Competitive Advantage Through HRM

Jason D. Shaw

What is Strategic HRM?

Strategic HRM - how the management of people in organizations relates to the ability of organizations to compete in the marketplace and, beyond this, to provide a sustainable competitive advantage

Functional HRM

Functional HRM studies employees and employment practices at the individual level. Unlike strategic HRM, the focus is on the individual rather than the organization as a whole

How is Strategic HRM Different From Other Areas of HRM?

Perspective is on the business and organizational level Studies typically involve:

Examination of the integration or fit among HRM practices HRM practices and other features of the organization

Strategic HRM Differences Continued

Most studies in the realm of strategic HRM focus on organizational performance

Organizational Performance

Intermediate dimensions of workforce performance such as:

Accident rates Voluntary and involuntary turnover Productivity Measures of corporate financial performance

HRM and the Environment

Environmental factors influencing HRM include:

Dramatic increase in white collar vs. blue collar jobs Dramatic shifts in the management of technology The workforce may grow at a rate that meets or exceeds prior levels Dramatic change in the way that decisionmakers manage the size of their workforces

Strategic HRM Responses

Invest in commitment oriented HRM practices such as:

Internal selection Group incentives Training Team building

Strategic HRM Responses Continued

Enhance the efficiency of internal communication networks through:

Building trust in management Improving the quality of social climates Creating a shared and meaningful organizational language

Strategic HRM Responses Continued

Organizations can not only minimize, but reverse the negative effects of layoffs in terms of organizational productivity by continuing investments in strategic HRM systems

What Research Says About Strategic HRM

A system of HRM practices rather than an isolated or best-practice approach is necessary for sustained advantage

What Research Says About Strategic HRM Continued

The effects of HRM systems on performance are partially indirect through their influence on the work force and work force outcomes such as turnover and productivity

What Research Says About Strategic HRM Continued

Organizations that invest in commitment-oriented HRM practices had:

High positive levels of internal social climate Exchanged and combined information more effectively Outperformed their competitors on revenue from new products and oneyear sales growth

Examples of Strategic HRM Success

Groups of HRM practices related positively to financial profitability in a sample of banks The productivity of U.S. production lines equaled that of Japanese lines when there was heavy investment in strategic HRM practices

Guidelines

Focus on sets of commitmentenhancing practices when work is knowledge-based and when internal communication processes are critical for success

Guidelines Continued

Use the functional HRM literature as a guide in developing an effective system of HRM practices Considerable research exists on HRM practices that work at the individual level

Guidelines Continued

Combine practices across domains in logically and theoretically consistent ways

More research needs to be done on best practices for combinations of HRM practices One size doesnt fit all

Guidelines Continued

Use HRM investment as a signal of future investment and an ambiguity reducer when work force size fluctuates Investment includes:
Direct and honest communication Continued HRM investments after layoffs

Guidelines Continued

Focus on flexibility or agility in the HRM system and beyond Agile enterprises require guiding principles that encourage the inflow and outflow of talent in ways that facilitate and only minimally disrupt internal fluidity

Conclusion

Strategic HRM practices can enhance the competitive advantage of businesses Results of the practices are reflected in real financial gains for the business