Link between HR Function and Business Success

The association of HR function to business success has been advanced according to the resource based view. According to this view, a firm achieves sustainable competitive advantage only from the resources and capabilities that it can build to make them highly unique, thus competitors cannot imitate such capabilities and resources easily (Kim & Gray 2005; Luthans & Sommer 2005; Ismail, Omar & Bidmeshgipour 2010). With respect to HRM, the resource based view has been critical in formulating the concept that the workforce of a particular entity, are of a strategic importance to the firm (Ismail, Omar & Bidmeshgipour 2010). Specifically, such arguments contend that differences in business strategies are evident from the differences in employee behaviour and attitudes required to implement such strategies (Ismail, Omar & Bidmeshgipour 2010).  Additionally, such studies pose that different HR policies result into employees’ responses that are characteristic of the respective policies implemented (Ismail, Omar & Bidmeshgipour 2010). Accordingly, for the success of a business, HRM would be required to be aligned to the business strategy to ensure that employee behaviours and attitudes are synonymous with those required for the successful implementation of such a strategy. With regard to business success brought about by alignment of HRM strategy and business strategy, the link has been argued on such factors as the effect of alignment on effectiveness and labour productivity. Wang and Shyu (2008), for instance evaluate such a link, the findings of the study indicating that the alignment of the HRM strategy with corporate strategy effectuates HRM activities and enhances labour productivity. The increase in labour productivity in this study arose either from a direct effect of enhanced effectiveness of HRM or the from the ability of a strategy fit (alignment of the business and HRM strategy) to enhance the relationship between productivity and effectiveness of HR practices (Wang & Shyu 2008). A second aspect where the resource based perspective has highlighted the link between HR function and business outcomes has been with respect to knowledge management (Ismail, Omar & Bidmeshgipour 2010). Effective knowledge management approaches have for instance been associated with employee satisfaction (Singh & Sharma 2011), which is among the factors that determine employee turnover. Accordingly, knowledge management would benefit the organization by avoiding costs that are associated with increasing difficult of recruiting fresh talent (Rynes & Cable 2003). Knowledge management has also been suggested to generate opportunities that prove productive to the organization and enhance the “uniqueness” of such opportunities for the concerned firm (Gao, Li & Clarke 2008, p. 3). A third aspect linking HR function and business success is innovation. According to Cohen (2004), the success of organizations in an increasingly competitive environment is determined by their ability to create entrepreneurial leadership throughout the organization ladder. To achieve this, organization require effective HRM practices that ensure employees are motivated to remain committed to the organization’s vision and thus identify innovative approaches that can help the entity compete effectively in the market (Cohen 2004). HRM policies, in this respect, could be used to encourage innovation thus eventually resulting into better ways of carrying out business processes (Cohen 2004). On the other hand, HRM policies based on a standard pay-for-performance approach could impede innovation, since candidate approaches developed via employees’ innovation, by being untested, could fail (Ismail, Omar & Bidmeshgipour 2010).  Thus, HRM could influence business performance through such aspects as encouraging innovation and labour productivity and reducing turnover thus saving the organization funds that could otherwise be used in staffing processes. Go to part 5 here.

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