Human capital is one of the most important resources that enable companies to create competitive advantages in their industries. A firm with a talented and innovative workforce is likely to develop unique products or services that satisfy market needs. Thus, most companies are adopting strategic human resource management (SHRM) strategies to overcome competition. The purpose of this paper is to provide a literature review on the role of SHRM in companies. The review will begin with a brief description of the general findings of current studies in SHRM. This will be followed by a detailed analysis or synthesis of the findings.
SHRM and Organizational Performance
SHRM refers to the alignment of “human resource management practices such as recruitment and training to a company’s strategy” (Ijose, 2011, pp. 1-11). SHRM involves implementing policies and procedures that ensure the effective execution of strategy through teams by taking advantage of cross-functional knowledge and competencies. Various studies have found a positive relationship between SHRM and organizational performance. Companies that have adopted SHRM tend to be more competitive than those that do not consider HRM as a strategic function.
According to Mitsakis (2014), SHRM improves organizational performance through its value addition and risk reduction capabilities. HR functions such as recruiting and training add value to organizations whenever they are incorporated in all aspects of strategy formulation. Engaging HR managers in the early stages of strategy formulation enables them to influence board decisions to improve organizational performance (Mitsakis, 2014). For instance, target recruitment can lead to improved performance by allowing HR managers to hire individuals who demonstrate the competencies that are required in a particular organizational culture. SHRM leads to the identification of risks such as high labor turnover, staff shortage, and underperformance. It is also a means of addressing risks by promoting innovation through staff training and development programs. The main strength of this study is that it emphasizes the importance of integrating HRM practices with the overall business strategy. However, it fails to identify the specific SHRM strategies that improve organizational performance.
Sani (2012) concludes that only a few SHRM strategies improve organizational performance. His study shows that career planning, training line managers, and developing clear job descriptions are the only SHRM strategies that improve competitiveness. By contrast, performance appraisal, compensation system, and selection procedures have an insignificant effect on performance (Sani, 2012). This study is an improvement on that of Mitsakis (2014) since it highlights the specific strategies that improve competitiveness. However, the findings might not be applicable in other industries and countries since the study is based only on data collected from Nigeria’s insurance industry.
According to Altarawneh and Aldehayyat (2011), the success of SHRM is determined by several factors. These include organizational culture, costs, the role of HR managers, and integration HRM practices with competitive strategies. In this regard, the researchers conclude that HR managers should create buy-in to ensure the successful implementation of SHRM. The implementation process should ensure that SHRM practices are systematic, linked to organizational culture, and based on corporate-level strategies. Line managers should be involved in the formulation of SHRM strategies to ensure their commitment during implementation (Altarawneh & Aldehayyat, 2011). Although this study highlights the strategies that can improve implementation SHRM, it ignores the role of organizational structure in enhancing the success of SHRM.
Ijose (2011) asserts that the success of SHRM practices depends on the ability of companies to implement and internalize them. Successful implementation of SHRM can be achieved if management commitment and the needs of strategic partners are taken into account. Competitive pressures should also be taken into account during implementation (Ijose, 2011). The strength of this study is that it highlights the importance of considering the external determinants of competition when implementing SHRM. However, its findings might not be applicable in large multinational corporations since they are based only on data collected from small and midsize enterprises (SMEs) that operate in the US.
Synthesis of Findings
The findings of Mistakis (2014) imply that SHRM improves organizational performance through its positive impact on the skills and knowledge of employees. An organization with competent employees is capable of meeting the needs of various stakeholders. For instance, it can produce products that meet customer needs and make adequate profits for investors. This means that SHRM allows companies to overcome competitive challenges such as globalization, technological change, and limited access to intellectual capital. It improves competitiveness by creating a strategic HR architecture that supports the vision and mission of an organization.
Sani (2012) suggests that the positive effects of SHRM on organizational performance are universal rather than contingent on firm-specific factors. According to the universalistic standpoint, the study implies that certain SHRM strategies such as career planning produce better results than others. Thus, companies are likely to succeed if they implement the most effective practices. This argument is inconsistent with the contingent standpoint, which suggests that the success of SHRM depends on firm-specific factors such as organizational culture. In this context, companies should align their SHRM practices to their overall business objectives to ensure success since there is no one-size-fit-all SHRM strategy.
The gist of the argument by Altarawneh and Aldehayyat (2011) is that SHRM has several components, which include policies, values, organizational culture, and practices. It also coheres or integrates different levels of management to facilitate success. This means that SHRM should be implemented as a best fit rather than best practice. Specifically, SHRM will be effective if it is designed and implemented in a manner that supports the generic strategies that a company uses to compete.
The findings of Ijose (2011) show that companies adopt SHRM practices to respond to the challenges in their competitive environment. Once adopted, SHRM practices must be institutionalized to enhance organizational performance. Institutionalization refers to the extent to which employees internalize SHRM practices by integrating them with organizational values. Institutionalization occurs when employees accept SHRM practices and consider them as sources of job satisfaction and psychological ownership in their company. It also involves considering SHRM as a means of enhancing employee commitment. This means that employees, strategic partners, and managers should actively participate in the formulation and implementation of SHRM practices to ensure success.
The literature reviewed in the foregoing paragraphs indicates that SHRM practices can improve organizational performance. SHRM allows companies to achieve innovation by leveraging their human capital. It also facilitates risk management and adaptation to changes in the business environment. Nonetheless, SHRM is only effective if it is implemented using appropriate strategies. Success can be realized if SHRM practices are aligned to the overall business strategy, vision, mission, and objectives. Moreover, all stakeholders should be involved in the implementation process to avoid failure.
Altarawneh, I., & Aldehayyat, J. (2011). Strategic human resource management in Jordean hotels. International Journal of Business and Management, 6(10), 242-255.
Ijose, O. (2011). Strategic human resource management, small and medium-sized enterprises and strategic partnership capability. Journal of Management and Marketing Research, 1(1), 1-11.
Mitsakis, F. (2014). Human resources as a strategic business partner: Value creation and risk reduction capacity. International Journal of Human Resource Studies, 4(1), 154-164.
Sani, A. (2012). Strategic human resource management and organizational performance in the Nigerian insurance industry: The impact of organizational climate. Business Intelligence Journal, 5(1), 8-19.