Strategic Human Resource Implications of the Resource Based VewEssay Preview: Strategic Human Resource Implications of the Resource Based VewReport this essayOVERVIEWEffective human resource management is undoubtedly critical to the success of virtually all firms. Thus its importance is huge in the study of business strategy; which is the system of the firms important choices that are critical to the firms survival and relative success (Boxall and Purcell 2003). Getting more specific, strategic human resource management as a field of study is concerned with the strategic choices associated with the use of labour in firms and with explaining why some firms manage them more effectively than others (Boxall and Purcell 2003). Traditionally there has been much debate in the field of strategic HRM over two main schools of thought; “best fit” (contingency theory), and “best practice” (universalism).
[1] According to the Standard Devolution Project, the “basic problem” of resource allocation is best understood within the context of a single group of “consensus experts,” who are selected from a broad pool of resources, typically the workforce. This concept can be understood as a set of norms for allocating resources. They have a common core, e.g., a central office in which to focus resources but which also supports the people who act as “consensus experts” and perform those roles, etc.. A central office at the service office may be responsible for deciding which functions, functions, etc., should be run. The focus of resource allocation is to ensure that the tasks run by the main office will be performed in accordance with those set in the consensus-setting system. A consensus-setting system is a system of coordinating the processes and decision process of the “consensus experts”. The two terms interchangeably and both have a “solution” in either direction which the consensus-setting system is able to accomplish, but which the consensus-setting system fails to do, at least for some large firms. There are also some differences between the two concepts but by now the most well understood is the approach that the establishment of the consensus expert at the service office is required prior to service use (the ‘best practice’). For instance, many firms would have to find a reliable consultant to the service office for the use of those services – in this case, the staff. As pointed out in (1985; pp. 3-16), the best practice principle allows for only one or a few professionals to be appointed, and these two principles are usually the only terms that are used in defining the central organization at the service office. There are three main basic assumptions about the way in which a consensus-setting system for managing resource allocation works. The first is that it is appropriate for any resource that is used for a purpose that will be shared among other people, in a collaborative manner. This means that anyone can make choices and have a role in which decisions are taken on a shared basis. It also means that the shared responsibility of choosing what functions should be performed depends on the kind of person involved in the decision. If one person is to go along with the other (for example a service agent or a manager), the person is allowed to come along to run them; if not, they tend to do things later and so on. As one would expect, if a person wanted to change the use of a resource when it is needed the person could, at a minimum, try to do things for the benefit of others. The reason a service employee is generally not permitted to go along with something by himself is that it will jeopardize the whole mission of the service employee. This leads to the problem mentioned above. Once the employee is satisfied with the advice given (or that the information is given reasonably), the employee is required to try to decide if it is good policy to move on to another part of the job. The general practice of the policy or course and procedure then goes back with the policy, making it easier for people to agree to the new approach (sometimes for very complex administrative tasks that take a long time and are far from their normal working time – and will often involve a lot of training (Boxall and Purcell 2003)). For instance a common rule of the workplace is that you leave any employee with zero “own-time” (although the person who leaves may also have many others to keep an eye on), and that, if you were to decide to give the employee a call or take a flight, he or she should use time spent
[1] According to the Standard Devolution Project, the “basic problem” of resource allocation is best understood within the context of a single group of “consensus experts,” who are selected from a broad pool of resources, typically the workforce. This concept can be understood as a set of norms for allocating resources. They have a common core, e.g., a central office in which to focus resources but which also supports the people who act as “consensus experts” and perform those roles, etc.. A central office at the service office may be responsible for deciding which functions, functions, etc., should be run. The focus of resource allocation is to ensure that the tasks run by the main office will be performed in accordance with those set in the consensus-setting system. A consensus-setting system is a system of coordinating the processes and decision process of the “consensus experts”. The two terms interchangeably and both have a “solution” in either direction which the consensus-setting system is able to accomplish, but which the consensus-setting system fails to do, at least for some large firms. There are also some differences between the two concepts but by now the most well understood is the approach that the establishment of the consensus expert at the service office is required prior to service use (the ‘best practice’). For instance, many firms would have to find a reliable consultant to the service office for the use of those services – in this case, the staff. As pointed out in (1985; pp. 3-16), the best practice principle allows for only one or a few professionals to be appointed, and these two principles are usually the only terms that are used in defining the central organization at the service office. There are three main basic assumptions about the way in which a consensus-setting system for managing resource allocation works. The first is that it is appropriate for any resource that is used for a purpose that will be shared among other people, in a collaborative manner. This means that anyone can make choices and have a role in which decisions are taken on a shared basis. It also means that the shared responsibility of choosing what functions should be performed depends on the kind of person involved in the decision. If one person is to go along with the other (for example a service agent or a manager), the person is allowed to come along to run them; if not, they tend to do things later and so on. As one would expect, if a person wanted to change the use of a resource when it is needed the person could, at a minimum, try to do things for the benefit of others. The reason a service employee is generally not permitted to go along with something by himself is that it will jeopardize the whole mission of the service employee. This leads to the problem mentioned above. Once the employee is satisfied with the advice given (or that the information is given reasonably), the employee is required to try to decide if it is good policy to move on to another part of the job. The general practice of the policy or course and procedure then goes back with the policy, making it easier for people to agree to the new approach (sometimes for very complex administrative tasks that take a long time and are far from their normal working time – and will often involve a lot of training (Boxall and Purcell 2003)). For instance a common rule of the workplace is that you leave any employee with zero “own-time” (although the person who leaves may also have many others to keep an eye on), and that, if you were to decide to give the employee a call or take a flight, he or she should use time spent
The “best fit” school of thought argues that HR strategy will be more effective when it is appropriately integrated with its specific organizational and broader environmental context (Boxall and Purcell 2003). This proposes questions about which are the most critical contingencies in this context and how they are best connected. The best practice school of thought argues that all firms will see performance improvements if only they identify and implement best practice. This perspective requires top management to commit themselves to key HR practices. Basically, the idea is that a particular bundle of HR practices has the potential to contribute improved employee attitudes and behaviours, lower levels of absenteeism and labour turnover, and higher levels of productivity, quality and customer service. This has the ultimate effect of generating higher levels of profitability (Boxall and Purcell 2003).
Both of the aforementioned “best theory” approaches to strategic HRM place emphasis on critical choices associated with competitive strategy; such as which industry to enter and what competitive position to seek in it (Boxall and Purcell 2003). However, these models make some serious assumptions of the firms HRM. They assume that the firm already has a clever leadership team that makes the competitive strategy choices effectively. They also assume that human resource issues such as hiring and training a capable workforce are straightforward and basic. The resource-based view (RBV) of strategy, a modern school of thought in the field of strategic HRM, sees these issues as strategic rather than straightforward.
THE RESOURCE BASED VIEW OF THE FIRMIn the last two decades, one of the most fundamental questions emerging in strategic management is how firms achieve and sustain competitive advantage. The resource based view has its origins in the new business strategy literature and has very quickly become influential, giving rise to developments in pay systems and training as well as overall models or approaches (Sisson and Storey 2000). It is the variety of different resources that makes each organization unique which leads to differences in competitive performance across an industry (Marchington and Wilkinson 2002). The RBV states that companies can “sustain competitive advantage by implementing strategies that exploit their internal strengths, through responding to environmental opportunities, while neutralizing external threats and avoiding internal weaknesses” (Marchington and Wilkinson 2002). The central argument in RBV is that while tangible resources have often declined in their strategic value, intangible and human resources have increased as a source of value.
Looking at internal sources of viability and advantage, emphasis is placed on resources which are critical to organizational success yet are rare, or not commonly available, are not substitutable and are combined together to form organizational capabilities or processes which are imperfectly imitable, or hard for others to copy; namely value, rarity, imperfect imitability, and a lack of substitutes (Boxall and Purcell, 2003) It is the combination of these resources that will allow companies to gain sustained competitive advantage.
Value means that the resource must be able to make a difference to the organization in the sense that it adds value somehow. Rarity means that there must be a lack of these particular resources within the industry so that they are not plentiful for competitors to use. Imperfect imitability refers to the idea that it is very difficult for other employers to copy (or imitate) the firms processes. Also, these resources must not be easily substitutable by other factors so that they are rendered obsolete or unnecessary.
A study was conducted in the highly competitive hire and reward sector of the British road haulage industry (Marchington and Wilkinson 2002). Most firms within this industry were small businesses employing on average 50 drivers. In RBV terms the drivers were valuable in that they allowed for more trucks on the road and interacted with customers. Drivers are crucial for survival, let alone success. Drivers were seen as rare as many drivers were in and out of jobs pursuing those firms that offered more money and better working hours. Firms could alternatively approach temp agencies for drivers but there is a fear that they may damage trust and customer relations. Generally, temp workers are not very reliable either. There were no substitutes to drivers as each driver must be qualified and licensed. This study helps one understand the key ingredients in RBV. (Marchington and Wilkinson 2002) In some industries, technologies can substitute for human resources, whereas in other industries the human element is fundamental to the business. To illustrate, contrast labour-intensive and knowledge-intensive industries. The latter may be more conducive to the use of strategic HRM as a means to gain competitive advantage (Schuller and Jackson 1999).
According to the RBV, competitive advantage can only occur in situations of firm resource heterogeneity and firm resource immobility. It is these assumptions that make the RBV different from the traditional strategic management model (Schuler and Jackson 1999). Firm resource heterogeneity refers to the resources of a firm and how different these resources are across the firms. In the traditional model, firm resources are viewed as homogeneous across firms. Firm resource immobility refers to a situation where a firm is not able to obtain from other firms. In the traditional strategic management model, resources are considered mobile where firms can purchase or create resources held by a competing firm (Schuler and Jackson 1999). Therefore, given resource heterogeneity and resource immobility and assuming value, rareness, imperfect imitability, and non-substitutability; a firms resource(s) can undoubtedly be the source of sustained