Developing the Reward Management Policies within an Organization - Essay Example

Employee Reward Contents Contents 2 Introduction 3 Body 4 Literature review 4 Analysis 7 Conclusion 10 Bibliography 11 Introduction The best fit approach is an important part of the Strategic Human Resource Management (SHRM). Best fit in strategic Human Resource Management refers to an approach of managing the people resources of an organization by focusing on the importance of developing flexible human resource strategies so that these strategies do not become redundant in changing situations experienced by the organization and its workforces. The best fit approach takes into account the integration of the human resource strategies with the operational processes. Organizational culture as well as the internal and the external environment of the respective business so that these strategies are developed in the most efficient, flexible and modifiable manner that can be employed under changing circumstances as faced by the organization at different time periods. Thus, it can be said that the best fit approach of Human Resource Management focuses on the basic ideology that different human resource management strategies have to be developed in different organizations and in different situations faced by the same organization by appropriately and adequately considering the needs of both the enterprise and all the levels of employees working in the enterprise. This report deals with the critical analysis of the view that the best fit approach of Human Resource Management is an efficient approach but becomes elusive in practice when it comes to developing the reward management policies within an organization. The supporting and opposing views related to this statement are studied in the report by comparing it with the other most common method of human resource management which is the best practice approach. The works of different human resource practitioners and scholars are referred to and their views are presented in the report with suitable supporting arguments presented in favour of both the views. The report is concluded by documenting the main findings from the report and providing recommendations of how the human resource managers in the current business world can use the best fit approach in the most value adding manner for an organization. Body Literature review According to Rose (2008), due to the high level of evolution and integration taking place in the current business world, the demand for managing and developing a strong base of employees has become a pre requisite for success and sustainability for any organization, irrespective of the kind of industry they are operating in or the scale of operations they are engaged in (Rose, 2008, pp.60-62). All types of firms and businesses have realised that the human resource groups are undoubtedly the most valuable assets that they have and building on these groups of assets is a sure shot way to ensure higher competitive advantage, long term profitability as well as sustainability in the future years. As such, more and more organizations across the world are concentrating on developing more innovative and useful human resource management strategies that would help to sustain, develop, integrate as well as connect the success of the organization with the human resources of the organization. These strategies are developed with the aim of achieving the required levels of ethicality, competitiveness, compliance as well as with the aim of setting globally applicable standards and beneficial visions and goals for the businesses. Armstrong (2006) argues that the best fit model or the contingency model of Human Resource Management is based on the arguments that the strategies of HRM becomes more effective and efficient when they are directly linked or tailored according to the internal and external environment and context of the business (Armstrong, 2006, p.444). There are two main elements which are considered for the purpose of developing best fit or contingency approach for managing and controlling the personnel of an organization. These are the internal and the external fit. The internal fit is developed on the basis of attaining the objective of creating a proper balance and alignment of the HR practices and policies that are employed in a firm. The coherence of the policies remains the main priority while achieving the internal fit in the best fit contingency model. The policies and strategies used in this approach are made to work in a collaborative manner and the creation of any kind of opposing or confronting views and results are avoided. For this purpose, if a company wants to encourage collaborative behaviour and teamwork, then it has to develop the reward policies on a group level rather than on an individual level. This is because, if the employees are made to perform in teams as per the requirement of the organization but are rewarded according to an individual performance evaluation, then the motivation among the employees to work as a team would automatically decrease and they would be more inclined to improve their own individual performances. Blyton and Turnbull (2004) have identified that this may result in higher conflicts among the employee groups and the integration of the teams within the company would be loosened up which can ultimately create a high level of incoherency among the human resource practices as well as among the existing employees within the enterprise (Blyton and Turnbull, 2004, p.60). The external fit of the best fit approach is based on developing suitable linkages between the different strategies of the company like the operational strategies, marketing strategies and financial strategies with the human resources management strategies of the company. This is aimed at developing strong and sustainable competitive strategy for the business as a single unit. The external fit is a pre requisite for developing the most useful best fit approach for employee management because this fit establishes the connection between employee behaviours, the individual and organizational performance levels, the human resource management strategies and practices and the competitive advantage creation for the business. The best fit approach has been considered as a significant strategy used in the complex processes of Strategic Human Resource Management. As this area of study is developing the scopes, suitability and implementation scope of the best fit approach are widely studied and analysed by the human resource management scholars and practitioners. Some scholars like Daniels (2006) have presented their view that the best fit approach is the most effective strategy that can be used to improve the performances of the employees and the overall business functioning in the modern world. This is because; the best fit approach has made the "one size fits all" approach of human resource management redundant which actually had little or no application in the practical dynamic business world (Daniels, 2006, p.80). The best fit approach is identified as a primary strategic approach in human resource management which is based on the intention of connecting the personal interests and achievements of the employees with the success and future direction of the organization. The best fit approach can be considered to be highly valuable in the globalized corporate world, because this approach involves the use of strategies that focus on the long term retention of employee by investing towards the development, addressing their issues and developing an overall supportive organizational culture and work environment that boost the morale and motivation of the employees and leads to the creation of a highly engaged and above average performing employee groups. This approach is also identified as a primary driver of a healthy, unbiased and open organizational culture that promotes the development of high quality performance scopes, greater efficiency and productivity, stronger value, ethics and commitment among the employees together with forecasting and managing the human resources and capabilities of the organization with the potential future needs. As per the view of Pepper (2006), the concept of the contingency model or the best fit approach can be applied to only selective scenarios of the reward structures in a company. Each of the best fit approaches aim to explain the basic philosophies of the human resource policies and have to necessarily consider the most optimum reward and appraisal policies that would value to the performances of the employees and enhance the overall efficiency of the organizations in question (Pepper, 2006, p.160). Analysis The best fit approach of Human Resource Management creates a high degree of appeal to the modern day human resource managers and practitioners because this kind of approach helps to position themselves as significant influencers of the strategic management of a company and also strengthens their position as the partners in the overall corporate and strategic management decision making processes of an organization. This is because, the best fit approach is developed with the aim of employing the one size fits all approach in human resource management in which there was limited scope for the human resource practitioners to achieve better control on the decision making processes and thus restrained their abilities to make proper use of the good judgement for the ultimate benefit of the organization as well as its employee groups. The appropriateness of the best fit approach is a much debated topic among different practitioners. Whereas some Human Resource practitioners consider this strategic management approach to be the most beneficial and value adding in the current scenario, others have argued that the best practice approach of strategic management is a more preferable and valuable way of managing the human resource groups in the present world because it lowers the complexity of the human resource management practices by developing a generalized set of strategies that are applicable to different organizations and different situations. This reduces the level of contingencies and the constant need of modification of the human resource policies and strategies thereby reducing the time and cost of human resource management in any company. There are mutually useful and compatible groups of human resource management policies that may help to sustain the motivation and engagement levels of the employees in an organization. The role of the best practice approach is dubious in the area of rewards management for the employees This is because, in case of the employment of the is approach, the decisions regarding the ways in which the rewards and appraisals would be made depend on a number of internal factors which make it more difficult for the human resource managers of a company to decide the rewarding and appraisal processes with optimum level of fairness towards the employees. There are apparent levels of disagreements related to the best fit approach of linking the pay scales of individual employees to the reward and appraisal systems. The performance appraisals of the employees, as per the best fit practices, are based on the consideration of competitive performances which encourage the short term engagement and focus of the employees but do not ensure long term motivation and success among the individual employees or teams functioning within the organization (Burchill, 2008, p.106). Often in case of the best fit approach, the reward systems become biased because this approach is developed on the basis of the external business environment that affects the functions and the success of the company. This leads to extensive political influences in the reward and appraisal decisions due to which the unpredictability and subjectivity of the reward management systems increase. An unbiased reward management system ensures that the corporate political skills of the employees play a major role in deciding the achievement of rewards and appraisals and the performances of the individual employees become a less prominent decision component in the reward systems (Shields, 2007, p.102). Also, this system makes it necessary to undermine team work and collaborative work in the organization and gives more emphasis on individual achievements and success. Lastly, the best fit approach has the negative influence on the reward management system design due to the creation of fear among the employees. This is because, unlike the best practice approach, in the best fit approach, the human resource managers have more control and say in the corporate decision making which makes the employees vulnerable to the partiality of the managers. This also encourages corporate politics and shadows the initiatives of the politically weaker groups of employees within the company. The best fit approach helps to develop a reward package that attracts a wide range of individuals because of the kind of composition of the reward packages, An organization which offers simple and straight basic salary to the employees without the scope for earning incentives attracts a different group of individuals as compared to a an organization which gives the employees a low basic pay and a higher percentage of incentive in the Cost to Company (CTC) structure (Armstrong and Murlis, 2004, pp.204-206). This system remains extremely efficient for the employees even in times of economic downturn when the sales volumes of a company are low because the basic pay of the employees helps to them to earn sufficiently and does not make them excessively dependant on rewards and incentives,. However, on the other hand, this kind of system acts as a motivating process for the employees when the business is functioning in a period of economic expansion and the employees are provided with ample scopes of earning high incentives and rewards. Also, in times of economic downturns, the labour markets become tighter due to which the availability of labours become lower and the competition among organizations increase for filling in the open vacancies. In such cases, the capability of the reward system of an organization plays a crucial role in deciding how efficient the organization would be to attract, employ and retain skilled employees in the company. In order to cope with these kinds of issues, the human resource managers taken up the flexible and agile best fit approach which allows for changes to be made in the composition of the reward packages and helps to attract diverse kinds of employees. As per the best fit approach of human resource management, the reward system in a company should be developed in a manner such that the rewards and appraisals are distributed fairly so as to make the most valuable employee groups of a company to feel contended and appropriately rewarded for their contributions and performances in their respective job roles. The organizations which reward their employees on the basis of different performance related rewards and pay incentives have higher changes of attracting more dynamic individuals who display a problem solving approach in their job roles. The best fit approach also assume that the high performing employees seek employment in organizations that recognize their performances and reward them on the basis of their contributions and performances rather than on corporate political relations developed by them. This can be said to be a practical observation because the skilled personnel tend to work in organizations in which their performances and achievements are appropriately recognized. This adds to their engagement and motivation levels and in turn further enhances their performances (Perkins and White, 2008, p.44). Conclusion The suitability of the best fit approach is supported by the argument that the customized personnel management strategies become more efficient because they are linked to the external business environment and all the key stakeholder groups and forces related to the business. As such, this leads to the development of a more beneficial and effective way of functioning for the organization in terms of managing its employees and also in terms of generating higher productivity both in quantifiable and non quantifiable terms of measurements. This approach is also considered good because of the high level of agility and flexibility that it brings into the human resource management department of a company. The fact that the contingency or best fit theory takes into account a wide number of factors like the external job market condition, the external economic conditions and the behaviours of the employee groups, therefore, the reward management system developed under the guidelines of this approach are established as more efficiently composed reward systems across different kinds of organizations. To this effect, an efficient reward system should promote the proper recognition and retention of the high performing employees in an organization and at the same time facilitate the correct corporate decisions as to which employees should be encouraged to improve their performances and how they should be encouraged to do the same. Bibliography Armstrong, M. & Murlis, H. (2004). Reward Management: A handbook of Remuneration Strategy and practice. 5th Edition. London: Kogan Page. Armstrong, M. (2006). A handbook of human resource management practice, 10th ed. London: Kogan Page. Blyton P. & Turnbull P. (2004). The Dynamics of Employee Relations. London: Macmillan. Burchill, F. (2008). Labour Relations (3rd edition). Basingstoke: Palgrave. Daniels, K. (2006). Employee Relations in an Organisational Context. London: CIPD. Gennard, J & Judge, G. (2005). Employee Relations, 4th ed. London: CIPD. Pepper, S. (2006).Senior Executive Reward – Key Models and Practices. Farnham: Gower Publishing. Perkins, S. & White, G. (2008). Employee Reward. London: CIPD. Rose, E. (2008). Employment Relations 3rd ed. London: FT Prentice Hall. Shields, J. (2007). Managing Employee Performance and Reward. Concepts, Practices and Strategies. Cambridge: OUP. Read More