Workforce in Strategic Human Resource Management

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Introduction

The field of human resource management (HRM) has constantly tried to find its position in the organisation (Drucker 1954; Wright, Dunford & Snell 2001). When the organisation operates through good times, HRM assumes an important position with increased expenditure done on training, employee involvement, recruitment increases. However, during difficult times, the first department, which faces cost cuts, is human resources. The constant fight of HRM to be incorporated in the strategic management arena has been observed in the management field (Wright & McMahan 2007). Apart from this, there has been a constant debate in the strategic HRM (SHRM) arena regarding the relevance of the resource-based view of the discipline and its people orientation (Boxall 2007). The debate whether HRM is of strategic importance to firms or not has led many to alter the focus of the discipline from ‘people’ to ‘resource’. Thus, there developed a specifically resource-based model of HRM (Boxall 2007).

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Background

Human resource management started being considered from the point of view of attaining competitive advantage (Porter 1985). In this case, competitive advantage was considered those capabilities or resources that helped the organisation to capitalise on an opportunity and avoid any impeding threats (Lengnick-Hall & Lengnick-Hall 1988). Thus in order to make human resources a strategic partner to the organisational business and in order to make the discipline a source of competitive advantage, it has lost, largely, its focus, i.e. ‘people’. HRM presently has begun to draw from the literature of resource-based strategy in order to increase its relevance in organisations. HRM has been stated as the strategic partner of the organisation, thus, increasing its prominence to the organisational functions. However, it must be noted that human resources have become more of a strategy to the organisation in terms of structure, culture, retention and staffing, etc. Thus, the question persists if SHRM has lost the ‘people’ focus and become more ‘resource’ oriented. SHRM is based on two fundamental assertions. First, human resources are of critical importance to an organisation as the employees within the organisation have the capability and potential to build and implement the firm’s strategy. Second, HRM practices of an organisation are instrumental in developing the capability of the people in the organisation. Thus, it is believed that the basic tenets of SHRM have an inclination towards the resource-based view of strategy (Colbert 2004). The proponents of this argument believe that firms gain a higher degree of competitiveness through the firm’s resource base and therefore draw greater consideration to the internal functioning of the organisation (Colbert 2004). Therefore, more emphasis must be placed on the managers in the selection, development, etc. of the managers. Clearly, when the resource becomes the basic tenet for HRM, the key area that is looked upon is people working within the organisation. Therefore, even though the focus of HRM after assuming a strategic role in the organisation has become resource based, the primary factor of concern remains to be people.

Aim and Objective

SHRM has started to give more emphasis on resources, but this shift in emphasis is not at the cost of less emphasis on people, as people remain to be the main factor for HRM. The essay discusses various aspects of SHRM and the way different views change the perspective of the discipline. Resource based view has become the basis for SHRM research for the past decade (Wright, Dunford & Snell 2001). Therefore, the importance of resources has increased to a great extend in the past decade. This essay will show the rising importance of resources in SHRM and will investigate if the resource-based view has resulted in a diminished focus on people.

SHRM

Previous research on human resources, i.e. people and HRM, has demonstrated that there were many fundamental questions that remained unanswered. First, the effect human resource practice had on the firm’s human resources. Second, which practices lead to greater organisational performance? Further, the relation between the firm’s strategy and HR practice was unclear. Therefore, SHRM brought forth a measure common to all which linked HR practices to the human resource pool and organisational performance. Thus, the key questions related to HR practices were answered by SHRM and the resource-based view of the discipline.

Definition

SHRM helps a firm in developing a competitive advantage by acquiring and developing the physical, human, and organisational resources of the firm in order to create a core competency, which is difficult for competitors to imitate (Barney 1991). Therefore, it has been observed that most of the SHRM practices are human resource-based, i.e. people-oriented, who are the real resource for the organisation (Barney 1991; Colbert 2004). SHRM is focused in two ways: (1) it shows the role human resources plays in the strategy of the organisation, and (2) it shows a focus on HRM (Wright, Dunford & Snell 2001). SHRM concept has been described as:

“The first is the idea of implicit modes of theorising embedded in the SHRM field. … three modes—universalistic, contingency, and configurational—discernible across a broad body of research, although not always explicitly acknowledged by the respective authors. The second concept is one of the levels of abstraction in the HR system, including principles, policies, and practices, over which theoretical constructs are often arrayed, also typically unacknowledged by the respective authors.” (Colbert 2004, p. 343)

According to Legge (1995), there are two distinct concepts of HRM – hard and soft. The hard model considers the HRM practices to be quantitative in nature, with more stress of utilising labour as a productive resource for production purposes (Legge 1995, p. 35). This traditionalist “hard” approach to HRM, according to Session and Storey, is “a simple relabeling of personnel management and industrial relations, arguably designed to capture the benefits of the other meanings.” (2000, p. 22). The soft HRM puts more emphasis on “developmental humanism” and stresses “business objectives” (Legge 1995, p. 35). In this view, HRM utilises human resources as a valuable asset rather than just another resource. Here the stress is more on managing human resources and business objectives (Session & Storey 2000). Thus, Legge concludes that the soft model of HRM aims to “deliver ‘resourceful’ humans” (1995, p. 35).

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Theories

Resource based view formed the forte of SHRM. Various questions related to the institutional theory (Wright & McMahan 1992), contingency theory (Lengnick-Hall & Lengnick-Hall 1988), or organisational learning (Snell, Youndt & Wright 1996). It is believed that the resource-based view of HRM has helped in establishing a bridge between the disciplines of strategy and HR (Wright, Dunford & Snell 2001; Colbert 2004).

Research has tried to take an architectural approach in demonstrating the effect of HR policies, principles, and practices on organisational outcomes (Becker & Gerhart 1996). It has been stated that that though SHRM has not been instrumental in the development of resource based view (Wright, Dunford & Snell 2001). Resource view shifted the focus of strategy from external factors such as industry to internal firm resources and towards building the competitive advantage of the organisation (Hoskisson et al. 1999). Thus, the resource-based view actually helped HRM to establish the legitimacy and importance of people within the firms and assert their strategic importance. Thus, over the last decade, there has been an observed increase in the amalgamation of the resource-based view in the SHRM literature and the foundation of research being the former (McMahan, Virick & Wright 1999). Further, the relatedness and closeness of the strategic management literature and resource-based view have led to the inevitable convergence of SHRM and strategic management (Snell, Shadur & Wright 2001). Thus, it is arguable that the resource-based view has actually helped to put ‘people’ on the stage of importance in the organisational literature map. This has definitely led to the development of concepts that are very close to people, like knowledge, individual capability, leadership, learning organisation, etc. (Wright, Dunford & Snell 2001). Thus, from the people strategy, organisations have started to build their competitive advantage has been observed in the case of many organisations like Southwest Airlines. Resource based view has shifted the focus of the organisational strategy from external to internal resources. SHRM has begun using the resource-based view for both theoretical developments as well as for gathering rationale for empirical research (Barney 1991; McMahan, Virick & Wright 1999).

An analysis of the resource based view of SHRM showed that the firm’s human resources could be a potential source of competitive advantage to the organisation (Wright & McMahan 1992; Wright, McMahan & McWilliams 1994). Industrial relations have also found extensive research of the implication of the resource-based view on SHRM and found that all business strategies requires a set behaviour pattern from employees, which would allow them to define the strategy and every human resource policy has the capability to develop a set behaviour pattern among employees (Cappelli & Singh 1992). The argument suggested that strategic management so far had implicitly assumed that given a strategy, resources would rearrange themselves automatically. However, research proves otherwise. Therefore, HR policies intervene to bring about those desired changes, thus increasing the strategic importance of the discipline.

Another article by Wright, McMahan and McWilliams (1994) suggested that there is a difference between HR practices and human resources. Wright et al. (1994) argued that sustainable competitive advantage for the organisation could not be created solely by HRM practices after applying the concepts of value, exclusivity, sustainability, and individuality to organisations and HRM. The reason behind this argument was that HR practices themselves could not create a competitive advantage on their own as they could easily be imitated by competitors. Instead, a concept of the human capital pool was suggested. A human capital pool means a team of extremely skilled and motivated workforce who was in a better position to create sustainable competitive advantage (Wright, McMahan & McWilliams 1994). It was noted that in order to develop a competitive advantage, the human resource pool must be self-motivated and highly skilled in order to create a productive outcome. Thus, the literature suggests that the resource-based view can be successful only when skilled and motivated people are utilised to create productive behaviour. Thus, Wright et al.’s article suggest that SHRM’s focus is further established on ‘people’ as a ‘resource’.

However, there are others who believe that it is not the people who are in the HR system, rather the practices and policies employed by HRM that allows firms to develop a sustainable competitive advantage (Lado & Wilson 1994).

Why resource based?

It has been argued that SHRM is based on the implementation of strategic objectives by taking human resources, i.e. people, as the means of reaching that strategic end (Wright, Dunford & Snell 2001). Thus, competitive choices are derived from human resources when SHRM follows the resource-based view. Further, it has been identified that traditionally human resources had tried to match people to strategy, whereas the important idea was to match strategy to people. Thus, the traditional view of HRM assumes that people are more flexible than strategy. It is suggested that in this form of traditional HRM, the cause and effect is unidirectional, and the causal direction is reversed (Wright, Dunford & Snell 2001). Therefore, multidirectional is lost in the process. Further, traditionally there was an external dominance of the firm as models relied on the organisation as a single unit or catalyst for change (Wright, Dunford & Snell 2001). This is a wrong approach as the organisational climate is derived from it rather than strategy (Chandler 1962). Further, another issue with the development of a traditional model based on resources is that traditional SHRM emphasised ‘fit’ while neglecting the need for lack of ‘fit’ during a transitory phase. Thus, the traditional SHRM definitely had a focus on resources and the external environment, but with a change in the perspective of the researchers, the SHRM shifted its focus towards internal resources i.e. people.

Traditional stress on resources has been observed in the case of human resource accounting systems. Two methods of human resource accounting prevalent in traditional HRM were: (1) cost-approach and (2) value approach (Cascio 1987a). In both cases, employees are viewed as “cost-to-date” or in terms of their ‘expect contributions’. Cost approaches are related to the cost that HRM incurs in order to recruit, train, replace and retain employees. Value approaches are related to the net expected value of the employee in terms of the expected contribution she was to make to the firm. Thus, human resource cost evaluation is a process of finding the return on investment in human resources by organisations, or in other words, it is a method of identifying the amount of resources firms give in order to get skill and the cost-benefit attached to it. Therefore, according to this method of resource evaluation, human capital is considered a resource, just like raw material, capital or infrastructure. This was the traditional approach to HRM. However, the advent of SHRM has changed the view wherein the evaluation of either the implementation cost or a comparison of different strategic options relative to human capital is done in order to give human resources a competitive strategy. Therefore, there has been a shift in the focus of firms from the valuation approach as they provide partial aid in making human resources the competitive strategy.

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Human resource planning is done in order to anticipate future business environmental conditions in terms of demand for personnel and accordingly make plans to meet the future expectations (Cascio 1987b). Thus, traditional HRM puts emphasis on human resource planning as a model for taking strategic decisions. However, research shows otherwise (Bard, Meshoulam & DeGive 1983). Traditional research has also focused on human resource supply and demand forecasting (Zedeck & Cascio 1984), and many statistical techniques are available (like the Markov Analysis), which allows such quantitative forecasting possible (Wright, Dunford & Snell 2001). However, there existed in the implementation of the statistical techniques available for the purpose of forecasting (Zedeck & Cascio 1984). Apart from this, succession planning has been associated with the strategic management system of the organisation, and so has been the response of HRM to external changes in the environment (Wright, Dunford & Snell 2001). Therefore, the resource orientation of HRN in its traditional form is explicitly noticeable. In the summary of the literature review of traditional SHRM practices, Wright et al. (2001) have suggested that efforts have been made constantly to make personnel the unit for strategic decision-making. The requirement for the workforce was interpreted through the strategic decision making of the organisation. Thus, a fit was sought for in the strategic objectives of the company. Thus, the literature review by Wright et al. demonstrates that strategic ends were tried to be met by fitting in the HRM practices, thus, losing the focus on ‘people’. Therefore, to a great extent, people were being equated with inanimate resources of the organisations and planning for them could be done through forecasting and other quantitative methods.

Latest Trend in SHRM

The latest trend in SHRM has changed this traditional view of strategy led human resource management policies. Wright et al. present a model based on three basic assumptions i.e. strategy has not been formulated, consideration should solely be made for human resources, and strategic issues are reflective of strategic contingencies. The typology presented by Wright et al. suggests that SHRM has two decisions to make – organisational goals and the availability of human resources. Therefore there has been a shift from the traditional strategy led human resource policy to organisational goals in relation to human resource policy has been emphasised. Thus, the predominance of people in the organisation has been stressed in the proposed typology for SHRM.

SHRM has stressed the importance of organisational effectiveness, and there remains ambiguity as to how, when, and why such interconnectedness between HRM and strategy exist (Boxall & Purcell 2000). Boxall and Purcell conclude that HR practices of a firm are heavily influenced by external environmental factors; however, they are not examples of ‘best practice’. Labor still assumes importance as the firm’s HR considerations and therefore managing people assume importance in firms even today (Boxall & Purcell 2000). However, it has been observed that the resource based view of SHRM has shifted the recent research agenda from employee motivation, retention, etc., to organisational adaptability and process (Boxall & Purcell 2000). Therefore, it has been pointed out that too much focus on strategy has led to a change in the focus of organisations from people. Thus, Boxall and Purcell suggest that effort should be made to draw on the understanding of SHRM from the point of organisation strategy with a focus remaining on people. In another study, it has been found that a resource based view has been applied to find what people strategy must be taken when human resources are not homogeneously knowledgeable and skilful (Lepak & Scott A 1999). Thus, the study suggests how human resources can be utilised to figure out employment modes, relationships, the configuration of human resources in order to attain competitive advantage. Thus, there has been an emphasis being made on people through the application of resource-based theory.

Conclusion

Human capital is an integral part of organisations. Traditionally human resource management had mainly relied on approaching ‘people’ from the point of view of ‘resources’ wherein they were treated as a commodity. With the advent of the resource-based view of SHRM, there has been an increase in the stress of human capital towards developing the strategy for the organisation. The traditional focus on strategy and resources of organisations to shape the human capital needs, i.e. the fit theory, has been altered, with the renewed focus being laid on people as the creator of strategy. Therefore, it can be concluded that traditionally SHRM had focused on fitting a ‘people’ strategy with the organisational goals. Now, with the advent of the ‘resource’ view of SHRM, ‘people’ has assumed an important role in framing the strategy for the organisation and no longer have to fit into the picture, as strategy originates through them. Thus, the ‘resource’ view has actually brought ‘people’ more into focus than before.

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