Strategic Human Resource Implications of the Resource Based Vew

OVERVIEW

Effective human resource management is undoubtedly critical to the success of virtually all firms. Thus its importance is huge in the study of business strategy; which is the system of the firm's important choices that are critical to the firm's survival and relative success (Boxall and Purcell 2003). Getting more specific, strategic human resource management as a field of study is concerned with the strategic choices associated with the use of labour in firms and with explaining why some firms manage them more effectively than others (Boxall and Purcell 2003). Traditionally there has been much debate in the field of strategic HRM over two main schools of thought; "best fit" (contingency theory), and "best practice" (universalism).

The "best fit" school of thought argues that HR strategy will be more effective when it is appropriately integrated with its specific organizational and broader environmental context (Boxall and Purcell 2003). This proposes questions about which are the most critical contingencies in this context and how they are best connected. The 'best practice' school of thought argues that all firms will see performance improvements if only they identify and implement best practice. This perspective requires top management to commit themselves to key HR practices. Basically, the idea is that a particular bundle of HR practices has the potential to contribute improved employee attitudes and behaviours, lower levels of absenteeism and labour turnover, and higher levels of productivity, quality and customer service. This has the ultimate effect of generating higher levels of profitability (Boxall and Purcell 2003).

Both of the aforementioned "best theory" approaches to strategic HRM place emphasis on critical choices associated with competitive strategy; such as which industry to enter and what competitive position to seek in it (Boxall and Purcell 2003). However, these models make some serious assumptions of the firms HRM. They assume that the firm already has a clever leadership team that makes the competitive strategy choices effectively. They also assume that human resource issues such as hiring and training a capable workforce are straightforward and basic. The resource-based view (RBV) of strategy, a modern school of thought in the field of strategic HRM, sees these issues as strategic rather than straightforward.

THE RESOURCE BASED VIEW OF THE FIRM

In the last two decades, one of the most fundamental questions emerging in strategic management is how firms achieve and sustain competitive advantage. The resource based view has its origins in the new business strategy literature and has very quickly become influential, giving rise to developments in pay systems and training as well as overall models or approaches (Sisson and Storey 2000). It is the variety of different resources that makes each organization unique which leads to differences in competitive performance across an industry (Marchington and Wilkinson 2002). The RBV states that companies can "sustain competitive advantage by implementing strategies that exploit their internal strengths, through responding to environmental opportunities, while neutralizing external threats and avoiding internal weaknesses" (Marchington and Wilkinson 2002). The central argument in RBV is that while tangible resources have often declined in their strategic value, intangible and human resources have increased as a source of value.

Looking at internal sources of viability and advantage, emphasis is placed on resources which are critical to organizational success yet are rare, or not commonly available, are not substitutable and are combined together to form organizational capabilities or processes which are imperfectly imitable, or hard for others to copy; namely value, rarity, imperfect imitability, and a lack of substitutes (Boxall and Purcell, 2003) It is the combination of these resources that will allow companies to gain sustained competitive advantage.

Value means that the resource must be able to make a difference to the organization in the sense that it adds value somehow. Rarity means that there must be a lack of these particular resources within the industry so that they are not plentiful for competitors to use. Imperfect imitability refers to the idea that it is very difficult for other employers to copy (or imitate) the firms processes. Also, these resources must not be easily substitutable by other factors so that they are rendered obsolete or unnecessary.

A study was conducted in the highly competitive 'hire and reward' sector of the British road haulage industry (Marchington and Wilkinson 2002). Most firms within this industry were small businesses employing on average 50 drivers. In RBV terms the drivers were valuable in that they allowed for more trucks on the road and interacted with customers. Drivers are crucial for survival, let alone success. Drivers were seen as rare as many drivers were in and out of jobs pursuing those firms that offered more money and better working hours. Firms could alternatively approach temp agencies for drivers but there is a fear that they may damage trust and customer relations. Generally, temp workers are not very reliable either. There were no substitutes to drivers as each driver must be qualified and licensed. This study helps one understand the key ingredients in RBV. (Marchington and Wilkinson 2002) In some industries, technologies can substitute for human resources, whereas in other industries the human element is fundamental to the business. To illustrate, contrast labour-intensive and knowledge-intensive industries. The latter may be more conducive to the use of strategic HRM as a means to gain competitive advantage (Schuller and Jackson 1999).

According to the RBV, competitive advantage can only occur in situations of 'firm resource heterogeneity' and 'firm resource immobility'. It is these assumptions that make the RBV different from the traditional strategic management model (Schuler and Jackson 1999). Firm resource heterogeneity refers to the resources of a firm and how different these resources are across the firms. In the traditional model, firm resources are viewed as homogeneous across firms. Firm resource immobility refers to a situation where a firm is not able to obtain from other firms. In the traditional strategic management model, resources are considered mobile where firms can purchase or create resources held by a competing firm (Schuler and Jackson 1999). Therefore, given resource heterogeneity and resource immobility and assuming value, rareness, imperfect imitability, and non-substitutability; a firm's resource(s) can undoubtedly be the source of sustained