The Role of Strategic HRM in Sustained Competitive Advantage: Review

This literature review delves into the field of Strategic Human Resource Management (SHRM) and its contribution to sustained competitive advantage. It begins by defining SHRM and its core focus on aligning HR practices with business strategies, emphasizing the integration of HR with the business environment to improve organizational performance and create unique, inimitable HRM systems. The review then explores various models of SHRM, including the hard and soft variants, highlighting their strengths and weaknesses. The hard model, or matching model, is criticized for its inflexibility and failure to consider employee interests, while the soft model, or Harvard model, is praised for its focus on the human aspect but lacks in explaining the complex relationship between SHRM and strategic management. The 5-P model, developed by Schuler (1992), is also discussed, emphasizing its role in linking organizational strategy with functional activities, although it is noted for being over-prescriptive. Finally, the review concludes by summarizing the benefits of these models in developing suitable human resource systems that contribute to the implementation of various business strategies, including talent acquisition, resource allocation, talent improvement, and cost reduction, ultimately enhancing firm performance and achieving a competitive advantage. The review emphasizes that though the models have their respective pros and cons, they are overall efficient in linking the organizational strategy and HR strategy.

Strategic HRM
The role of strategic HRM in contributing to sustained competitive advantage
Literature Review
Defining SHRM
The field of strategic HRM is in an evolving phase, but there is little agreement among various
scholars on a specific definition. SHRM has been linking the organization with its people and
integrates the HRM strategies into well-defined corporate strategies. The essential programs and
plans addressing and solving all the fundamental strategic issues associated with human
resources management in any organization are termed as HR strategies (Schuler, 1992). It
primarily focuses on the alignment of the HR practices, programs and policies of the
organization with strategic and corporate business unit strategies (Greer, 1995). The integration
of HR with its environment and business is the focal point of strategic HRM and believed to
integrate the business strategy with the HRM so as to contribute towards attaining an effective
management of the human resources and improving the overall organizational performance
(Holbeche, 1999; Schuler and Jackson, 2005). Further, the organizations are benefitted so as to
achieve competitive advantage for the creation of unique HRM systems that cannot be easily
imitated (Huselid et al., 1997). The two prime aspects of SHRM include integration of corporate
and business strategy and development of the HRM to their line managers rather than the
personnel specialists. Integration has been defined by Brewster and Larsen (1992: 411–12) as the
extent to which the issues concerning HRM are associated with the formulation of the business
strategy whereas development can be considered as the extent to which the HRM practices are
given responsibility to the line managers instead of the personnel specialists’.
Models of SHRM
Hard Variant of HRM
The hard variant or the matching model of HRM aims to develop an appropriate human resource
system for characterizing the HRM strategies contributing towards the successful
implementation of all the business strategies. However, the model has been successful in
providing an initial framework for further development of the strategic HRM. However, the
model has been criticized as it fails to consider the interests of the employees and is highly
prescriptive in nature due to all the assumptions being strongly unitarist in nature (Budhwar and
Debrah, 2001). Therefore, this model considers HRM as reactive, passive and implementation-ist
function. According to Lengnick-Hall and Lengnick-Hall, 1988, the model fails significantly
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while perceiving the potential for a reciprocal relationship among the organizational strategy and
HR strategy. The model strives to make a tight-fit in the organization making it highly inflexible
towards the required changes and thereby making the organization a misfit in the dynamic
business environment. As it fails to consider the human aspect of HRM, it is termed as a hard
model.
The soft variant of HRM
The Harvard or the soft model is an analytical framework which stresses on the human aspect
and focuses on the employee-employer relationship. The model focuses on the interests of
stakeholders and relates it to the objectives set by the management. The model focuses on the
integration of the employees along with the development of the enterprise. This model inculcates
the employee influence, reward systems, human resource flows and work systems. The model
acknowledges the role of societal outcomes and therefore it provides a beneficial foundation for
HRM analysis. But the model fails to explain the complex relationship between HRM and
strategic management (Guest, 2001).
‘5-P model’ of SHRM
‘5-P model’ of SHRM was developed by Schuler (1992), which melded over five HR activities
namely, policies, philosophies, practices, programs and processes which reflected the overall
plan for the growth adaptability, survival, and profitability. The model was highly significant in
explaining the significance of the activities mentioned in the model for achieving the objectives
and goals of the organization along with interrelating the activities with the organization. This
model helped in linking the organizational strategy with the functional activities. The model,
however, was over-prescriptive and hypothetical in nature. Further, the melding of HR activities
with business needs are highly challenging as the linkages between the business needs, and HR
activities are found to be an exception in during un-agitated and non-turbulent times.
According to various researchers, Budhwar, 2000a; 2000b, Budhwar and Sparrow, 1997 etc.,
these models benefit the organization in integrating the corporate strategy with the HRM which
includes, successful implementation of the corporate strategy, plethora of solutions in solving
organizational problems that are highly complex, maintaining effective organizational
performance and contributing to achieve all the perceived goals. These models also aim to ensure
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that all the financial, technical and human resources are provided with equal and high
consideration in order to set the objectives and evaluating all the implementation capabilities.
This helps the organization to limit subordination and to further neglect the issues related to
strategic considerations thereby providing a long-term focus in the field of Human Resource
Management and finally achieving the competitive advantage.
Conclusion
All the models have their respective pros and cons but are overall efficient in linking the
organizational strategy and HR strategy. These models are beneficial in developing suitable
human resource system that can also contribute to the efficient implementation of the various
business strategies. These models can be sustainable in nature along with implementing the
additional strategy like talent acquisition for attracting best human talent, effective resource
allocation for maximizing the use of existing human resources to the right person, talent
improvement for maximizing the talents of the existing employees and finally cost reduction for
reducing the personnel costs to the lowest value.
Implementation of such policies will be beneficial in identifying and examining the HR
strategies so as to induce paternalism, high commitment, etc. which will help in enhancing the
significant performance of the firm.
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References
Schuler, R.S. (1992) Linking the People with the Strategic Needs of the Business.
Organisational Dynamics: 18–32.
Greer, C.R. (1995) Strategy and Human Resources. Englewood Cliffs, NJ: Prentice-Hall.
Holbeche, L. (1999) Aligning Human Resources and Business Strategy. Oxford: Butterworth-
Heinemann.
Schuler, R.S. and Jackson, S.E. (2005) A Quarter-century Review of Human Resource
Management in the U.S.: The growth in importance of the international perspective.
Management Revue, 16: 11–35.
Brewster, C. and Larsen, H.H. (1992) Human Resource Management in Europe: Evidence from
ten countries. The International Journal of Human Resource Management, 3: 409–433.
Budhwar, P. and Debrah, Y. (2001) Rethinking Comparative and Cross National Human
Resource Management Research. The International Journal of Human Resource Management,
12(3): 497–515.
Lengnick-Hall, C.A. and Lengnick-Hall, M.L. (1988) Strategic Human Resources Management:
A review of the literature and a proposed typology, Academy of Management Review, 13: 454–
470.
Budhwar, P. (2000a) Strategic Integration and Devolvement of Human Resource Management in
the British Manufacturing Sector. British Journal of Management, 11: 285–302.
Budhwar, P. (2000b) A Reappraisal of HRM Models in Britain. Journal of General
Management, 26(2): 72–91.
Budhwar, P. and Sparrow, P.R. (1997) Evaluating Levels of Strategic Integration and
Devolvement of Human Resource Management in India. The International Journal of Human
Resource Management, 8(4): 476–494.
Guest, D.E. (2001) Human Resource Management: When research confronts theory.
International Journal of Human Resource Management, 12: 1092–1106.
Huselid, M.A., Jackson, S.E. and Schuler, R.S. (1997) Technical and Strategic Human Resource
Management Effectiveness as Determinants of Firm Performance. Academy of Management
Journal, 40: 171–188.
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