Unit 1 - Why is SHRM important?

The arguments relating to the importance of strategic human resource management tend to be constructed around the claim that ‘people make the difference’. The point being made here is that other resources are available and purchasable (capital, new plant and equipment etc.) on a relatively open market but it is the creative utilisation of these resources and ideas by people (singularly and in combination) which lies at the root of creating a competitive advantage.

These arguments are in some ways similar to those which stress the importance of the resource-based view or of the role of knowledge and the importance of ‘dynamic capability’. Dynamic capability was defined by Teece et al. as a ‘firm’s ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments’ (1997, p. 516). It suggests that intangible assets, including the knowledge and skills of the workforce, can be configured so that traditional routines do not hamper responses to rapidly changing environments. Instead, more flexible, meta-routines can be created which enable organisations to be capable of a higher state of responsiveness to inherently unpredictable forces. Failure to attract, retain and motivate the right numbers and right kinds of people means that opportunities are missed and that other resources are wasted.

HR matters too, it is argued, in the way it can affect customer outcomes – that is the customer experience. The connections that lead from one to the other have been explored by a number of researchers and management consultancies. In Figure 2.1 below, Bowen and Pugh (2009) show the potential linkages across business strategy, employees’ perceptions of human resource management practices, the organisational climates that are shaped considerably by these HRM perceptions and customer outcomes such as satisfaction, quality perceptions, loyalty, and even profitability.