Sustaining Competitive Advantage through the Strategic Management of Human Resources - Essay Example

Sustaining competitive advantage through the SHRM Name: Institution: In the modern world, the economic environment is undergoing random changes, which majorly depends on change in investor and customer demands, globalization, and of course the continuous increasing competition for products and markets. For effective competition and success therefore, an organization must find better ways of improving its performance. This improvement in performances majorly focus on innovating products, reducing costs and improving quality, speed to market and quality of products and processes. It is in this context that the human resource management becomes of great significance since it is the most significant resource to the current firms. Currently, employees, and more specifically, how they are managed has proven to be a highly significant source of enhancing competitive success. Therefore, recognizing that the priorities of the basis of competitive advantage has changed is critical in coming up with a frame of reference in considering the pertinent issues around strategic human resource management. The Strategic Human Resource Management (SHRM) presents the new transformation in human resource management since it is more concerned with the role of HRM systems in the firm’s performance and alignment of the human resources in attaining high competitive advantage. SHRM has various approaches, which base on theories laid down by earlier scholars. Of consideration to this essay are two approaches, Best-practice approach to SHRM and Resource-Based view of the firm and SHRM. The essay thus looks at these two approaches in detail and after a thorough scrutiny, comes up with the better choice of the two. This is made possible by looking at the tenets of each approach separately then coming up with an empirical evidence in terms of benefits or appropriateness that each approach can bring to a firm. Key tenets of Best-practice approach Best-practice approach is also the universal approach and it is the simplest approach in analysing human resource management strategies. The basics of this approach is that there are exact and specific set of practices that if adopted by the human resource, then the organization can attain high performance and competitive advantage. It is significant to note here that this approach focus on advocating for those practices that are oriented in reinforcing the employees’ abilities (Caliskan, 2010). According to the proponents of this approach, these practices include certain methods of recruitment and selection, variable compensation, performance appraisal or comprehensive training. This approach thus asserts that there is a direct relationship between attaining competitive advantage and human resource practices, which generally apply to all industries and organizations despite of their context. According to the proponents of this approach, seven practices are highly significant to all organizations in order to achieve competitive advantage. According to this framework, the proponents interpreted that sustained competitive advantage is attainable through application of one particular employment practices. This framework thus places more emphasis to adopting high-skill and high cost employment policies. Evidently, this is also regarded as high commitment human resource management. The outlined seven practices include; selective hiring, employment security, decentralised decision making and self managed teams, extensive training, comparatively high compensation, low barriers and status distinctions, and extensive sharing of performance and financial information (Lockwood, 2007). These practices thus put more focus on the people within the organization or firm as the basic required resources. Therefore, integration of people with the human resource practices becomes paramount for an organization to attain competitive advantage. However, to put more specifics to this approach, it is realisable that the emphasis of high commitment human resource goes to the managers since they need to adopt and implement these practices. This is because it is highly significant for every manager to find various ways of motivating his/her employees based on their individual efforts and contributions. This is essential to the employees since they create motivation and encouragements to want to work harder. Another emphasis is that there is need to provide employment security to the employees since this would encourage them and reduce laying-off, which relates to cost and competitors. If a firm invests in hiring and training of employees, lying-off of such employees become a backward set for the firm (Chow, et al, 2008). Competitors can easily employ such people ending up incurring less cost since there is no need of training such employees and at the same time end up with better performance hence the competitors having a competitive advantage of the organization. More significantly for this approach is the issues to do with teamwork. This approach acknowledges that teamwork is a significant part of the human resource policies since it is employees who work as a team that tend to yield higher levels of satisfaction to the organization as compared to their fellow individual counterparts (Jing, & Huang, 2005). In order to get a gist of the significance of teamwork, it is critical to consider the case for Air national, which managed to use the human resource strategy in sustaining competitive advantage. The company focused on employee commitment and empowerment. This clearly, indicated that the most significant assets in the long-term survival of any organization and hence a competitive advantage is through considering people as the most essential asset. Key tenets of Resource-Based view of the firm and SHRM For over the last two decades or so, most researches have shown that the best way to maintaining a competitive advantage over competitors is by resource-based approach in strategic human resource management (Wright, et al, 2001). Researches based on the application of the resource-based view to organizations as a form of strategic human resource management tool has produced evidences that resources indeed form the foundation for the achievement of both long-term and short term goals in two premises as far as competitive advantage is concerned. The first premise is that, internal capabilities and resources form the major competitive sources of an organization’s strategies. Moreover, the second premise is that the majority of an organization’s superior returns and revenues are mostly derived from the internal resources and capabilities. In a resource-based view basis, competitive advantage arises when an organization is implementing values that create strategies that cannot be simultaneously implemented by the competitors. This approach therefore, defines competitors to a firm as those that include both the potential and current competitors. In this context of definition, an organization can create first-mover advantage or a short run competitive advantage. However, these two might not be sustainable since the competitors are also in a position of purchasing the same sources of the advantage. In order to achieve a sustained competitive advantage, the organization must be implementing value-creating strategies that the current and potential competitors cannot easily imitate (Chow, et al, 2008). In understanding the proponents of resource-based view of SHRM, it is essential to accept that management of people is the key way to be able to do something different from competitors. This is because other sources such as markets, products, cash or equipments might be similar to those of other organizations and therefore, creation of the competitive advantage becomes difficult. Difference in management of people within an organization can significantly create a much more preferred competitive advantage over competitors. All these other resources within the firm are inert except people (Akhtar, et al, 2008). Therefore, the productivity of the workforce becomes critically important to the firm. The most significant aspect to understand about this approach is the need for recognition that success through human resources is actually sustainable since competitors do not imitate it readily. One of the most evident supports of this is that the success that associates to managing people is not always transparent or visible as to its source (Wright, et al, 2001). The occasionally dismissed effects of aspects such as culture, people management, their behaviour and skills always play a big role in defining an organization. It is also difficult to comprehend the dynamics of any organization based on how it operates in terms of management of people in the system. In addition, according to this approach, the organization needs to work on certain issues in order to ensure a sustained competitive advantage (Prasad, 2012). The organization thus needs to invest in people through encouragement and introduction of learning processes that increase capability and align skills to the needs of the firm. Secondly, the organization must ensure that it identifies the knowledge mandatory to satisfy customers, meet goals, and then take the necessary steps to develop the required intellectual capital. In addition, the organization must define the required behaviours in order to ensure success for the organization (Ehnert, 2009). The behaviours thus must be valued, encouraged and rewarded. People must also be engaged wholeheartedly in the organization’s activities and the organization must gain the commitment and confidence of people in achieving the organization’s values and mission. Best approach for consideration It is evident from the two approaches considered here above that resource-based view of the firm and SHRM is the most essential approach to use in SHRM in order to achieve a high competitive advantage effectively. In the pure context of attaining competitive advantage, the concept of adopting best-practice approach may be of little consideration (Elliot, 2003). This is because the best-practice approach does not give distinctive features that clearly indicate why the competitor cannot easily adopt the strategy used by the organization in order to beat the competitive advantage enjoyed by the organization. The universal practices that the best-practice approach offers are readily available to all the companies or organizations and thus if followed correctly, then all companies will be able to achieve their goals and it will be difficult for one company to develop a competitive advantage over the other. The concept of similar or universal strategies does not create resource heterogeneity, as is the case with resource-based view approach (Inyang, 2010). This is because the human resources that various organizations own are unlikely to be identical. The resource-based approach requires that in order to achieve a competitive advantage, a company’s resources must be able to meet four requirements. That is, the resources must be valuable, rare, inimitable, and non-substitutable. It is clearly evident that from the above requirements, especially those to do with having rare resources shows that best-practice approach cannot fit the above descriptions as resource-based approach would (Sharma, 2009). Therefore, if the resources must be inimitable then the firm must employ resources that the other companies cannot easily imitate. Human resources highly meet these descriptions. Other firms due to causal ambiguity and social complexity cannot easily imitate linkages of the firms’ resources and strategies if human resources are put into consideration. Therefore, sustained competitive advantage for the firms is easily achievable through integration of human resources policies and practices alongside appropriate strategies (Pranit, 2009). Competitive advantage is highly achievable when a firm has a unique blend of procedures, processes, personalities, capabilities, styles and organizational culture that is not easy to imitate. Therefore, competitive advantage through differentiation becomes of great significance. Resource-based view approach therefore, ensures that an organization has higher quality people than the competitors, unique intellectual capital, and an encouragement to organizational learning (Inyang, 2010). Therefore, as far as these two approaches are concerned, -competitive advantage can only be easily achieved through resourced-based view of the firm and SHRM. In conclusion, therefore, identification of an approach to ensuring competitive advantage requires several considerations. However, from the above discussion, it is evident that all approaches might be good as far as the operations of the organization are concerned. However, in terms of enhancement of competitive advantage, a firm must develop and utilise its unique resources in order to ensure that the competitors does not have these similar resources to counter the efforts of uniqueness of the organization. The uniqueness of employees categorically differentiates one firm to another and this clearly indicates that this is the most appropriate and sure way of attaining competitive advantage. Therefore, the resource-based view of the firm and SHRM becomes the best and most appropriate approach since they categorically dwell of people and their unique characteristics in the operations of the organization. References: Inyang, B. J. (2010). Strategic Human Resource Management (SHRM): A Paradigm Shift of Achieving Sustained Competitive Advantage in Organization, International Bulletin of Business Administrations, Euro Journals, Issue 7, pp. 23-36.ISSN: 1451-243X. Wright, P., Dunford, B. & Snell, S. A. (2001). Human resource and the resource based view of the firm, Journal of Management, 27(6), pp. 701-721. Doi: 10.1177/014920630102700607. Elliot, H. G. H. (2003). SHRM Best-Practices & Sustainable Competitive Advantage: A Resource-Based View, The Graduate Management Review, pp. 43-57. 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Strategic HRM practices and their impact on company performance in Chinese enterprises, Human Resource Management, 47(1), pp. 15-32. Doi: 10.1002/hrm.20195 Jing, w. & Huang, T. (2005). Relationship between Strategic Human Resource Management and Firm Performance, International Journal of Manpower, pp. 434-449. Read More