the impact of competitive strategies, and strategic human

ArchivesofBusinessResearch–Vol.5,No.1

PublicationDate:January.25,2017DOI:10.14738/abr.51.2464.

Sayyad,N.(2017).TheImpactofCompetitiveStrategies,andStrategicHumanResourceManagementonFirmPerformance

ofPalestine.ArchivesofBusinessResearch,5(1),1-15.

Copyright©SocietyforScienceandEducation,UnitedKingdom 1

TheImpactofCompetitiveStrategies,andStrategicHumanResourceManagementonFirmPerformanceofPalestine

NermeenSayyad

Al-QudsUniversity,FacultyofBusinessandEconomicsDepartmentofBusinessAdministrationJerusalem,Palestine

Abstract

ThispaperexaminestheimpactofcompetitivestrategiesandstrategicHuman

ResourceManagementonFirmPerformanceofPalestinefromvariouscritical

perspectives.Rapidenvironmentalchanges,competitiontoprovideinnovative

products and services, changing customer and investor demands and

globalization have become the standard backdrop for firms. Sustained

competitive advantage could be generated from a firm’s human capital by

designingstrategichumanresourcemanagementtodiagnoseafirm’sstrategic

needs which is required to implement a competitive strategy and achieve

operational goals. Effective human resource management strategy

systematicallyorganizesallindividualhumanresourcemanagementmeasures

to directly influence employee attitude and behavior in a way that leads

business to achieve its competitive strategy. The researcher has selected

corporate andnon-corporate firms aswell as small andMediumCorporation

were chosen in different areas of Palestine (south, north, and middle) 106

respondents selected from 45 firms across the three zones of Palestine. The

general objective of the study is to investigate the place of Strategic Human

ResourceManagementinimprovingcorporateperformanceamongmentioned

firms in Palestine. The study used descriptive statistics (frequencies, means

andpercentages) toanswer the threeresearchquestionsposed for thestudy.

The Spearman Rank Correlation Coefficient was used to test the three

hypotheses that guided the study. The final results showed that there is a

strong positive correlation between strategic HRM and performance level of

competitioninthefirms.ItwasalsoconcludedthatSHRMisanimportantand

indispensabletoolforanyorganizationsperformanceandforanyorganization

that wants to gain competitive advantage over others. Finally, this article

develops a conceptual framework that explains the relationship between

strategic human resource management, competitive strategies and firm

Performance.

KeyWords:Strategichumanresourcemanagement,Firmperformance,Competitivestrategy,Palestine

INTRODUCTION

Thewordorganization implies that there isaholisticsystem,membersof thissystemare insomewaycommittedorobligatedtoit,andthatthesystemisarrangedaccordingtosomekindof designated design or structure (April Young love 2006). The organizations usually haveresources at their disposal which they deploy to realizing their goals and objectives. Theseresources are: Capital, Land, Labor (Human) andTechnology.Humans are an organization'sgreatestassets;humansand thepotential theypossessdriveanorganization(Christine Jahn2007). Today's organizations are continuously changing. Organizational change impacts not

Sayyad,N.(2017).TheImpactofCompetitiveStrategies,andStrategicHumanResourceManagementonFirmPerformanceofPalestine.ArchivesofBusinessResearch,5(1),1-15.

URL:http://dx.doi.org/10.14738/abr.51.2464. 2

only the business but also its employees. In order tomaximize organizational effectiveness,humanpotential—individuals'capabilities,time,andtalents—mustbemanaged.Organizations are seeking to create much competition between them, taking more market,morecustomers,moresales,etc.Rapidchangesstemmingfromglobalization,advancementofinformationsystemsandotherfactorshavecausedhighercompetition.Manyorganizationsaredriven by the market to set their goals in their performance. Some of the goals are: costreduction, achieving sales levels, increasing thenumberof customers, increasing themarketpercentage, improvingproductivityandquality, innovativeproducts.Therealizationof thesegoalswillbeachievedthroughthehumanresourcesmanagementinorganizations.Workforce,asthekeytosuccess,willenabletheachievementoforganizationalperformance.Humanresourcesareregardedasoneofthemostimportantsourcesoftoday'sfirms.Humanresources management is more important than other competitive sources because thesepeople use other assets in organization, create competitiveness and realize objectives. Thusfirstly,organizationsmustunderstandtheexpectationsoftheirworkforceinordertoachievethedesiredperformance.Therealizationofexpectationsofemployeeswillenablethedesiredbehavior of employees in the organization. The desired outcomes of the organization inmanaging their workforce are: competence, cooperation of employees with managers,cooperationof employeesbetween them, showing the capabilitiesof employees;motivation,commitmentandsatisfaction;attitudeandpresence;employeebehaviors.The overall goal of performancemanagement is to create a culture as high performance inwhichindividualsandteamstotakeresponsibilityforthecontinuousimprovementofbusinessprocessesandtheirskillsandcontributeinachievingthetargetssetbymanagers.Inparticular,managementperformancecanbeexpressedas theapproximationof individualobjectivesofemployeeswithorganizationalobjectivesprovidedthatemployeessupportthecultureoftheorganization.(Armstrong,2006).The purpose of strategic human resourcemanagement is to improve business performancethrough people management. The organizations need to manage their human resourceseffectively and efficiently to achieve the desired goals and objectives. The achievement thegoalsandobjectivestranslatealso inbetterperformance.So, the issuesraised fordiscussionare:Howshouldorganizationsmanagetheirmainsource–humanresources?Doesstrategichumanresourcemanagementhelptomeettheneeds,thegoalsandobjectivesofthebusiness?Asshouldbeadaptedstrategichumanresourcemanagementtorealizetheperformance?Howshould adapt strategic management of human resources to increase organizationalperformance?Themainobjectivesofthestudyare:

1. To observe closely how applicable is in practice the theoretical aspect of strategichuman resourcemanagement for the achievement the organizational performance inPalestine.

2. To observe if organizations use the strategy of human resourcemanagement for theachievementoftheirperformanceobjectives.

3. To observe the importance of these strategies in the organization and in theirperformanceinPalestine.

4. Is there any relationship between Strategic Human Resource Management andorganizationalsuccessinPalestinianfirms?

5. DoPalestinianfirmspracticeSHRMdifferently?6. DoesStrategicHRMhaveanysignificanteffectonorganizationalperformance?7. DoesSHRMgivesomeorganizationsanedgeoverothersthatdonotpracticeit


ArchivesofBusinessResearch(ABR) Vol.5,Issue1,January-2017

LITERATUREREVIEW

HumanResourcesDefined

Human Resources (HR) has been given many definitions over the years, but the two mostpopulardefinitionsgivenbytheAmericanHeritageDictionaryare“thepersonsemployedinabusinessororganization”(HoughtonMifflinCompany[HMC],2000)and“thefieldofpersonnelrecruitmentandmanagement”(HMC).Bothdefinitions fail toprovidethekey insight intothepower of HR policies, strategies and quality personnel to be able to create substantialcompetitive advantage for an organization. TheHR field has changed dramatically from theoriginalHRdepartmentsof theearlyandmid-twentieth century to today.TheseoriginalHRdepartments (called personnel departments at the time) existed primarily to hire newemployeesandadministeremployeebenefits.Theachievementsoforganizationalobjectivescanbedifferentindifferentorganizations.Thestudies emphasize the impact of HRM on organizational performance. Basically, and otherstudies in this area, point out that it is necessary to achieve organizational objectives andmanagementofhumanresourcesshouldbestrategic.Also, thestrategiesofhumanresourcemanagement should be integratedwith the overall organizational strategy in the context ofachieving performance. There has been much research on strategic human resourcemanagement thataffectsorganizationalperformance.Thediscussionsanddefinitionswillbedivided in two parts of speech: the strategic management of human resources andorganizationalperformance.StrategicHrmConcept

StrategicHRMisaprocessthatinvolvestheuseofoverarchingapproachestothedevelopmentofHR strategies,which are integrated verticallywith the business strategy and horizontallywith one another. These strategies define intentions and plans related to the overallorganizational considerations, such as organizational effectiveness, and to more specificaspects of peoplemanagement, such as; resourcing, learning and development, reward andemployee relations. Strategic HRM focuses on actions that differentiate the firm from itscompetitors(Purcell,1999).ItissuggestedbyHendryandPettigrew(1986)thatithassevenmeanings:

Ø Theuseofplanning;Ø Acoherentapproachtothedesignandmanagementofpersonnel;Ø Systemsbasedonanemploymentpolicyandworkforcestrategy;Ø Oftenunderpinnedbya“philosophy”;Ø MatchingHRMactivitiesandpoliciestosomeexplicitbusinessstrategy;Ø Seeingthepeopleoftheorganizationasastrategicresource;Ø Achievementofcompetitiveadvantage(Armstrong,2006).

StrategicHRMhasaclearfocusonimplementingstrategicchangeandgrowingtheskillbaseofthe organization to ensure that the organization can compete effectively in the future(Holbeche, 2004). SHRM facilitates the development of a human capital that meets therequirementsofbusinesscompetitivestrategy,sothatorganizationalgoalsandmissionwillbeachieved (Guest, 1987). Strategy of human resource management is an integral part ofbusiness strategy.Themain focusof this strategy is to achieveorganizationalobjectives. So,strategy, then, is a set of strategic choices, some of which may be formally planned. It isinevitablethatmuch,ifnotmost,ofafirm’sstrategyemergesinastreamofactionovertime(BoxallandPurcell,2003).



OrganizationalPerformanceConcept

Campbell’s(1999)theorydefinesperformanceasbehaviororactionrelevanttotheattainmentofanorganization’sgoalsthatcanbescaled,thatis,measured.Moreover, jobperformanceisdefinedaswhatoneispaidtodo,orwhatoneshouldbepaidtodo.Thetheorystatesthatthemeasurement options, be they ratings from a supervisor, peer, or self, a simulated worksample,orhardcriteria(e.g.tallyingrevenuegenerated,costssaved,customercomplaints,orsomevariantofacomputerizedperformanceassessment)besidesbeingvalid,reliable,andnotdeficient should be free of contamination from sources of variation that are not under thecontrol of the individual (e.g. differences in technology impacting a person’s performance).Situationalenhancersorconstraints,ifnottakenintoaccountinanappraisal,cancontaminatethe mean, variance, or both with regard to an individual’s performance. Observation andinterpretationholdthekeytotheestablishmentofeffectivecriteria.Yet,anongoingprobleminappraisingpeople is the lackofreliability intheobservationof theirbehavior(RonanandPrien1971).Thisunreliability is largelyattributedtowell-knownratingerrorssuchas“firstimpressions”, “halo”, and “similar-to-me”. Lifson (1953) found that up to one-third ofperformance measurement variance is due to rater differences despite the fact that theobservershadconsiderableexperience inobservingandevaluatingpeople in theworkplace.Lance(1994)corroboratedthis finding.Experience,however, isnotasubstitute for training.Tosolvetheproblemregardinglackofreliability,anobservermustbetrained.Inthissection,training programs that have been shown to be effective are described, and the necessity oftakingcontextintoaccountisexplained(Boxall,PurcellandWright,2007).Organizational performance is one of the most broadly and extensively used dependentvariablesinorganizationalstudiestoday,andyet,atthesametime,itremainsoneofthemostimpreciseandloosely-definedconstructs(RogersandWright,1998).Inthestrategyliterature,the focus of attention on this construct has been concerned almost entirely with financialmeasuresofperformance.Conceptually,organizationalperformancehasbeendefinedas thecomparisonof thevalueproducedby a companywith thevalueowners expected to receivefrom the company (Alchian and Demsetz 1972). Ramanujam (1986) indicate that a narrowdefinitionofperformance focuson theuseof simpleoutcome-based financial indicators thatareassumedtoreflectthefulfillmentoftheeconomicgoalsofthefirm.The literaturereveals thatstudies intotheHRMperformancehavenotdeterminedaspecificand precisemeaning for the organizational performance construct. Some studies have usedsubjectivemeasures toevaluate firms’performance,suchasemployeesatisfaction,customersatisfaction,executives’perceptionsaboutthecompany’sperformance,absenteeism,employeecommitment,andotherbehavioraspects.Otherstudiesreferencevariousobjectivemeasuresforevaluatingfirms’performance,suchasfinancialandmarketindicators.Asaresult,thereisno common theory concerning organizational performance, and researchers utilize differentindicators or variables to measure this construct. For this reason, there is also a call for aprecise theory of organizational performance (Janssens and Steyaert, 2009) and HRMresearchersandprofessionalsmightgivecrucialandspecialconsiderationtofillingsuchagap(Guest,2011).Anotherway,theconceptofperformancehasbeenexpressedbyBrumbrach(1988)asfollows:performancemeansbothbehaviors and results. Behaviors emanate from theperformer andtransform performance from abstraction to action. Not just the instruments for results,behaviors are also outcomes in their own right – the product ofmental and physical effortappliedtotasks–andcanbejudgedapartfromresults.Thisdefinitionofperformanceleadstotheconclusionthatwhenmanagingperformancebothinputs(behavior)andoutputs(results)



needtobeconsidered.Itisnotaquestionofsimplyconsideringtheachievementoftargets,asused to happen in ‘management by objectives’ schemes. Competency factors need to beincludedintheprocess(Armstrong,2006).StrategyandHumanResourcesManagement

In their seminal thesis on the development of HR function, Jamrog & Overholt (2004:1)declaredthat“over thepast100years theHRMprofessionalhasbeencontinuouslyevolvingandchanging,addingmoreanddifferentresponsibilities”.Theauthors’accountshowsthattheHRMfunctionhasevolvedthroughmanystages,fromthemedievaltimethroughtheindustrialrevolution, the scientific management, the human relations movement, etc., to the presentstrategic business partner model. For most of its history, HR has mainly focused on theadministrative aspects of HRM, except recently,with the strident call for HRM to become astrategicbusinesspartner (Ulrich,1997;Brockbank1999;Lawler III&Mohrman,2000;andLawlerIII&Mohrman,2003).Somescholarstherefore,arewonttodifferentiatebetweenthetraditionalHRMandSHRM.TraditionalHRMistransactionalinnature,concernedessentiallywith providing administrative support in terms of staffing, recruitment, compensation andbenefits(Rowden,1999;andWei,2006).Ulrich(1997)arguesthattheHRfunctionhasbeenan administrative functionheadedby personnelwhose roles are essentially focused on costcontrol and administrative activities. Managing people is therefore the responsibility of HRmanager.HRM is then a “formal system for the management of people within the organization”(Bateman & Zeithaml, 1993:346). For Inyang (2001:8), HRM is simply “organization’sactivities,whicharedirectedatattracting,developingandmaintaininganeffectiveworkforce”.Themanytransactionaloradministrativeactivitiesinvolvedinmanagingthehumanresourcesof an organization – training and development, staff motivation, compensation, staffcommitment,qualityperformance,etc.aremeanttobecarriedouteffectivelytoinfluencetheachievement of corporate objectives (Inynag, 2008a). The paradigm shift from theadministrativeaspectsofHRM led to theemergenceof SHRMas anewgenerationof value-added core responsibility or function of HRM. The emphasis of SHRM is that of a strategicbusiness partner. It now supports the company’s competitive advantage by providing highquality people and by helping business managers strategically plans the functions of thehuman capitalwithin the organizations (Rowden, 1999). SHRM, strongly beliefs that criticalorganizationalcapabilitiesorperformancebehaviorsaresinequanon,fortheattainmentofaparticularbusinessstrategyorgoal.Unlike the traditional HRM which covers a wide range of employment practices, includingrecruitment,selection,performanceappraisal,traininganddevelopmentandadministrationofcompensation and benefits, SHRM reflects a more flexible arrangement and utilization ofhuman resources to achieve organizational goals, and accordingly helps organizations gaincompetitiveadvantage(Wei,2006).StrategicHumanResourcesManagement

Strategichumanresourcemanagementisacomplexprocesswhichisconstantlyevolvingandbeingstudiedanddiscussedbyacademicsandcommentators.Itsdefinitionandrelationshipswith other aspects of business planning and strategy is not absolute and opinion variesbetween writers. The definitions below are from the CIPD book Strategic HRM: the key toimproved business performance (Armstrong, M et al 2002) within which there iscomprehensive coverage of the various definitions and approaches to HRM, strategy andstrategic HRM. Strategic HRM can be regarded as a general approach to the strategic



managementofhumanresourcesinaccordancewiththeintentionsoftheorganizationonthefuturedirection itwants to take. It is concernedwith longer-termpeople issues andmacro-concerns about structure, quality, culture, values, commitment and matching resources tofutureneed.Ithasbeendefinedas:Allthoseactivitiesaffectingthebehaviourofindividualsintheireffortsto formulateandimplementthestrategicneedsofbusiness(Schuler,R.S.1992).The pattern of planned human resource deployments and activities intended to enable theformstoachieveitsgoalsWright,P.M.etal1992).StrategicHRMcanencompassanumberofHRstrategies.Theremaybestrategies todeliverfairandequitablereward,toimproveperformanceortostreamlinestructure.However, in themselves these strategies arenot strategicHRM. StrategicHRM is theoverallframeworkwhichdeterminestheshapeanddeliveryoftheindividualstrategies.Boxall and Purcell (2003) argue that strategicHRM is concernedwith explaining howHRMinfluences organizational performance. They also point out that strategy is not the same asstrategic plans. Strategic planning is the formal process that takes place, usually in largerorganizations,defininghow thingswillbedone.Howeverstrategyexists inallorganizationseventhoughitmaynotbewrittendownandarticulated.Itdefinestheorganization’sbehaviorand how it tries to cope with its environment. Strategic HRM is based on HRM principlesincorporatingtheconceptofstrategy.SoifHRMisacoherentapproachtothemanagementofpeople, strategic HRM now implies that that is done in a planned way that integratesorganizationalgoalswithpoliciesandactionsequences.StrategicHrmandBusinessStrategy

Agoodbusinessstrategy,onewhichislikelytosucceed,isinformedbypeoplefactors.Oneofthedrivingfactorsbehindtheevaluationandreportingofhumancapitaldata istheneedforbetter information to feed into thebusiness strategy formulationprocess. In themajority oforganizationspeoplearenowthebiggestasset.Theknowledge,skillsandabilitieshavetobedeployedandusedtothemaximumeffectiftheorganizationistocreatevalue.Theintangiblevalue of an organization which lies in the people it employs is gaining recognition byaccountantsandinvestors,anditisgenerallynowacceptedthatthishasimplicationsforlongtermsustainedperformance.Itisthereforetoosimplistictosaythatstrategichumanresourcemanagement stems from the business strategy. The twomust bemutually informative. Theway inwhichpeoplearemanaged,motivatedanddeployed,andtheavailabilityofskillsandknowledgewillallshapethebusinessstrategy?It is nowmore common to find business strategies which are inextricably linked with andincorporated into strategic HRM, defining the management of all resources within theorganization. IndividualHRstrategiesmaythenbeshapedbythebusinessstrategy.So if thebusiness strategy is about improving customer service this may be translated into trainingplansorperformanceimprovementplans.StrategicHrmandHumanCapitalManagement

AnumberofwritershavearguedthatstrategicHRMandhumancapitalmanagement(HCM)are one and the same thing, and indeed the concept of strategic HRMmatches that of thebroader definition of HCM quite well as the following definition of the main features ofstrategicHRMbyDyer andHolder (1998) shows: ·Organizational level - because strategiesinvolvedecisionsaboutkeygoals,majorpoliciesandtheallocationofresourcestheytendtobeformulated at the top. Focus - strategies are business-driven and focus on organizational



effectiveness;thusinthisperspectivepeopleareviewedprimarilyasresourcestobemanagedtoward the achievement of strategic business goals. Framework - strategies by their verynature provide unifying frameworks which are at once broad, contingency-based andintegrative.TheyincorporateafullcomplementofHRgoalsandactivitiesdesignedspecificallytofitextantenvironmentsandtobemutuallyreinforcingorsynergistic.ThisargumenthasbeenbasedonthefactthatbothHRMinitspropersenseandHCMrestonthe assumption that people are treated as assets rather than costs and both focus on theimportanceofadoptinganintegratedandstrategicapproachtomanagingpeoplewhichistheconcernof all the stakeholders in anorganizationnot just thepeoplemanagement function.However, the concept of human capital management complements and strengthens theconcept of strategicHRM rather than replaces it (Armstrong,M et al 2002). It does this by:drawingattentiontothesignificanceof‘managementthroughmeasurement’,theaimbeingtoestablishaclear lineofsightbetweenHRinterventionsandorganizationalsuccessprovidingguidance on what to measure, how to measure and how to report on the outcomes ofmeasurement·underliningtheimportanceofusingthemeasurementstoprovethatsuperiorpeoplemanagement is delivering superior results and to indicate the direction inwhichHRstrategyneedstogo.ShrmandOrganizationalPerformance

AlthoughmoststudiesspeakofSHRMpracticesleadingtoperformance,suchaone-waylineofcausation is unsatisfactory (Edwards and Wright, 2001). The usual key criticism of SHRMpracticesandorganizationalperformanceisthatsoundtheoreticaldevelopmentthatexplainshowsuchSHRMpracticesoperateisabsent(BeckerandGerhart,1996).Inanefforttoaddresssuch theoretical developments in the area, scholars haveproposed to consider intermediatelinkages between SHRMpractices and organizational performance (Ferris et al, 1998). ThusthegeneralconsensusdevelopedisthatSHRMpracticesdonotleaddirectlytoorganizationalperformance.Rathertheyinfluencefirmresources,suchasthehumancapital,oremployeebehaviors,anditistheseresourcesandbehaviorsthatultimatelyleadtoperformance;eventhoughonlyafewresearchers(KatouandBudhwar,2006)havemeasuredthesemediatorsandaddressedtheir24importance.SincetheSHRMpracticesarenotstandardizedandtheyonlydifferaccordingtotheaimsandobjectivesofeachindividualresearch,KatouandBudhwar(2006)suggestuseof“mediatingmodel”whichadoptstwosystemsofSHRMpracticesthatareusuallypresentinalmostallworks,namely,resourcing/development,aimingatattractinganddevelopinghumanresources; and rewards/relations, aiming at retaining and motivating human resources.Similarly,Gerhart (2005)suggestsapplicationofmotivationasamechanismbywhichSHRMpracticesimpactorganizationperformance.Motivation is affected by a variety of SHRM practices, including recruitment, training anddevelopment, work arrangements, compensation systems, and appraisal systems. However,consideringthattheliteraturehighlightsthatmoststudiesexaminingtherelationshipbetweenSHRM practices and organization’s performance have been conducted mostly in a fewdeveloped countries (US and UK), and that only a few researchers have measured themediatorsandaddressedtheirimportance,thequestionstill leftunansweredistheinfluenceof SHRM practices on human capital or specifically, motivation and, consequentlyorganizationalperformanceinothercontexts(KatouandBudhwar,2006).Tofillthisgapandtofurtherexaminetheexistenceofsucharelationship,itisimportanttoconductresearchin



non-US/UKcontexts.ThisstudythereforeseekstoinvestigatetheassociationbetweenSHRMpracticesandorganizationperformanceandalsothemediatingroleofemployeemotivationinthePalestiniancontext.Literature on SHRM shows that primarily there are three school of thoughts related toimplementationofSHRMpractices:UniversalisticapproachThis is the simplest approach,whichoperateswithabasic assumption that there is a linearrelationship between variables and that can be extendable to entire population (Delery andDoty,1996)ContingencyapproachMany researchers contend that contingency approach is more complex than universalisticapproach because contingency approach is more inclined towards interactions rather thansimplelinearrelationship(Schoonhoven,1981;Van,A,andDrazin,1985;Venkatraman,1989).ConfigurationalapproachThisisthemostcomplexonebecausethisapproachisconcernedaboutthesynergeticeffectofa certain SHRM practice (Doty, Glick, and Huber, 1994). Although there ismore theoreticalsignificanceofcontingencyandconfigurationallyapproach,butbothoftheseapproacheslackstatistical significance, while on the other hand, universalistic approach hasmore empiricalsignificance (Syed et al., 2008). This study examines the implications of universalisticapproach.We are using sevenbest practices ofHRM that are describedbyDelery andDoty(1996)andfurtherimplementedbySyedetal.,(2008),whicharediscussedbelow.InternalcareeropportunitiesInternal career opportunities refer to the tendencywhether to hire employeesmostly fromwithin the organization or from the outside. According to Delery and Doty (1996),organizations give importance to internal hiring as compared to external. Pfeffe (1994)describesitasagiveandtakeprocessinwhichmanagerspromotetheiremployeesprimarilyfrom within the organization and show trust on them and in return expect greaterperformance.The relationship between internal career opportunities and organizational performance isempirically supported by Blackwell, Brickley, and Weisbach (1994) and Shay (2006), whofoundapositivecorrelationbetweenthesevariables.While,ontheotherhand,GaertnerandNollen(1989)relatethepromotionratewithpsychologicalcommitment.Furthermore,Ngo andTsang, (1998) provide support to Gaertner andNollen’s argument intheir study of 778 business executives in Hong Kong ,who found a positive impact oncommitment.TrainingTraining refers to the quantity of official training given to employees. Organizations maychoose either to provide extensive official training or to rely on attaining expertise throughselection. Literature on universalistic approach shows that training has themost significanteffectonorganization’sperformance(Pfeffer,1998,PfefferandVeiga1999,HarelandTzafrirs,1999, Syed et al., 2008, Shay, 2006). Several researchers are of the view that training is a



universalbestpractice (Arthur,1992,DelaneyandHuselid,1996,HuselidandBecker,1996,Youndt,Snell,Dean,andLepak,1996).In a studyof Chinese firms, Syed et al. (2008) found training as themost influencing SHRMpractice thataccounted for12.17%variance inorganizationalperformance.HatchandDyer,(2004) found that extensive training caused fewer defects in products in their study of 25semiconductormanufacturing firms.Huang (2001a, b) studied568Taiwan’s companies andfound a significant direct relationship among training and product and service quality. ThefindingsofthestudyofmanagerialattitudetowardHRMbyJennings,Cyr,andMoore,(1995)also found training and development to be the most significant SHRM practice, therebysupportedtheearlierstudies.EmployeeparticipationSeveral researchers believe that employees’ participation is directly associated withorganization’sperformance(Arthur,1992,Batt;Pfeffe,1994;Colvin,andKeefe,2002;Hodson,2002;KatoandMorishima,2002;Shay,2006).Batt,Colvin,andKeefe,(2002)foundanindirectrelationshipbetweenemployeeparticipationindecisionmakingandemployeeturnoverrate.WhileHodson,(2002)foundanotherdimensionandshowedthatworkplaceconflictscouldbereducedthroughemployeeparticipation.Result-orientedappraisalsAccording to Delery and Doty (1996), primarily appraisals are based on two types: resultsbasedandbehaviorbased.Behavior-basedappraisalsfocusonthespecificbehaviorsthatbestmatchthejobwhileresult-orientedappraisalsfocuspurelyontheresultsofthosebehaviors.Inaresult-orientedappraisalsystem,certainincentivesaregiventoemployeesoncompletionof their performance objectives (Pfeffer, 1998). Delery and Doty, (1996) found a significantpositive relationship between result-oriented appraisal and organizational performance.Furthermore,thestudybySyedetal.,(2008)alsoshowedsimilarresults.ProfitsharingProfit sharing refers to the integration of pay with organizational performance. Delery andDoty,(1996)foundapositivesignificantrelationshipofprofitsharingwithperformance.InastudyofChinesefirmsSyedetal.,(2008)investigatedtheimpactofprofitsharingontwofoldperformance measures and found a unique relation in which profit sharing had a positivesignificant relation with only financial measures of organizational performance and notsignificantrelationwithotherdimensionsofperformance(product/servicequality).EmploymentsecurityTheimportanceofemploymentsecurityisemphasizedbyPfeffer,(1998)whoholdsthatitisunrealistic on the part of the organizations to expect hardwork, devotion and commitmentfrom their employees in the absence of employment security. Syed et al., (2008) found apositive significant relationship between employment security and organizationalperformance. Furthermore, Pfeffer, (1998) describes that the importance of employmentsecurityaccordingtofirm’spointofviewistwofold:cost;andcompetition.If organization does not provide its employeeswith job security then they obviously switchtowardsbetteropportunitiesandthusincreasingcost(training,selectionetc)andcompetition.JobdescriptionThedegreetowhichjobdutiesarewelldefinedisveryimportant.DeleryandDoty,(1996)findamoderatecorrelationbetweenjobdescriptionandafirm’sperformance.



Furthermore, the study by Syed et al., (2008) shows that 8.30% variance in organizationalPerformanceisobservedduetojobdescription.Whatisperformancemeasurement?

Performancemeasurementissimplyamethodforassessingprogresstowardsstatedgoals.Itisnotintendedtoactasareward/punishmentmechanism,butratherasacommunicationandmanagementtool.InPerformanceMeasurementandEvaluation:DefinitionsandRelationships(GAO/GGD-98-26), the U.S. General Accounting Office (GAO) defines performancemeasurement as the ongoing monitoring and reporting of program accomplishments,particularly progress towards pre-established goals. It is typically conducted by programoragency management. Performance measures may address the type or level of programactivities conducted (process), the direct products and services delivered by a program(outputs),and/or theresultsof thoseproductsandservices(outcomes).Aprogram”maybeanyactivity,project,function,orpolicythathasanidentifiablepurposeorsetofobjectives.Performance measures quantitatively tell us something important about our products,services,andtheprocessesthatproducethem.Theyareatooltohelpusunderstand,manage,andimprovewhatourorganizationsdo.Effectiveperformancemeasurescanletusknow:Howwellwearedoing, ·Ifwearemeetingourgoals, · Ifourcustomersaresatisfied, ·Ifourprocessesareinstatisticalcontrol,and·Ifandwhereimprovementsarenecessary.Theyprovideuswiththeinformationnecessarytomakeintelligentdecisionsaboutwhatwedo.Aperformancemeasureiscomposedofanumberandaunitofmeasure.Thenumbergivesus amagnitude (howmuch) and the unit gives the number ameaning (what). Performancemeasuresarealwaystiedtoagoaloranobjective(thetarget).Performancemeasurescanberepresentedby single-dimensionalunits likehours,meters, nanoseconds,dollars, numberofreports, number of errors, number of CPR-certified employees, length of time to designhardware, etc. They can show the variation in a process or deviation from designspecifications. Single-dimensional units of measure usually represent very basic andfundamental measures of some process or product. More often, multidimensional units ofmeasureareused.RelationshipbetweenOrganizationalEffectivenessandHumanResourcesManagement

MostoftheearlyreviewsoftheliteraturewerepublishedbynotableindustrialpsychologistsascitedinFerris(etal.,1999).Asaconsequence,thesereviewstendedtoemphasizeappliedindividual-levelissues,suchasemployeetesting,trainingandmotivation.Gilmer’s (1960) discussion of situational variables explicated the importance of matchingpersonnel strategies with organizational strategies. Further, Gilmer invited researchers todesignmeasures toassess the relationshipbetween “individualpersonalities”and “companypersonalities”(1960ascitedinFerrisetal.,1999).Someresearchershaveproposedthatevaluationsofeffectivenessshouldbebasedonfinancialmeasures (e.g., profit) and for years, human resources issues have been secondary to suchmeasures.Today,manyCEOsagreethatprofitaloneisnotenoughtoholdtheenthusiasmandloyaltiesofemployeesortocallattentiontothevitalelementsofabusinessthatmustreceiveattentionifitistoperformeffectively(Watson,1991ascitedinZellars&Fiorito,1999).Underthe threat of exit (Hill & Jones, 1992), organizations now recognize that they must fulfil



responsibilitiestomanyconstituencies(Baumhart,1968;Clarkson,1991ascitedinZellars&Fiorito,1999),includingemployees.Mohrman&LawlerIII, (1997)advocatesthatanorganization iscreated inwhichthehumanresource management practices of the past no longer fit. Organizations are faced with asituationthatcriesoutfornewsolutionstothethornychallengesofintegratingbusinessandpeopleneeds.Acquaah (2004) states that human resource management practices enhance organizationaleffectiveness and performance by attracting, identifying, and retaining employees withknowledge,skills,andabilities,andgettingthemtobehaveinamannerthatwillsupportthemissionandobjectivesof theorganization.Thus, theeffectivenessofHRMpracticesdependsonhowitengenderstheappropriateattitudesandbehaviors inemployees, inadditionto itsimplementation.Today,HRdepartmentsareexpectedtocontributetoorganizationalperformance(Ettore,etal.1996;Fitz-enz,1994;Mathes,1993),andmanyorganizationsnowbelievethatthesuccessofthestrategicmanagementprocess largelydependsontheextent towhichtheHRfunction isinvolved(Butler,etal.1991ascitedinZellars&Fiorito,1999).Studiesat the lastdecade(e.g.,Arthur,1994;Delery&Dory,1996;Huselid,1995;Huselid&Becker,1996;Huselid,Jackson&Schuler,1997ascitedinDyer&Shafer,1998)havereportedratherlargeeffectsonsuchoutcomesasemployeeturnover,productivity,quality,profits,andeven stock prices. Trouble is, for a variety ofmethodological reasons - including unreliablemeasures of HRM and OE, common method variance, poorly specified models, and cross-sectional rather than longitudinal researchdesigns - theseestimates strain credibility to thepointofincredulity(Becker&Gerhart,1996ascitedinDyer&Shafer,1998).Over time, employees who feel neglected will seek alternatives and may withdraw eitherthroughincreasedabsenteeismandturnoverordecreasedcommitment.Thismaythreatenthefirm’ssurvivaloratleasthinderitssuccessasothersourcesofcompetitiveadvantagesuchasscaleeconomiesandprotectedmarketswane–“whatremainasacrucial,differentiatingfactoristheorganization,itsemployees,andhowtheywork”(Pfeffer,1994,p.14ascitedinZellars&Fiorito,1999).ItisimportantthatafirmadoptHRMpracticesthatmakebestuseofitsemployees.Thistrendhas led to increased interest in the impact of HRM on organizational performance, and anumber of studies have found a positive relationship between so-called “high-performancework practices” (Huselid, 1995) and different measures of company performance.Furthermore,thereissomeempiricalsupportforthehypothesisthatfirms,whichaligntheirHRM practices with their business strategy, will achieve superior outcomes (Bae & Lawler,1999).©ResearchInstituteforProgressionofKnowledgewww.ripknet.org



SURVEYANALYSIS

Table1:Socio-DemographiccharacteristicsoftheRespondents

Age of Business Frequency percentage 0-5 10 9 6-10 54 51 More than 10 42 40 Total 106 100 Number of employees Below 50 47 44 51-100 36 34 Above 100 23 22 Total 106 100 Product diversity 74.50 Single line product 79 25.50 Multi products 27 100 Total 106

Source:Fieldsurvey(2016)

Analysisofdataandresearchquestions

StrategicHRMbySMEsIsstrategicHRMpracticedbyPalestinianfirms?

Table2

S/n Variable SA A U D SD Remark 7 Structured planning 4 40 4 50 0 Disagreement

mechanism (3.8) (40.6) (5.7) (50.0) 8 Differentiation 9 38 4 42 3 Disagreement

strategy (9.4) (37.7) (5.7) (43.4) (3.8) 9 Sales growth/low cost 0 46 3 50 2 Disagreement

strategy (45.3) (3.8) (49.0) (1.9) 10 Mixed strategy/ 0 37 6 59 4 Disagreement

revenue growth (34.9) (5.7) (55.7) (3.3) TheresearchshowedthatmajorityoftheSMEsinPalestinedoesnotadoptstrategicHRM.Thisisan indication thatmajorityof therespondent’sstaffof theSMEswas indisagreement thattheir firms does not have structured planningmechanism, differentiation strategy, low coststrategy/sales growth and mixed strategy. This concludes that the disagreement to thesevariablesimpliesthatthesefirmsdonotadoptthemintheirmanagementprocessesinreturnthiswillaffecttheirperformancelevel.HowdoesSHRMaffectthelevelofcompetitioninPalestinianfirms?

Table3

S/n Variable SA A U D SD Remark 11 Do things that gives us 20 58 7 11 0 Agreement

edge over our rivals (23.6) (56.6) (7.5) (12.3) 12 Frequency of customer 0 13 33 65 2 Disagreement

complaints (11.3) (28.5) (58.5) (1.9)



TherespondentsshowedthattheadoptionofstrategicHRMwillenhancetheabilityofSMEstodothingsthatgivesthemedgeoverothersandaswellenablethemtoexperiencegrowthincustomerbase.Theresultfromthequestionitem12indicatedthatnoneoftheSMEsisbestintermsofattainingtocustomercomplaints;hencenoneof themcouldsatisfycustomersneedeffectively.Hypothesestesting

H01:AdoptionofstrategicHRMhasnosignificanteffectonperformanceofSMEsHypothesisonewastestingwithquestionnaireitem7and8

Table4

Variable Data 1 Data 2 Rank 1 Rank 2 D D2 A 3 11 2 3 1 1 B 45 39 4 4 0 0 C 5 5 3 2 1 1 D 52 44 5 5 0 0 E 0 4 1 1 0 0

CalculatingtheSpearmanRankcorrelationcoefficientofrankeddata,R=1-(6∑d2)/n(n2-1)Analysisoftheresult,Spearmanrankcorrelation(calculated)=0.9Spearmanrank(table)atp=0.05=0.900Degreeoffreedom(DF)=3ThisshowsstrongpositivecorrelationbetweenstrategicHRMandperformancelevelofSMEsin Palestine. On the other hand, adoption of strategic HRM has significant effect onperformance level of SMEs in Palestinian firms. Since the p value is below the 5% level ofsignificance for this study. Therefore, the study rejects the null hypothesis that adoption ofstrategicHRMdoesnothaveanyeffectonperformancelevelofSMEsinPalestine.H02:AdoptionofstrategicHRMdoesnothavesignificanteffectonlevelofcompetitionofSMEsinPalestine.

Hypothesis two was testing with questionnaire item 11 and 12 Table 5 Variable Data 1 Data 2 Rank 1 Rank 2 D D2 A 25 0 4 1 3 9 B 60 12 5 3 2 4 C 8 30 2 4 2 4 D 13 62 3 5 2 4 E 0 2 1 2 1 1

UsingR=1-(6∑d2)/n(n2-1)Analysisoftheresult,thespearmanrankcorrelation(calculated)=0.1Spearmanrank(table)atp=0.05=0.198Degreeoffreedom=3These represent strong positive rank correlation between strategic HRM and SMEscompetition level. This implies that the adoptionof strategicHRM influences competition insmallandmediumenterprises.Thepvalueisbelowthe5%levelofsignificanceforthisstudy.Therefore,thestudyrejectsthenullhypothesisthatadoptionofstrategicHRMdoesnothavesignificanteffectonlevelofcompetitionofSMEsinPalestine.



CONCLUSION

AneffectiveHumanResourcesManagementgiveschanceemployeestocontributeeffectivelyand productively to the overall company direction and the accomplishment of theorganization's goals and objectives. Inworking life, themost important value is employees.ThatiswhyHumanResourcesManagementisthekeyfactorforsuccessofabusiness.Beingaglobal world and being a part of global competitive markets processes force businesses tomanagehumanfactormoretrulyforeverylevel.A growing number of sources in HRM literature support the change and development ofHuman Resources perspectives from personnel management to HRM and then to StrategicHRM; they claim that, the human resources are the companies’ most important assets, andeffective management of these resources will contribute to the sustainable competitiveadvantageoffirms.ThesurveyshowedthelevelofuseandeffectofstrategicHRMonSMEsinPalestine.DescriptiveandspearmanrankcorrelationindicatedthefollowingfindingsStrategicHRM is an important and indispensable tool for any organization performance and for anyorganizationthatwantstogaincompetitiveadvantagesoverothers.Thestudyrevealsthatagenuine application of strategic HRM by SMEs will enhance staff and organizationalperformances.StrategicHRMhaseffectonlevelofcompetitionofSMEsinPalestine.References

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the impact of competitive strategies, and strategic human

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