Business strategy and performance: the role of human resource management control
| DOI | https://doi.org/10.1108/00483480510591444 |
| Date | 01 June 2005 |
| Published date | 01 June 2005 |
| Pages | 294-309 |
| Author | Yao‐Sheng Liao |
Business strategy and
performance: the role of human
resource management control
Yao-Sheng Liao
National Pingtung Institute of Commerce, Pingtung, Taiwan, Republic of China
Abstract
Purpose – To illuminate how the alignment of HRM control and business strategy affects firm
performance.
Design/methodology/approach – Empirical data are collected from computer and peripheral
equipment industries via questionnaire. The measures include business strategy, HRM control, and
performance. The major analytical technique used in this study is moderated hierarchical regression
analysis.
Findings – The value of any approach to HRM control can be augmented or diminished by
simultaneously matching the HRM to the type of business strategy adopted by firms.
Research limitations/implications – It is unknown how the selection of industries and
geographical areas would affect this study’s findings.
Practical implications – Firms should use an appropriate combination of HRM control systems
aligned with their strategic goals in order to improve business performance.
Originality/value – This paper identifies the match between HRM control and business strategy
and offers practical help to a firm when they are used in combination effectively.
Keywords Human resourcemanagement, Corporate strategy,Control
Paper type Literature review
Introduction
Human capital has long been held to be a critical resource in most firms (Pfeffer, 1994).
Human resource management (HRM) is one of the principal mechanisms by which
managers integrate the actions of individuals to keep their behavior congruent with the
interests of the firm (Goold and Quinn, 1990). Business leaders now recognize that
the human resource (HR) function has a direct impact on bottom line results and must
be aligned with corporate goals. Both academics and practitioners agree that as the
dynamics of competition accelerate, people are perhaps the only truly sustainable
source of competitive advantage (Reich, 1990; Stewart, 1990). Therefore, effective
management of human capital may be the ultimate determinant of organizational
performance.
Rather than focusing on particular HR practices that are used in isolation,
strategic human resource management (SHRM) researchers look more broadly at
bundles of HR practices that are implemented in combination. SHRM research ers
have established a broader perspective that is oriented toward managing the
workforce as a whole since the era of SHRM was ushered decades ago. Since that
time, behavioral perspective has emerged as the predominate paradigm for the
research (Fisher, 1989; Schuler, 19 89; Snell, 1992). According to behavio ral
perspective, different strategies require different behaviors and different HRM
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/0048-3486.htm
PR
34,3
294
Received October 2003
Accepted February 2004
Personnel Review
Vol. 34 No. 3, 2005
pp. 294-309
qEmerald Group Publishing Limited
0048-3486
DOI 10.1108/00483480510591444
practices to elicit and reinforce those behaviors. This view of the link between
strategy and HRM provides a clear explanation for why such management should be
linked to strategy. To date, a growing body of empirical evidence supports this
perspective (Schuler and Jackson, 1989).
HRM has evolved over the years from a disjointed collection of employment
practices. If we are to develop a more parsimonious depiction of the field as a whole, an
overarching construct is needed to describe how particular patterns of practice fit
together. Control is an important – if sometimes neglected – facet of organizational
design. In the past, the construct of control has been used as a lens for combining HRM
practices (Eisenhardt, 1985; Gupta and Govindarajan, 1991; Snell, 1992). A control
perspective is consistent with the behavioral perspective in many ways; for instance,
control systems mold the emergent behavior (Snell, 1992). Accordingly, this study used
the concept of control to integrate HRM practices and place them in the strategic
context of firms.
Strategies are only a means toward an end. According to contingency theory, a close
link exists between business strategy and HRM methods. This theory holds that HRM
methods are determined by the type of business strategy a firm follows. It moreover
assumes that the companies that closely coordinate their business strategy and HRM
practices achieve better performance than the companies that do not (Huang, 2001).
To date, there is an extensive research exploring the links between competitive
strategy and HRM strategy (Bird and Beechler, 1995; Delery and Doty, 1996;
Huang, 2001; Huselid, 1995; MacDuffie, 1995). However, one of the areas that is
conspicuous by its absence is, based on control perspective, the links between HRM
control and business strategy, and their effects on performance. Further effort is
needed to direct toward closing the gap.
The focus in this study is on the performance effects of HRM control an d interaction
of business strategy with HRM control. As such, this research contributes to
knowledge about the effects of HRM control on firm performance and, importantly,
illuminates how HRM control moderates the relationship between business strategy
and firm performance.
Literature review and hypotheses
Business strategy
A strategy is an integrated and coordinated set of commitments and actions designed
to exploit core competencies and gain a competitive advantage. In the sense, strategies
are purposeful and precede the taking of actions to which they apply (Slevin and Covin,
1997). Business-level strategy is designed to provide value to customers and gain a
competitive advantage by exploiting core competencies in specific, individual product
markets (Dess et al., 1995). Thus, a business-level strategy reflects a firm’s belief about
where and how it has an advantage over its rivals.
Business strategies are concerned with a firm’s industry position relative to
competitors (Porter, 1985). Thus, favorably positioned firms may have a competitive
advantage over their industry rivals. As to the types of business strategy, Miles and
Snow’s (1984) strategy types involved defenders, prospectors, and analyzers. Porter
(1985) classified strategies into three generic types: cost leadership, differentiation, and
focus. Schuler and Jackson (1987) used labels slightly different from those of Porter to
classify business strategy into three types: cost-reduction, innovation, and
Business
strategy
performance
295
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