Best Fit and the Best Practice Approach in Strategic Human Resource Management - Literature review Example

Strategic Human Resource Management Name: University: Date: Strategic Human Resource Management (SHRM) Introduction The concepts of best practice and best fit according to Storey (2007) are utilised in the SHRM to different organisational structures, such as reward structures. All the existing approaches endeavour to expound the way HR policies can result in improved organisational efficiency. Basically, organisations can work with both the best practice and best fit. In this regard, best fit focuses on aligning organisational strategy closely with different systems with the objective of improving the organisational. Proponents of the Best Fit argue that good performers always look for employment in organisations where good performance is not only recognised but also rewarded. Clearly, skilled personnel prefer working in environments where good performers are appreciated. On the other hand, Best Practice Model is anchored on the notion that there exists some best HRM practices, which when adopted can result in improved organisational performance. Generally, the Best-Fit Approach serves as an answer to the inadequacies associated with the Best-Practice Approach. Furthermore, the Best-Practice model consider that the SHRM objective is offering a fit amid business and HRM policy goals. As pointed out by Guest (1997), the organistaion’s HR strategy has to be contingent on the organisation’s circumstances and needs. The purpose of this essay is to critically analyse, compare and contrast the best fit as well as the best practice approach in SHRM literature. Discussion Armstrong (2009) pointed out that the approach of best practice is rooted in the conjecture that there exist some best practices HRM, which are universal since they are best in all circumstances; therefore, espousing them can result in superior performance in the organisation. Pfeffer (1998a) as cited by Armstrong (2009) provided numerous lists of ‘best practices’; self-managed teams, information sharing, selective hiring, employment security, training, high compensation dependent on performance, and decreasing status differentials. Some commentators as mentioned by Armstrong (2009) believe that the ‘best practice’ rubric has been exaggerated since the majority of companies have different management practices. On the other hand, the best fit approach according to Armstrong (2009) is in proportion to the contingency theory and stresses the need of HR strategies fitting with the organisation’s state of affairs and context. Therefore, the best fit is viewed in terms of alignment or vertical integration between the organisation’s HR strategies as well as business. As mentioned by Armstrong (2006), the best fit approach place emphasis on the essence of making sure that HR strategies are suitable to organisation’s circumstances, which comprises of its external environment and culture operational process. Armstrong (2006) further point out that the HR strategies must consider certain needs of the workers and the organisation. The SHRM practices like employee relations, training and development, resourcing, as well as reward management focus on how organisation’s employ and manage employees in order to realise competitive advantage by strategically deploying highly capable and committed workforce. The universalistic theory (the best practice model) assumes that are some set of best HRM practices that when adopted can certainly result in improved organisational performance. According to Waiganjo, Mukulu, and Kahiri (2012), the best practice concept was originally utilised as the US HRM approaches, most of them suggested the idea that adopting a particular ‘best’ HR practices can lead to improved organisational performance, which can be demonstrated with enhanced employee behaviours and attitudes, higher skills levels, reduced levels of turnover and absenteeism, and improved efficiency, productivity, and profitability. Proponents of universalistic perspective argue that every organisation can improve their performance if they can successfully put a set of best practices into practice. Universalistic theory points out that firms performance could be improved after finding as well as applying best practice no matter the product market situation or firm’s location or industry. Therefore, the concept of best practice is more suitable for identification of practices’ choices. On the other hand, the contingency theory (the best fit) maintains that there are no universal prescriptions of human resource practices as well as policies; instead, it is all contingent on the business strategy, culture and context of the organisation. Advocates of contingency theory believe that the effectiveness of HR strategy is contingent on the ability of the strategy to integrate appropriately with certain environmental and organisational context (Waiganjo, Mukulu, & Kahiri, 2012). Therefore, the significance of making certain the HR strategies remain suitable to the organisation’s conditions are underlined by the best fit approach, which includes the external environment, operational processes and culture. Antagonists of contingency theory argue that it somehow over-simplify the organisational reality and is limited by the modelling impossibility of every contingent variable; thus, making it challenging to show the interconnection between the variables. In addition, the best fit school does not place emphasis on the individual businesses’ internal context as well as the unique practices and characteristics that could serve as the basis of sustainable competitive advantage. With the view to MBAtools (2002) article, best practices can result in improved performance, but diversity can move best practice far from uniformity. The article further mentions that HR strategy can become more efficient when tailored/connected to the business surrounding environment or context. There are two types of business fit; (1) external fit, which is connected to the marketing strategy and the operations strategy that support the organisational flexibility; and (2) internal fit, which point out that the HR practices and policies should be coherent. Armstrong (2008) posits that the concept of best practice is suitable for identifying principles that underline the choice of practices. Therefore, Armstrong (2008) thinks it is ideal to consider ‘good practice’ instead of ‘best practice’. The Business Systems theory states that the differentiation level amongst organisations relies on a certain developmental trajectory that reflects the distinction in both the corresponding social agency and institutional configuration. For this reason, firms are inclined to search for best fit, but will likely espouse the local ‘best practice’ understandings to comply with the unwritten norms and formal rules of particular institutional contexts. In some contexts, some practices appear to be more effective, bur less effective in other contexts. In their study, Stavrou, Brewster, and Charalambous (2010) established that there exists no universal or perfect set of best practices, but instead an integration of ‘best fit’ and best practice’ contingent on region and bundle. While examining the best practice and best fit in agricultural context, the agricultural extension utilised standardised models in the past, particularly the visit and training system (Birner, et al., 2009). However, the present agricultural extension trends emphasis on privatisation, outsourcing, and decentralisation. According to Birner et al. (2009), the previous experiences exhibit that importing standardised extension models to a different context cannot be a favourable strategy, even while viewing the imported models as the ‘best practice’. Birner et al. (2009) suggest that it is imperative to create a capacity amongst extension managers as well as policy planners in order to identify ways of offering and supporting extension, which best fit particular development priorities and conditions of their country. Guest (1997) pointed out the concept of ‘integration’ or ‘fit’ is underlined by the contingency approach, which states that organisations with HR policy and practice that respond effectively to the external factors are inclined to achieve superior performance. Fit was viewed by Guest (1997) as gestalt (effectiveness in HRM can be achieved by finding a suitable combination of practices), as best set of practices, and as ‘bundles’ (the existing different patterns or configurations of practices). At surface level, the HR practices as indicated by Paauwe and Boselie (2004) will continuously be influenced by the context; therefore, it is more firm-specific and context (best fit). At the underpinning level, the HR practice is associated with the generic HR processes and general principles that every firm should follow and are naturally universalistic (best practice). When combined together with institutional theory and resource based view, Paauwe and Boselie (2004) believe that coevolution provides a valuable way of illuminating the means through which organisations can espouse and choose best HRM practices. Therefore, the high-performance model has been endorsed as ‘best HRM practice’ for organisations because the practices related to it result in performance levels that are beyond those related to the traditional employment relations and workplace practices. Such practices according to Godard (2004) enable and encourage employees to more fully develop, apply and share their skills and knowledge instead of doing the traditional practices, which positively impact the jobs’ quality and organisational performance. A number of scholars in the industrial relations field as mentioned by Godard (2004) maintain that implementing such practices generate opportunities that allowed unions to get rid of their conventional oppositional role to the advantage of the new, partnership role. Therefore, the high-performance model is considered to be a best practice for the employers, employees, and unions. The ‘best HRM practice’ notion according to Marchington and Grugulis (2000) is acquainted with scores of HRM specialists as well as industrial relations. Marchington and Grugulis (2000) propagated an HRM brand that depended on employers espousing high skill and cost employment policies. There exists no theoretical framework for best practices approach in human resource development or training literature, but earlier research as cited by Marchington and Grugulis (2000) demonstrated that good internal fit and high-performance work practices result in positive outcomes. Practices for exemplary training are recognised by Association for Talent Development (ATD), whereby firms that successfully connect learning objectives with corporate strategy, as well as exhibit increased performance anchored on learning, are acknowledged and awarded. Still, transfer practices according to Burke and Hutchins (2008) play an insignificant part in the criteria used for ATD awards. Still, human resources are considered a crucial basis of improved performance. The majority of workers as well as empirical and theoretical research are anchored on the firm’s resource-based view. According to Agusioma, Gommans, and Kihiko (2014), the RBV theory states that an organisation should develop resource in a way that is valuable, non-imitable, rare, as well as non-substitutable so as to achieve sustainable competitive advantage. Agusioma, Gommans, and Kihiko (2014) assert that resources, which historically have been source of competitive advantage for many firms, can be imitated rapidly and easily; therefore, the firm’s workers have become the most crucial basis for the sought after competitive advantage. Furthermore, the human resource is no more perceived as a cost; instead, it is viewed as a capital asset to all firms seeking succeeds in the contemporary dynamic world. A mentioned by Agusioma, Gommans, and Kihiko (2014), in case a generalizable effect of best practice exists, it cannot be present at the Human Resource practice level. This is because of the overall system architecture that focus on the HR system principles, which when embedded deeply within the organisation can result in the best practice effect. With regard to the internal fit notion, Agusioma, Gommans, and Kihiko (2014) identified the threshold-fit as the principal viewpoint in the paradigm of HR commitment. Therefore, unless there is a high policy development threshold in all the HR policy areas, the effects that are sought after on either organisational performance or employee behaviours cannot be realised. The level of confidence amongst the advocates of best practice with regard to pay as the main motivator is very low since they rely on Herzberg’s Two Factor Model (Morris & Maloney, 2005). They believe that pay can only be used to offer symbolic recognition and prevent dissatisfaction amongst employees. They believe that the capability to use pay in order to influence certain behaviours can potentially destroy the trust as well as relationship, which normally are the foundation of organisational commitment. As observed by Morris and Maloney (2005), best practice mainly relies in the Herzberg’s Two Factor Model, whereby pay is considered a hygiene factor that could result in dissatisfaction. Therefore, employee motivation can be improved by carefully considering work itself as well as generating a work setting where employees can grow, progress and become successful. Best fit according to Morris and Maloney (2005) follows the contribution principle concept; that is to say, employees should be paid according to their organisation’s contribution (the inputs are matched with the outcomes). On the other hand, the best practice place emphasis on the principle of equality, whereby individuals doing the same job should be paid the same amount so as to promote cooperation and collegiality. In this case, collective incentives are encouraged so as to compensate workers for their strong organisational performance. The debate regarding the best practice versus best fit raises the question whether there exists a best way of performing activities associated with the human resources, and that can be applied ubiquitously. A number of authors as cited by Paphavatana and Mohiuddin (2011) believe that there are some HR practices which can enable the organisation achieve competitive advantage; thus, support the best practices view. HR practices as mentioned Paphavatana and Mohiuddin (2011) place their positive influence into practice by offering and enhancing employees ‘ competence, influencing their commitment and motivation, and planning a job in order for the human resources to offer their best at work. Best practices theory borrows a number of elements from the rational expectations theory suggesting that every element has to be present to achieve the best results. For instance, when employees have positive attitudes, it can result in reduced turnover, absenteeism levels, as well as improved performance (Guest, 1997). In the contemporary work environment, best practices involve selection methods, employee development, continuing education, selection, better working conditions, as well as rewards. On the other hand, the best fit view focuses on the connection between the HRM practice and realising competitive advantage over the rivals (Lojic, Škrbic, & Ristic, 2012). Importantly, it demonstrates the reliance of certain circumstances in different organisations. In other words, what is best for a certain organisation is not best for another organisation. Purcell (1999) argues that the best practice bundle assertion is generally applicable, and has resulted in an ideal cul-de-sac, which disregards the highly significant as well as powerful variations within the society, employment, as well as work, which are perceptible within the organisations and the community in general. For this reason, looking for high-commitment work practices’ bundles is crucial. A number of organisations appear to have suitable human resource systems for the present and future needs as compared to others. The best-fit theory according to Odiyo, Chepkilot, and Ochieng (2013) provides some solutions to the inadequacies attributed to the best-practice approach. The SHRM objective according to the best-fit approach is to offer a fit between the business and HRM policy goals. In the HR literature, Worland and Manning (2005) opine that there is an ongoing debate regarding the compatibility between a HR strategy that is integrated and consistent as well as the significance of aligning organisational strategy with business needs. This has led to a dilemma on whether firms should pursue a best practice (high commitment) bundle or implement an approach that is more flexible enabling the firm’s business units to use external environment so as to focus on the best fit. Generally, the best-fit paradigm is recognised as an HRM matching model because it is a variant from precedent models and focuses on creating HRM policies aligned with the business strategy. Conclusion In conclusion, this essay has critically analysed, compared and contrasted the best fit and the best practice approach in the SHRM literature. As mentioned in this essay, the best practice vs. best fit model has been analysed widely in the SHRM literature and they both seek to expound the way HR policies can result in improved organisational efficiency and performance. The best-fit approach is somewhat more convincing as compared to the best practice approach, but organisations should avoid using the context to determine the strategy. There must be enough room for making choices that are strategic. As pointed out in the essay, best fit approach is inclined to be static and often ignore the processes of change. Furthermore, the approach disregards the notion that HRM is shaped by institutional forces. A number of commentators as evidenced in this paper believe that it is not appropriate for firms to pursue the ‘best practice’ approach with no certainty that what occurs somewhere else could work in organisation the context. For this reason, ‘Best fit’ model is preferred over the ‘best practice’ provided that the organisation steers clear of being trapped in the contingent determinism by letting the strategy to be determined by the context. Still, organisations looking for best fit are constrained by the lack of ability to model the contingent variables, the hardship of exhibiting their interconnection, as well as failure to understand how a change in one variable can influence the other variables. References Agusioma, N. l., Gommans, H. P., & Kihiko, M. K. (2014). A Critical Analysis Of Human Resource Management Practices Influencing Performance In Public Universities (Case Study Of Universities In Nairobi C.B.D). 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