Strategic human resource management has been linked to competitive advantage and in turn to organizational performance. This linkage has been viewed from a universal, a contextual or a configurational perspective. Adopting the latter perspective, the authors of the present study investigate the possible Strategic HRM Bundles of competitive advantage within the EU and the extent to which these bundles are linked to business performance. The exploration revealed fifteen bundles: six of which have a positive and one has a negative relation to performance. These results raise theoretical as well as practical implications about the extent to which HRM is viewed strategically within the EU business context.
Key words: Business Performance, Competitive Advantage, Strategic Human Resource Management
Researchers have linked strategic human resource management to competitive advantage and, in turn, to business performance (Ulrich/Lake 1990; Pickles et al. 1999). To illustrate, Ferris et al. (1999) argued that few of the more traditional sources of competitive advantage create sustainable worth for the organization, while strategic human resource management can create the required value for the organization to help establish a sustainable competitive advantage. Strategic Human Resource Management (SHRM) provides requisite links between HRM and the strategic management processes of the organization (Taylor/Beechler/Napier 1996). Fundamental to the SHRM perspective is the assumption that firm performance is directly related to the set of HRM practices firms have in place (Huselid/Jackson/Schuler 1997).
However, in practice SHRM seems far from being applied as a competitive tool linked to business performance (Harris/Ogbonna 2001). As examples, Brewster (1995) reports that the integration of human resource management to business strategy is rare even among large organizations; Down et al. (1997) report that many management teams have had difficulty transforming human resource management into a strategic function, leaving the human resources department in most companies focused on administrative and clerical tasks.
In their attempt to explore the HRM-performance relationship empirically, researchers have identified different human resource management practices as crucial to sustainable competitive advantage (Flanagan/Deshpande 1996; Pfeffer/Veiga 1999; Ferris et al. 1999). However, no consensus exists in relation to the specific practices to be employed (Ferris et al. 1999; Boxal/Steeneveld 1999). Further, the systematic categorization of these practices into "Strategic HR Bundles" and their connection to performance is missing from existing research (MacDuffie 1995). Even so, a number of studies utilizing "bundles" of different management practices have shown the effects of these bundles on organizational performance to be much greater than when such practices are explored individually (MacDuffie 1995; Ichniowski/Shaw/ Prennushi 1997; Perry-Smith/Blum 2000).
Finally, while the connection between HRM and performance has been extensively researched in the US, very few studies on the subject have been conducted in Europe. Yet the European Union (EU) is increasingly successful economically and stands out as distinct from other economic areas like the USA or Asia (Brewster 1995). Brewster, Mayrhofer, and Morley (2004) emphasize the necessity to explore HRM approaches that are indigenous to the EU.
The present study is pursued in the EU context and has two aims. The first is to use the configurational approach to find the possible Strategic HRM Bundles of competitive advantage and the second is to investigate the extent to which these bundles are linked empirically to business performance. As measures of performance we combine profitability, productivity and service quality (Huselid 1995; Delaney/ Huselid 1996; Fox et al. 1999).
2. Strategic Human Resource Management and Performance
The strategic importance of human resources has been widely recognized (Swiercz/ Spencer 1992; Huselid 1995; Pfeffer/Veiga 1999). …