Strategic Human Resource Management and Performance: A Critical Analysis


To compete effectively in a dynamic market, business entities need to develop resources that ensure their survival. Increasing competition has for instance arisen with increased globalization and adoption of technology that has eliminated the competitive-effect of many traditional factors that positioned an entity at an advantage over other competing entities (Andersen 2010). For instance, Internet platforms that enable firms to sell their products to a wide market have eliminated the need to invest in multiple distribution channels. Start-ups can thus have a wide reach without having to invest in extensive distribution channels. Increasing globalization has also enabled aspects such as outsourcing thus enabling entities to make substantial savings in cost. Out of the resultant increasing competition, it has become necessary for entities to identify and build resources that would offer them an advantage upon which they would compete effectively (Andersen 2010).

The resource-based view posits that entities can sustain their competitive position by constantly developing their resources and capabilities. By developing such resources, entities would find it easier to come up with innovative products that sustain their competitiveness in the market (Andersen 2010). Strategic human resource management (SHRM) builds on such a resource-based view of an entity’s internal environment. SHRM contends that, by basing the HR strategy on the entity’s strategy, HR policies and practices would help in the achievement of the goals and vision of the firm (Kane & Palmer 1995). Such an alignment creates capabilities that competitors cannot imitate easily thus enabling the entity to compete effectively in the market (Kim & Gray 2005). Consequently, adopting SHRM approach would result into better outcomes for the entity; this paper assesses such an assertion by evaluating whether SHRM leads to high performance.

The paper first expounds on the concept of SHRM then evaluates the link between SHRM and an entity’s performance. Subsequently, the paper discusses the limitation of assessing performance of an entity with respect to HR based wholly on financial aspects. Using the broad measures of performance highlighted in the discussion about limitations of financial metrics in assessing HR performance, the paper discusses two ways – being a change agent and a business partner – through which SHRM adds value to a business. Finally, the paper discusses the challenges that impede the achievement of a strategic role for the HR department providing potential solutions to such challenges and core competencies that help the HR professionals to achieve SHRM objectives.

Background to Strategic Human Resource Management

SHRM argues for an approach of managing human resource by linking HR policies and practices to the entity’s business strategy. By linking the HR strategy to the entity’s strategy, SHRM advances that the HR department would play strategic roles such as building the capacity of the entity to adapt to change and being a business partner (Lawler 1995; Haines & Lafleur 2008). As a business partner, SHRM advances that the HR department would be involved actively in developing the business strategy and work more on strategic issues such as planning rather than administrative roles such as preparing employee payroll (Haines & Lafleur 2008). As a change agent, the HR department participates in activities such as succession planning or developing new behaviors that help the company to remain competitive even with a change in leadership or culture (Haines & Lafleur 2008).

In its traditional approach HR department’s roles were mainly administrative in nature. Administrative functions designed to free line managers to concentrate on business activities instead of dealing with employee issues were the main occupation of the HR department (Lawler 1995). Accordingly, the HR department roles entailed personnel administration, developing rules that enhance equity in the organization and labor relations. The HR department thus did not offer significant contribution towards the business planning process. Forces such as increasing competition, globalization and technological advancement have necessitated a shift to a strategic role for the HR department. Increasing competition for instance demands that organizations establish the capacity to change in response to market trends to ensure their survival. HR department is, in this respect, needed to develop the human resources of the entity to build such capacity (Haines & Lafleur 2008). Globalization, on its part, has increased labor mobility resulting into a multicultural workforce in most organizations (Seymen 2006). Consequently, the HR department is required to develop strategies and systems that enhance the management of such a multicultural workforce thus ensuring the entity reaps the advantages associated with a multicultural workforce. Go to part two here.

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