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Table of Content

Executive Summary……………………………………………………………………2

Introduction……………………………………………………………………………3

Traditional View of HRM……………………………………………………………..3

Literature Review of SHRM……………………………………………………………4

Contribution (Importance) of SHRM to Organizational Performance………………….5

Conclusion………………………………………………………………………………

References……………………………………………………………………………….8
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Executive Summary

This work looks at the contributions of SHRM to organizational performance in today’s global
business environment. It reviews the literature on the traditional meaning of HRM as the
framework of philosophies, policies, procedures and practices for the management of the
relationship that exists between an employer and worker. Furthermore, it explores the literature
on the meaning of SHRM from different views in the field. In addition, it looks at the importance
or contributions of SHRM to organizational performance. It ended with a conclusion from the
view of the writer on the topic.
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Introduction

In a global economy, business organizations are driven by market pressures and they need to
include in their goals- improved quality and productivity, greater flexibility, continuous
innovation and the ability to change to respond rapidly to market needs and demands. Thus, in
today’s intensely competitive and global marketplace, maintaining a competitive advantage by
becoming a low-cost leader or a differentiator entails having a highly committed and competent
workforce. Competitive advantage lies not just in differentiating a product or service or in
becoming the low-cost leader but in also being able to tap the organization’s special skills or core
competencies and rapidly respond to customer’s needs and competitor’s moves. In other words,
competitive advantage lies in management ability to consolidate corporate wide technologies and
production skills into competencies that empower individual businesses to adapt quickly to
changing opportunities.

Also globalization of business has increased the need to identify and analyze ways in which
business organization can operate effectively now and in the future. Thus, for organizations
looking for ways to gain a competitive advantage, the implication of human resources strategic
choices for organizational performance is certainly the key factor.

Traditional human resource management cannot ensure it and hence, it is essential to study
Strategic Human Resource Management, (Tapomoy Deb, 2006, P.46).

Traditional View of HRM

Traditionally, human resource management is the term commonly used to describe all those
organizational activities concerned with recruiting and selecting, designing work for, training
and developing, appraising and rewarding, directing, motivating and controlling workers. In
other words, HRM refers to the framework of philosophies, policies, procedures and practices
for the management of the relationship that exists between an employer and worker, (Nick
Wilton, 2010, p.3).
 
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Literature Review of SHRM

Among HR practitioners, the term “strategic human resource management” is used broadly to
signal the view that human resource management activities should contribute to business
effectiveness. This linkage between HRM activities, the needs of the business, and
organizational effectiveness is the core of the area called strategic human resource management.

Two guiding assumptions of strategic human resource management are that (1) effective human
resource management requires an understanding of and integration with an organization’s
strategic objectives, and (2) effective human resource management leads to improved
organizational performance. When HR policies and practices are aligned with an organization’s
strategic objectives, the system can be described as “vertically integrated”, (Randall S. schuler,
Susan E. Jackson, 2007, p.215).

In another view, strategic human resource management (SHRM) is an approach to the

development and implementation of HR strategies that are integrated with business strategies and
enable the organization to achieve its goals.

In essence, strategic HRM is conceptual; it is a general notion of how integration or ‘fit’ between
HR and business strategies is achieved, the benefits of taking a longer-term view of where HR
should be going and how to get there, and how coherent and mutually supporting HR strategies
should be developed and implemented. Importantly, it is also about how members of the HR
function should adopt a strategic approach on a day-to-day basis. This means that they operate as
part of the management team, ensure that HR activities support the achievement of business
strategies on a continuous basis and are consciously concerned with seeing that their activities
add value, (Michael Armstrong, 2008, 4ed, p.1).

Understanding the strategic objectives of an organization requires developing a deeper

understanding of the entire context in which organizations must function. Furthermore, it
provides a basis for conceptualizing an organization’s HR policies and practices as a system of
many elements that are more or less well-aligned. The goal of developing HR policies and
practices that are aligned to form a coherent system is often referred to as achieving “horizontal
integration” among HRM activities. Achieving both vertical and horizontal integration requires
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that HR professionals work in partnerships with line managers and employees (and their
representatives). In sum, strategic human resource management is about:

 Vertical integration- understanding the organization and its context;

 Horizontal integration- creating coherent HRM systems;
 Demonstrating effectiveness- showing how HRM systems affect organizational
performance;
 Partnership- HR professionals working cooperatively with line managers as well as with
non-management employees, (Randall S. schuler, Susan E. Jackson, 2007, p.215).

The overall purpose of human resource management is to ensure that the organization is able to
achieve success through people. As Ulrich and lake (1990) remark: ‘HRM systems can be the
source of organizational capabilities that allow firms to learn and capitalize on new
opportunities. (Armstrong, 2008, 4ed, p.1 ).

Contribution (Importance) of SHRM to Organizational Performance

Modern developed economies are increasingly relying on human capital to gain their competitive
advantage. In such a “knowledge economy”, it is the skills and knowledge of employees rather
than just the abilities inherent in technology and machinery that are crucial. The capacity of an
organization to manage its talent is what will set it apart from other competitors. In Honk Kong,
the HKSAR government asserts that human resources are the key for successful economic
development. Indeed, Tung Chee Hwa made the following statement in his policy address. “Our
people are our most valuable resources and the key to the development of a knowledge-based
economy. Only by developing our own local human resources and providing opportunities for
continuing education for people of all walks of life can we prepare ourselves for the changes in
the marketplace. This is of utmost importance to the well-being of our people and the long-term
development of Honk Kong”.

However, talented people are scarce, as a result companies must pay closer attention to the issue
of talent management, in terms of attracting, recruiting, and developing talent in an economy that
is increasingly knowledge-based, (Anna P. Y. Tsui, K. T. Lai, 2009, P.29).
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The importance of human resource management function to an organization’s strategy is

underscored by reviewing the overall functions of strategic planning. These include periodic
forward scanning, analysis based on longer time frame, communication about goals and resource
allocation, framework for short-term plan evaluation and integration, institutionalizing longer
term time horizons necessary for investments, and decisional criteria for short-term decision
making. It is impossible to address these critical issues without bringing in the human resources
factor at each element of the process.

In the early development of strategic management, there was little concern about the human
resources function until the actual implementation began. Rarely was the human resource
brought into the planning process. Now this is changing. Strategy and human resource planning
are integrated early in the process. There are several benefits of integrating human resource
planning with strategic planning, making it imperative for this integration to be regularly
pursued. Some experts have suggested that the human resource manager be labeled Director of
People Strategy.

Because of the importance of strategy in the success of firms and the critical ingredient of human
resources in the strategic plan, human resource managers are finding themselves heavily
involved in the strategic planning process. Because strategy is related to the organizational goals,
the ultimate opportunity to show the contribution of human resources begins in the strategic
planning arena, (Jack J. Philips, 1996, p.32-33).

The strategic importance of human resources has been widely recognized. As a result, strategic
human resource management (SHRM) has been argued to be positively related to organization
performance. More especially, HRM has been linked to increased productivity, good customer
service, improved efficiency, increased firm value, greater profitability or financial returns and
overall organizational survival.

Snell, Youndt, and Wright (1996, 62) characterized the strategic role of HRM as “organizational
systems designed to achieve competitive advantage through people”. In turn, competitive
advantage may be defined as a set of capabilities or resources giving an organization an
advantage that leads to superior performance relative to that of competitors. In this respect, the
main focus of SHRM is on integrated combinations of HRM practices, through which
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organizations should create competitive advantage rather than simply adapting to the existing
context. A review of the literature reveals five interrelated approaches to the link between the
competitive position of an organization and the creation of superior human assets.

First, the resource-based approach of competitive advantage focuses on the relationships between
a firm’s internal resources, its profitability and the ability to stay competitive through its strategy
formulation. According to this approach, a resource is considered as an internal strength only if it
meets the five criteria for sustainable competitive advantage. Specifically, a resource must (1) be
immobile; (2) be difficult to replicate; (3) have no close substitutes; (4) be rare: and (5) create
value. The central idea of the resource-based theory is that a firm’s systems, among its other
attributes, enable the organization to achieve success relative to competitors.

Another approach focuses on the way human resource systems support competitive advantage
and organizational learning through people. This perspective implies that human resource
management should focus on how the integration of organizational resources, practices and
capabilities can lead to sustainable competitive advantage. To understand this integration
researchers have used notions of internal or horizontal fit and external or vertical fit.
Management must have a clear understanding of internal fit and the way such fit facilitates
organizational learning and adaptation. Furthermore, practices with external fit create capabilities
that maintain the organization’s overall strategy and support multiple strategic dimensions in
order to lead to sustainable competitive advantage, (Rudiger Kabst, 2005, p.189).

Conclusion

It is obvious from the literature review and researches that in today’s global and knowledge-
based business environment, the role or importance of Strategic Human Resources Management
(SHRM) in every business organizations cannot be underscored or undermined in helping the
organization realized its business objects (gaining a competitive advantage, profitability,
increasing shareholders wealth, etc.). Therefore, for every organization to achieve its goals, it
must place a premium to its strategic human resource management.
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References

Tapomoy Deb: Strategic Approach to Human Resource Management, 2006, P.46.

Nick Wilton: An Introduction to Human Resource Management, 2010, p.3

Randall S. schuler, Susan E. Jackson: Strategic human resource management, 2007, p.215

Michael Armstrong. Strategic human resource management; a guide to action, 2008, 4ed, p.1

Anna P. Y. Tsui, K. T. Lai: Professional practices of human resource management in Hong

Kong: linking, 2009, P.29

Jack J. Philips, Accountability in human resource management, 1996, p.32-33

Rudiger Kabst; Special issue: Human resource management and economic success, 2005, p.189