International Journal of Engineering Technology Science and Research

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 3, Issue 1
January 2016

Linkage between Business Strategy and Human Resource

Strategy to gain Competitive Edge for an Organizational
Success
Gulati J.K Monica
(Associate Professor) Research Scholar
Guru Nanak Dev University College, Jalandhar Guru Nanak Dev University College, Jalandhar

Abstract
As the human resource is no longer seen as liability for an organization .It is considered as rare, inimitable, valuable
resource of an organization in this extremely competitive environment to get superior market place in comparison to its
competitors. This paper presents a model which exhibits linkage between business strategy and HR strategy to achieve
an overall organizational goal by gaining competitive edge. The purpose of this study is to discuss the brief overview of
the strategic human resource management and to show the link between strategic human resource management practices
and organizational success.
Key Words: Strategic human resource Management, Competitive advantage, Organizational success.

Introduction
Researchers day by day making their effort to look into the constructs related to the human resource
management as human resource contribute to the positive outcome of the firm. Human Resource Development
is key in terms of success if it is linked up with business strategy, the firms that are identified themselves in
the development of their people it will definitely add value in maintaining and gaining competitive
advantage.[1].So the issues related to these constructs present a major challenge for every organization to
cover up in order to get competitive advantage.The foundation of philosophy related to Strategic Human
Resource Management focuses on Human Capital as the most valuable asset for gaining the organizational
success by creating the competitive advantage [2,3] The organization has been found in making strategies to
enhance employee retention, employeeengagement, employee involvement, employee empowerment, and to
reduce employee turnover, absenteeism and so on to make their human resource as a competitive
advantageous.Modern theories assert that a firm obtains a competitive advantage by effective human resource
management strategies and practices. While responding to the environmental opportunities,Porter (1985)
stated that Strategic human resource management is proactive in nature and recognized the importance of
securing labor who is experienced, diversified, engaged and involved in their work. The` potential gains’ for
organization lie in the effective utilization of strategic human resource management and the investments in the
human resources are a potential source of competitive advantage.(4).There is a need to replace traditional HR
practices i.e selection training, appraisal etc in order to meet the changing demands by having the
organizational culture with empowered, engaged and involved human resources

Definition of Strategic Human Resource Management

SHRM is managing the human resources by proactively making strategies to satisfy the needs and values of
employee and integrates traditional HRM activities within a firm's overall strategic planning and
implementations so that they engaged and empowered themselves to actively involved and engaged to attain
the organizational goal.Strategic management is defined as the set of decisions and actions resulting in
formulation and implementation of strategies designed to achieve the objectives of an organization.
[5].Strategic human resource management (SHRM) is a concept that integrates HR with otherresources in the
setting of goals

62 Gulati J.K, Monica

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 3, Issue 1
January 2016

[6]) defined strategic human resource management as “the pattern of planned human resource deployments
and activities intended to enable the firm to achieve its goals”.
SHRM is an approach for the management of employee to achieve competitive advantage through the
deployment of a highly committed capable human capital using an array of cultural, structural and personnel
techniques
[7]classified SHRM into 3 concepts:
 Improving employees flexible competencies
 Encouraging work commitment and participation in the business decision making process
 Promoting learning opportunities for the development of flexible competencies of firm.
[8,9,10,11] had employed 5 constructs of SHRM:
 Competency-Based HR practices.
 Internal career development opportunities.
 The performance –based reward system.
 Supportive learning opportunities.
 Participation opportunities in business decision making.
Relationship between SHRM and Competitive Advantage
Competitive advantage is a state in which company gains a superior market place relative to its competitors.
Maura Sheehan in UK made a study of the HRM practices in small and medium sized enterprises. This paper
addressed a significant gap in the HRM performance literature within the extent of such firms. In this study
significant relationship between HRM practices and performance indicators are found which ensures that
HRM practices positively enhance sustained competitive advantage.
Strategic Human Resource Management refers to the use of HRM practices to gain or to keep a Competitive
Advantage. The modern approach of managing HR is evolving from traditional emphasis to a strategic
emphasize:

SHRM Competitive
HR Outcomes
Practices/Variables Advantage

 Internal career  Cost reduction by

 Reduction in
opportunities employee
 Extensive Training  Turnover retention,
 Result oriented  Absenteeism commitment
appraisals  Employee
HR Strategies

 Profit sharing  Increment in differentiation

 Employment  Job Satisfaction with its
   competitors by
security
 Participation  Employee Highly skilled
involvement and diversified
 Broad Job  Employee workforce
descriptions Engagement
 Performance  Work Commitment
evaluations
 Performance-based
pay
 Selective staffing
Figure 1: SHRM and Competitive Advantage
Strategic human resource practices are those which are related to the overall performance of the
organization[12,13,14,15] stated that not all HR practices are strategic, they identified seven practices that are
considered as Strategic HR Practices as stated above: Internal career opportunities, Training, Result oriented

63 Gulati J.K, Monica

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 3, Issue 1
January 2016

appraisals, Profit sharing, Employment security, Participation, Job description.[16] defined six different
variables to measure SHRM System of the firm that are : selective staffing, extensive training,
empowerment,performance evaluation, broad job design, and performance-based pay these all
practices/variables impact the overall performance of the organization as it comes with the human
resourcebehavioral outcomes i.e. reduction in Turnover, Absenteeism, and increase in Job Satisfaction,
Employee engagement, involvement and work commitment which will lead to have edge to its competitors by
cost reducing of turnover,absenteeism,dissatisfaction and retaining the capable, committed ,diversified
andskilled workforce. So this figure links the HR strategies and SHRM Practices to the Human Resource
outcomes as their performance to gain competitive edge

Model of SHRM and Organizational Success

SHRM literature consists of work which is concerned with identifying the determinants of the organizational
performance and to access their impact on the capability of organization and on people’s behavior, attitudes
and skills of the employees and it also focuses on the improvement in organizational performance through
capacity building and staff management processes.
[17]in their study by examining 293 US firms evaluated the impact of HR Managers’ capabilities on
competitive environment and its later impact on the financial performance of the firm and they found positive
relationship among all these variables.
[18] made a study and identified various models of SHRM in content with Indian organization by studying
300 managers from 9 companies and found that SHRM Practices i.e. flexibility leadership, coherence,
empowerment, teamwork, employee involvement and organizational commitment has a positive impact on
firm`s success
[19]in their research suggested that SHRM gives the opportunity to HR Professionals to play a greater rolein
contributing to the organizational success. If the HR managers effective policies and systems relating to
Human Resource then it will definitely contribute to the needs of organizational values, goals and mission in
an effective manner to gain organizational success.
[20]in their study conceptualized Strategic Management from the resource based view. They found that the
competencies i.e managerial, input-based, transformational and output based are facilitated by the potential of
HR systems to yield sustained competitive advantage for a firm. The resource based view describes that HR
systems can contribute to the firm through inhibiting the development of organizational
competencies.[21,22,23]
There is a positive relationship between SHRM systems and organizational effectiveness. Business
performance can be improved by enhancing HRM practices which constitute a core area around which
positive outcomes are found as shown in the model:

Strategy
GOA formulation
SHRM
L
Practices

ORGANISATIONAL
Competitive
SUCCESS
Advantage

Figure 2: Model of SHRM and Organizational Success

[24]in their study identified the key challenges facing by strategic human resource management and several
new directions which emphasized on strategic implementation as central mediating variable between human
resource and positive firm performance relationship. Organizational variations like:globalization, e-business,

64 Gulati J.K, Monica

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 3, Issue 1
January 2016

diversity, IT, Intellectual capital and these days firms have to compete less on product and more on
competencies, relationships and new ideas for attainment of organizational goal [25]. HR is an important asset
and here roadmap has been given for where managers need to go to for organizational success.
Organizational goal is the outline of expected outcomes established by top management. To achieve this
objective the business strategy isplanned and HR strategy is formulated in accordance with the overall
business strategy to facilitate the employee engagement, employee involvement, employee empowerment for
getting the things done effectively and efficiently through people as employee engagement shows the
emotional attachment of employees towards his job and organization , employee involvement is the regular
participation of the employee in deciding how their work is to be done, employeeempowerment is giving
employees a certain degree of autonomy for decision making regarding organizational tasks. All this enable an
organization to gain and maintain edge over its rivals to be successful. Employee is seen as a key business
driver for success of every organization. High levels of engagement in organization promote retention of
talent, foster customer loyalty and improve organizational performance and stakeholder value. Thus to get
engaged employee HR should design and evaluate workplace policies and practices to attract and retain talent
with skills and competencies necessary for growth and sustainability.Strategichuman resource management
practices have a positive effect on organizational performance- job satisfaction, commitment, employee
productivity and these key practices helps to achieve higher levels of organizational performance.[26]

Conclusion and Discussion

While the field of strategic HRM is relatively young, significant progress has been made at a rapid pace.
Researchers have provided great theoretical and empirical advancements in a period of just over 25 years.
Much of this progress is the result of the implementation of advanced techniques to integrate employee’s
needs with the organizational needs and objectives to attain sustainable competitive advantage to become
successful.However, the link between SHRM and competitive advantage to bestrengthened by making more
efforts to improve HR practices and strategies. Strategic HRM is proactive in nature and it considers
employees as an asset and it defines the organization’s intentions and plans on how its business goals should
be achieved through people. The fundamental aim of strategic HRM is to generate strategic capability by
ensuring that the organization has the skilled, committed and well-motivated employees it needs to
achieve sustained competitive advantage.

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IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 3, Issue 1
January 2016

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