Organizations are intent on human recourses as a benefit to their firm so that it can help the organization achieve its competitive advantage.
Changes in the environment such as widespread globalization, rapid technology and other such factors have led to organizations realizing the significance of controlling human resources in a firm. Since organizations have also become more dynamic and complex, the need to manage human resources has become more essential. In recent years, many individuals demanded for a more strategic approach to managing people in a firm, rather than the traditional methods, and thus the idea of strategic human resource management (SHRM) was adopted.
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There are a number of models within the field of HRM and these models help to describe the various approaches to the development of HRM, and help to explain why managing human resources in a firm is essential.
The Resource-based view (RBV) of the firm will be discussed in order to back-up arguments on whether or not the RBV leads to a sustained competitive advantage, and other models such as the ‘best fit’ and ‘best practice’ will also be discussed, with their pros and cons. The information collected in order to evaluate this topic was mainly taken from journal articles, books and websites.
Strategy is important for every firm, but it is the internal resources that shape strategy. Strategic HRM is based on generating strategic capability by ensuring that employees are well trained and well motivated in such a way that the organization can achieve its competitive advantage. (Michael, 2001)
The Resource based view suggests that organizations may be more successful if they focus on what happens inside the organization, and use the resources it has to shape the strategy.
The concept is founded on the belief that if a firm can obtain human resources that learn and apply their learning faster than it’s rivals then the firm can obtain a competitive advantage. Thus it believes that investment in people is what will add value to a firm.
When the external environment is a state of inconsistency, the organization’s internal resources prove to be a much more stable basis. Thus internal resources such as employee talents, motivation, innovation etc. are the ways in which people develop a competitive advantage.
In 1997 Harrison noted that it is the strategic capability of an organization that determines the extent to which an organization achieves the best possible fit between the unique tangible and intangible assets it possesses and the competitive position it occupies in its environment. (Amstrong, M & Baron, A)
Wright and McMahan (1992) presented the RBV as an aspect that provided logic for how an organization’s human resources could offer a sustainable competitive advantage. (Patrick, M et al 2001). The Resource base View of strategy sees it as a way to create opportunities for the firm by using its internal sources and competences and thereby creating a competitive advantage, by building inward strategy. It addresses methods of increasing firm’s strategic capabilities by the development of managers and other staff who think and plan strategically.
In 1991, Barney stated that a firm is said to have a competitive advantage only when any other firm does not duplicate the strategies that it has adopted. This would happen when resources are incomparable, valuable and non-sustainable. (Amstrong, M 2012). The logic behind the RBV is that the resources and capabilities of the firm are very essential while creating it’s strategy because they help the firm establish it’s identity and they therefore lead to profitability in a firm.