THE CORRELATION OF SHRM AND COMPETITIVE ADVANTAGE

THE CORRELATION OF SHRM AND COMPETITIVE ADVANTAGE

 

Introduction

            Strategy is an ambiguous term. Johnson and Scholes define strategy as the direction and scope of organisation over the long-term within a challenging environment whereby through the configuration of resources the needs of the markets are met and the stakeholders’ expectations are fulfilled in order to achieve an advantage. Nonetheless, strategy is applied unique to each levels of the organisation such as corporate, business unit and operational. Currently, the term ‘strategy’ is associated with every function of the organisation that purports on turning strategies into actions as a key to achieve cost and competitive advantages. Notable is the Strategic Human Resource Management (or simply SHRM).

What is SHRM?

            The interest of numerous organisations in ‘strategic management’ resulted in the integration of organisational functions into strategic management processes. Human Resource Management (HRM) field likewise sought to integrate this strategic management schema through the development of a new discipline known as SHRM. As an outgrowth of its mother discipline, theorists and practitioners regarded SHRM as the reconciliation of HR practices and its determinants from a strategic context. However, the deficiency is that there is no strong theoretical model for HR determinants and the non-existence of clear delineation of SHRM with HRM.

How SHRM can contribute in achieving competitive advantage?

            Nonetheless, despite universalistic, contingency or configurational approaches, SHRM is an important element of achieving the competitive edge in terms of quality, cost and flexibility. Either processual or systemic, SHRM puts human at the center. When we say ‘human’, it does not necessarily mean the employees, but embracing also those people whom the organisation does business with. Through them, sustainable competitive advantage, or the achievement of value-creating strategies that direct and indirect rivals could not implement, could be achieved.

From a resource-based perspective, there are various categories of resources that SHRM can build upon to gain the so-called advantage such as physical, organisational, financial, and technological and most especially human resources. As assets, the mere existence of human is not sufficient but the relationship among them that therefore must be controlled for the purpose of long-term commercial success. The sustainable competitive advantage potential of human resources is central on the premises that human resources are valuable, rare, inimitable and non-substitutable.

As valuable resources, human resources are heterogeneous since organisations require different jobs which require different skills as well as differing in types and level of idiosyncratic skills. As such, the variance placed on the contribution of individuals to the organisation means to provide value at diverse degrees. The rarity of high quality and ability workers is due to their skills and competency levels and the supposedly normal distribution of skills, competencies, expertise and capabilities. For the human asset to be imitated, competitors should be able to identify the exact source of such and duplicate exactly the elements of the human capital. In addition, human resources should not be imperfectly mobile so that they cannot be traded. Lastly, for the human resources to be able to provide sustainable competitive advantage, they must not be substitutable.

Achieving competitive advantage is based on the collective practices within that are intended for the outside environment which otherwise cannot be achieved or limited through HRM alone.  These are employment security, recruitment selectivity, high wages, incentive pay, employee ownership, information sharing, participation and empowerment, self-managed teams, training and skills development, cross-utilization and cross-training symbolic egalitarianism, wage compression and promotion from within. The emphasis is on envisioning individual workers as sources of competitive advantage instead of complementary or limiting factor of the organisational success.

Competitive advantage is also realized when the organisation through SHRM is continuously investing on its reputation or image stressing the need for sound human resource policies and practices and aligning such with the business strategies and its external context. The focus is both on cost and quality whereby there are definite processes, systems and procedures that consolidates competencies, continuous education, proficient performance at individual and collegial levels and balance monetary and non-monetary reward systems.

Apart from this, the materialization of the competitive advantage is delivered by investing on diversity and maximising their potential through SHRM. The things to consider are retention/turnover and motivation, morale and productivity, innovation, creativity and problem-solving, teamworking, ensuring synergy at all levels and avoidance of legal suits. It is also through SHRM that the creation of an inclusive workforce is plausible since there are structured opportunities for sharing and self-disclosure, increased understanding of the cultural diversity, demonstrated flexibility for varying needs and preferences, demonstrated unwritten rules and mutually-satisfying conflict resolution systems.

Why not HRM alone?

            HRM that are too centered on human as an integral asset while neglecting the key factor of nurturing relationships with them and between them makes HRM a shallow endeavor though it is not to say that HRM is futile. With HRM, relationships stagnate whereas with SHRM relationships are optimized and translated into loyalty, engagement, trust and confidence among others. SHRM, unlike HRM which is confined as a mere organisational function, is tended on ‘above and beyond’ behaviours. Though HRM is in charge of relationship with employees at the business level, SHRM is responsible for the total stakeholder relationship strategy.

HRM cannot be considered doing so since there are still inconsistencies of defining what actually constitutes the best HR practices per se much more taking on a holistic approach to managing people and managing relationships between these people. There are also no clear evidences that HRM practices lead to improved organisational performance apart from difficult in justifying costs devoted to HR practices. Further, HRM are aligned only to specific organisational context such as the needs of the employees, its contradicting ideologies, the inadequacy of HRM systems and lack of synergy between HR practices.

Conclusion

            SHRM is not just a strategy that puts the human resource at the heart of the business but a holistic approach that builds on the human asset as value-adding factor and the relationship between and among them through inclusion and diversity as well as the process of building on organisational reputation or image through internal-to-external policies, systems and procedures.

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