Chapter 4 The Strategic HRM Debate and the Resource-based View of the Firm Peter Boxall

1. Chapter 4The Strategic HRM Debate and the Resource-based View of the FirmPeter Boxall

2. Two broad strands of meaning in the academic discourse on HRM • commitment-oriented model of labor management • relationship between strategic management and employee relations in the firm This article defines HRM as including all styles of labor management, including the high commitment variant.

3. Managers are typically engaged in managing the ‘strategic tension’ between ends and means in an external environment characterized by risk, change, complexity and ambiguity and an internal environment characterized by bounded rationality, endemic co-ordination problems, inertial tendencies and political trade-offs. •  Intensification of competition presented incentive to develop a strategic HRM approach to the management of their staff, placed cost control at a premium, and meant that the implementation of a consistent HRM approach was difficult.

4. ‘Levels’ of strategy • First order - long-term direction of the firm • Second order - internal structure, connections and reporting relationships • Third order - critical questions of functional management/employee relations ‘Matching model’, ‘behavioral perspective’, contingency hypothesis’-‘fitting’ HR strategy to the firm’s choice of competitive strategy, although there are variations which add or (sometimes) substitute other contingencies such as life cycle stage and structure

5. Theoretical critique Strategy and Strategy Making • It is better to conceive of business strategy as a systemically connected mix of strategic choices, incorporating competitive strategy and a variety of other strategies in such areas as HRM, structure, technology and finance. • The most resilient firms are good at everything: they are superb ‘all rounders’ Employment Relations • The need for compromise with worker rights and interests is overlooked. • Fail to take into account the widely observed tendency of firms to segment their workforces and adopt different HR strategies for each major segment. • Employing a core of ‘strategic employees’ on more favorable terms than other staff groups.

6. Empirical SHRM Studies • A high commitment model of labor management lays the basis for all kinds of fruitful strategizing and strategic implementation • A ‘fit’ hypothesis predicts that either mass or flexible production plants with a good fit between their HR and production strategies will perform well • Qualitative studies measuring the extent of strategic choice are lacking • There is a widespread failure to structure studies around the phenomenon of workforce segmentation. • Only when all questionnaires and/or interviews allow respondents to reply for each workforce segment will the surveys give us a more accurate snapshot of human resource strategy.

7. The Resource-Based View • ‘Physical’ and ‘human’ resources, including knowledge/experience of the management team • Competition does not eliminate all ‘differences among firms in the same line of business’ • Some factors of production can be traded but there are various productive capabilities which can only be internally developed • To generate sustained advantage, resources must meet the criteria of value, rarity, imperfect imitability and non-substitutability • Firm’s ability to learn faster and apply its learning more effectively than its rivals, gives it competitive advantage

8. Strengths of the Resource-Based View • The models are sensitive to history • Competitive success from distinctive capabilities • Performance depends on industry structure and history the firm has been through ‘Resources are not valuable in and of themselves, but because they allow firms to perform activities that create advantages in particular markets’.

9. Strengths of the Resource-Based View • Implies the need to build strategic management processes, although this depends somewhat on how theorists treat the notion of ‘casual ambiguity’ • Importance of intelligent, proactive leadership in firms • Dynamic capabilities’ as ‘the capacity of a firm to renew, augment an adapt its core competencies over time’ • Firms which combine high levels of competence in multiple modes of strategy-making appear to be the higher performers’

10. Implications 1.  Provides a conceptual basis for asserting that key human resources are sources of competitive advantage. 2.Stresses the value of the complex interrelationships between the firm’s human resources and its other resources: physical, financial, legal, informational and so on. 3.HRM can be valued not only for its role in implementing a given competitive scenario, but for its role in generating strategic capability

11. Implications Continued 4.  Firms have the possibility of generating human capital advantage through recruiting and retaining outstanding people, through capturing a stock of exceptional human talent, latent with productive possibilities. 5. Human resource advantage might be conceived as the product of its human capital advantage and human process advantage. 6. Outcomes in one context cannot readily be translated to another if the typical ‘critical success factors’ are lacking 7.  Isolating mechanisms-attributes that make replication difficult

12. The Resource-Based View and Existing HR Research 1.The problem of survival has involved restructuring through ‘delayering’ and ‘rightsizing’. 2.We have witnessed the growth of more contingent models of labor management 3.More stress on ‘performance management’ and de-emphasized or abandoned explicit or implicit promises of lifetime employment. 4.Create new forms of work organization without an explicit pledge of employment security legitimated by the extent of corporate restructuring and unemployment and the waning of union power.

13. The Resource-Based View and Existing HR Research 5.Striking a balance between long-run, resource-based investment on the one hand and short-run, cost containment, on the other. 6.HRM’s position on the ‘strategic agenda’ of senior management is lower than it ought to be. 7.Survival anxiety has generated delayering, rightsizing and increasingly contingent forms of employment.

14. Conclusion The resource-based perspective opens up an array of research opportunities Identifying and analyzing sources of human resource advantage within the context of firms, industries and nations will be a complex, challenging task.