Human resources strategy as a catalyst for the success of the competitive strategy: an analysis based on alignment

Abstract

Competitive strategy is one of the key factors traditionally related to performance, but research explaining the mechanisms through which this strategy improves business results is scant. This study aims to shed light on this relationship by analysing human resources management (HRM) strategy as an essential tool for transforming business strategy into results. Focussing on two generic competitive strategies, we establish hypotheses on the need for alignment among four echelons: business strategy, HRM system objectives, HRM system capabilities and business performance. We test these hypotheses with structural equation modelling techniques using data provided by 204 industrial companies. The results show that to get the most out of a competitive strategy based on quality differentiation, HRM system objectives and capabilities must be focussed on quality. In the same way, a competitive strategy based on innovation differentiation requires HRM system objectives and capabilities focussed on flexibility to achieve the maximum impact on performance. In this second case, alignment is fundamental in low dynamic environments. This research not only provides additional evidence for the strategic relevance of the human resources function but also reveals the potential benefits of focussing on objectives and capabilities rather than on practices. Moreover, it shows that the role of HRM objectives and capabilities in the implementation of a competitive strategy can be shaped by factors beyond the company’s control, such as environmental dynamism.