Cruciality of Hrm in Strategic Formulation and Implementation

Businesses are increasingly looking at human resources as a unique asset that can provide sustained competitive advantage. The changes in the business environment with increasing globalisation, changing demographics of the workforce, increased focus on profitability through growth, technological changes, intellectual capital and the never-ending changes that businesses are undergoing, have led to increased importance of managing human resources (Devanna, Fombrum, & Tichy, 1981; Wright, 1998).

Strategy has always been considered a critical success factor in all areas of human

activity. This has been a dominant viewpoint in theory and practice, not only in business enterprises but also in areas such as military action and diplomacy, politics and

government, personal development and career. In all these areas, it is widely recognized

that “strategy matters”. The argument of course holds for a good strategy, appropriate for

given conditions, which can render superior outcomes or can even overcome deficiencies? Due to resource disadvantage and difficult environmental conditions.

Everybody wishes to learn from successful examples in order to understand which

strategy was followed and how this was applied in specific conditions. Particularly for

business enterprises we expect strategy to provide direction and cohesion of action

in the highly competitive and continuously changing business scene; to identify what type

of competitive advantage the enterprise should pursue, what activities and positioning

should select and how to implement the strategic choices.

Strategy formulation is only one part of the equation however; it is often in the details of implementation that business strategies get into difficulties. Implementation like formulation requires an appropriate environment. There no doubt therefore that human resource is fundamental (crucial) to the business and a favourable human resource (HR) environment has to be established before the various strategic choices can be analysed. It is human resource strategy, and the role of human resources in building competitive advantage and successful strategies.

Formulation of strategies focuses on dealing with opportunities and threats in the environment. Human resources and human resource management (HRM) can play major roles in the organization's overall strategy, particularly when human resources are viewed as providing a major competitive advantage. Strategic human resource management (SHRM) is the effective application of the organization's human resources to accomplish the organization's overall strategies. Human resource strategies define the manner in which the organization's practices, programs, policies, and activities will be aligned to obtain consistency with the organization's overall strategies. Such strategies play an implementation role and are valuable means of obtaining direction, consistency, and coherence in human resource efforts.

Strategy implementation focuses on business transformation and change. Directing strategy implementation and change processes, methods and tools. Defining a change plan, with actions spanning over a wide spectrum: structures and systems, skills and culture, individuals and management style. Organization of the project of strategic change, agents and roles. Engagement of stakeholders, overcoming resistance, communication as well.

There is little disagreement about the strategic importance of human resources in organizations among scholars and practitioners. During the recent years a growing number of sources have claimed, that the human resources are the companies most important assets, and that management of these resources to a larger extent will contribute to the continuous competitive advantage of firms (e.g., Wright et al., 1994; Lado & Wilson, 1994; Pfeffer, 1994; Ulrich (ed), 1998).

As a scarce strategic resource core employees and managers must be carefully allocated and continuously developed. Also, since traditional sources related to markets, financial capital, and/or scale economies is weakened by globalization, effective management of human capital may possibly be the significant determinant of firm performance. Human resource activities are claimed to be related to the performance of a firm. Appelbam et al. (2000) investigated the link