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Shrm Essay

5300 words - 22 pages

RELATIONSHIPS BETWEEN HUMAN RESOURCE MANAGEMENT PRACTICES, BUSINESS STRATEGY FIT AND FIRM PERFORMANCE
Oya Erdil & Ay e Günsel Gebze Institute of Technology, Turkey

ABSTRACT
While there has been growing interest concerning the relationship between human resource (HR) practices, firm strategy and firm performance, limited research attention has been paid providing empirical evidence in support of them. This study investigates the relationships between HR practices, human resources management (HRM) - firm strategy fit and the firm performance of 63 small and medium sized firms located around Kocaeli and Gebze from both theoretical and empirical perspective. The findings indicate a strong ...view middle of the document...

Although the literature suggests that the link between HR practices and firm performance is quite positive, it is nevertheless not necessarily a direct relationship (Lau and Ngo, 2004). Regarding which HR practices are relevant, the literature often focuses on bundles of HR practices as determinants of firm performance. (Wright et all., 1997; Lepak et all., 2005). In this study the effects of five groups of HR practices on firm performance are analyzed. The bundle of HR practices is: selective hiring, use of teams and decentralization, incentive on performance, training and sharing information. These HR practices are adopted from the study by Ahmad and Schroeder (2003). Firm performance scale measures overall organizational performance including market share, growth and success. The effects of the HR practices on HRM-firm strategy fit (alignment) are also analyzed on the study.

INTRODUCTION
Global rivalry, shorter product life cycles, and unstable product and market environments have contributed to a new business world that offers some interesting challenges and opportunities to organizations. Established competitive mechanisms have become less useful response, and therefore firms continuously seek for newer sources of competitive advantage, one of the most important being human resource management (HRM) (Jayaram et alL.,1999:1; Terpstra, 1994: 13). Survival and success of organizations increasingly depend on their ability to build highly skilled work forces and to release the full potential of their human resources. Accordingly, within the last two decades, there have been a variety of important developments in the literature concerning the issues pertaining to the management of people and significant attention has been directed towards HRM practices (Haris and Ogbonna, 2001:158). HR practitioners have become busy with indicating the value of the HRM, mostly through showing its impact on firm performance (Rogers and Wright, 1998: 311). Studies linking strategy and HRM generally emphasize people-related activities that companies perform. This involves an essential assumption that all HR practices

THEORETICAL BACKGROUND Human Resource Management
From a strategic perspective, resource-based view

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(RBW), suggests that resource advantage of valuable knowledge, unique skill sets, and decision-making capability result in a firm's competitive advantage within the market place (Offstein et all., 2005). The RBW was originally proposed to shift from an organizational product perspective to a resource perspective to better explain strategic management of business. This approach assumes that resources exist heterogeneously among firms and there is a significant cost for the transfer of resources. These two characteristics lead to competitive advantage (Gowen III and Tallon, 2005). The RBW`s main assumption holds that only resources that are valuable, rare, inimitable and sustainable are capable of generating superior performance. Such...

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