Linkage between Business Strategy and Human Resource Strategy to gain Competitive Edge for an Organizational Success

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1 Linkage between Business Strategy and Human Resource Strategy to gain Competitive Edge for an Organizational Success Gulati J.K (Associate Professor) Guru Nanak Dev University College, Jalandhar Monica Research Scholar 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

2 HR Strategies International Journal of Engineering Technology Science and Research [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 Practices/Variables HR Outcomes Competitive Advantage 63 Internal career opportunities Extensive Training Result oriented appraisals Profit sharing Employment security Participation Reduction in Turnover Absenteeism Increment in Job Satisfaction Employee involvement Employee Engagement Work Commitment Cost reduction by employee retention, commitment Employee differentiation with its competitors by Highly skilled and diversified workforce Broad Job descriptions Performance 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

3 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: GOA L Strategy formulation SHRM Practices ORGANISATIONAL SUCCESS Competitive 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

4 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. References 1. Hamel &PrahaladCK(1989) Strategic intent. Harvard Business review,67(3), Grant,R.J(1991) the resource-based theory of competitive advantage: Implications for strategy formulation, California Management Review, 33(3), SudiptiBanerjee(2012) Book:Theoratical perspectives of Strategic human resource management. pp David P. Lepak. (1998). Virtual HR: Strategic Human Resources Management Research in 21st Century, Human Resource Management Review, vol. 8 pp Barney, J.B 1992 Integrating organizational behaviour and strategy formulation research: A Resource Based Analysis, In P.Srivastava, A. Huff &J.Dutton (Eds), Advances in strategic management. vol:8, pp Wright & Mc Mahan 1992``Theoratical perspectives for strategic human resource management Journal of Management. 7. Appelbaum, E, Bailey T. Berg,P&Kallerberg,A.(2000)``Manufacturing Advantage : why high-performance work system pay off. Ithaca, NY:ILR Press 8. Delaney, J T and Huseild M A (1996)``The impact of HRM practices on perceptions of organizational performnance Academy of management Journal,39(4) Delery, JE (1998) Issues of fit in SHRM: Implications for research HRM review 8: Delery J E& Doty, D H (1996)``Modes of theorizing in SHRM :Tests of universalistic,contingency anf configurational performance prediction Academy of Management Journal 39(4) Kim(2005) A human Capital of corporate as a consequence of SHRM practices The Korean entrepreneurship society 8(2), Osterman. (1987). Choice of employment systems in internal labour markets. Industrial relations,26:

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