Strategy Alignment

CRITICAL REVIEW PAPER

‘Strategic fit among business competitive strategy,

human resource strategy, and reward system’

Hsieh & Chen 2011

Word count: 1889

Nowadays, business performers are struggling more rigorously to outperform their competitors. This endeavor is with the aim of gaining sustainable competitiveness. So as to support such effort, a wide variety of research has been conducted in seeking a new avenue toward gaining a sustainable success in business industry.

One research for achieving sustainable competitive advantage has been released by Hsieh and Chen in 2011. In their study, they proposed three different reward systems including human capital reward, output reward and position reward, each of which corresponds to the following human resource (HR) strategies: innovation-oriented, contribution-oriented and commitment-oriented. In their approach, they immediately derived these HR strategies from Porter’s generic business strategies consisting of differentiation, overall cost leadership and focus. This attempt of immediately deriving HR strategies from business strategy is with an intention of winning the business competition by aligning the HR strategy with business strategy.

Figure. The integration among competitive strategies, human resource strategies and reward systems

Source: Adapted from Hsieh and Chen (2011, p. 26)

The notion they adapted which aligns HR strategy with business strategy is broadly accepted. Nevertheless, when designing HR strategy together with its reward system merely by deriving it from business strategy, and rather than from the company’s business process, and not considering cultural factor, the result will be ineffective to be applied in the corresponding company’s environment. Therefore, the approach of establishing strategy in managing people and compensating their work should be refined.

Hsieh and Chen (2011, p. 11) proposed the synergy between HR strategy with business strategy on the base of a premise that if an HR strategy is appropriately fitted to a business strategy then it will attract, retain and motivate employees who have the potential to enhance the company’s performance toward achieving its competitive advantage. However, HR strategy by itself is only a concept of how to manage people. Thus, to effectively apply the HR strategy to the potential employees, an appropriate reward system, as an HR tool, must be applied. In addition to that, as reward system is the tool functions in implementing HR strategy then its provision should also be made in accordance to the design of each HR strategy.

From the brief overview given, to some extent, it is highly accepted to