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ISSN: 2230-9926 International Journal of Development Research

Vol. 07, Issue, 12, pp.18036-18042, December, 2017

ORIGINAL RESEARCH ARTICLEORIGINAL RESEARCH ARTICLE OPEN ACCESS

STRATEGIC HUMAN RESOURCE MANAGEMENT AND ORGANIZATIONAL PERFORMANCE:

A REVIEW OF LITERATURE AND RESEARCH FRAMEWORK
*Dr. Muhammad Aminu Bawa
Department of Petroleum Marketing and Business Studies, Directorate of Science, Petroleum Training Institute,
Effurun, Delta State, Nigeria

ARTICLE INFO ABSTRACT

Article History: The primary objective of this paper is to present a review of literature on theories and empirical
Received 26th September, 2017 studies on the relationship between Strategic Human Resource Management (SHRM) and
Received in revised form organizational performance and derive a framework for further research. Three central issues
12th October, 2017 emerged in this paper. First, that a growing body of evidence converge to suggest that changes
Accepted 09th November, 2017 taking place in the global business environment often are not accompanied by complementary
Published online 30th December, 2017 changes in human resource management practices leading to a situation whereby the failure of
some firms is due to the mismanagement of people rather than to problems with technical systems
Key Words: per se. Secondly, that this is because organizations have achieved relatively low levels
Strategic HRM, effectiveness in implementing Strategic Human Resource Management (SHRM) practices
Performance, especially in emerging economies of Asia and other developing countries in Africa like Nigeria
Competence, that are exposed to the challenges and opportunities of globalization. Finally that in order to
Firm Size, manage employees for competitive edge, human resource personnel must possess competencies
Technology.
relevant for implementing such strategic HRM policies and practices. Guided by theoretical
perspectives such as the firm’s resource-based theory of competitive advantage and empirical
studies, this paper develops a research framework to guide further research in strategic HRM to
prepare organizations especially in the developing world for the challenges of globalization.

Copyright © 2017, Dr. Muhammad Aminu Bawa. This is an open access article distributed under the Creative Commons Attribution License, which permits
unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Citation: Dr. Muhammad Aminu Bawa, 2017. “Strategic human resource management and organizational performance: A review of literature and
research framework”, International Journal of Development Research, 7, (12), 18036-18042.

relatively less on the role of human resources. Secondly, the

INTRODUCTION issue of globalization has been addressed predominantly in,
and with respect to, the developed economies of Western
A great deal of evidence has accrued to suggest that changes
Europe, North America and Japan. This paper is an attempt to
taking place in the global business environment often are not
address these two limitations since the human factor is one of
accompanied by complementary changes in human resource
the key issues in the new era of globalization (Bawa and Ali,
management practices leading to a situation whereby the
1999; Hassan, 1992; Sims and Sims, 1995). The primary
failure of some firms is due to the mismanagement of people
objective of this paper is to conduct a literature review on the
rather than to problems with technical systems per se (Bawa
role of strategic HRM on organizational performance in a
and Ali, 1999). This is because organizations have achieved
competitive business environment and to develop a research
relatively low levels of effectiveness in implementing Strategic
framework in order to advance empirical studies in the field.
Human Resource Management (SHRM) practices (Huselid,
Following Wright and McMahan’s (1999) comprehensive
Jackson and Randall, 1997). This is particularly the case in
theoretical framework for Strategic HRM, this paper develops
developing countries like Nigeria that are exposed to the
a research framework for Strategic HRM to prepare
challenges and opportunities of globalization. In spite of this,
organizations for the challenges of globalization. The rest of
attention of researchers to the challenges of globalization has
the paper is divided into three sections. The next section
been focused, more, on macroeconomic aspects and there is
presents a review of conceptual, theoretical and empirical
*Corresponding author: Dr. Muhammad Aminu Bawa, literature on the subject matter under study. Section three
Department of Petroleum Marketing and Business Studies, Directorate of
Science, Petroleum Training Institute, Effurun, Delta State, Nigeria.
18037 Dr. Muhammad Aminu Bawa, Strategic human resource management and organizational performance:
a review of literature and research framework

summarizes the literature and develops research framework competitive advantage, the resources available to competing
and the last section concludes the paper. firms must be variable among competitors and these resources
must be rare (not easily obtained). Three types of resources
LITERATURE REVIEW associated with organizations are (a) physical (plant;
technology and equipment; geographic location), (b) human
Conceptualizing Strategic HRM (employees' experience and knowledge), and (c) organizational
(structure, systems for planning, monitoring, and controlling
Strategic Human Resource Management (SHRM) involve a set activities; social relations within the organization and between
of internally consistent policies and practices designed and the organization and external constituencies). HR practices
implemented to ensure that a firm's human capital (employees) greatly influence an organization's human and organizational
contribute to the achievement of its business objectives resources and so can be used to gain competitive advantages
(Delery and Doty, 1996; Huselid et al., 1997; Jackson and (Schuler and MacMillan, 1984).
Schuler, 1995). Schuler (1992: 18) has developed a more
comprehensive academic definition of SHRM: “Strategic The second theoretical influence is the behavioral view based
human resources management is largely about integration and on contingency theory. This view explains practices designed
adaptation. Its concern is to ensure that: (1) human resources to control and influence attitudes and behaviors, and stresses
(HR) management is fully integrated with the strategy and the the instrumentality of such practices in achieving strategic
strategic needs of the firm; (2) HR policies cohere both across objectives. The third influence, based on transaction costs
policy areas and across hierarchies; and (3) HR practices are explains why organizations use control systems such as
adjusted, accepted, and used by line managers and employees performance evaluation and reward systems. The argument is
as part of their everyday work”. For Wright and McMahan that in the absence of performance evaluation systems linked
(1999), SHRM refers to the pattern of planned human resource to reward systems, strategies might not be pursued (Greer,
deployments and activities intended to enable an organization 1995: 107-8).
to achieve its goals. Some of the frequently cited fundamental
elements of SHRM in the literature includes the view that Combining the arguments from the three theories above,
Strategic HRM practices are macro-oriented, proactive and two issues become obvious
long term focused in nature; views human resources as assets
or investments not expenses; implementation of Strategic In the first place, HRM practices are adopted because of three
HRM practices bears linkage to organizational performance; specific social forces, factors or influences. First, constraining
and focuses on the alignment of human resources with firm forces, which shift as practices once viewed as negative
strategy as a means of gaining competitive advantage (Khatri, become interpreted positively and gain legitimacy. Second,
1999). cloning forces which pressurize firms to mimic the actions of
leading companies in the face of uncertainty and third, learning
Theoretical Foundations of Strategic HRM forces which are shaped through processes in educational
institutions and professional associations (McKinley, Sanchez
Several theoretical perspectives have been developed to and Schick, 1995; Thompson and Heron, 2005, cited in
organize knowledge of how HR practices are impacted by Ibrahim & Shah, 2013: 6). Secondly, this exposition provides a
strategic considerations. For example, Wright & McMahan more complete perspective on how researchers and managers
(1999) developed a comprehensive framework on theoretical can make HR decisions that ultimately affect the extent of
influences on HR practices. Four of these influences provide implementing strategic HR practices for positive firm level
explanations for practices resulting from strategy outcomes. Accordingly, researchers have tried to define and
considerations. These include the resource-based view of the guide empirical research and HR practices as to which
firm, behavioural view, the cybernetic system and the practices are considered strategic in nature. Delery and Doty
transaction cost view. The two other theories provide (1996) identified seven practices that are consistently
explanations for HR practices that are not driven by strategy considered strategic HR practices. These are internal career
considerations; they are the resource dependence and opportunity, formal training systems, appraisal measures,
institutional theories. The resource-based theory of the firm profit sharing, employment security, voice mechanisms and
blends concepts from organizational economics and strategic job definition. There are other Strategic HRM practices that
management (Barney, 1991). This theory holds that a firm’s might affect organizational performance. For example, Schuler
resources are key determinants of its competitive advantage. & Jackson (1987) presented a very comprehensive list of HR
Firms can develop this competitive advantage only by creating practices. However, the seven practices listed by Delery and
value in a way that is difficult for competitors to imitate. Doty above appear to have the greatest support across a
Traditional sources of competitive advantage such as financial diverse literature. For example, nearly all of these are also
and natural resources, technology and economies of scale can among Pfeffer's (1994) 16 most effective practices for
be used to create value. However, the resource-based argument managing people.
is that these sources are increasingly accessible and easy to
imitate by other organizations. Thus they are less significant An obvious question at this juncture is: How can organizations
for competitive advantage especially in comparison to a effectively adopt, implement and maximize strategic HRM
complex social structure such as an employment system. If that practices for valued firm level outcomes? That is, how can
is so, human resource policies and practices may be an firms increase the probability that they will adopt and then
especially important source of sustained competitive advantage effectively implement appropriate HR practices? Ensuring that
(Jackson and Schuler, 1995; Pfeffer, 1994). Specifically, four members of the HRM personnel have the appropriate human
empirical indicators of the potential of firm resources to capital or competencies has been suggested as one way to
generate competitive advantage are: value, rareness, imitability increase the likelihood of effective implementation of HRM
and substitutability (Barney (1991). In other words, to gain practices (Huselid, et al., 1997). What are these core
18038 International Journal of Development Research, Vol. 07, Issue, 12, pp.18036-18042, December, 2017

competencies? Ulrich and Yeung (1989) argue that HR performance. Similarly, Leonard (1990) found that
professionals will need four basic competencies to become organizations having long-term incentive plans for their
partners in the strategic management process. These include executives had larger increases in return on equity (ROE) over
business competence, professional and technical knowledge, a four-year period than did other organizations. Gerhart and
integration competence and ability to manage change. On the Milkovich (1990) found that pay mix was related to financial
other hand, the United Kingdom-based Management Charter performance. That is organizations with pay plans that
Initiative (MCI), an independent competence-based included a greater amount of performance contingent pay
management development organization, identifies seven key achieved superior financial performance. In combination, these
roles and required competencies. These include competencies studies indicate that organizations with stronger pay-for-
required to manage roles like managing activities, managing performance norms achieved better long-term financial
resources, managing people, managing information, managing performance than did organizations with weaker pay-for-
energy, managing quality and managing projects (MCI performance norms.
Management Standards, April, 1997). Finally, Huselid et al
(1997) identified two sets of HR personnel competencies as In another study, Terpstra and Rozell (1993) posited five
important for HR personnel: (1) HR professional competencies "best" staffing practices and found that the use of these
and (2) Business-related competencies. This paper focuses practices had a moderate and positive relationship with
only on these two core competences. Human Resource organizational performance. Huselid (1995) identified a link
professional competence describes the state-of-the-art HR between organization-level outcomes and groups of high
knowledge, expertise and skill relevant for performing performance work practices. Instead of focusing on a single
excellently within a traditional HR functional department such practice (e.g., staffing), Huselid assessed the simultaneous use
as recruitment and selection, training, compensation, etc. This of multiple sophisticated HR practices and concluded that the
competence ensures that technical HR knowledge is both HR sophistication of an organization was significantly related
present and used within a firm (Huselid et al., 1997). Business- to high sales turnover, organizational productivity and
related competence refers to the amount of business experience financial performance. Ayanda and Sani (2010) examined the
HR personnel have had outside the functional HR specialty. effect of strategic HRM practices on the effectiveness of
These capabilities should facilitate the selection and public sector organizations on a sample of 255 civil servants
implementation of HRM policies and practices that fit the cutting across thirty Ministries, Departments and Agencies
unique characteristics of a firm including its size, strategy, (MDAs) in Niger state, North Central Nigeria. Using
structure, and culture (Jackson & Schuler, 1995). In other correlation and multiple regression analysis, the results
words, these competencies will enable the HR staff to know indicate that strategic HRM is moderately practiced and found
the company's business and understand the ever changing that strategic human resource management was aligned with
economic and financial capabilities necessary for making overall government objectives. Finally, the researchers also
logical decisions that support the company's strategic plan found that line management development; training and
based on the most accurate information possible. development, compensation, career planning system and
employee participation are the most important strategic HRM
Empirical Studies practices that impacted more on organizational effectiveness in
the public sector. Ayanda and Sani (2011) conducted another
Human resource practices (HR practices) are the primary study examining the extent to which strategic HRM is
means by which firms can influence and shape the skills, practiced in the Nigerian manufacturing sector as well as its
attitudes, and behavior of individuals to do their work and thus impact on organizational performance. Using a multi-
achieve organizational goals (Collins and Clark, 2003, cited in respondent survey of 21 Nigerian manufacturing companies
Ibrahim & Shah, 2013: 8). An important issue at this juncture the results show that strategic HRM was moderately practiced
is how to conceptualize the path through which the by the companies. Results also indicate that line management
implementation Strategic HRM practices can lead to better devolvement, innovative recruitment and selection system,
organizational performance. Guest (1997, cited in Ibrahim & regular training and development of personnel, equity based
Shah, 2013: 8) provides a detailed suggestion in this regard compensation system, performance appraisal system, effective
positing that the commitment and flexibility provided by career planning system and a robust employee participation in
highly involving actions leads to behavioural changes among the organizations’ decisions and actions are the key strategic
employees because employees show high levels of motivation, HR practices that influence organizational performance.
co-operation and citizenship, thereby adopted better
performing behaviors, leading to lower absenteeism and In another study, Ugheoke, Isa and Noor (2014) investigated
turnover rates, as well as better productivity and quality. These the impact of strategic HRM on tangible firm performance
behaviors are associated with undesirable social results like using data from a sample of 250 SMEs in Lagos, South
turnover, conflicts and absenteeism and organizational results Western Nigeria. Using multiple regression analysis, the result
such as productivity, quality of goods and services and shows that strategic HRM has a significant positive influence
customer complaints. According to Guerrero and Barraud– on tangible performance. Michie and Sheehan (2005) in their
Didier (2004, cited in Ibrahim and Shah, 2013: 8), these types survey of 362 firms from both manufacturing and service
of performance were supposed to affect financial performance. sectors in the United Kingdom found that Strategic HR
Empirical studies accumulate to posit that greater use of practices significantly contributed to all the performance
Strategic HRM practices will always result in better measures used. In another study using 120 Spanish
organizational performance (Abowd, 1990; Gerhart and manufacturing firms, Rodriguez and Ventura (2003), found
Milkovich, 1990; Huselid, 1995; Terpstra and Rozell, 1993). that the implementation of a “make” HR system has a
Abowd (1990) found that the degree to which managerial significant and positive effect on the organization’s overall
compensation was based on an organization's financial performance and this leads to the enhancement of the
performance was significantly related to future financial employees’ commitment to the firm. Another study was
18039 Dr. Muhammad Aminu Bawa, Strategic human resource management and organizational performance:
a review of literature and research framework

conducted by Khatri (2000) using 222 firms in Singapore and competitive advantages of firms in the rapidly changing
found that high performance HR practices have marginal direct knowledge-based economy, some scholars have paid attentions
effect on sales and non- financial performance. Similarly, to examine the determinants of the adoption of HR practices
Wan, Ong and Kok (2000) in a study consisting of 191 firms (Tannenbaum and Dupuree Bruno, 1994, cited in Bahrami, et
in Singapore found that high performance work practices were al., 2013) or what some researchers refer to as organization’s
positively related to firm performance. In the case of requisite context variables (Ali and Bawa, 1999; Irwin, Hoffman and
Strategic HR competences, evidence from empirical research Geiger, 1998; Jackson and Schuler, 1995). These factors
demonstrates the increasing need for HR personnel to have include firm size, technological sophistication and union
both HR professional and business-related skills and coverage. Bawa, Jantan and Ali (1999) argue that the influence
competences. Noe, Hollenbeck, Gerhart and Wright (2010) of firm size on HR practices is well documented in theoretical
conducted a survey of HR executives in the US showed that and empirical studies. For example, institutional theory
HR managers are spending relatively less time in record suggests that larger organizations should adopt more
keeping and auditing, while their time spent in their activities sophisticated and socially responsive HR practices because
as business partners have doubled. The survey also revealed they are more visible and are under more pressure to gain
that HR managers believe that the most important skill needs legitimacy. However, economic considerations suggest that
of HR staff are team skills, consultation skills and because of the costs associated with many aspects of HRM,
understanding of business. acceptable economies of scale must be reached before
sophisticated HRM systems can be implemented. An empirical
Research has also shown that managerial competences study conducted by Ibrahim and Shah (2013) on 121
particularly in the HR function bring two advantages to the HR manufacturing firms in the electrical and electronic sector in
function: (1) Enhancing the status of the HR Department Malaysia discovered that among the three organizational
(Barney and Wright, 1988) and (2) Acting as important context variables investigated, only firm size showed
influences on the level of integration between HR management significant difference in firms’ decision to adopt strategic
and organization strategy (Golden and Ramanujam, 1985; HRM practices. As these researchers argue, larger firms could
Ropo, 1993). A study of Singaporean companies by Khatri have more complete and sophisticated human resource systems
(1999) found that when HR managers lack the necessary skills compared to small firms, as large firms need to spread out their
to perform their duties competently, line managers and cost, higher level of control and image consciousness due to
executives take over some of the functions of HR managers. their higher visibility in society. In addition, emerging
Research on managerial competences by Ropo (1993:51) evidences show that HR practices may differ in organizations
stressed that “the internal dynamism of the HR function serves depending on the level of technological sophistication in terms
as the most critical mechanism to keep the integration process of training (Majchrzak, 1988), performance appraisal (Snell,
going after it has been started under favorable organizational 1992) and reward systems (Snell and Dean, 1992). Studies also
and strategic circumstances”. Other studies show that if HR support the position that the presence of specific HRM
managers can evaluate their priorities and acquire new sets of practices may differ based on the union coverage of a firm (Ali
professional and personal competences, the HR function would and Bawa, 1999; Ng and Maki, 1993, Wagar, 1998; Lawler
be able to ride the wave of business evolution proudly with and Mohrman 1987).
other functions in the organization (Ulrich, Brockbank, Yeung
and Lake, 1995). RESEARCH FRAMEWORK

Suryaningtyas and Asna (2017) conducted a study to identify From the literature review so far, the following issues emerge.
and describe the strategic roles of human resource managers in First, that there appears to be a significant relationship between
a hospitality industry using data from three-star hotels in strategic HRM practices and firm performance (low employee
Malang, Indonesia and interviewed six human resource turnover, high productivity and high profitability (Bawa,
managers as participants in a qualitative method employing Jantan and Ali, 2000; Ibrahim and Shah, 2013; Huselid et al.,
semi-structured interview. The results show that the strategic 1997). Secondly, it is also clear that there exist low incidence
roles of human resource managers contribute in anticipating of implementing strategic HRM practices (Huselid et al., 1997;
competitive business challenges; contribute in creating Wright and McMahan, 1992). Thirdly, although there exists a
competitive advantage; and also that human resource were significant relationship between the extent of both HR
central in creating the competitive advantage for the company. professional and business-related managerial competencies
An elaborate study by Huselid et al. (1997) on 293 firms in the and the incidence of implementing HRM practices,
US to evaluate the impact of human resource managers' organizations have achieved higher levels of HR professional
professional/technical competencies on HR practices and the competencies relative to business-related competencies.
latter's impact on organizational performance. Results of the Finally, environmental context variables like firm size,
study suggest that consistent with the resource-based view of technology and union status affect the extent of implementing
the firm, there exist a significant relationship between HRM practices (Ali and Bawa, 1999; Bawa, Jantan and Ali,
Strategic HRM practices and organizational performance. 2000; Ibrahim and Shah, 2013; Jackson and Schuler, 1995;
They found that (1) HR related competencies and, to a lesser Snell and Dean, 1992; Wagar, 1998). The relationships
extent, business-related competencies increase the extent of discussed above are presented in a research framework (see
effective implementation of SHRM practices and (2) Fig. 1 below) and relevant propositions derived for future
consistent with studies linking HRM activities and firm research. This research framework is in keeping with the
performance (Huselid, 1995; Huselid and Becker, 1996), the thinking of a number of authors including Bawa and Jantan,
study support the argument that investments in human 2000, Delery and Doty (1996), Huselid, et al. (1997), Jackson
resources are potential sources of competitive advantage. and Schuler (1995) and Wright & McMahan (1992).
Owing to the increasing importance of HR practices to the
18040 International Journal of Development Research, Vol. 07, Issue, 12, pp.18036-18042, December, 2017

CONCLUSION

In conclusion, it is pertinent to point out issues raised in the

preceding sections of this paper are particularly relevant for
giving insights into the strategic HRM challenges facing
organizations especially in developing countries like Nigeria in
the new era of globalization. In other words, these issues will
help us organize thoughts on the level of preparedness of
organizations in implementing strategic HRM practices to
achieve higher organizational performance. This is only
possible if they have the requisite competence to play key roles
in enhancing the status of the HR Departments and also act as
important influences in the level of integration between HR
practices and organizational strategy.

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