Strategic Hrm

Cornell University ILR schooldays emailprotected CAHRS functional Paper Series Center for advance kind-hearted preference Studies (CAHRS) 4-1-2006 strategicalalalal worry and HRM Mathew R. Allen Patrick M. Wright Cornell University survey this and additional campaigns at http//digitalcommons. ilr. cornell. edu/cahrswp This Article is brought to you for free and open access by the Center for Advanced military man imagery Studies (CAHRS) at emailprotected It has been accepted for inclusion in CAHRS workings Paper Series by an authorized administrator of emailprotectedFor more in arrangement, please contact emailprotected edu. strategic foc utilize and HRM annul Excerpt The purpose of this chapter is to contend this intersection in the midst of strategical charge and HRM, what we k right away, and in store(predicate) directions for SHRM explore. We become begin by briefly discussing the judgment of outline and the popularization of the optionfulness-based f ind out (RBV) of the ho parthold. Next we leave hail its berth in creating the railroad tie among HRM and strategical wariness including fundamental questions that the RBV has raise in singing to SHRM.We get out then examine the menstruum state of affairs in SHRM the progress make, and secern questions and concerns occupying the charge of SHRM queryers. Finally, we entrust conclude with our views on emerging directions for SHRM look for. Keywords CAHRS, ILR, center, homophilee imagery, studies, advanced, link, in material bodyation technology, business partner, strategical role, competencies, HR, HRM, HR professionals, wariness Comments Suggested Citation Allen, M. R. & Wright, P. M. (2006). strategical watchfulness and HRM (CAHRS Working Paper 06-04).Ithaca, NY Cornell University, School of Industrial and wear out Relations, Center for Advanced Human Resource Studies. http//digitalcommons. ilr. cornell. edu/cahrswp/404/ This article is ready(prenominal) at emailprotected http//digitalcommons. ilr. cornell. edu/cahrswp/404 CAHRS at Cornell University 187 Ives Hall Ithaca, NY 14853-3901 USA Tel. 607 255-9358 www. ilr. cornell. edu/CAHRS WORKING PAPER SERIES strategical steering and HRM Mathew R. Allen Patrick M. Wright Working Paper 06 04 Strategic wariness and HRM CAHRS WP06-04Strategic heed and HRM Mathew R. Allen Patrick M. Wright Department of Human Resource Studies School of Industrial and Labor Relations Cornell University Ithaca, NY 14853-3901 April 2006 http//www. ilr. cornell. edu/cahrs This paper has non chthoniang unrivalled(a) formal review or approval of the faculty of the ILR School. It is intended to brighten results of Center query available to some others interested in preliminary form to encourage tidings and suggestions. to the highest degree (if not all) of the CAHRS Working Papers ar available for reading at the Catherwood Library.For information on whats available link to the Cornell Library Catalo g http//catalog. library. cornell. edu if you wish. Page 2 of 26 Strategic instruction and HRM CAHRS WP06-04 Abstract Page 3 of 26 Strategic Management and HRM CAHRS WP06-04 Strategic Management and HRM Introduction It has been said that the nigh of import assets of any business walk out the door at the end of each day. Indeed, throng and the heed of people be increasingly studyn as key elements of private-enterprise(a) service (Boxall & Purcell, 2003 Pfeffer, 1998 Gratton, Hailey & Truss, 2000).Spurred on by increasing competition, fast paced technological miscellanea, globalization and other factors, businesses be seeking to understand how one of the withstand truly rivalrous choices, their serviceman picks, give the axe be managed for war-ridden reward. This thought process that the piece elections of a hearty groundwork play a strategic role in the success of an organization has led to the formation of a playing field of research often referred to as strategic kind visionfulness steering (SHRM).This relatively young field represents an intersection of the strategic vigilance and human vision care (HRM) bookss (Boxall, 1998 Boxall and Purcell, 2000). Wright and McMahan (1992) defined strategic human resource management as the pattern of planned human resource deployments and activities intended to modify the fast to achieve its goals (1992, p. 298). The purpose of this chapter is to discuss this intersection between Strategic Management and HRM, what we know, and future directions for SHRM research.We will begin by briefly discussing the concept of strategy and the popularization of the resource-based view (RBV) of the hard. Next we will address its role in creating the link between HRM and Strategic Management including key questions that the RBV has raised in relation to SHRM. We will then examine the up-to-the-minute state of affairs in SHRM the progress do, and key questions and concerns occupying the attentio n of SHRM researchers. Finally, we will conclude with our views on future directions for SHRM research. Strategy And The Resource-Based View Of The FirmThe field of strategy straines on how sozzleds lav position themselves to compete, and its popularity began increasing exponentially in the mid 1980s with dickens books. First, Peters & Page 4 of 26 Strategic Management and HRM CAHRS WP06-04 Watermans (1982) In Search of Excellence provided a practitioner-oriented summary of sensitive companies and the common threads that united them. However, Porters (1980) Competitive Strategy presented a more academically based analysis of strategy, provided in a way that practitioners/executives quickly gravitated toward.This Industrial/ organic law Economicsbased analysis primarily accent marked on industry characteristics, in particular the five forces of barriers to entry, power of buyers, power of suppliers, substitutes, and rivalrous rivalry as the determinants of industry pro con tactability. While this analysis did propose four generic strategies (cost, disparateiation, focus, and stuck in the affection), the bulk of the analysis focused on external factors that determined company pro consortability. This siting seemed to dominate strategic management thinking of the archaeozoic 1980s.However, with the advent of the resource-based view of the family (Barney, 1991 Wernerfelt, 1980), strategic management research move to a more internal focus. Rather than simply developing competitory strategies to address the environment, the resource-based view suggested that firms should emotional state inward to their resources, twain(prenominal) physical and intellectual, for sources of competitive good. Though others had addressed the concept of the RBV preliminaryly, Barney (1991) specifically explicated how firm resources confer to the sustained competitive usefulness of the firm.He suggested that resources that ar valuable, rare, inimitable and non-sub stitutable will come about to competitive advantage. Value in this context is defined as resources either exploiting opportunities or neutralizing threats to the organization and rarity is defined as organism a resource that is not currently available to a large number of the organizations current or future competitors (Barney, 1991). Inimitability refers to the fact it is difficult for other firms to copy or otherwise honk the resources for their hold use.Finally, non-replaceability means that other resources seatnot be used by competitors in fix up to replicate the arrive at (Barney 1991). When all four of these conditions are met, it is said that the firm or organization possess resources which can fortissimoly lead to a sustained competitive advantage over quantify. Page 5 of 26 Strategic Management and HRM CAHRS WP06-04 The resource-based view has become almost the assumed paradigm within strategic management research (Barney and Wright, 2001).It has been the basic d ivinatory tack togetheration from which lots of the current strategic management research regarding knowledge-based views of the firm (Grant, 1996), human dandy (Hitt et al. , 2001), and dynamic capabilities (Teece, Pisano, & Schuen, 1997) are derived. In fact, Priem and Butler (2001) mapped RBV studies against eighteen strategy research topics, demonstrating the breadth of its distri furtherion within the strategic management domain.More importantly from the standpoint of this chapter, the resource-based view has become the guiding paradigm on which virtually all strategic HRM research is based (Wright, Dunford, & Snell, 2001). In spite of the wide acceptance of the RBV, it is not without criticism. Priem and Butler, (2001a, b) squander leveled the most cogent critique to watch suggesting that the RBV does not truly constitute a scheme. Their account focuses primarily on two basic issues. First, they suggest that the RBV is basically tautological in its definition of key cons tructs.They position that Barneys statement that if a firms valuable resources are absolutely bizarre among a set of competing and potentially competing firms, those resources will generate at to the lowest degree a competitive advantage (Barney, 2001 102) essentially catchs definitional dependence. In other words, without definitional dependence (i. e. valuable resources) the diametrical statement that ridiculous firms possess competitive advantages does not logically follow. Their second major criticism of the RBV as a theory focuses on the softness to test it (Priem & Butler, 2001b). They note he necessity condition of falsifiability for a theory. In other words, in value for a set of stated relationships to constitute a theory, the relationships must be able to be thrifty and time-tested in a way that allows for the theory to be found to be false. This relates directly to the surplusage criticism, but brings the controversy into the confirmable realm. In spite of these criticisms, even the critics agree that the match of the RBV on strategic management research has been remarkable and that the effort to focus on the internal aspects of the organization in explaining competitive advantage has been a useful one (Preim & Butler,Page 6 of 26 Strategic Management and HRM CAHRS WP06-04 2001b). While the debate might continue as to the theoretical implications of the RBV for strategic management research, it is clear that it has made a significant contribution to Strategic Management and, more specifically, SHRM research (Wright, Dunford & Snell, 2001). A Brief History Of Strategic HRM Wright and McMahans (1992) definition of strategic human resource management illustrates that the major focus of the field should be on aligning HR with firm strategies.Jim Walkers (1980) classic book, Human Resource Planning, was one of the stolon to directly suggest considering a firms business strategy when developing a human resource plan. Devanna, Fombrum, an d Tichys (1981) article, Human Resources Management a Strategic Perspective, added to the foundation. These attempts tended to take an existing strategy typology (e. g. Miles and Snows (1978) prospectors, analyzers and defenders) and delineate the kinds of HRM radiation diagrams that should be associated with each strategy. These attempts to tie HRM to strategy have been referred to as upended conjugation (Wright & McMahan, 1992).Beer, Spector, Lawrence, Mills and Walton (1984) introduced an alternative to the individual HR sub-function framework for HR strategy. They make dod that viewing HRM as sort HR sub-functions was a product of the historical development of HRM and current views of HR departments. They proposed a more customaryist approach to viewing HRM with the focus on the entire HR organization quite than single HR practices. This led to a focus on how the distinct HR sub-functions could be aline and work unneurotic to accomplish the goals of HRM and a more macro view of HRM as whole kinda than individual functions.This alignment of HR functions with each other is often referred to as horizontal alignment (see this Handbook, chapter 19. ) The combination of both upright piano and horizontal alignment was a significant step in explaining how HRM could provide to the accomplishment of strategic goals. However, disposed(p) the external focus of the strategic management writings at that time, HR was seen to play only a secondary role in the accomplishment of strategy with an emphasis on the role that HRM Page 7 of 26 Strategic Management and HRM CAHRS WP06-04 layed in strategy implementation, but not strategy formulation. Lengnick-Hall and LengnickHall (1988) stated strategic human resource management fashion exercises emphasize implementation over strategy formulation. Human resources are considered means, not part of generating or selecting strategic objectives. Rarely are human resources seen as a strategic contentedness from which c ompetitive choices should be derived (1988, p. 456). A shift in strategic management thinking would be necessary to change that perception and open the door for further development of the SHRM literature.The diffusion of the resource-based view into the Strategic HRM literature spurred this paradigmatic shift in the view of the link between strategy and HRM. Because the resourcebased view proposes that firm competitive advantage comes from the internal resources that it possesses (Wernerfelt, 1984 Barney, 1991), the RBV provided a legitimate foundation upon which HRM researchers could argue that people and the human resources of a firm could in fact contribute to firm-level procedure and exercise strategy formulation.This resulted in a number of efforts to conceptually or theoretically tie strategic HRM to the resource-based view. For instance, Wright, McMahan, and McWilliams (1994) suggested that while HR practices might be easily imitated, the human metropolis pool of an organ ization might constitute a source of sustainable competitive advantage. Lado and Wilson (1994) argued that HR practices combined into an overall HR organization can be valuable, unique, and difficult to imitate, thus constituting a resource meeting the conditions necessary for sustained competitive advantage.Boxall (1996, 1998) proposed a distinction between human resource advantage (advantage stemming from a superior human dandy pool) and organizational process advantage (advantage stemming from superior processes for managing human swell). The resource-based view likewise provided the theoretical rationale for empirical studies of how HR practices might impact firm success. One of the early empirical studies of this relationship was carried out by Arthur (1994). Using a sample of steel mini-mills, he found that a specific set of HR practices was significantly related to firm proceeding in the form of lower Page 8 of 26Strategic Management and HRM CAHRS WP06-04 scrap rates and lower good sprainover. Huselid (1995), in his landmark study, present that the use of a set of 13 HRM practices representing a high- mathematical process work system was significantly and overconfidently related to lower turnover, and higher pro views, sales, and market value for the firms studied. In a similar study, MacDuffie (1995), development data from automobile manufacturing plants, demonstrated that different bundles of HR practices led to higher writ of execution, furthering the argument that the integrated HR system, rather than individual HR practices, leads to higher deed.Delery and Doty (1996) similarly demonstrated the impact of HR practices on firm public presentation among a sample of banks. This vein of research quickly expanded in the U. S. (e. g. , Batt, 1999 Huselid, Jackson, & Schuler, 1996 Youndt, Snell, Dean, & Lepak,, 1996), the U. K. (e. g. , Brewster, 1999 Guest, 1997 Guest, Michie, Conway, & Sheehan, 2003 Tyson, 1997), elsewhere in europium (e. g. , dArcimoles, 1997 Lahteenmaki, Story, & Vanhala, 1998 Rodriguez & Ventura, 2003) and Asia (e. g. Bae & Lawler, 2000 Lee & Chee, 1996 Lee & Miller, 1999), as come up as in multinational corporations operating in multiple international environments (Brewster, Sparrow, and Harris, 2000). In sum, the RBV, with its focus on the internal resources possessed by a firm, has habituated the field a theoretical reason of why human resources systems might lead to sustainable competitive advantage and provided the spark to generate empirical research in this vein (Guest, 2001 Paauwe & Boselie, 2005 , Wright et al, 2005). Key Questions Raised By The Application Of RBV To SHRMIn spite of the significant hail of research demonstrating a link between HRM practices and firm mental process, on that point are several key questions regarding the RBV and its implications for SHRM research that remain unanswered. First, thither is some question as to whether current research on HRM and performan ce is truly testing the RBV. Second, there is still a general overleap of understanding sound-nigh the concept of fit, and its role in the link between strategy and HRM. Third, there are still unanswered questions regarding HRM and whether orPage 9 of 26 Strategic Management and HRM CAHRS WP06-04 not HRM defined as systems of HR practices truly constitutes a resource under the conditions outlined by Barney (1991) and, specifically, whether those resources are truly sustainable over time. Finally, there are several measurement and methodological issues that, while not within the direct image of this chapter, are worth mentioning as they are pertinent to our discussion of this intersection between Strategic Management and HRM research. Testing of the RBV within SHRMWhile the SHRM research just discussed has used the RBV as a basis for the assertion that HRM contributes to performance, it has not actually tested the theory that was presented in Barneys (1991) article (Wright, Dunfor d & Snell, 2001). Most of this research has taken a similar view on how HR practices can lead to firm performance. The model generally argues that HRM in the form of HR practices directly impacts the employees either by increasing human capital or motive or both. This in turn will have an impact on operative outcomes such as quality, client service, turnover or other operational level outcomes.These operational outcomes will in turn impact firm-level outcomes such as financial performance in the form of revenues, lolly or other firm-level measures of performance (Dyer, 1984). In a similar vein, Wright Dunford and Snell, (2001) point out that there are three important components of HRM that constitute a resource for the firm that are influenced by the HR practices or HR system. First, there is the human capital pool comprised of the stock of employee knowledge, accomplishments, motivating and behaviors.HR practices can help build the knowledge and skill base as salubrious as dr aw out relevant behavior. Second, there is the flow of human capital through the firm. This reflects the movement of people (with their individual knowledge, skills and abilities) as well as knowledge itself. HR practices can currently influence the movement of people. However, more importantly, the types of reward systems, culture, and other aspects of HRM influence the extent to which employees are willing to create, share, and apply knowledge internally. Page 10 of 26 Strategic Management and HRM CAHRS WP06-04Third, the dynamic processes through which organizations change and/or renew themselves constitute the third area illustrating the link between HRM and the resource-based view of the firm. HR practices are the primary levers through which the firm can change the pool of human capital as well as attempt to change the employee behaviors that lead to organizational success. There appears to be a general consensus among SHRM researchers about the general model of the HR to pe rformance relationship and the role of HR practices, the human capital pool, and employee motivation and behaviors as discussed by Dyer (1984) and others.The implications of this for RBV and SHRM research is that while separate components of the full HRM to performance model have been tested such as HR practices (Huselid, 1995 McDuffie, 1995) and human capital (Richard, 2001 Wright, McMahan & Smart, 1995), a full test of the causative model through which HRM impacts performance has not (Wright, Gardner, Moynihan, & Allen, 2005 Wright, Dunford & Snell, 2001 Boxall, 1998). Current research has established an empirical relationship between HR practices and firm performance, but more remains to be do.By testing the full model, including the additional components of the human capital pool and employee relationships and behaviors, a more complete test of the underlying assumptions of the RBV could be established, thus adding credibility to the theoretical model of the relationship betwe en HRM and performance. Fit and the Resource-based View of the Firm In the Priem and Butler (2001) critique of the RBV, one of the points brought up as a theoretical weakness of the RBV is escape of definition around the boundaries or contexts in which it will hold.They point out that relative to other strategy theories little effort to establish the hold contexts for the RBV has been apparent (2001 p. 32). The notion of context has been an important issue in the study of SHRM (Delery & Doty, 1996, Boxall & Purcell, 2000). Most often referred to as contingencies (or the idea of fit), contextual arguments center on the Page 11 of 26 Strategic Management and HRM CAHRS WP06-04 idea that the role that HRM plays in firm performance is contingent on some other variable.We break our discussion of fit into the role of human capital and HR practices. Human Capital and Fit. The most often cited post for explaining contingency relationships in SHRM is the behavioral perspective (Jackson, S chuler & Rivero, 1989) which posits that different firm strategies (other contingencies could be inserted as well) require different kinds of behaviors from employees. Consequently, the success of these strategies is dependent at least in part on the ability of the firm to elicit these behaviors from its employees (Cappelli & Singh, 1992 Wright & Snell, 1998).Going back to the distinction between human capital skills and employee behavior, Wright and Snell (1999) noted that skills and abilities tend to be necessary, but not sufficient conditions for employee behavior. Consequently, any fit to firm strategy must first consider the kinds of employee behavior (e. g. , experimentation and discovery) inevitable to flourishingly execute the strategy (e. g. , focused on offering innovative products), and the kinds of skills necessary to portray those behaviors (e. g. , scientific knowledge).Obviously, the workforce at Nordstroms (an upscale retailer) is quite different from the workfor ce at Wal-Mart (a send away retailer). Thus, the resource-based industry to SHRM requires management on a fit between the skills and behaviors of employees that are best suited to the firms strategy (Wright et al. 1995). While this idea of fit focuses on crossways-firm variance in the workforce, Lepak and Snell (1999) developed a framework that simultaneously addresses variation across firms and variations in HR systems within firms (see this Handbook, chapter 11).Their model of human resource architecture posits that the skills of individuals or jobs within a firm can be placed along two dimensions value (to the firms strategy) and uniqueness. Their framework demonstrates how different jobs within firms whitethorn need to be managed differently, but it also helps to explain differences across firms. For instance, within Wal-Mart, those in charge of logistics have extremely valuable and unique skills, much more so than the average sales Page 12 of 26 Strategic Management and HRM CAHRS WP06-04 associate.On the other hand, at Nordstroms, because customer service is important, sales associate skills are more critical to the strategy than those of the logistics employees. HR Practices and Fit. The theoretical assumption that the skills and behaviors of employees must fit the strategic needs of the firm in order for the workforce to be a source of competitive advantage leads to the exploration of how HR practices might also need to achieve some form of fit. With regard to vertical fit, as noted previously, business strategies require different skills and behaviors from employees.Because HR practices are generally the levers through which the firm manages these different skills and behaviors, one would expect to see different practices associated with different strategies. For instance, one would expect that firms focused on low cost might not pay the aforementioned(prenominal) level of wages and benefits as firms focused on innovation or customer service. Hori zontal fit refers to a fit between HR practices to ensure that the individual HR practices are set up in such a way that they support each other (Boxall & Purcell, 2003 Baird & Meshoulam, 1988, Delery, 1998).An spokesperson of this would be a selection process that focuses on finding team players and a compensation system that focuses on team-based rewards. Theoretically, the rationale for horizontal fit suggests that (a) complementary bundles of HR practices can be redundantly reinforcing the development of certain skills and behaviors resulting in a higher likelihood that they will occur and (b) conflicting practices can send change integrity signals to employees regarding necessary skills and behaviors that reduce the probability that they will be exhibited (Becker & Huselid, 1998).There appears to be some agreement in the literature that both types of fit are necessary for optimal impact of HRM on performance (Baird & Meshoulam, 1988 Delery, 1998 Delery & Doty, 1996 Boxall & P urcell, 2003), but not necessarily empirical support for these types of fit (see this Handbook, chapter 27 Wright & Sherman, 1999). Potential Pitfalls of Fit. The idea of fit, whether it be vertical or horizontal, raises two important questions for SHRM researchers. The first question focuses on empirical support forPage 13 of 26 Strategic Management and HRM CAHRS WP06-04 the idea of fit. Second, even if fit has positive consequences in the short term, does fitting HRM practices with strategy or other contingent variables universally lead to positive results? That is, are there negative implications of fit? As previously discussed, numerous researchers have argued for fitting HRM to contingent variables. However, the power of fit has not received much empirical support (Paauwe, 2004 Wright & Sherman, 1999).Huselids (1995) landmark study sought to test the fit hypothesis using a variety of conceptualizations of fit, only found little support. Similarly, Delery and Doty (1996) only found limited support across a number of fit tests. The lack of empirical support may largely be imputable to focusing only on a fit between generic HRM practices and strategy, rather than the outcomes, or products (Wright, 1998) of the HRM practices (skills, behaviors, and so forth ). Thus, it seems that it may be too early to draw any definite conclusions about the validity of the fit hypothesis.However, while fit between HRM practices and various contingency variables might enhance the ability of HRM to contribute to firm performance, there is also the possibility that a tight fit between HRM and strategy may conquer the ability of the firm to remain flexible enough to adapt to changing wad. Firms are increasingly required to adapt to environments that are constantly changing, both within and outside the firm. A tight fit may appear to be desirable but during times of transition and/or change a lack of fit might irritate adaptation and change more efficient (Lengnick-Hall, Le ngnick-Hall, 1988).Wright and Snell (1998) developed a framework in which HRM contributes to fit and flexibility simultaneously without conflict between the two, but this framework has yet to be tested and the question remains as to when and where fit might be more or little appropriate. The second question raised by contextual issues surrounding SHRM and the idea of fit is related to the efficacy of fit. Regardless of whether or not fit can have a positive effect on organizational outcomes, there is still some question as to whether or not true fit with key contingencies is feasible.Large organizations operate in complex environments, often across Page 14 of 26 Strategic Management and HRM CAHRS WP06-04 multiple products, industries and geographies. This complexity leads to questions regarding the ability of the firm to fit HRM practices to all of these diverse and complex circumstances (Boxall & Purcell, 2003). In addition, Boxall and Purcell, (2003) argue that there are competin g ideals within a business that require trade-offs in fit.They break fit as a process that involves some tension among competing objectives in management and inevitably implies tensions among competing interests (2003, p. 188). A simple example of these tensions can be seen in attempting to fit a strategy of dedication to employees with a hostile or extremely competitive operating environment. A firm with a strategic commitment to the well-being of employees operating in an economic downturn or time of increased competition may be forced to make choices between commitment to employees and a need for estructuring, layoffs or other non-friendly actions toward employees in order to stay assoilnt. In these situations, compromises will have to be made on either the fit with the strategy or the fit with the environment or both, raising the question again as to whether or not a true fit with contingencies is feasible. These questions regarding the ability to achieve fit and the desirabi lity of achieving fit do not diminish the importance of understanding contextual issues in SHRM research.Understanding the contextual issues surrounding HRM and its impact on performance remains critical. In spite of the interest in the role of contextual issues and fit in SHRM, findings in support of contingency relationships have been tangled (Wright & Sherman, 1999). Much of this criticism could be due to idle methods used in the measurement of HRM or the contingency and performance variables studied or that the correct contingencies have not yet been studied (Becker & Gerhart, 1996, Rogers & Wright, 1998 Wright & Sherman, 1999).In addition, Boxall and Purcell (2000) have argued that more complex and comprehensive models of contingency relationships are take in order to understand the impact of context on the HRM to performance relationship. Regardless of the reasoning, it is clear that the impact of context on this important relationship is not yet completely understood and m ore research is Page 15 of 26 Strategic Management and HRM CAHRS WP06-04 needed to understand the role of context, as well as questions surrounding models of fit in SHRM research.HRM Practices and Sustainable Competitive Advantage Another issue that has been raised by the RBV and its application to SHRM research is the sustainability of HRM as a competitive advantage. Whether one focuses on bundles of HR practices as an HR system, the human capital pool or employee relationships and behaviors, there remains the question as to whether HRM as a resource meets the inimitability and nonsubstitutability conditions that are required in the RBV for sustained competitive advantage (Barney, 1991).According to Barney (1991), there are three general reasons why firm resources would be difficult to imitate the resources are created and formed under unique historical conditions, the resources are causally ambiguous, or the resources are accessiblely complex. Labeled as travel guidebook depende ncy by Becker and Gerhart (1996), the unique historical conditions under which HRM is formed in individual firms may make its understanding and replication extremely difficult, if not impossible.HR systems are developed over time and the complex narration involved in their development makes them difficult to replicate. The development and implementation of a single HR practice such as a variable pay system takes place over time including time to solicit management input and buy-in, work out discrepancies, and align the practice with current strategies as well as firm culture and needs. The end result is a practice that reflects the philosophies and culture of the firm and its management, created to solve the specific needs of the company.Compound that single HR practice with a whole system of practices each with its own history and evolution specific to a particular firm, its philosophies and current situation and you have an HR system that cannot be bought or easily replicated wit hout a significant investment both of time and financial resources. causative ambiguity implies that the exact manner in which human resource management contributes to the competitive advantage of the firm is either unknown or sufficiently ambiguous Page 16 of 26 Strategic Management and HRM CAHRS WP06-04 so as to be difficult or impossible to imitate.According to Becker and Gerhart (1996), the ability to replicate a successful HR system would require an understanding of how all of the elements of this complex system interact and in turn impact the performance of an organization. Given the previous discussion of the basic HRM to performance model and the manner in which it is expected that HRM contributes to firm performance, it is difficult to imagine how the intricate interplay among various HR practices, human capital and employee behaviors, employee outcomes, operational outcomes and firm-level outcomes could be understood by a competitor in a meaningful way.Finally, Barney (19 91) points out that competitors will find it difficult to replicate a competitive advantage based on complex complaisant phenomena. Given the nature of HRM and its direct relation to employees, almost every aspect of the HR system, the human capital and especially the employee behavior and relationships has a social component.The way in which HR practices are communicated and implemented among different departments and parts of the organization is influenced by the various social relationships involved top management to general managers, general managers to department heads or managers and those managers to employees as well as interactions between departments and employees. The complexity of the social relationships in the eluding of HRM makes it difficult for competitors to imitate it. Finally, for a resource to constitute a source of sustainable competitive advantage it must be non-substitutable.This implies that competitors should not be able to use a different set of resource s in order to achieve similar results (Barney, 1991). This concept has not yet been tested, but could provide for interesting research in the area of contextual factors and SHRM. If, in fact, it is found that a particular set of HR practices is positively related to performance in a given context, then, a follow-on question to that which would get at the substitutability question might be whether or not there is another set of HR practices for which the results are similar.This could lead to discussions about strategic configurations of HR Page 17 of 26 Strategic Management and HRM CAHRS WP06-04 practices rather than universal high-performance work systems that have dominated agone research (Delery & Doty, 1996). Regardless of whether there is one or many ways to achieve similar results in different contextual situations, the testing of these possibilities would lead to an increased understanding of the relationship between the RBV and SHRM research and the sustainability of HRM as a strategic resource.Measurement and Methodological Issues In addition to key questions surrounding the RBV and SHRM research, there are also several measurement and methodological issues which have hindered our ability to better understand the relationship between strategy and HRM. Measurement issues relating to the HRM, competitive advantage and key control variables have made the comparison of results across studies and interpretation of findings difficult (Rogers & Wright, 1998 Dyer & Reeves, 1995).In addition, there are questions around the appropriate level of analysis within the firm at which to test these relationships as well as issues related to the mixing of variables measured at different levels of analysis (Rogers & Wright 1998, Becker & Gerhart, 1996). Finally, as was pointed out, the majority of research to date has focused on the relationship between HR systems and firm-level performance and, while the findings indicate a positive relationship, there is insufficient evidence at this point to be able to infer that the relationship is causal (Wright et al. , 2005).A full discussion of these issues is beyond the scope of this chapter and a more thorough discussion may be found in other chapters in this text (see particularly chapters 26 and 27), but it is important to note in discussing key questions in SHRM that they exist and need to be addressed or at least considered in future research. Future Directions Research on SHRM management over the past decade has made significant progress in developing our understanding of the role that HRM plays in firm performance. The field now has a significant foundation upon which to build future research.In our opinion, future research should focus on both answering key questions that remain in understanding the relationship Page 18 of 26 Strategic Management and HRM CAHRS WP06-04 between HRM and performance and by expanding or broadening what is considered SHRM. Such extension would encompass both other reso urces and other theories currently studied in strategic management research. Key Unanswered Questions The previous portion of the chapter pointed out several key questions that have been raised as a result of the application of the RBV to SHRM research that are not yet answered.First, research that directly tests the concepts outlined in the RBV has not been done (Priem & Butler, 2001). Thus future research should focus on testing the concepts of the RBV by testing the full model through which HRM leads to competitive advantage or firm performance. Do HR practices impact the human capital pool and the relationships and behaviors of the employees and do those outcomes in turn impact both operational and firm-level performance? Answering these questions by testing the full causal model would be a significant contribution to our understanding of the strategic nature of HRM.In essence, this reflects the black box process that Priem and Butler (2001) argued must be addressed by RBV theor ists and researchers. Second, future research should focus on understanding the contextual questions surrounding the HRM to performance relationship. Mixed results in past contextual research is not reason enough to abandon the question all together. It is highly apparent that HRM takingss more or less in certain situations or under certain conditions. Efforts should be made to continue to test established models of HRM in new and unique situations.In addition, more thorough tests of moderating variables in the HRM to performance relationship should be tested. Given the complexity involved in the measurement and testing of these relationships and the mixed results of past research in this area it is likely that researchers will need to seek out contexts with bring down complexity such as departments within large organizations or small businesses where reduced complexity will provide more meaningful measures of potential moderating variables and more meaningful tests of the modera ting relationships can be performed. Page 19 of 26 Strategic Management and HRM CAHRS WP06-04Another step that needs to be taken in understanding the role of context in the HRM to performance relationship is to move away from universal-type models of HRM such as highperformance work systems and high-involvement work systems and develop and test different configurations of HR practices that might apply to specific situations. In doing this, researchers will be able to better understand the specific bundles or HR practices that are applicable or fit with different types of organizations or situations, thus making a significant contribution to our understanding of the types of HRM that will numerate in a given situation.Expanding the Role of SHRM Future research in SHRM should focus on conceptually expanding what is considered to be the role of SHRM. Historically, SHRM has been viewed as the interface between HRM and strategic management (Boxall, 1996) with the focus of much research being on understanding how the HRM function (namely HRM practices) can be strategically aligned so as to contribute directly to competitive advantage.This implies a concern with how HR practices can contribute to strategy implementation without addressing the larger question of how HRM can contribute or play a role in strategy formulation (Lengnick-Hall & Lengnick-Hall, 1988). Wright et. al. (2001) argued that it is the human capital (the knowledge skills and abilities of the human resources) as well as the relationships and motivation of the employees that leads to competitive advantage. The purpose of HR practices is to develop or acquire this human capital and influence the relationships and behaviors of the employees so that they can contribute to the strategic goals of the irm. Future research should examine human capital and the social interactions and motivations of the human element within a firm (Snell, Shadur, & Wright, 2002), not only as independent variables but also as mediating and dependent variables. A focus in this area will bring the field more in line with contemporary views in strategic management. Research in this area will also help us to get beyond questions regarding how HR practices can facilitate the strategic goals of a firm and begin to understand how organizations can understand the resources found in their human element and use that Page 20 of 26Strategic Management and HRM CAHRS WP06-04 understanding to influence or even drive their decisions about their strategic direction. For instance, IBMs strong HR processes/competencies led it into the business of offering outsourced HR services. This was an internal resource that was drawn-out into a new product line, and illustrates how an understanding of such resources can influence strategic direction. Along these same lines, another way to break away from this notion of HRM as a facilitator of the strategic direction of the firm is by focusing on some of the resources currently salie nt to strategic management researchers.In their review of the RBV and SHRM relationship, Wright, Dunford and Snell, (2001) argue that the RBV created a link between HRM and strategic management research and that as a result of this link the two fields were converging. Because of this convergence, the potential impact of SHRM research on mainstream strategy issues is tremendous. Increasingly, strategy researchers are focusing on knowledge and knowledge-based resources (Argote, & Ingram, 2000 Grant, 1996), human capital (Hitt et al. 001), social capital (Inkpen & Tsang, 2005 McFadyen, Ann, & Albert, 2004), capabilities (Dutta, Narasimhan, & Rajiv, 2005), and dynamic capabilities (Teece, Pisano, & Schuen, 1997), as critical resources that lead to organizational success. While HRM practices strongly influence these resources, the SHRM literature seems almost devoid of empirical attention to them. single recently have researchers began to explore these issues (Kinnie, Swart, & Purcell, 2005 Thompson & Heron, 2005). Additional research in these areas would provide tremendous synergy between HRM and strategy.In addition, alternative theories such as learning organizations (Fiol & Lyles, 1985 Fisher & White, 2000), real options theory (McGrath, 1997 Trigeorgis, 1996) and institutional theory (Meyer & Rowan, 1977) can be combined with SHRM research to enhance our understanding of the strategic nature of HRM. For instance, Bhattacharya and Wright (2005) showed how real options theory can be applied to understanding flexibility in SHRM. In addition, Paauwe and Boselie (Chapter 9) provide a detailed analysis of how institutional theory can better inform SHRM research. The use of these in addressing questions in SHRM research willPage 21 of 26 Strategic Management and HRM CAHRS WP06-04 provide new lenses through which researchers are able to view the HRM to performance relationship, potentially providing new insights and ideas that will further our understanding of SHRM. Conclusion While the field of strategic HRM is relatively young, significant progress has been made at a rapid pace. Researchers have provided great theoretical and empirical advancements in a period of just over 25 years. Much of this progress is the result of the RBV and its emphasis on the internal resources of the firm as a source of sustainable competitive advantage.The RBV and its application to SHRM research created an important link between strategic management and HRM research. Its application has been followed by a significant amount of research using the RBV as a basis for assertions about the strategic nature of HRM. However, the link between HRM and strategic management can be strengthened by breaking away from the focus on HR practices. Other key resources currently being researched in strategic management have the potential to be directly influenced by HRM, but their coverage by SHRM researchers has been minimal, leaving a tremendous probability for future research i n this area.In addition to this, new theories relevant to strategic management have yet to be combined with SHRM research, leaving potential for additional contributions to our understanding of the intersection between strategic management and HRM. Page 22 of 26 Strategic Management and HRM CAHRS WP06-04 References Argote, L. , Ingram, P. , Levine, J. M. , & Moreland, R. L. (2000). Knowledge transfer in organizations Learning from the experience of others. organisational Behavior & Human Decision Processes, 82(1), 1-8. Arthur, J. B. (1994). Effects of human resource systems on manufacturing performance and turnover.honorary society of Management diary, 37(3), 670. Bae, J. , & Lawler, J. J. (2000). 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