Development of strategic human resource management research: A review
Abstract: This paper aims to review the basic theory of strategic human resource management (SHRM) and to provide an overview of research objectives and processes in this field. The goal of this paper is to provide background theory to readers who do not have significant knowledge of this topic and to establish a basis of knowledge for the development of meaningful research. The target audience is readers who are newly interested in the topic of SHRM and want to quickly gain a basic understanding of it. The main issues covered are an overview of SHRM, SHRM perspectives, SHRM research objectives and SHRM research development.
Human resources are a core factor of success in organizations, and SHRM is a tool that helps a company gain benefits through improving the effectiveness of its human resource management (HRM). HRM is the process of managing human capital in an organization to help the organization achieve its goals.
Human resource (HR) functions create value by decreasing cost and gaining revenue (Barney & Wright, 1998). A strategy is a pattern of behaviour intended to help a company win against its competition (Gary P. Pisano, 2012), and SHRM is a process that helps companies achieve a competitive advantage (Jackson, S.E. & Schuler, R.S., 1995). In other words, SHRM is “the pattern of planned human resource deployment and activities intended to enable the firm to achieve its goals” (Wright & McMahan, 1992). SHRM focuses on the pattern of planned HR deployments and activities intended to enable the firm to achieve its goals (Patrick M. Wright, Scott A. Snell, 1998). It involves forecasting, understanding, changing, improving and leading HRM (Pelin Vardarlier, 2016).
1. SHRM perspectives
In this review, we focus on the theory of the most popular SHRM perspectives, which are the universalistic, contingent, configurational, and contextual perspectives (as defined by Martin Alcazar et al., 2005) as well as the resource-based view (RBV), best fit, and best practice. Some other perspectives are not mentioned in-depth in this paper because in our view, they are not basic; for instance, the behavioural perspective is rooted in contingency theory (Fisher, 1989). In another example, when knowledge becomes a critical resource for a firm, the RBV model becomes the knowledge-based view (KBV) model (Eric Kong & S. Bruce Thomson, 2008).
The universalistic model indicates that “some HR practices are always better than others and that all organizations should adopt these best practices”. Organizations that adopt a universalistic model can generate greater returns; however, some HR practices are more appropriate under certain conditions (John E. Deley & D. Harold Doty, 1996), Best practices are not feasible or limited, but best practices are not enough for an individual company to differentiate itself from its competitors (Paul Boselie, Jaap Paauwe & Paul Jansen, 2000).
The contingent model indicates that “in order to be effective, an organization’s HR policies must be consistent with other aspects of the organization” (John E. Delery & D. Harold Doty, 1996). To enhance performance, an organization should implement an HRM strategy that supports its business units or organizational strategies (Theresa W. Welbourne & Alice O. Andrew 1996). For example, HR practices should be consistent with the company’s strategic position (John E. Delery & D. Harold Doty, 1996). The contingency perspective complements the universalistic model (Fernando Martin Alcazar, Pedro M. Romero-Fernandez & Gonzalo Sanchez-Gardey, 2005). The logic is that HRM systems can contribute to organizational success when there is a coherent pattern of links between the system and the organizational strategy (Matt Bloom & George T. Milkovich, 1998).
The configuration model differs from the traditional contingent model because it is “concerned with how the pattern of multiple independent variables is related to a dependent variable rather than with how individual independent variables are related to the dependent variable” (John E. Delery & D. Harold Doty 1996). In configuration model analysis, not all the contingent factors will have the same weight in different organizations (Natalia Garcia Carbonell, Fernando Martin-Alcazar & Gonzalo Sanchez-Gardey, 2014).
The contextual perspective model is the model that studies the relationship between SHRM and its context. When compared to the other models reviewed above, this model is distinguished by the addition of macrosocial factors, for instance, the frequency of change in a firm’s external environment (Christin S. Kiberg, Dawn R. Detienne & Kurt A. Heppard, 2003), technological environment (Elena Cefis, 2011), or institutional environment (Diana Marcela Escandon Barbosa, Andrea Hurtado Ayala & Alberto Arias Sandoval, 2016).
The resource-based model emphasises the links between a firm’s internal resources, its HR strategy, and its performance. A resource is anything that can be thought of as a strength or weakness of a given firm. There are three resource categories: physical capital resources, or a firm’s plant and equipment; human capital resources, or experience; and organizational resources, which include a firm’s structure and its planning, controlling and coordinating systems and informal relations among groups within the firm and between the firm and other firms. In the RBV model, human resources are the pool of human capital, and competencies are found in the areas of knowledge, skill and ability (Patrick M. Wright, Gary M. Wright, Gary C. McMahan & Abagail McWilliams, 1993). The firm is seen as a bundle of sources and capabilities for production and market competition, and it can foster the required resources through its particular HR policies and practices (Ken Kamoche, 1996). HR practices affect the human capital pool and HR behaviour, and HR behaviour affects the firm’s sustained competitive advantage. HR practices aid in developing human resources and the human capital pool (Patrick M. Wright, Gary M. Wright, Gary C. McMahan & Abagail McWilliams, 1993). The RBV provides the logical link between HRM and strategic management theory (Peter Boxall, 1998).
In another perspective, SHRM models are divided into the best practice model and the best fit model. “Best HRM practices are those whose adoption generally leads to valued firm-level outcomes”. Thus, the best practice perspective declares that “particular human resources policy can be described as a best practice”. The best fit perspective declares that “adoption of an internally consistent system of high performance work practices will be reflected in better firm performance” (Mark A. Huselid, 1995). In this model, “strategic human resource management is the process of linking HR practice to business strategy” (Ulrich, D & Lake, D, 1991). Based on HR performance, each system has its own advantages and disadvantages (Evelien P. M. Croonen, Marko Grunhagen & Melody L. Wollan, 2016). The best fit approach offers a solution to the shortcomings of the best practice approach (Dr. Wilson Odiyo, Dr. Ronal Chepkilot & Dr. Isaac Ochieng, 2013). Most SHRM based on fit assumes that a certain strategy requires particular behaviours and attitudes from employees and particular HR policies (Patrick M. Wright, Benjamin B. Dunford & Scott A. Snell, 2001).
2. SHRM research objectives
SHRM is concerned with whether human resources can be a source of competitive advantage (Ken Kamoche, 1996). Research in SHRM usually finds a relationship between HR factors and other factors in organizations (Parul Jhajharia & Ritika Kaur, 2015). HR factors include management support, environment training, employee empowerment, teamwork (Bonnie F. Daily & Su-chun Huang, 2001), rewards systems (Bonnie F. Daily et al., 1996), selection, development, retention (Cemal Zehir, Youca Gurol, Tugbe Karaboga & Mahmut Kole, 2016) training, rewards (David E. Guest 1997), et cetera. Organizational performance is measured according to sales growth, stock growth (Paul F. Buller, Glenn M. McEvoy, 2012; Christopher J. Collins, Kevin D. Clark, 2003), job performance (Christopher J. Collins, 2003), IPO performance, long-term survival (Theresa W. Welbourne, Alice O. Andrew, 1996), organizational creativity (Teresa M. Amabile, Regina Conti, Heather Coon, Jeffrey Lazenby, Michael Herron, 1996), firm innovation, firm performance (Cemal Zehir, Youca Gurol, Tugbe Karaboga, Mahmut Kole, 2016), et cetera. Other factors that affect performance may include a company’s culture, resources, strategy, structure, focus on technology (Teresa M. Amabile, Regina Conti, Heather Coon, Jeffrey Lazenby, Michael Herron, 1996), et cetera.
The universalistic model is the simplest form of SHRM theory; research on this model focuses on the relationship between HR practice and a firm’s performance. There are two main steps that identify important strategic HR practices and determine the relationship between strategic HR and firm performance (John E. Delery, D. Harold Doty,1996).
In the contingent model, the researcher must determine how HR practices interact with other aspects of an organization to result in organizational performance (John E. Delery, D. Harold Doty,1996). For instance, research on the relationship between business strategy and HR strategy may identify HR practices as the basis of competitive gain (Parul Jhajharia, Ritika Kaur, 2015).
In the configuration model, an organization must develop an HR system that achieves both horizontal and vertical fit. Vertical fit is the fit between the HRM practices and strategic management processes of the firm, and horizontal fit is the fit between various HRM practices (Patrick M. Wright, Scott A. Snell, 1998). Researchers determine the relationships between HR practices that maximize horizontal fit and then link these employment systems to alternative strategic configurations to maximize vertical fit (John E. Delery, D. Harold Doty,1996). Fit may be divided into two: first is HRM fit at the developmental stage of the organization, with the five stages of initiation, functional growth, controlled growth, functional integration, and strategic integration; second is how HRM practices complement and support each other, relating mainly to six strategic components: hiring and firing, the structure of HR functions, planning and controlling resources, the compensation programme, skill needs, information management (analysis), and awareness of the environment (Lloyd Baird, Ilan Meshoulam, 1988).
In the RBV model, competitive advantage comes from firm resources, and internal aspect of the firm should thus be the centre of strategic analysis (Eric Kong; S. Bruce Thomson, 2008). The first objective of RBV research is predicting how resources affect performance. For instance, investment can increase performance (Joseph Sarkis, Pilar Gonzaler-Torre, Belarmino Adenso-Diaz, 2010). The second research objective is to determine whether HR practices can be a source of competitive advantage when they support resources or competencies that provide value to a firm (Wright Benjamin B. Dunford, Scott A. Snell, 2001). This model states that a firm also gains a competitive advantage by developing, combining, and effectively deploying its physical, human and organizational resources (Barry A. Colbert, 2014) or exploring the relationship between organizational characteristics and the adoption of SHRM (Ikhlan I. Altarawneh, Jehad S. Aldehayyat, 2011).
In the contextual perspective model, international SHRM scholars identify and describe how various macrosocial factors affect the relationship between HRM practices and organizational performance (Martin Alcazar, Fernando, Romero-Fernandez P. M., Gardey G. S, 2005). For instance, the research follows the theory that “the differences in institutional environment serve as boundary conditions with respect to the generalizability of our models and empirical results” (Patrick M. Wright, Scoot A. Snell, Lee Dyer, 2005).
3. SHRM research development
3.1. Establish the research objective
Mark A. Huselid (1995) researched the relationship between sales derived from each strategy and employee skills, organizational structure and motivation scales. Authors have also measured the relationship between HR and business objectives. Matt Bloom and George T. Milkovich (1998) determine whether risk influences the use of base and incentive pay and whether risk moderates the relationship between incentive pay and firm performance. Patrick M. Wright and Scott A. Snel (1998) researched the relationship between strategy, HRM practices, employee skills, and employee behaviour. John R. Deckop and Carol C. Cirka (1999) investigated how pay performance (compensation linked to employee performance) affects employee behaviour. Orlando C. Richard (2000) examined the relationship between culture, business strategy and firm performance. M. A. Youndt and S. A. Snell (2001) researched the effects of HR practices on human capital, social capital and organizational capital. Toby Marshall Egan, Baiyin Yang, and Kenneth R. Barlett (2004) researched the relationship among organizational learning culture, job satisfaction, and organizational outcome. Azadeh Rezvani, Pouria Khosravi, Maduka Subasinghage, and Melville Perera (2012) investigated how contingent reward transactional leadership behaviour influences enterprise resource planning systems. Pelin Vardarlier, Yalcin Vural, Ozgur Yildinrim, and Burcu Ylmazturk (2013) researched the relationship among companies’ HR strategies, internal growth strategy and resource types. Christopher J. Collins (2003) researched the effect of incentive pay based on organizational performance. Parul Jhajharia and Ritika Kaur (2015) researched the relationship among business strategy and HR strategies, selection and recruitment, induction, training, performance management, skill flexibility, accountability, teamwork, communication, involvement and participation, partnership, and compensation. Nouha Lahiani, Abderrahman El Mhamedi, Yasmina Hani, and Abdelfattah Triki (2016) researched the relationship between optimal assignment HR and maintenance of performance. Allison S. Gabriel, Arik Cheshin, Christina M. Moran, and Gerben A. van Kleef (2016) researched the relationship between HR practices and emotional performance. Ryza Aryanto, Avanti Fontana, and Adi Zakaria Afiff (2015) researched the relationship among SHRM practices, innovation capability and innovation. Yu Min Wang and Yao-Ching Wang (2016) identified model factors that facilitate and inhibit the implementation of knowledge management systems.
3.2. Identify variables
HR variables: According to Osterman (1994), HR practices include teams, job rotation, quality circles, and total quality management. According to kand (, they include staffing, training, rewards, appraisal, work design, participation, recognition, and communication, and employee relationships include psychological, contractual, job related, discretionary, and organizational citizenship relationships. Kuen-Hung Tsai, Christine Chou, and Ming-Yi Chen (2008) measured pay policy based on states where pay is comparable to the average market pay. Christopher J. Collins (2003) measured incentive programmes in organizations using the two variables of bonuses and stock options.
Firm performance variables: Mark A. Huselid (1995) measured both intermediate employment outcome and financial performance. Kuen-Hung Tsai, Christine Chou, and Ming-Yi Chen (2008) measured increases in sales, profits and the difference between revenue and the cost of material inputs.
Theresa W. Welbourne and Alice O. Andrew (1996) measured company results by IPO performance. Cemal Zehir, Youca Gurol, Tugbe Karaboga, and Mahmut Kole (2016) measured firm performance with both financial and nonfinancial measures, where finance is economic factors and nonfinance includes market share, quality, satisfaction and market effectiveness. David E. Guest (1997) measured performance outcome based on high productivity, quality, and innovation and low absence, labour turnover, conflict, and customer complaints. Theresa W. Welbourne and Alice O. Andrew (1996) measured business outcome by ability to survive to a particular time. Toby Marshall Egan, Baiyin Yang, and Kenneth R. Barlett (2004) measured motivation to transfer learning and turnover intention. Timothy Bartram, Pauline Stantion, and Sandra Leggat (2007) measured service indicators (satisfaction with service delivery, process outcome). Cemal Zehir, Youca Gurol, Tugbe Karaboga, and Mahmut Kole (2016) measured business outcome by willingness to support the development of new processes and productiveness by willingness to explore new opportunities.
Company strategy variables: Innovation strategy was measured by firms’ efforts to exploit knowledge or process development (Kuen-Hung Tsai, Christine Chou, Ming-Yi Chen, 2008). Business strategy was measured with various types; various authors have created business type classifications such as defenders, prospectors, and analysts and actions such as cost leadership, differentiation, focus, cost reduction, innovation, and quality enhancement (Jyoti Verma, 2012). Strategic priorities include team-based job design, a flexible workforce, quality improvement practices, employee empowerment, and incentive compensation (Wan-Jing April Chang, Tung Chun Huang, 2005).
Control variables: There is a relationship between firm size and performance and firm age and performance. Firm size is positively correlated and firm age is negatively correlated with performance (Kuen-Hung Tsai, Christine Chou, Ming-Yi Chen, 2008). Firm size, technology (Osterman,1994)
Other variables: Contingent variables include company size, company age, technology, capital intensity, degree of unionization, and industry sector (Osterman,1994). Cultural factors are measured by collectivism, power distance, uncertainty avoidance, and femininity (Wan Khairuzzaman Wan Ismail, Rosmini Omar, Maryan Bidmeshgipour, 2010). Firm resources include assets, capabilities, organizational process, attributes, information, and knowledge (Jay Barney, 1991). Human capital was measured by individual and collective ability, skill, and knowledge (Paul F. Buller, Glenn M. McEvoy, 2012). External factors were measured by frequency of change (Christin S. Kiberg et al., 2003) or measured in high- and low-innovation-intensive industries (Elena Cefis, 2011), where the degree to which the institutional environment is favourable for business was measured (Diana Marcela Escandon Barbosa et al., 2016). Instrumental measures were based on capital and on operating and managerial resources (Robert D. Klassen, D. Clay Whybark, 1999).
3.3. Deliver questions and conduct analysis
Delivery of questions: Questionnaire responses were collected from CEOs to measure HR practices, from members of top management teams (excluding CEOs) to measure networks, and from secondary resources to measure performance (Christopher J. Collins, Kevin D. Clark, 2003). Groups ranging in size from six to sixteen workers were asked about their job satisfaction (Thomas S. Bateman, Denis W. Organ, 1983).
Dominant research method: Qualitative methods may be applied to discover novel effect factors (Catia Milena Lopes, Annibal Scavarda, Luiz Fernando Hofmeister, Antonio Marcio Tavares Thome, Guiherme Luis Roehe Vaccaro, 2017). However, quantitative research is much more popular in recent SHRM research, and research on the relationship between HR practices and performance has provided a firm foundation on which the next generation of research can be constructed (Patrick M. Wright, 2003). Path analysis is an extension of multiple regression that can examine situations with several final dependent variables (David L Streiner, 2005). Path coefficients not only identify the direct effect of each of the exogenous variables on the appropriate dependent variables but can also be used to calculate both the indirect and the total effects of each variable (Toni Somers, 2009).
Sample size: When applying the path method, a minimum of ten cases is required for each parameter (David L Streiner, 2005). The sample sizes in previous studies are as follows: Orlando C. Richard (2000) collected data from 63 banks. Azhdar Karami, Farhad Analoui, and John Cusworth (2004) surveyed 114 senior managers from small and medium companies. Theresa W. Welbourne and Alice O. Andrew (1996) researched 136 firms. Emin Babakus, Ugur Yavas, Osman M. Karatepe, and Turgay Avci (2003) collected data from 415 employees of 16 banks and 180 responses to analysis. Wan-Jing April Chang and Tung Chun Huang (2005) surveyed 235 firms. Toni Somers (2009) researched 269 firms in the manufacturing industry. Cemal Xehir, Youca Gurol, Tugbe Karaboga, and Mahmut Kole (2016) analysed 297 valid questionnaires. Didem Pasaoglu (2015) sent 450 surveys, collected responses to 315, and used 304. Diana Marcela Escandon Barbosa, Andrea Hurtado Ayala, and Alberto Arias Sandoval (2016) surveyed 400 export companies. Bhanu S. Ragu-Nathan, Chades Apigian, T. S. Ragu-Nathan, and Qiang Tu (2004) sent questionnaires to 800 IS executives selected randomly from 3000 companies. Toby Marshall Egan, Baiyin Yang, and Kenneth R. Barlett (2004) researched 3336 firms and received 245 completed survey forms.
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