Cruciality of Hrm in Strategic Formulation and Implementation

2812 Words Mar 5th, 2008 12 Pages
Businesses are increasingly looking at human resources as a unique asset that can provide sustained competitive advantage. The changes in the business environment with increasing globalisation, changing demographics of the workforce, increased focus on profitability through growth, technological changes, intellectual capital and the never-ending changes that businesses are undergoing, have led to increased importance of managing human resources (Devanna, Fombrum, & Tichy, 1981; Wright, 1998).

Strategy has always been considered a critical success factor in all areas of human activity. This has been a dominant viewpoint in theory and practice, not only in business enterprises but also in areas such as military action and diplomacy,
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Human resource activities are claimed to be related to the performance of a firm. Appelbam et al. (2000) investigated the link between high performance work systems (implemented through HRM) and company performance. The results showed that HRM helped employees in three vital areas; ability, motivation and opportunity.

Human resource (HR) department that is highly administrative and lacks strategic integration fails to provide the competitive advantage needed for survival, thus losing its relevance. Huselid and Becker (1997) found that there were noticeable financial returns for the organisations whose human resource management (HRM) systems have achieved operational excellence and are aligned with business strategic goals. According to Ulrich (1998), one of the four roles of HR personnel is to become strategic business partner. Youndt and Snell (1996) find that firms employing HR practices according to the stated strategy are regarded to have better performance.

How human resource(s) (departments) can contribute to the competitive advantages of the firm has been described thoroughly since the mid-1980s (e.g., Paauwe (2004) for an overview). In particular during the last years HR has had the opportunity to prove, that it can contribute to organizational success through the development of a more strategic role, i.e. delivery of efficient
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