Last Updated 10 May 2020

Factors Affecting Human Resource Management

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Wright and McMahan (1992) use the resource based view to explain how an enterprise’s human resources could generate sustained competitive advantage. Using Barney’s work (1991) as a staring point, Wright and McMahan (1992) argue that human resources can provide an important source of sustained competitive advantage when the following four criteria are met: 1) Human resources create value for the firm; 2) Human resources are unique and rare among current and potential competitors of the firm; 3) Human capital resources cannot be easily imitated.

Human resources cannot be substitute with other firm resources. Boxall (1996) further built upon the RBV and Strategic Human Resource Management paradigm, stating that human resource advantage (i. e. , the superiority of on firm’s HRM over another) consists of two parts. First, human capital advantage refers to the potential to capture a stock of exceptional human talent “latent with productive possibilities” (Boxall, 1996:67). The second one refers to the task of developing the employees and teams in such a way as to create an organization capable of learning within and across industry cycles.

Successful accomplishment of this task results in the organizational process advantage. Wright et al. , (2001:711) assert that besides the contributions brought to SHRM above discussed, the RBV also effectively put “people” on the strategy radar screen. According to Wright, et al. (2001), in the search for competitive advantage, strategy researchers increasingly acknowledge human capital (Hitt, et al. , 2001), intellectual capital (Edvinsson and Malone, 1997) and knowledge (Grant, 1996; Leibeskind, 1996; Matusik and Hill, 1998) as critical components.

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Hence, the RBV has provided a relevant platform for emphasizing the importance of people to competitive advantage, and thus, the inescapable fact that RBV strategy researchers must bump up against people and /or HR issues. Sanz-Valle et al. (1999) comment that HRM practices are usually grouped into broader topics in order to facilitate their study. They also argue that most of the scholars make a distinction between the following HRM fields: competence acquisition, development, compensation and appraisal.

For example, Fombrun, Tichy and Devanna (1984:41) argue that there are four generic HRM functions “that are performed by human resource managers in all organizations”: (a) Selection: acquiring “people who are best able to perform the jobs defined by the structure” (1984:41); (b) Development: enhancing employees performance on their current position as well as on positions they may occupy in the future. (c) Appraisal: appraising performance “to facilitate the equitable distribution of rewards”(1984:41);

(d) Reward: linking performance to rewards in order to motivate employees. Several factors can affect the implementation of HRM functions within organizations. In the following paragraphs, I will review some of the main internal and external factors discussed in the relevant literature. Firm infrastructure Size-structure effects, growth stage, culture and management is expected to influence HRM activities. Firm size is positively related to the formalization of HRM systems. Growth stage of the firm is associated with specific requirements for the HRM function.

The culture of a firm determines the shared meanings and values that underline HRM policies and practices. Management skills directly influence and limit HRM activities within a firm. The utilization of recruitment practices depends on firm size. Thus, in micro-businesses ordinary staff is recruited typically through informal channels while technical or managerial employees were recruited through employment agencies, recruitment fairs and advertising announcements (Matlay, 1999).

Larger businesses use application forms, press advertisements, and aptitude tests more frequently than smaller businesses (Hornsby and Kuratko, 1990). For many of the jobs within small firms, informal methods for recruitment are perceived to be entirely appropriate way of selecting the right applicant in SMEs and have the advantage of not requiring initial financial outlay in the context of SMEs’ limited resources (Cassell et al. , 2002: 686).

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