The Evolution of HR Strategy: Adaptations to Increasing Global Complexity

Introduction

Discussions regarding the link between HR and strategy have long been evolving. From as far back as the industrial revolution, managing human resources was seen as the most costly and uncontrollable activity of the firm. The focus was on driving these costs down through person-job fit. Later, with the complexities of global competition, diversification, and total quality management, HR management was seen as something that needed to be consistent across the firm and aligned with the firm's strategy. More recently, with the increase of highly dispersed and diversified workforces, scholars have tried to understand how HR is coterminous and even formative to a firm's strategy. The implications of which are pushing scholars to venture into areas that neither HR nor strategy scholars have gone before.

The key objective of HR strategy is to guide the process by which firms develop and deploy people, relationships, and capabilities to enhance their competitiveness (Snell et al., 2001). Interestingly, this objective has not changed much over time, rather the context and environment in which firms are operating has changed. While our purpose here is not to discuss the evolution of markets and work environments, a discussion void of these considerations would be detrimental in understanding how HR strategy has and continues to evolve. Such an evolution, as we see it, has been beneficial to the overall productivity of firms as well as the overall value of the individual inside the firm.

Two things have changed over time that defines where we are today. First, the distinctions between HR strategy and competitive [Page 85]strategy have begun to blur (Snell et al., 2001). No longer are SHR scholars the only ones calling for a stronger focus on the people and processes inside the firm and how they are managed, but now strategy scholars realize that for their theories to be more complete and robust they must also focus on these ‘micro-level’ factors (e.g., Felin and Hesterly, 2007; Teece, 2007). As the value proposition of a firm rests more and more in its knowledge and service activities, strategic management depends largely on what people know and how they behave. A firm's strategy rests largely on how it is implemented by individuals, but also how it is formulated by individuals— leaving difficulty in separating how people are managed from organizational strategy.

The second change to define where we are today is in how valuable people are seen to the firm. Snell et al. (2001) pointed out that when people are no longer viewed as merely ‘hands and feet’ in a production function, but as key sources of strategic capability, the focus on organization and governance changes as well. Because no other resource possessed by a firm has free will or heterogeneity of ideas, products and services often originate in individuals, making human resources and how they are managed a potentially unique source of strategic leverage (Chadwick and Dabu, 2008). Further, managing the exchanges among geographically dispersed employees and between employees and external actors is difficult (i.e., the Barnard/Simon notion of partial inclusion). Many who define the firm as a knowledge community (e.g., Kogut and Zander, 1992), realize the difficulty involved in creating firm advantage. For one, the increase in differentiated workforces possess added cultural, geographical, and competency gaps (Becker and Huselid, this volume). So, in addition to managing the collective knowledge of individuals within a firm, advantage comes in being able to manage the relationships of those individuals as well (Kang et al., 2007).

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