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Trace the Development of Strategic Human Resource Management from the Resource Based View of the Firm. How Does the Resource Based View of the Firm Facilitate and Inhibit the Actual Practice of Strategic Human Resource Management.

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Essay title: Trace the Development of Strategic Human Resource Management from the Resource Based View of the Firm. How Does the Resource Based View of the Firm Facilitate and Inhibit the Actual Practice of Strategic Human Resource Management.

Today, human resources are seen as “the available talents and energies of people who are available to an organization as potential contributors to the creation and realization of the organization's mission, vision, strategy and goals” (Jackson and Schuler, 2000, p. 37).There exist two models that seek to describe what strategy is and how an organization should develop such strategy. The first model known as the Industrial Organization (I/O) model is based on the assumption that firms competing in the same industries are homogenous and emphasizes the external environment as the basis for organizational decision making. The second model, called the Resource Based View contrasts the I/O model by assuming that individual firms are unique and composed of distinct bundle of resources. According to the resource based perspective, firms attempt to develop and exploit distinctive competencies based on the physical, organizational and human capital resources under their control. Eventually, these distinctive competencies may lead to sustainable competitive advantages and superior performance. The emphasis on human capital resources leads to understanding the role of strategic human resource management in gaining competitive advantage.

Wright and McMahan defined Strategic Human Resource Management (SHRM) as “the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals” (1992:298). This field moves away from traditional ‘personnel management’ and heads toward the view that employees play an integral role in the development of an organization’s competitive advantage and as such carefully planned HR initiatives should be implemented to increase their value to the firm. SHRM conceptualized with Walker’s (1978) article, which highlighted the need for linkage between strategic planning and human resource planning. However, it originated with Devanna, Fombrum and Tichy’s (1984) article which analyzed in great detail the link between business strategy and HR. The field of SHRM has enjoyed a remarkable ascendancy during the past two decades as both an academic literature and focus of management practice.

While RBV may not have contributed directly to this evolution of SHRM, it did play a major role in its development. The development of SHRM only initiated when HR researchers realized that RBV provided a compelling explanation as to why HR practices led to competitive advantage. RBV highlights the necessity of internal factors and resources as sources of competitive advantage and this conjecture catapulted the great importance of employees (human resource) to the forefront of HR theory. RBV has placed ‘people’ on the HR map thereby justifying the concepts laid out by SHRM. This is supported by Barney’s (1991) article discussing the basic theoretical model and conditions for sources of sustainable competitive advantage.

SHRM makes managing people top priority and assimilates all HR programs and policies into the company’s strategy. RBV demonstrates how valuable resources that are neither perfectly imitable nor substitutable without great effort (Hoopes, 2003, p891; Barney, 1991, p117), can assist the firm in sustaining above average returns. Huselid (1995) argued that HR practices can help create a source of competitive advantage, if they are aligned with the firm’s competitive strategy. Wright and colleagues (1994) applied the resource based approach of strategic management to examination of the role of human resources in developing competitive advantage. According to their model, individual HR practices can be easily copied by competitors. Therefore, competitive advantage is derived from a human capital pool (stock of employee skills) that contains the necessary skills and willingness, when it can add value and cannot be easily imitated or replaced. Firms select individuals who possess the compulsory skills to carry out a chosen strategy.

However, according to Penrose (1959), the advantage a firm achieves may not be due to the fact that it has better resources but because it makes better use of these resources than other firms. The firm may maximize the use of its human capital resources by correctly assigning workers to positions in which they have high productivity (Tomer, 1987). Mahoney and Pandian (1992), gave support to this by stating that a competitive advantage may be more readily obtained when a firm’s human resources are effectively matched with its strategy. Lado and Wilson (1994) opposed Wright’s declaration of imitability and proposed that HR systems can be unique, casually ambiguous and synergistic in how they boost firm’s competencies. These systems with all the complementarities and interdependencies among the set of practices would be impossible to imitate. A contemporary view came from Lepak and Snell (1999) who emphasized that variance presented itself among the uniqueness

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