are commonly referred to in studies of the psychological contract.Competitive strategy can never be taken as the dominant force determining HRM (…should part‟). These relate, firstly, to the static nature of the models used. The point made by Wright and Snell (1998) on an integration of …fit‟ and …flexibility‟ is well made. Markets, technology and supply lines change as Marks and Spencer have found to their cost. Then is the problem that firms rarely face a single …pure‟ market with various degrees of diversification, as means of risk reduction, expected. Which competitive market should dominate and how should market variety, and differences in market conditions and market share, be reflected in HRM? Can a firm have different HR systems each linked to competitive strategy? How much flexibility and knowledge sharing across markets is optimum? This is especially important for large multi-divisional companies. To prominent a position given to competitive strategy also relegates …labor‟ to a subservient position after market, technology, operational and distribution choices have been made. Under this logic a failure to take account of employee interests, reflected perhaps in collective and individual conflict expressions would cause competitive disadvantage but getting a fit between HR and competitive strategy is a taken-for-granted requirement of good management but which would notlead to competitive advantage. (Poter 1996:74)Competitive strategy, in fact, in the whole strategy world, as taught and researched, has opened up in recent years with competitive strategy seen as just one part of a bigger picture. Quite how big this picture is, under the generic title …business strategy‟ is shown by Grant (2002) state that “the task of business strategy… is to determine how the firm will deploy its resources within its environment and so satisfy its long-term goals, and how to organize itself to implement that strategy”. (p.13) in the later analysis in the Grant‟s book also state this: “str ategy is a quest for performance focused… on sources of profitability” (p.20) and “increasingly, strategic planning processes are becoming part of companies‟knowledge management systems…” (p.29). and finally “one of the most pernicious misconceptions in t he history of strategic management is the idea that the formulation for strategy can be separated from its implementation” (p.188). So much for Porter‟s …ope rational effectiveness as given‟!Business strategy seems is that covers everything and sub-disciplines have proliferated out of mathematics, economics, sociology, psychology, ecology, organization behavior and, of course, HRM. To put some boundary around this, once the subject or object of business strategy covers both internal and external resources, resource allocations and implementation and strategic intentions, it is necessary toreturn to determining the differences between strategic and operational decisions. Grant (2002:17) suggest strategic decisions are important because involve a significant commitment of resources but are not easily reversible. Johnson (1987:4-6) adds that strategic decisions involve a high degree of uncertainty, they are likely to be concerned with change, for example, involving the persuasion and organization of people to change from what they are doing. This should help us to delineate strategic HRM from operational decisions. However, the shift in focus to business strategy makes long standing topic areas within HRM yet more relevant especially once implementation is seen as a central concern of strategy. To give three examples as above, among many –the formation, cognition and …leadership‟ of top teams, the people who make strategic decisions is important. Workforce alignment, compliance and motivation, can never be taken for granted, and line managers as the enactors of strategy have always been problematic and not just because of the principal agent problem loved by economists. We have much to say about each one of these.The biggest influences the changing forms of strategy analysis have had on HRM are those relating to the resource based, and knowledge based view of strategy and the preoccupation with performance rather than planning. Resource-based view seeks to explain the sources of sustained competitive advantage in turbulent conditions where external positioning is uncertain. Looking at internal sources of viability and advantage, emphasis is placed on resources which are critical to organizationalsuccess yet are rare, or not commonly available, are not substitutable (people by technology for example) and are combined together to form organizational capabilities or processes which are imperfectly imitable, or hard for other to copy.However, the argument in resource-based view is that while tangible resources have often declined in their strategic value, intangible and human resources have increased as a source of value. Grant (2002) describes those Human resources as specialized skills and knowledge, communicative and interactive abilities, and motivation. This is the bread and butter of HRM. The successful firm not only has to have better than average human capital, through recruitment, selection and development and then appropriate job design, motivation, communication and involvement systems, but also better processes or capabilities. These combine human and non-human resources together in ways highly appropriate for end users and markets and in ways which other firms find hard to copy. This has been described by Boxall (1996) as Human Resource Advantage which is the sum of Human Capital Advantage (HCA) and Organizational Process Advantage (OPA). The former, human capital advantage is familiar territory but organizational process advantage takes in a much wider area of interest, and has implications for the boundaries of our subject and our magpie habit of talking useful theories from cognate subjects.Resource Based View (RBV) has big implications for HR architecture (Lepak andSnell, 1999), and these can be disturbing to those who have a universalistic view of best practice. The logic that rare human capital is only likely to apply to a segment of an organization‟s work force is inescapable. Even if they could argue, or demonstrate, that all workers in the firm have such rare skills and develop sophisticated organizational processes, they would need to go beyond the boundaries of the firm into subcontracting or externalization, for example, …the HP way - outsourcing‟. At the same time workers with high levels of generic, technical or professional skills who do not require unique, firm specific knowledge to practice have more boundaries less identities requiring more market based as opposed to commitment based HR (Lepak and Snell 1999, Boxall and Purcell, 2003). The logic of the core-periphery model of diverse HR systems within, and beyond, the firm to the supply chain, thus applies. This has ethical consequences of course, but is it more ethical to have …bad‟ jobs placed in developing economies and among the disadvantaged in our societies, or no jobs at all? The answer is different for the employment strategy of the firm than for the workforce strategy of the nation.In the conclusion, the essay gives some recognition to Human Resource Management in strategy analysis of business; the central role for HRM is establishing an incentive system that supports the implementation of strategic plans and performance targets through aligning employee and company goal. It is a common belief in the business that the human resources of an organization can be a source of competitive advantage, provided that the policies for managing people were integrated with strategic businessplanning and organizational culture. Management chooses whatever a business performance model is a very seemingly clear divide between competitive strategies and their implications for HRM, and for ethics. However, Competitive strategy can never be taken as the dominant force determining HRM. The biggest influences the changing forms of strategy analysis have had on HRM are those relating to the resource based, and knowledge based view of strategy and the preoccupation with performance rather than planning. Resource Based View (RBV) has big implications for HR architecture.ReferenceAppelbaum, E., Bailey, T & Berg, P. 2000. Manufacturing Advantage: Why High performance Systems Pay Off. Ithaca: ILR Press. p. 23Bailey, T. 1999. …Organizational Innovation in Apparel Industry‟ Industrial Relations 33(2): 31-32Bain, P & Taylor, P. 2000. …Entrapped by the “Electronic Panoptic an”? Worker resistance in the call centre‟ New Technology, Work and Employment 15(1): 18Barry, D & Elmes, M. 1997, …Strategy Retold: Toward a Narrative View of Strategic Discourse‟, Academy of Management Review, vol. 22, no. 2: 452.Becker, B & huselid, M.A. 1998. High performance work systems and firm performance: A synthesis of research and manageria; implications. 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