To compete effectively in a dynamic market, business entities need to develop resources that ensure their survival. Increasing competition has for instance arisen with increased globalization and adoption of technology that has eliminated the competitive-effect of many traditional factors that positioned an entity at an advantage over other competing entities (Andersen 2010). For instance, Internet platforms that enable firms to sell their products to a wide market have eliminated the need to invest in multiple distribution channels. Start-ups can thus have a wide reach without having to invest in extensive distribution channels. Increasing globalization has also enabled aspects such as outsourcing thus enabling entities to make substantial savings in cost. Out of the resultant increasing competition, it has become necessary for entities to identify and build resources that would offer them an advantage upon which they would compete effectively (Andersen 2010).
The resource-based view posits that entities can sustain their competitive position by constantly developing their resources and capabilities. By developing such resources, entities would find it easier to come up with innovative products that sustain their competitiveness in the market (Andersen 2010). Strategic human resource management (SHRM) builds on such a resource-based view of an entity’s internal environment. SHRM contends that, by basing the HR strategy on the entity’s strategy, HR policies and practices would help in the achievement of the goals and vision of the firm (Kane & Palmer 1995). Such an alignment creates capabilities that competitors cannot imitate easily thus enabling the entity to compete effectively in the market (Kim & Gray 2005). Consequently, adopting SHRM approach would result into better outcomes for the entity; this paper assesses such an assertion by evaluating whether SHRM leads to high performance.
The paper first expounds on the concept of SHRM then evaluates the link between SHRM and an entity’s performance. Subsequently, the paper discusses the limitation of assessing performance of an entity with respect to HR based wholly on financial aspects. Using the broad measures of performance highlighted in the discussion about limitations of financial metrics in assessing HR performance, the paper discusses two ways – being a change agent and a business partner – through which SHRM adds value to a business. Finally, the paper discusses the challenges that impede the achievement of a strategic role for the HR department providing potential solutions to such challenges and core competencies that help the HR professionals to achieve SHRM objectives.