Under the rapid alteration in the business world lately, more and more firms and companies realize that their employees are considered as an asset which is a crucial resource of the establishment. In order to integrate these assets, a lot of establishments start to focus on planning and implementing the ideal model or strategy that can improve the combination and connection of the human resource with regards to their success which they share their standards, visions and goals. Wheelen and Hunger (1995, p.3) defines strategic human resources management as 'that set of managerial decisions and actions that determines the long-run performance of a corporation'.
Morris & Maloney (2005) argues, there are two perspectives for strategic pay literature. The terms “Best-Fit and Best Practice” are commonly used in Strategic Human Resource’s Management literature under the specific policy area of reward systems. Morris & Maloney (2005, p.2) defines Best-Fit as ‘the firm’s reward system which is aligned to support the organization’s business strategies in order to attain competitive rewards’. Meanwhile, Best-Practice as a ‘bundle of Human Resource policies including the reward system that lead to highly motivated and committed employees who are the key to an organization’s competitive advantage’.
Thorpe and Homan (2000), Argues that previous improvements in the design of pay system did not directly relate to the real problems faced by organizations. Thus, the need to devise pay system linked to business strategy arose.
The
original proposition that people resource planning and strategic planning
should be linked, came from Walker (1978). This was followed by Tichy et al (1982: 47)
who, dealing specifically with SHRM, proposed that: ‘The fundamental strategic management
problem is to keep the strategy, structure and human resource dimensions of the
organization in direct alignment.’ As noted by Wright et al (2001: 701),
Walker’s call signified the conception of the field of SHRM, but its birth came
in the early 1980s with Tichy et al’s article devoted to extensively exploring
the link between business strategy and HR.
Fombrun
and his colleagues introduced the ‘Michigan model’ of HRM (sometimes called the ‘matching model’), which proposed that HRM systems and the organization
structure should be managed in a way that is congruent with organizational
strategy. This key-point was made in their classic statement that: ‘The
critical management task is to align the formal structure and human resource
systems so that they drive the strategic objectives of the organization’ (ibid:
37). This is essentially the concept of vertical fit. In their ‘Harvard model’,
Beer and his colleagues argued that ‘HRM policies need to fit with business strategy’
(p178). They also advocated a multi-stakeholder approach which means being concerned
about all the organization’s stakeholders – employees as well as shareholders.
Armstrong & Brown (2019), Argues that emergence of the notions of vertical and horizontal fit sparked a debate at about this time on the relative merits of what became known as ‘best fit’ (the belief based on contingency theory that HR strategies should be related to the context and circumstances of the organization) and ‘best practice’ (the view that there is a set of HRM practices that are universal in the sense that they are best in any situation and that adopting them will lead to superior organizational performance). A number of attempts have been made to list best practices but the following one (Figure 1.0) by Pfeffer (1994) became one of the best known:
Figure 1.0: Best Practices
Various studies have pointed out that the adoption of single practices won’t deliver the same improvement of results (Huselid, 1995). Katz, Kochan and Keefe (1987) found that plants adopting team-based working without implementing other changes performed worse than those which had not. Ichniowski and Shaw (1995) also showed that the adoption of single practices did not improve productivity.
List of References,
· Armstrong, M & Brown, D (2019)
“Strategic Human Resource Management: Back to the future”, A literature review,
Institute of Employment Studies, Report 517
· Fombrun, CJ, Tichy, NM and Devanna, MA (1984), Strategic Human Resource
Management, New York, Wiley
· Huselid, MA (1995)
"The impact of human resource management practices on turnover,
productivity and corporate financial performance", Academy of Management
Journal, 38, pp.635-70
· Ichniowski, C., Shaw, K And Prennushi, G (1994) "The Effects of human resource management
practices on productivity", Working paper, Columbia University
· Katz, HC., Kochan, TA and Keefe, JH (1987) “Industrial Relations and Productivity
in the U.S. Automobile Industry”
· Morris, D. & Maloney, M (2005); “Strategic
Reward Systems: Understanding the Difference between ‘Best Fit’ & ‘Best
Practice’.
· Pfeffer, J. (1994)
Competitive Advantage Through People: Unleashing the Power of
the Workforce. Boston, MA: Stanford Graduate School of Business, Harvard
Business
School Press.
· Thorpe, R & Homan, G.
(2000) Strategic Reward Systems. London: Pearson Education
Limited.
· Tichy, N, Fombrun, C and
Devanna, M (1982), ‘Strategic human resource management: the evolution of the
field’, Sloan Management Review, 23 (2), pp 47-61
· Walker, J (1978), ‘Linking
human resource planning with strategic planning’, Human Resource Planning, 1,
pp 1-18
· Wright, P Dunford, B and
Snell, S (2001), ‘Human resources and the resource-based view of the firm’,
Journal of Management, 27 (6), pp 701–21
