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
Empirical research on best practices sets out a set of human resources policies that are particularly suitable for maximizing performance regardless of market and production strategies (Pefer 1998, Guest 2000). Outstanding performance is characterized by consistent human resource activities, including high performance, motivation, motivation, and employee commitment (Maloney and Morris 2005). Based on the concepts of optimism (Vroom 1964, Lawler 1971) best human resource training leads to high quality, productivity and reduction of absenteeism and pollution (guest 2000).
ReplyDeleteHi Malinga, thank you for adding your valuable thoughts on this post. Pfeffer (1994) argues that although people do work for money, work also adds meaning to their lives. Therefore, organizations with best human resource training, offer intellectually engaging work, a family friendly environment, the opportunity to work with fun and interesting people in addition to a competitive reward package.
DeleteHi Malithra, I agree with you and Malinga, This model is based on the assumption that they have the best human resource management practices that are universal in the sense that they are the best in any situation and that following them will lead to higher organizational performance. A number of ‘best practices’ lists have been produced, most notably quoted by Pfeiffer (1998): employment security, selective hiring, self-managed teams, high compensation contingent on performance, training to provide a skilled and motivated workforce, reduction of status differentials, sharing information (Armstrong, 2014, 22).
ReplyDeleteHi Ranga, yes the general idea of the best practice approach is having a reward system that lead to highly motivated and committed employees who are the key to an organization’s competitive advantage (Marchington and Wilkinson, 2006).
DeletePurcell (1999:26) states that “Taken to extremes the search for best practice tends to take on the flavour of a moral crusade seen most vividly in the popularist books such as Pfeffer’s Competitive Advantage through People: Releasing the Power of the Workforce . Although a wealth of detail is provided, theunmistakable thrust of the analysis is that all firms can and should adopt a set ofhuman resource management practices for the combined benefit of the firm and its employees”.
ReplyDeleteBest practice proponents state a bundle of HR Policies which include reward system. Best f it advocates believe firm’s reward system should be aligned to organization strategy. Best practice proponents the set of HR practices introduced lead to high motivation and better employee commitment. Best fit HRM strategy results in achieving competitive advantage.
Hi Janaka, strongly agreed upon the statement that, the organization can or should adopt to a approach which combines both best-fit and best-practice approaches for the betterment of the employees' as well as the organization (Farkas & Anthony, 2006).
DeleteThe best practice approach claims that certain bundles of HR activities exist which universally support companies in reaching a competitive advantage regardless of the organizational setting or industry (Redman and Wilkinson 2009). Best practice bundles of activities are characterized as mutually compatible HR activities which forge high levels of workforce competence, encourage motivation and introduce a workdesign boosting employee commitment (Maloney and Morris 2005)
ReplyDeleteUniversalistic perspective focuses on the ‘best practices’, which implies that firms will be better off if they identify and adopt ‘best practice’ in the way they manage people (Boxall & Purcell, 2000). In other words, some human resource practices are always better than others, regardless of the firm, its strategy or its environment (Rose & Kumar, 2006).
DeleteHi Malithra, adding to your post, the ‘Best Fit’ can be approached by organizations in 3 models; Life cycle, Competitive Strategy and Strategic Configuration. Life Cycle model takes place in 4 stages; start, growth, maturity and decline, hence the name life cycle. In the competitive strategy, there are 3 strategies for competitive advantage. Being innovative in your product, delivering quality products and services to customers and cost leadership which is to plan result of policies aimed at ‘managing away’ expenses. On competitive strategy, Schuler and Jackson argued that to yield the best results, organizations must match the role characteristics of employees to the preferred strategy. Strategic configuration is when an organizations strategy is best matched with a defined theory as produced by Miles and Snow. Four types of organizations were identified, of which Prospectors, Defenders and Analyzers were classified as ideal organizations while Reactors were identified as unstable organizations (Armstrong & Taylor, 2014). Therefore, knowledge of these will help organizations to implement the most appropriate model in Best Fit
ReplyDeleteHello Sonali, thank you for your valuable thoughts on this subject. Armstrong (2012) also stated that Best-Fit approach can be explained under three models. Life cycle which explains four stages of development steps as startup, growth, maturity & decline. Competitive strategy which Porter(1985) explains using three key areas as advantages of Best-Fit as in, Innovation or niche, quality of the output & cost leadership. Last but not least, Strategic configuration which explains the advantages when Best-Fit matched with the strategic alignment. Hope to go deep, under this subject in an upcoming blog.
DeleteHi Malithra, Contingency or the fit perspective requires companies to adopt human practices that fit their human resource strategies and this perspective maintains that the performance effects of such practices are achieved through their application under appropriate institutional conditions (Charles, 1995). A company can achieve the greatest performance from selected staff practices when it adopts a business strategy that simultaneously distinguishes itself from its competitors by producing the highest quality products and also selective staffing practices enable the company to recruit employees with sufficient skills to produce such high-quality products(Charles, 1995).
ReplyDeleteThe best fi t model seems to be more realistic than the best practice model. As Dyer and Holder (1988) pointed out: ‘The inescapable conclusion is that what is best depends’. It can therefore be claimed that best fi t is more important than best practice. But there are limitations to the concept. Paawue (2004) emphasized that: ‘It is necessary to avoid falling into the trap of “contingent determinism” (ie claiming that the context absolutely determines the strategy). There is, or should be, room for making strategic choices.’
DeleteAccording to Dessler (2003), there has been a significant amount of research examining what skills and qualities employers value most in job applicants. Qualifications, work experience and communication or interpersonal skills are the most frequently identified qualities.
ReplyDelete‘'May it be for your professional or personal life, it is important that you work towards your self-development each day'' (President Gotabaya Rajapaksa, 2020).
It was discovered that HRM best practices enhance firm performance. The academic studies found that performance appraisal, internal communication, career planning, training and development, recruitment and selection, and SHRM alignment in the organization have positive relationship on firm performance (Beh & Loo, 2013).
DeleteAs a response to (Thorpe and Homan 2000), The focus of recruitment and selection according to (Montgomery 1996) is on matching the capabilities and inclinations of prospective candidates against the demands and rewards inherent in each job. Furthermore, (Jovanovic 2004) said HRM recruitment is a process of attracting a pool of high-quality applicants to select the best among them. For this reason, top performing companies devoted considerable resources and energy to creating high quality selection systems.
ReplyDeleteWhile agreeing to your comment, I would like to add further more that Huselid’s (1995) groundbreaking study established that a set of human resource practices, also known as high performance work systems (HPWS) were strongly related to turnover, accounting profits and firm
Deletemarket value.
It is believed that the development of the best fit model is derived from the Harvard, Michigan and New York models. Sparrow and Hiltrop (1994) claim that these models could be classified as ‘matching models’ because of their common aim is to match the human resources strategy with that of the corporation. Thorpe and Homan (2000), argue that previous developments in the design of pay systems did not directly relate to the real priorities and problems faced by organisations. Thus, the need to devise pay systems linked to business strategy arose.
ReplyDeleteThe best practice approach suffers from a series of limitations. Firstly, when implementing best practice standards organizations run risk of introducing mutually prohibitive combinations like team working and compensation based on individual performance resulting in a deterioration of employee collaboration through overexaggerated competition (Delery 1998 in Redman and Wilkinson 2009).
ReplyDeleteAccording to Osterman (1987) and Sonnenfeld & Peiperl (1988), the most influential best practices set consist of seven practices namely internal career opportunities, training systems, appraisals, profit-sharing plans, employment security, voice mechanisms (grievance systems and participation in decision making) and degree to which jobs are narrowly designed.
DeleteAccording to Croonen and Grunhagen (2016), Best fit required for an organization to increase the effectiveness while gaining competitive advantages through par with the organization’s strategies and better fit will improve a better competitive advantage to the organization.
ReplyDeleteThe best-fit model is considered as a variant from precedent models of Harvard, Michigan and York and is called “matching model” for HRM (Sparrow and Hiltrop 1994). It is based on developing HRM policies according to business strategy. Strategy involves planning future activities, performances objectives, and policies towards reaching the corporate aims. HRM strategy should be designed and applied to support the given corporate strategy (Lawler 1995).
ReplyDeleteBersin’s High-Impact Total Rewards research reveals that high-performing organizations aren’t following the best-practices pack. Rather they are unapologetically different when it comes to rewards, and what makes them different is their approach to rewards design. They give a nod to best practices and benchmark data to make sure they understand what’s being offered by other companies. But they follow a best-fit approach to rewards that is tailored to their organization (DeBellis, 2018).
DeleteThe concepts of ‘best fit’ and ‘best practice’ are two well known approaches to human resource management and the ‘best fit’ perspective claims that HR strategy become more and more efficient when it is linked to its environment of the business(Mok & Bryant, 2006).
ReplyDeleteUniversalistic perspective focuses on the ‘best practices’, which implies that firms will be better off if they identify and adopt ‘best practice’ in the way they manage people (Boxall & Purcell, 2000).
DeleteThe best practice and best fit models have evolved with the organizational target of gaining competitive advantage (Prasad, 2012). This is an universalistic approach that leads in directing and controlling the human resource of the organization. Through best practice HR strategy, the organization can avail maximum output of the employees towards achieving the goals of the company while minimizing the gap between the employee and the employer (Armstrong, 2006).Best fit, concerns on the vertical integration or the alignment in between the business process and the HR strategies of the organization.
ReplyDeleteWhat makes best-fit rewards unique to your company is also what will differentiate it in the market for talent. So, you should identify those differentiating factors, figure out which of them are most compelling, and then communicate them far and wide. This will transform your rewards offering into a beacon that will help attract like-minded candidates to your company (DeBellis, 2018).
DeleteAccording to Prasad (2012), this is a universalistic approach that leads in directing and controlling the human resource of the organization. According to Boxall and Purcell (2003), in order to get the maximum benefit of the application of Best Practice and Best Fit approach, the Human Resource Management Strategies of the company need to go par with the business objectives and the business strategy of the organization.
ReplyDeleteGooderham et al. (2006) conducted a study using a factor analysis of 80 different HRM practices on its relationship with organizational performance among the European firms. The study shows that training monitoring, share-options, evaluation of Human Resource Department, profit-sharing, group-bonus, and performance related pay have a statistically significant impact on performance.
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ReplyDeleteHi Malithra, Becker and Gerhart (1996) argue that the idea of best practice might be more appropriate for identifying the principles underlying the choice of practices, as opposed to the practices themselves. Perhaps it is best to think of ‘good practice’ rather than ‘best practice’.
ReplyDeleteThe best-fit approach is connected with contingency theory which focuses on HR strategies which address certain situations of a company. Lifecycle, competitive strategy, and strategic configuration can be seen as three models of the best-fit approach (Harrison, 2007). On the other hand best practice can be seen as an assumption that there are accepted set of HRM practices which are considered to be the best. It is also known as the universal approach (Armstrong, 2009)
ReplyDeleteWhen done right, the best-fit approach should result in a unique and compelling rewards brand. If it doesn’t, it could mean that the company’s purpose, culture, and strategy aren’t unique, which might not bode well for its future or it could be that the organization is not asking the right questions of its employees in the right way (DeBellis, 2018).
DeleteIn the face of this trend toward identifying practice guidelines for counseling and other helping professions, there is a concurrent professional discourse that questions the assumptions underlying the best practices trend. One of these assumptions is that the best practices movement equates to a reduction of counseling to a medical model (Coleman, 2001).
ReplyDelete