HRM Strategy and Implementation: RBV (Resource Based View) Should be Read as Realistic Business Vision
The seeds of idea that once envisioned humans as the prime capital of trade and commerce have now bloomed to their glory with the patronage of digital revolution and globalization. Therefore it is only but natural that they would now command more care and concern, and accordingly the Human Resource Management is now busier than ever to manage this dynamic asset, which is now seen as the prime component of competitive advantage (Boxall and Purcell, 2003, Pfeffer, 1998; Gratton, Hailey and Truss, 2000). Accordingly HRM has to gear up with newer ideas and application and in walked Strategic HRM, which is regarded ...
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...by the researchers as the “pattern of planned human resource deployments and activities intended to enable the firm to achieve its goals” (Wright and McMahan, 1992, p.295). Therefore, this essay explores the elements of Resource Based View (RBV) to ascertain about its efficacy as an SHRM of the organization.
1. The Movement and RBV
The movement on firm positioning began in the 1980-s and it gained momentum with the books like Competitive Strategy (Michael Porter, 1980) and Search of Excellence (Peters & Waterman, 1982), which started generating new waves in the field of strategy with ideas like five forces (barriers to entry, power of buyers/suppliers, substitutes and competitive rivalry). It didn’t take much time for this new wave to culminate into more cogent and cohesive shape, when the concept of “resource-based view” arrived in the scene (Barney, 1991), which improvised the previous researches on this field (Wernerfelt, 1984) and tilted the focus of organizations on the desired internal conditions of an organization. This concept settled for developing both intellectual and physical resources of the organizations as it regarded those components as the real engine for competitive advantage. Thus this new framework defined value in terms of the merit of the resources, where it would either exploit the opportunities or diffuse any threats to the organization, it observed that rarity is another exclusive resource for any organization, and it defined uniqueness as an sharp tool to maintain competitive advantage. This view might have sounded revolutionary at that time, but by now it has become a forgone conclusion that unique elements of a company (be it human ability or its end product) can create a separate identity for it, which cannot be earned by its competitors. Thus the proponent of this concept, Barney, provided a crisp definition of it – the resources that are valuable, rare, unique and non-substitutable, will earn sustained competitive advantage for any organization (Barney, 1991).
Thus resource-based view provided a refreshing platform for strategic management researches, especially the ones undertaken from knowledge-based perspective (Grant, 1996). However, it could not avoid criticism that labelled it as just a tautological wonder (Priem and Butler, 2001) and chased what Barney placed as maxim by saying that the definition of valuable resources lacks definitional dependence and thus the his conclusion, that unique firms possess competitive advantage, remains logically unsatisfying. There were some more criticisms on the ground of falsification theory, but as it happens, at the end of the day, power of an idea rules and so did the concept of RBV.
1.1 The Genesis of SHRM
It started with the view of aligning HR with the strategies of the organizations, an idea that had been doing rounds from the 1980-s, as the books like Human Resource Planning (Jim Walker, 1990) or articles on strategies (Devanna et al., 1981) suggest. Together they tried to bundle HRM into a comprehensive and powerful packages of strategy, where it fetched different nicknames for it, like “vertical alignment” (Wright and McMahan, 1992), or “horizontal alignment” (Beer et al., 1984), according its assembly line and line of action. While vertical alignment harps on an existing strategy and prescribes a specific HRM practice for it, horizontal alignment goes for utilizing all arsenals of HRM into practice by activating all its subsets.
In spite of being ready with solutions for big situations, HRM had to remain contend by playing second fiddle till mid 1990-s, when the researchers like Huselid (1995) substantiated its efficacy beyond any doubt. He demonstrated that the use of a set of 13 HRM practices under the module of ‘High-Performance Work System’ was embedded to all the successes an organization can dream of – lower turnover, higher profits, sales and rise in market value. There was MacDuffie (1995), who too came up with another convincing evidence like different bundles of HR practices leading towards higher performance. All these boiled down to the idea that integrated HR system leads the higher performance (Delery and Doty, 1996).
2. Pumping RBV into SHRM
There may be apprehensions in applying RBV into SHRM, like the quality of research that prescribes it, or there is a lack of understanding over the concept of fit, save its role between strategy and HRM. Some might even cite the absence of a machine that can measure the amount of resource in a person and put a price tag on each individual on that account. These questions will always be there, but a clear model of application in this regard can serve the purpose better. For instance, one can pick up a practice module like HPWS and check it in detail.
2.1 Applying RBV as SHRM
A basic chart of human resource policy (HRP) for any company might look like below:
Human Resource Policy of XYZ
Position, Duties, Responsibilities, Personal information, Job specification, Wage scale, Promotional Avenue, Police history,
Advertisement, Test, Interview, Agreement to Terms & Conditions.
Annual increments, Promotions on fulfilment of criterion, Medical and other benefits, facilities of Employee Cooperative, other permissible benefits from time to time.
Gratuity and other permissible benefits, Notice of three months in advance from either side in appropriate cases, No Objection certificate under satisfactory circumstance.
At the discretion of Administration
Annual Sports, Annual Cultural Meet, Seminars/Symposia
Now to implement this basic policy, HRM needs a customized roadmap, and for that matter it can utilize, High-Performance Work System, a new avatar of HRD.
3. HPWS in Brief
High Performance Work System, popularly known as HPWS is a specific combination of HR practices, work structures, and processes that maximizes employee knowledge, skill, commitment, and flexibility (Bohlander, 2004). It is understood that systems composed of many interrelated parts that complement one another to reach the goals of an organization, large or small. As for example, System design looks like below:
These are fed with Linkages to Strategy and Principles of High Involvement. Then the process is implemented and the outcome is observed in Organizational and in Employee levels. In short, this package of strategy aims “create an environment within an organization where the employee has greater involvement and responsibility” (Brown, 2006). According to the researchers, this new avatar of HRD started shaping up in the late twentieth century “amid the crunch period of United States manufacturing environment”, when it felt the heat of global competition and realized the need of rejuvenating their manufacturing process (Barnes, 2001). Thus, much in the mould of ‘necessity is the mother of inventions’, HPWS came into being with a set of fresh practicality based on the nuances of human behaviour.
3.1. Underlying Principles of HPWS
HPWS starts with three pillars at the outset, like involvement, training and incentives¸ before adding the fourth, support technology; to take off as a full fledged system. Overall it looks like below:
Figure – 1: Skeleton of HPWS
3.2 Components of HPWS
The first important component “Involvement” provides the employees an “increased opportunity to participate in decisions” (Barnes, 2001). This becomes possible by sharing information among the members of the organization. Thus HPWS emphasizes on creating a culture of information sharing, where the employees would share the information for the greater interest of the company.
Second component, “Training” gears towards developing the knowledge and skill on the subjects employees deal with. Here HPWS prefers a culture of ‘on-site’ or ‘real-time’ training rather than theoretical knowledge, where the employees would be encouraged to apply new approaches or ideas and to enrich the knowledge bank itself.
The third component, “Rewards” or “Incentives” aligns the goals of the employees with the goal of the organization by utilizing the reward system. It prescribes to connect the rewards to performance to make both the company and the employee mutually benefited.
The combination of the three in a free flowing manner creates an egalitarian work environment that eliminates the status and power differences, which in turn enhances collaboration and teamwork.
The fourth component is “Technology”, where HPWS wants exploit the advantage of modern technology to make the system further effective.
The Diagram below explains the basic structure of HPWS
3.3. Critical analysis of HR Policies and Procedures
The HR policies and procedures of the company primarily evolve out of the needs of its departments, though the policies as a whole are expected to cover the needs of all other vital organs of the company. Accordingly HPWS works on two layers, viz., internal and external – where it ensures ‘Internal fit’ and ‘External fit’. Internal fit refers to the situation where all the internal elements of the work system complement and reinforce one another. In the case of External fit, it refers to the situation where the work system supports the organization’s goals and strategies. It looks like below.
Figure – 3
Figure – 4
The above diagrams describe how HPWS works in an identifiable pattern, where it takes all affairs of the organization into consideration. Here the strategy works with three basic elements like Competitive Challenges, Company Values and Employee Concerns, which gathers inputs from the internal fit, that comprise of the elements like Leadership, Technologies, Work-flow Design and HR Practices, which work in tandem to produce inputs to external fit and to work on the feedbacks received from it, just like the external fit does. Alongside it takes the help of two methods of analysis, like SWOT (Strengths, Weaknesses, Opportunities and Threats) for internal analysis and PEST (Political/Legal Economic/Social and Technological Factors) analysis for external situation.
3.4. Basic Components of SWOT and PEST
State of Company brand in local and global market.
State of relationship with Employees.
State of growth.
Employee retention rate.
Usage of high technology.
Attitude of company towards improving overall benefit of employees, etc.
State of communication gap between departments
State of irregularity in resource management, selection and training.
State of interpersonal communication.
State of logistics in recruitment.
State of motivation.
State of team communication.
State of individual assessment.
Level of information sharing and idea exchange, etc.
State of global market.
Employee base from the perspective of competitive advantage.
Rapport of management with local and global market.
State of fund, etc.
Increasing state of competition.
Inadequate knowledge bank.
Slow production rate, etc.
POLITICAL / LEGAL FACTOR
State of political situation.
Approach of unions.
Legal standing of the company, etc.
State of regional economy.
Margin between expenditure and profit.
State of manpower and skill to meet global demand of production.
Scope of checking expenditure, etc.
State of social relations.
Alignment with the culture of the region, etc.
State of technology.
State of knowledge flow.
State of individual analysis, etc.
3.5. HPWS Plan Sheet:
Depending on the outcome of the above analyses, HPWS goes on to prepare a plan sheet for the company towards achieving its goal. Thus an imaginary plan sheet of HPWS looks like below:
Parameters of HPWS
Team decision making
It shows how HPWS emphasizes on Sharing Information, Knowledge Development, Performance-Reward Linkage and Egalitarianism.
3.6. The Impact of HPWS
1. Work Flow: Here the two categories of staff carry the workflow of the department, and HPWS helps both the categories to reach the egalitarian stage through unbroken flow of information sharing.
2. Staffing: It incorporates knowledge development by recruiting experts in modern technology and management, besides inducing the policy on team decision making among staff.
3. Training: It identifies four areas of training with special emphases on knowledge development and team training, Keeping in mind the issues like differences between departments and recurrence of legal disputes due to lack of knowledge of handling debatable contents.
4. Compensation: It incorporates a transparent system of Incentive, Gain sharing, Profit Sharing and Skill-based Pay.
5. Leadership: It includes all of leadership parameters to make them aligned with its own underlying principles.
6. Technologies: It intents to utilize both human skill and creativity to enhance the knowledge base and fasten the production process besides enhancing communication among staff-members of the organization.
3.7. Recruitment and Selection Plan:
At the outset, HPWS creates a demand forecast plan that might look like below:
Keeping this chart in mind, HPWS takes off by
i) Making a compelling case for change linked to the company’s business strategy.
ii) Making it certain that senior and line managers own the change.
iii) Allocating sufficient resources and support for the change effort.
iv) Ensuring early and broad communication.
Alongside it introduces systematic analyses of the positions on the basis of the company need and creates a detailed job description for each post.
3.8. Process chart for the Plan
Internal Recruitment Plan
Evaluation of ability
Evaluation of attitude
Responsiveness to reward
External Recruitment Plan
Employee background; Viable
Responsiveness to reward
HPWS then ensures a reflection of its idea in the company advertisement, while formulating an implementation schedule.
3.9. Implementation Schedule
Initial research by HRD
Requires meetings with Company’s policy makers besides study and research.
Screening, Short listing and Interview by HRD
Screening, Short listing, Final Process
Process of employment
Accommodating prospective applicants
Employee Orientation by HRD
Imbibing company philosophy in the newly recruited employee.
The process of HPWS clearly show that it always keeps human resource as its axis of operation, which reflects the present standing of HR amid the global scene.
3.10. Choice of Selection Methods and Rationale
The possible benefits of HPWS can be all-round, touching every nook and corner of the organization. Not only in selection process, HPWS comes out as an effective tool in monitoring the efficacy of the same with its policy of applying process audit and evaluation where it prepares its questionnaire on various important issues that can affect HR.
3.11. Process Audit
1. Are employees truly working together?
2. Are employees getting the information they need to make empowered decisions?
3. Are training programs developing the knowledge and skills employees’ need?
4. Are employees being rewarded for good performance and useful suggestions?
5. Are employees treated fairly so that power differences are minimal?
3.12. HPWS Evaluation
1. Are desired behaviours being exhibited on the job?
2. Are quality, productivity, flexibility, and customer service objectives being met?
3. Are quality-of-life goals being achieved for employees?
4. Is the organization more competitive than in the past?
Human Resource from HPWS Perspective
1) He is Valuable
2) He is Rare
3) He is Organized
4) He is unparallel.
The above viewpoints perfectly align with RBV.
Starting its journey from Personnel Management, the Human Resource Management has walked a long way through the various bends of civilization, all the while evolving with time. However, it required the intervention of a dual impact from digital revolution and globalization to prove the real worth of HRM, which is now gaining grounds with each passing day. The Information Age has created a plethora of opportunities in every direction and discipline, and according HRM too has geared up to meet the new responsibilities like knowledge management or managing globalization of business. Now intense competitive forces amid global marketplace and a considerable decrease in the availability of knowledgeable and skilled employees place compounding pressures on organizations to gain, maintain, and sustain a competitive advantage over competitors. Amid this environment, both HRM and company need to work in tandem to solve this issue. Thus for a sustained competitive advantage, the companies can rightly adopt RBV as SHRM.
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