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 decision-
makers 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 one-
year 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 commitment-
enhancing 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