Importance of Business Strategy and Human Resource Strategy, Difficulties to Determine the Impact of Human Resource Strategy on Business’s Performance

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4.3 Profit Maximization

To secure profit maximization is also another reason to why it is vital to have close relationship between business and HR strategy. Therefore, by using the Resource-Based View Model, it will allow the firm to achieve maximum competitive advantage and remove threats. For Example, comparing Nike with Under Armour using the VRIO, Under Armour had lost to Nike in the Supply Chain Management (SCM) & Production. Under Armor had over production and storing the goods in the warehouse for long period. However, Nike had outsourced their SCM & Production to cheaper labor country. Therefore, leading to higher profitability and market-leading margin for Nike.

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(Peterson, 2014)

4.4 Higher chance of organization success and performance

To have a greater chance of firm success and performance is also another reason to why it is important to have close relationship between HR and business strategy. By using the “Best Practice” Model, HR strategies must unite employees from different backgrounds (Information Sharing) and giving them a sense of unity (teamwork). It also helps to keep the employee loyal and motivated thus leading to low turnover rate. Overall, this will improve the direction of the work team to a firm goal, giving employee self-satisfaction & recognition from superior (performance appraisal) and attaining firm success.

5. Why is it difficulties to determine impact of HR Strategy on organisation’s performance

5.1 Lack of consensus

Lack of consensus is the reason to why is it hard to determine. Lack of consensus on what constitutes a HR package and no agreement on the level of specificity of HR Practice (Karen Manning, 2005). There are many HR practices for example, Legal Issue, Disciplinary Procedure, Compensation, Benefits such as medical, dental, Conflict Management. However, there are no standard methods on which practices to be measure. Therefore, HR must set a standard guideline of the HR measurement.

5.2 Different type of method

The reason is because of the different type of method used to determine. There is no specific type of method that one firm will use. For example, a firm uses statistic method to analyze from January to June whereas from July to Dec, it uses qualitative & quantitative method. By using different methods, the final result of studies will be inaccurate when evaluating the firm’s performance.

5.3 Limitation of HR practices

Another reason to determine why is because of the limitation of HR practices. There are other factors that are affecting the firm’s performance such as leadership and productivity. For example, A US study conducted by (Clint Chadwick, 1998) identified two approaches to managing employee. An investment HR system (including extensive training, employee involvement, and teamwork) and a contractual HR system (average pay, use of atypical workers, and importance of industry credentials for selection). The findings suggested that not only were invested systems more likely to improve performance than contractual systems, but also that contractual system could have a detrimental effect on performance (Thompson, 2014).

5.4 Difference of Multi-National Corporation (MNC) and Small Medium Enterprise (SME)

Another reason is due to the difference of MNC and SME. Due to the characteristics of SMEs, it tends to use measures less often to manage firm performance and have an informal approach towards strategy with measures often reflecting only single aspects of firm strategy (Bäuml, 2014).

6. Conclusion

In conclusion, HR Strategy is the most important factor. Without the HR strategy, it will not be able to support the business strategy. Therefore, it will lead to the firm to a downfall (low profit & revenue, high turnover rate). Reason being, the business strategy will not be able to derive to the firm’s mission, vision and goals. However if HR Strategy is being put at a good use, firm will be able to derive to their goals smoothly.

7. Bibliography and References

7.1 Works Cited

Kluytmans, E.v.S.&.F., 1994. Business Strategy and Human Resource Management: Setting the Scene. Research Paper. Maastricht MERIT.

Business Case Study, 2014. Business Strategy. [Online] Available at: http://businesscasestudies.co.uk/business-theory/strategy/business-strategy.html#axzz4P6tiH749 [Accessed 31 Oct 2016].

EvolveDesign, 2014. Why business strategy is important? [Online] Available at: https://evolvedesign.ie/business-strategy/business-strategy-important/ [Accessed 6 Nov 2016].

George N. Root III, 2014. The Importance of Business Strategies. [Online] Available at: http://smallbusiness.chron.com/importance-business-strategies-4630.html [Accessed 6 Nov 2016].

CANIA, L., 2014. The Impact of Strategic Human Resource Management on Organizational Performance. Research. Albania: - European University of Tirana.

Surrey, E., 2013. Soft and Hard HRM. [Online] Available at: http://www.tutor2u.net/business/reference/soft-and-hard-hrm [Accessed 6 Nov 2016].

Thompson, J.B.&.A., 2004. Human Resource Management. 4th ed. UK: Pearson.

Tom Redman, A.W., 2006. Comtemporary Human Resource Management: Text and Cases. 2nd ed. Melbourne: Prentice Hall.

Jaap Paauwe, P.B., 2003. Challenging "Strategic HRM" and the relevance of the insitutional setting. Human Resource Management Journal, 13(3).

Jurevicius, O., 2013. Strategic Management Insight. [Online] Available at: https://www.strategicmanagementinsight.com/topics/resource-based-view.html [Accessed 6 Nov 2016].

Peterson, H., 2014. Business Insider Singapore. [Online] Available at: [Accessed 6 Nov 2016].

Business Case Study, 2015. Business Strategy. [Online] Available at: http://businesscasestudies.co.uk/business-theory/strategy/business-strategy.html#axzz4PD47Wbpf [Accessed 6 Nov 2016].

Karen Manning, D.W., 2005. Stategic Human Resource Management and Performance.