THE COMPLEX RESOURC-BASED VIEW: IMPLICATIONS FOR THEORY AND PRACTICE IN STRATEGIC HUMAN RESOURCE MANAGEMENT BY BARRY A.COLBERT York University

SHRM is predicted on two fundamental assertions. First it is the ides that an organization’s human resources are of critical strategic importance – that the skills, behaviours and interaction of employees have the potential to provide both the foundation of strategy formulation and the means for strategy implementation. Second it is the belief that a firm’s HRM practices are instrumental in the developing the strategic capability of its pool of human resources. Proponents of the RBV argue that sustained competitive advantage can originate in a firm’s resource and thereby draw attention to the internal workings of an organization. This view places more emphasis on the role of managers in the selection, development, combination and deployment of firm’s resources, and not merely on selecting its competitive position in the operating environment.

Some important questions need to be addressed:

a)      How does a firm ensure resources are aligned to support current strategies, are adaptable to new strategies, and are able to influence new strategic directions?

b)      How does a firm actively build and continuously renew strategic human and organizational resources to fuel competitive advantage?

The RBV: An Integrating Ground for SHRM

The RBV states that a firm develops competitive advantage by not acquiring but also developing, combining, and effectively deploying its physical, human, and organizational resources in ways that add unique value and are difficult for competitors to imitate (Barney, 1991)

Dimensions for Theory in SHRM

Universalistic perspective – or best approach asserts that certain independent –dependent variable relationships hold across whole populations of organizations- that is, some HR practices are always better than others and all organizations should adopt them.

Contingency perspective -  effectiveness of HR practices is contingent on how well they mesh with aspects of the organization (e.g. what discrete policies would be most appropriate if an organization were to pursue a low-cost strategy or wanted to encourage new product innovation)

Configurationally perspective – focuses on patterns of HR practices that together form an internally consistent whole (i.e. their effects are mutually reinforcing) and draws a correlation between those patterns and organizational performance (Doty &Glick 1994).

Once the appropriate policies are selected, the firm chooses from the available array of HR practices, or specific tools to execute the policies. Quality circles or TQM teams; variable compensation schemes, profit sharing  or piecework (all types of incentive pay); newsletters learning fairs, or town hall meetings to communicate – all HR practices a firm can implement and align with the policy level and guiding the principle of this.

NB: Delery notes that while the resource based view provides a nice backdrop, explaining the importance of human resources to firm competitiveness, it does not specifically deal with how an organization can develop and support the human resources it needs for competitive advantage. (1998: 290). It is difficult to grasp the precise mechanism by which the interplay of human resources practices and policies are generating value. To imitate a complex system, it is necessary to understand how the elements are interacting. Are the effects additive or multiplicative, or do they involve complex nonlinearities?... it is even difficult for a competing firm to imitate a valuable hr system by hiring away one or a few top executives because the understanding of the system is an organizational capability that is spread across many (not just a few) people in the firm (Becker & Gerhari 1996:787)

COMPLEXITY AS AN EXTENSION OF THE RBV

Complex RBV: Critical but Difficult Features of the RBV and Key Features of Complex Systems

Key features	RBV	Complexity
Creativity/adaptivity	Competitive advantage grows from latent creative potential embedded in firm resources	Complex adaptive systems learn and create new responses to their contextual environment
Complexity and ambiguity	Inimitability arises from social complexity and causal ambiguity	Living systems are composed of complex interrelationships that are nonlinear, nondeterministic and unpredictable
Disequilibrium, dynamism, path dependence	Complex relationships build over time and are historically dependent, disequilibrium is the creative state: dynamism and process issues are paramount	Systems thrive and create a far from equilibrium states; equilibrium leads to stagnation, decline and death; history matters; paths untold irreversibly through time
System –level resources	Some key strategic resources are intangible and exist only at the system level, in relationships	Some elements only exist at the system level, in the dynamic relationships between things

Current Approaches to HR Strategies: Inside-Out Versus Outside-In

     By Patrick M.Wright et al

Conclusion

HR functions and their corresponding strategies are much better positioned to add value to firms when they take an outside-in perspective. To develop an outside-in approach:

a)      develop a formal process for involving line executives in the development of HR strategy

b)      have formal mechanisms for tracking developments in the external environment as part of the process

c)      Begin with the assumption that everything the current HR function is doing is either wrong or does not exist – ensure that no current or prospective HR processes and systems are considered before there a deeper understanding of the business and people issues.

d)     Identify the key business and people metrics that will determine or indicate the success of the business, then constantly track and communicate those metrics o the entire internal HR community

e)      Based on the business issues and metrics, develop HR strategy that will maximally develop performance on those metrics

f)       Remember that HR strategy is a process, not a document, intervention, or event – the strategy should be formally examined for relevance annually, but informally examined on a continual basis.

STRATEGIC HUMAN RESOURCE PRACTICES, TOP MANAGEMENT TEAM SOCIAL NETWORKS, AND FIRM PERFORMANCE: THE ROLE OF HUMAN RESOURCE PRACTICES IN CREATING ORGANIZATIONAL COMPETITIVE ADVANTAGE

          Christopher J.Collins & Kevin D.Clark

HR practices can only be a source of sustained competitive advantage when they support resources or competencies that can provide value to a firm (Wright et al., 2001). Turbulent environmental conditions place a premium on both the speed and the quality of top management team (TMT) decision making and firm action. A key factor in a TMT’s ability to achieve both speed and quality is the use of real-time information (Eisenhardt, 1989). The social networks of top managers, defined as the systems of relationships top managers have with employees and other actors outside of their organization, are the chief source of timely and relevant information on the state of both the external environment and the organization. Three components of information management lead to effective action under uncertainty: information gathering (from inside and outside a firm), processing, and distribution. Through their unique position in the organization, top managers are able to affect the information flow within the organization by gathering and redistributing information across key external actors and internal locales. The structure (size and range) and strength of ties of TMT external and internal networks provide informational benefits that lead to competitive advantages and higher firm performance. Further, if TMT social networks are idiosyncratic because they are created through firm specific practices, they can lead to sustainable competitive advantage (Barney, 1991). TMT networks that are large and diverse in range provide value to a firm in the form of information advantages.

SHRM and the Development of TMT Social Networks

HR practices can enhance performance when they are aligned with one another to manage employees in a manner that leads to competitive advantage (Delery & Doty, 1996). HR practices can create value for a firm when the individual practices are aligned to develop critical resources or competencies. The employee based capabilities built and sustained through HR practices will be difficult to imitate because these practices and policies may be firm-specific, socially complex and path dependent (Lado & Wilson, 1994). Even if a set of practices can be imitated, there will be a considerable lag time between the implementation of a system and its impact. Performance appraisal and compensation are the primary HR practices fir use to elicit and reinforce desired behaviours (Lathan &Wexley, 1981)

A point to be noted is that since different network characteristics affect firm performance differently, companies should be careful to create the network characteristics that are most likely to affect performance in their particular environmental context.

Business strategy, human resources, labour market flexibility and             competitive advantage

By Jonathan Michie and Maura Sheehan

A broad consensus has emerged on the positive relationship between the use of human resource policies and corporate performance. It is argued that HR policies that are consistent with the firm’s strategy – strategic human resource management (SHRM) – are more effective (Miles and Snow et al 1984). In addition, labour market deregulation and flexibility are regarded as key determinants of national competitiveness and successful corporate performance. This paper examines:

a) The effects of HR policy on firm performance

b) The links between strategy, HR and the use of flexible employment contracts

c) The moderating effects of strategy on the links between HR, flexible labour and performance

The link between strategy and HR management

a)      best practice (universalistic perspective) – may be embodied in a variety of concrete and detailed HR techniques or practices that will encourage sharing of information within the organization

b)      The contingency approach argues that to be effective, HR policies and practices must be consistent with the strategy being implemented (Miles and Snow 1978, 1984. Guthrie et al., 2002). Business performance will be improved when there is consistency (fit) between business strategy and HR policies.

c)      The configurational approach differs from the “best practice” and contingency theories by being guided by a holistic approach to inquiry and adopting the systems assumption of “equifinality” configurational SHRM is concerned with the “pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals” (Wright and McMahan, 1992: 298). The configurational approach suggests that the firm must develop HR as a system so that both horizontal and vertical consistency can be achieved. The configurational perspective suggests that improved performance will occur only when “vertical” or external consistency and “horizontal” or internal consistency are achieved.

Competitive Strategies

Porter describes competitive advantage as the “essence of competitive strategy” and proposes three strategies that companies can use to this advantage: innovation, quality enhancement and cost reduction. In companies pursuing a cost based strategy, the logical approach to HR strategy would be to emphasize numerical flexibility and wage cost minimization. In such situation, the values and goals imbued within HR would be consistent with the organization’s primary cost reduction goals (Hogue, 1999: 421)

Labour market flexibility and corporate performance

Labour market deregulation has been regarded as playing a key role in the drive for a competitive, flexible economy. On the one hand, the use of flexible work practices can result in savings on wage costs. First, work may be hired and paid for only if there is work to be done. Second, “flexible” workers on average earn less than comparable tenured workers and are not entitled to the benefits of that tenured workers receive, in addition, “the decisions to hire new workers is taken more easily if workers can be fired more flexibly under the adverse circumstances. In this way, part of the entrepreneurial risk is shifted to employees thus making job creation easier (Kleinknecht et al., 1997:2)

In addition, if the time horizons of firms become shortened, the pursuit of what economists would characterize as “efficiency gains” may come to dominate other sorts of gains to be had from innovation and technological progress. This becomes problematic if the pursuit of short-term efficiency gains reduces the potential of the system for economic progress (Kleinknecht, 1998; Michie and Prendergast, 1998).

For firm-level analysis, such flexible work practices are often placed into the following broad areas:

1. Numerical flexibility – is the ability of firms to vary the amount of labour employed, by making use of part-time, temporary and seasonal employees, short-term contracts, agency labour, freelance work and homework or out work. The use of this type of labour is commonly referred to as “flexible employment contracts or contingent labour.
2. Functional flexibility – the ability to move workers from one task to another.
3. Wage or reward flexibility – having payment systems in place that encourage and reward improved performance (for example, performance-related pay.

Whether or not a firm use the types of flexible practices outlined is likely to reflect a strategic decision made by management. In other words, the use of flexible employment is likely related to – contingent upon – the firm’s competitive strategy. In particular, firms that are pursuing a cost-based strategy will be more likely to use flexible labour compared to firms pursuing an “innovator/quality –enhancer approach.

Conclusion

One of the aims of managers who invest in “progressive” HR practices will be to achieve improved corporate performance. If successful, the costs of such policies can, of course be recouped. A pertinent question then tends to be what sort of strategy their firm should be pursuing. Additionally, how much should be invested in HR practices. The degree to which the adoption of HR practices will indeed improve corporate performance – in statistical terms, the size and significance of the effect – will vary according to a range of factors one being the strategy that the firm adopts. It may pursue “high road” strategy of investing in progressive HR practices in order to motivate the workforce, to enhance their technical abilities and to provide opportunities for them to work more productively. In such situations, HR investment will be positively correlated with productivity and profitability

Alternatively, the firm may choose a low road, cost cutting strategy. For firms pursuing this type of strategies, it is unlikely that there will be a high level of investment in HR. in addition, where such HR practices are pursued, while there is evidence of “best practice” – meaning that investment in HR in general, especially in a number of policies, is correlated with performance - such investments are less likely to be more correlated with statistically significantly improved outcomes than in the case of for firms pursuing quality and innovation strategies.

There is a reason to believe that the costs of investing in HR practices will be recouped through improved performance. However, for this to happen requires not just that the HR practices lead to higher levels of commitment and motivation among staff, it is also necessary for this to be matched, first by the skills to work more productively and, also, by the opportunities to put those skills and motivation to good effect. For these three factors to be present – motivation, skills and opportunities – HR practices must be pursued as coherent packages, and combined with appropriate work organization. The decisions from HR should be consistent and coherent. And second, where investment in HR practices is appropriate, the degree to which this investment will pay dividends depends in part on an appropriate bundling of such practices.