IntroductionIt is widely acknowledged and accepted in business that the sources of sustained competitive advantage lie not only in access to finance or capital, but within the organisation, in people and processes capable of delivering business strategies such as customer satisfaction or rapid innovation. (Lundy, 1994). A strategic approach to human resource management (HRM) ensures that a firm's human capital contributes to the achievement of its business objectives. Various influential writers have expressed differing opinions on the importance of employees as a direct influence on an organisations competitive advantage. Although no firm agreement has been reached, it is generally accepted that the use of strategic human resource management (SHRM), (i.e. proactively changing and implementing a series of internal HR policies to ensure effective contribution from a firms human capital to the achievement of business objectives), is relevant within HR intensive firms. 2 Perspectives on HRMStrategic human resource management is often used as the basic framework for the investigation of human resource strategy and its relation to the organisations performance. Three main theories have been focused on by the top writers on the subject. These are the universalistic, resource-based and configurational perspectives of HRM. Briefly these are: 2.1 Universalistic theory Universalistic perspective is the simplest and most widely used model in literature. Basically, the follower of the universalistic view seeks to instill 'best practices'. That is, they believe some HR practices are always better than others and that firms adopting these practices will experience an improved performance. Seven practices have been identified as 'best'. These are: Good internal career opportunities Formal training systems Results and behavior based appraisals Profit sharing plans Strong employment security Voice mechanisms, e.g. participation in decision making Tightly defined jobs A number of authors have spoken in support of this theory. Leonard (1990) found that firms with long-term incentive plans in place for their executives had greater increases in return on equity over a four-year period than other organisations. Abowd (1990) also proved that the degree to which managerial remuneration was tied to their firm's performance was strongly correlated with future financial performance. There are however a number of critics of the universalistic theory. The first and most obvious fault is that a lot of organisations that do not adopt 'best practices' manage to survive in, and even lead their markets. It is also obvious that any competitive advantage gained through the use of 'best practices' will be hard to sustain, as competitors will be quick to catch on and imitate. It is apparent that the universalistic approach is not suitable to all types of business. It has even been suggested by some prolific thinkers, that only profit sharing, result-orientated appraisals and employee security could have any strong relationship with important measures of performance. 2.2 Resource-based theory The resource-based theorists hypothesize that an organisation needs to adopt specific HR policies and practices for different business strategies. Thus, in order to be effective, an organisations HR policies must be consistent with other aspects of the company. An organisations strategy thus demands certain skills and behavioral requirements for success, and the use of HR practices can control employee behavior to be consistent with this strategy. An organisation can establish HR systems and practices to ensure that staff with the required abilities are hired and retained, and then motivated to behave in ways consistent with the business strategy (Fama & Jenson 1983). 2.3 Configurational theory The configurational theory is concerned with how patterns of multiple planned human resource activities can achieve the organizations goals. To achieve this, an HR system has to be...
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