There are different arguments concerning the field of human resource management that it does not have a coherent theoretical framework. Strategic human resource management can be explained using different theories (Devanna et al 1999). The essay describes four perspectives on strategic human resource management. These perspectives include the behavioral perspective, cybernetic models, agency or transaction cost theory, and resource-based view of the firm.
These theories are important when understanding both strategic and non-strategic determinants of HR practices. The essay also describes the aspects and implications of the theories in strategic human resource management and practice. The theoretical models help in understanding the role of HRM in organizations and the determinants of various HR practices. They also form the basis with which people differentiate HRM and SHRM.
Strategic Human Resource Management (SHRM)
SHRM can be described as the macro-organizational advances in the way responsibilities as well as the function of human resources are scrutinized in the big organization. SHRM is a model that enhances the practice of human resource activities for the achievement of organizational goals. The theories of SHRM tend to be concerned through the determinants of resolutions which relate to human resource exercises, the composition of the human capital resource team, the requirement of the obligatory behavior of human resources in addition to the efficiency of these decisions in presence of given various business strategies and competitive situations (Boxall 1992, p. 68).
The essay evaluates four theoretical models that describe the determinants of HR practices. They include; the resource-based view of the firm which focuses mainly on the relationships among strategy, HR practices, and the HR capital pool. The behavioral approach is concerned with the interrelationship between strategy, HR practices, and HR behaviors. The cybernetic and agency or transaction cost models try to examine the relationships among strategy, HR practices, and both the HR capital pool and HR behaviors.
Theories of Strategic Human Resource Management
Resource-based outlook of the firm
It takes keen on considerations view of the firm within provisions of competitive advantage as well as a continued competitive advantage (Barney 1991, p. 99). In the resource-based view of the firm approach, competitive advantage occurs when the firm has a human resource which is heterogeneity and immobility. A firm must have its HR completely different from other firms to achieve a sustainable competitive advantage. The immobility of a firm’s resources ensures that it is difficult for competing firms to obtain the resources used by the firm.
A firm that provides sustainable competitive advantages has its resources unique among current and potential competitors. The resources are difficult to be imitated by the potential competitors and should add positive value to the firm. The resource must be difficult to substitute with another resource by competing firms.
According to Fombrun (1984), the resource-based view requires that firms should understand the need for sustained competitive advantages and that it cannot be bought. The reason is that the existence of the advantages in the firm must be found in the rare, imperfectly imitable, and non-substitutable resources already present in the firm. A firm can capitalize on HRM to gain and maintain a competitive advantage by having targets of HR practices where both upstream and downstream activities are used in the firm. The firm must involve its customers, its distributors and servicers, and its suppliers in its activities.
Firms that rely on a resource-based view must involve organizational culture, distinctive competence, and strategic unity in the strategy for competitive advantage. A firm must focus on the relationship between human resources, strategies, and competitive advantage. The human resource in the firm must meet the criteria of maintaining value to the firm, rare, inimitable, and no substitutes.
For example, Waywire Company has demonstrated its commitment to maintaining a competitive advantage in the market through the practice of employment security for the employees. The company does selective hiring of employees to get the ones with the greatest capabilities. The management ensures that there is a team working within the organization where employees share experiences in various tasks. The company invests fully in extensive training that will ensure that employees are equipped with current technology.
There must be conditions of heterogeneous demand for labor and a heterogeneous supply of labor for human resources to add value to a firm. Human resources in the firm must be rare for the firm to be able to achieve sustained competitive advantage. Firms must hire individuals with the highest ability since they are rare. The firm must have a sound system which able to identify and retain the applicants with the highest ability. This can be done through a combination of valid selection programs and attractive reward systems. A firm must always work towards getting a new technology from that of competitors to stay as a competitive advantage.
The resource-based view requires the integration of human resource practices in the formulation stages of a firm’s strategy. The advance observes the team of human resources that may perhaps take out a specified strategy throughout the implementation phase of strategic management. It demonstrates the fact that strategies are not universally implementable they are contingent on having the human resource base necessary to implement them (Dyer et al 1978).
The behavioral perspective
It’s based on the contingency approach on the behavior of employees as the mediator between strategy and firm performance. In this theory, various organizational practices are employed to acquire and control employee attitudes and behaviors that will be most effective for the firm. These attitudes and behaviors employed by the firm must be different from those of other firms. Employee behaviors are important in the implementation of competitive strategies. Lengnick- Hall et al (1998, p. 468) advocates that role behaviors may vary in different dimensions.
The function behaviors could happen as recurring versus innovative behavior, small versus big risk-taking behaviors, in addition to inflexible versus flexible to change behaviors. Innovation strategies that are to be implemented by the firm must have a high degree of innovative behavior. These strategies ought to be continuing by way of a high level of supportive behavior and a reasonable degree of anxiety for superiority. The firm may decide to take a cost reduction strategy. This strategy must have repetitive behaviors which are short-term with autonomous activity and high concern for quantity. The strategy has a moderate concern for quality and low-risk taking.
The HRM practices must be congruent with each other to promote the most effective role behaviors that are consistent with the organizational strategy. The behavioral perspective centers mainly on the throughput transformation process where employee role behavior is the main intermediary between strategy and the effective achievement of the strategy. The behavioral perspective assumes that strategies lead to HRM practices that draw out employee behaviors leading to various outcomes that are beneficial to the firm.
SHRM practices lead to employee attitudes, accident rates, productivity, and labor costs. Hence different strategies are associated with different levels of firm performance. In addition, the relationship between strategies and firm performance is either mediated or moderated by HRM practices and employee role behaviors (Jones et al 1988, p. 168).
For example, Siemens Company has been working very hard to achieve the best practices through employees training. Employees are found to have diverse behaviors in the workplace; the company is achieving the best employee behavior through teamwork and appreciation of group performance. The company encourages employees to initiate entrepreneurial behavior when thinking of the goals of the organization. Employees are encouraged to make efficient use of new technology through training which enables them to have a positive attitude towards the company. The company advocates for global thinking and the ability to work in a multicultural environment.
The applications of cybernetic models in SHRM depend on the treatment of the system. Several forms of centers of attention are on closed systems where mechanisms are put up to buffer the hi-tech core within the surroundings. Others treat systems because of being open to exchanges within their background (Hoskisson et al 1990, pp. 467). Open systems models are based on the general systems models. They hold that organizations can be portrayed as input, throughput, output systems that are involved in transactions with a surrounding environment. Open systems can be used to generate the SHRM responsibilities which are competence management and behavior management. Inputs in the HR system are competencies and the outcomes are performance and effective outcomes.
For example, Bushnell Company hires high school students to develop them as young professionals. The students participating in this program are found to be ambitious, disciplined, and performance orientated. Students are encouraged to apply their theoretical knowledge within the company to build a strong relationship with the company during the program. Through this, the company usually reduces the cost of recruiting new employees that may be incurred during the recruitment process.
The model advocates for coordination across various HRM practices but exceeds the other models by explicitly recognizing the imperfect nature of decision-making in SHRM due to bounded rationality and uncertainty. The control theory or the open systems theory in the cybernetic sense is a dynamic model that requires constant environmental monitoring and internal adjustment.
Firms must be more concerned with the constant monitoring of the outcomes of HRM practices and adjust those practices whenever the outcomes tend to deviate from the desired. Cybernetic models describe true open systems by being expanded to consider the relational feedback from the environment. They also discuss the internal HRM adjustments in response to this feedback. Hence the theory has impressive potential to examine how SHRM practices change or need to change over time (Salaman et al 2000, p. 190).
Agency cost theory
The model explores transactions as a means of controlling employee behavior. It examines the problems of human exchange which are based on the fields of finance and economics. The approach aims to identify the environmental factors which lead organizations to internalize transactions as a means of reducing the costs associated with the transactions. It identifies bounded rationality and opportunism as the two human factors which are major obstacles to human exchange.
Bounded rationality refers to the fact that people are subject to information processing limits and opportunism refers to the fact that people act with self-interest and guile to pursue their own goals (Beardwell et al 2007). The increase in transaction costs leads to the internalization of transactions in an organization. Agency costs are associated with the establishment of efficient contracts between parties. The Agency/transaction cost theory is very important in strategic management literature when studying diversification, internalization, and restructuring.
According to Armstrong (2006, p. 122), the transaction cost approach argues that employees have strong incentives to reduce their performance and rely on the efforts of others in the group. The model can be linked to HR through the use of bureaucratic costs which are transaction costs associated with managing human resources in a hierarchy. The model is important for employee motivation in the sense that it provides a theoretical framework for linking variables or approaches at the individual, group, and organizational levels. Agency theory can be used to determine compensation systems in the firm.
Gratton et al (1999) denote that, agency/transaction costs model is useful in the strategic management literature and can be applied as a theoretical framework for linking strategy to SHRM. A firm’s strategy affects the nature of work as either uncertain or observable.
Factors that affect strategic organizational objectives and the role of SHRM in their achievement
The HR policy
Various function-related factors influence the achievement of goals by the SHRM. They comprise human resource strategy, choices accessible to human resource practices as well as the budget for HRM. The HR policy emphasizes the compatibility among various HR practices to facilitate a fine regulation process in the system (Wright et al 2009, p. 13). The HR policy requires that all functions be considered equally important for equal ineffectiveness of those functions.
For example, a firm that sets up an HR policy that favors some aspects of HR practice and discriminates against others leads to a poor exercise among HR practices. The firm may experience higher costs and poor performance in the future. The SHRM suggests that the goals of the firm can be achieved through enhancing the HR policy to balance the variety of HR practices. The firm is also advised to have its HR policies to be based on more available options of HR activities. In addition, more investment should be provided for the HR activities.
According to Kanter (1983, p. 17), there are personal factors that affect the achievement of the goals of the firm. Personal factors such as the abilities and skills of individuals in the organization should be considered when implementing organizational goals and strategies. The personal abilities and skills of employees may bring a great impact on the successful implementation of the organizational goals. The firm should monitor the HR capability based on competency perspective and organizational dimensions.
HR Manager Competence
The ability of the human resource manager is supportive within scheming as well as implementing the human resource arrangement. The firm must utilize the knowledge of the human resource manager who can initiate changes in the organization and coordinate HR redirection that corresponds to the strategic changes of the firm. Managers in the firm should have the capability of dealing with problems as well as initiating adjustments that can rectify the incompatibility of the HR system. Hence human resource managers must possess a wider scope of capabilities that can be applied to a variety of HR practices necessary to achieve the goals of the firm (Smith-cook et al 1991, 448).
For example, Bushnell Company has been hiring high school students for developing them as young professionals. Students are encouraged to apply their theoretical knowledge within the company to build a strong relationship with the company during the program. Through this, the human resource manager does not require more costs of recruiting new employees in the recruitment process. The company introduces the program to meet the existing demands for employee recruitments that may arise in the future. Students develop skills that can be demonstrated in the output of the company.
Senior Managers Support
SHRM advocate that, an organization needs have more support from the senior managers toward the successful accomplishment of its goals. The firm can employ organizational competencies that are available from the senior management. Competencies like managerial capabilities that are possessed by managers act as potential sources of competitive advantage for the firm.
In conclusion, the essay has critically described four theoretical models of SHRM. The essay has evaluated the theoretical models that describe the determinants of HR practices. They include; the resource-based view of the firm which focuses mainly on the relationships among strategy, HR practices, and the HR capital pool. The behavioral approach is concerned with the interrelationship between strategy, HR practices, and HR behaviors. The cybernetic and agency or transaction cost models try to examine the relationships among strategy, HR practices, and both the HR capital pool and HR behaviors.
Theories of SHRM are beneficial to the firm and must be applied in the activities of the firm. Theories in SHRM can be used o diminish the complexity between HRM and SHRM. Researchers and practitioners can benefit from a sound theoretical development. The theories follow specified policies when demonstrating their application in the firm activities. Other factors affect strategic organizational objectives and the SHRM has devised several policies that can deal with the effects of such factors. The SHRM requires that the firm should monitor the effectiveness of the HR policy on the achievement of the organization’s goals. The management ability and the help from the senior managers are also vital in the accomplishment of the firms’ goals.
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