Both approaches agree that externally competitive reward packages are important to attracting and retaining qualified employees (Anku-Tsede & Kutin, 2013). Thus, ‘Best fit’ advocates emphasize the importance of external competitiveness for attracting and retaining employees (UKEssays, 2018). To be effective, a reward system must distribute rewards in a way that will lead the organization’s most valuable employees to feel satisfied when they compare their rewards with those received by individuals performing similar jobs in similar organizations. According to Schuster and Zingheim (1992), “good performers tend to seek organizations where performance is recognized and rewarded.”
Armstrong (2008), Argues
that best fit is based on the premise that picking the most effective HR
policies and practices depends on matching them appropriately to the
organization’s environment. The contingent factors influencing HR strategy
might include type of business strategy pursued, organization size, type of
technology, geographic location and labor market, management skills and
preferences, industry sector and economic conditions. Best fit approach shows a
high margin of confidence regarding pay as a motivator and it follows the
expectancy theory that believe that people will perform better if they believe
their effort will be rewarded. Due these circumstances, the best fit approach
focuses on the financial aspect and uses it as a driver for corporate human
resource (UKEssays, 2018).
Armstrong (2012) explained
three models that included to the ‘best fit’ approach as,
·
Life cycle –
Explains four stages of development steps as
§ Startup
§ Growth
§ Maturity
§ Decline
·
Competitive
Strategy – Porter (1985) explains three areas as advantages of ‘best fit’ as
§ Innovation or niche
§ Quality of the out put
§ Cost leadership
·
Strategic Configuration – Explains the
advantages when the ‘best fit’ matched with the strategic alignment
Best fit advocates continue
to argue that an organization’s structure is contingent on situational
variables and a reward system can have a significant impact on reinforcing and
defining the organization’s structure. Lawler (1996, p. 532) states that the
“…key issues here seem to be the degree to which the reward system is
hierarchical and the degree to which it allocates rewards on the basis of
movements up the hierarchy.” Milkovich and Newman (1999, p. 65) explain the
difference between egalitarian and hierarchical structures when they observe,
“Egalitarian structures have few level and smaller differential between
adjacent levels and between the highest and lowest paid workers.”
Scholars argue that, either
structure can be pointed as fair depending on reward system administration or
employee values (Morris & Maloney 2005). However, each is thought to promote
different types of behavior. Hierarchical organizations tend to concentrate on
individual performance rather than group performance and there are
opportunities for promotion that attract higher wages. Top management makes
important decisions on pay and other organizational issues. Status differences
are reinforced through large pay differentials and perquisites (Morris &
Maloney 2005).
IKEA is one of the leading
companies which absorbed the best fit approach for the growth of the
organization.
IKEA – Why They’re So Successful
(Source: Company Man 2018)
List of References,
· Anku-Tsede, O & Kutin, E (2013) Total Reward Concept: A Key Motivational Tool for Corporate
Ghana, Business and Economic Research, ISSN 2162-4860, Vol. 3, No. 2
· Armstrong, M & Tayler, S (2012) A Handbook of Strategic Human Resource Management
practice 13th edition
· Armstrong, M
(2008) Armstrong’s Essential Human Resource Management practice London
Philadelphia New Delhi
·
Camaleen, A (2019) Specific Approaches to Develop HR Strategies in Modern Business
Environment
·
Company Man
(2018), https://www.youtube.com/watch?v=QgbtoL65X04
· Lawler, E (1996) The Design of Effective Reward Systems. In Motivation and Leadership at
Work, sixth edition, eds. R. Steers, L. Porter and G.Bigley, p. 527-550. New
York: McGraw Hill International Press.
· Milkovich, G and Newman, J (1999) Compensation, 6th ed. Homewood, IL. McGraw-Hill Higher
Education.
· Morris, D &
Maloney, M (2005); “Strategic Reward Systems: Understanding the Difference
between ‘Best Fit’ & ‘Best Practice’
· Porter, M (1985)
Competitive Advantage: Creating and Sustaining Superior Performance
· Schuster, JR
& Zingheim, PK (1992), Building Pay Environments to Facilitate
High-Performance Teams
· UKEssays. November 2018. Best Fit And Best Practice Perspectives For Hr Management Essay. [online]. Available from: https://www.ukessays.com/essays/management/best-fit-and-best-practice-perspectives-for-hr-management-essay.php?vref=1 [Accessed 6 November 2020].
Hi Malithra, I agree with you, the best fit model conforms to the contingency theory. Emphasizes that human resource strategies must be in line with the context and circumstances of the organization. The ‘best fit’ can be understood in terms of the vertical integration or alignment between the organization’s business and human resource strategies. There are three models: life cycle, competitive strategy and Strategic configuration (Armstrong, 2014, 23).
ReplyDeleteThe lifecycle model is based on the theory that the development of a firm takes place in four stages: start-up, growth, maturity and decline. This is in line with product lifecycle theory (Baird and Meshoulam, 1988).
DeleteAdding to your post, like there are advocates on ‘Best fit’ model, it does not lack criticism as well. Becker & Gerhart (1996) and Boxall & Purcell (2003) argues ‘best fit’ model raises questions on the most critical contingencies or elements from an organizational and environmental context. Boxall and Purcell (2003), also states the model overlooks employee needs, prevailing social norms and legal requirements which are also a part of the strategic goals of HRM. Therefor a more sophisticated approach to the contingency theory would be to consider the organizational culture, operational processes and external environment it operates (Majovsk, I, 2019).
ReplyDeleteAs Boxall et al (2007) assert: ‘It is clearly impossible to make all HR policies reflective of a chosen competitive or economic mission; they may have to fit with social legitimacy goals’. And Purcell (1999) commented that: ‘The search for a contingency or matching model of HRM is also limited by the impossibility of modelling all the contingent variables, the difficulty of showing their interconnection, and the way in which changes in one variable have an impact on others’.
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ReplyDeleteThe relationship between performance and human resources management of UBA canbe linked to two approaches which are the “best practice” and “best fit”. United bank for Africa (UBA) as an organization takes advantages of both approaches to carry out theirhuman resources activities. Best practice proponents believe that human resourcesactivities should be carried out following a set of HRM practice which is capable withimproving any organizational performance irrespective of the location and size of theorganization (Marchington& Grugulis2011). Conversely, advocates of best fit modelaffirm that if human resource policies of any organization align with business strategy,high performing work practice will be achieved (Armstrong 2012).
ReplyDeleteBoth theories aim to achieve high performance in organizations. 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.
DeleteAgree with you, 'Best fit' advocates emphasize the importance of external competitiveness for attracting and retaining employees. To be effective, a reward system must distribute rewards in a way that will lead the organization's most valuable employees to feel satisfied. Good performers tend to seek organizations where performance is recognized and rewarded (UKEssays, 2018).
ReplyDeleteAccording to Dowling & Welch (2006), there is also an emphasis on the importance of external competitiveness of an organization for attraction and retention of employees. According to best fit advocates, for effectiveness, a reward system must distribute rewards such that the most valuable employees of the organization will feel contended while relating their rewards with those of individuals performing same jobs in organizations of the same nature as theirs.
DeleteLam’s et al. (2001) research found that reward (including benefits) has a positive relationship with overall job satisfaction. In fact, the variable ‘reward’ emerged as the most important factor in predicting overall job satisfaction. Arnolds and Boshoff (2001), found that employees are significantly motivated by monetary rewards and basically pay has symbolic importance, giving feedback to the employee of his or her worth to the organisation (Pearson,1991). In order to prevent dissatisfaction, management needs to continue to observe competitors’ salaries and keep their staff’s salaries in line with competitors.
ReplyDeleteThe ‘best fit’ approach to strategic human resource management (HRM) explores the close relationship between strategic management and HRM by considering the influence and nature of vertical integration. Vertical integration, where leverage is gained through the close link of HR policies and practices to the business objectives and therefore the external context of the fir, is considered to be key theme of strategic HRM (Beardwell and Claydon, 2007).
DeleteAs you mentioning that ‘Best fit’ advocates emphasize the importance of external competitiveness for attracting and retaining employees (UKEssays, 2018) there can be a criticism on as companies move through their life-cycle HR practices have to be aligned which leads to an alternating treatment of employees which can have a demotivating effect and show inconsistency in corporate culture (Boxall and Purcell 2003).
ReplyDeleteHowever, Becker et al (1997) stress that high-performance work systems must be tailored carefully to a firm's individual situation to achieve optimum results.
DeletePerformance-based HRM is thought to have originated from the notion of so-called ‘best practices’, which mainly originate from the U.S. companies and are becoming the model for a great number of companies in the world (Rowley and Bae 2002). In the framework of ‘best practices’, there is one universal HR practice set which can be applied to any situations, which ensures high performance
ReplyDeleteNumerous studies have attempted to empirically study the link between HRM and firm performance in different contexts (Bowen and Ostroff 2004; Kidwell and Fish 2007). There are three dominant theoretical perspectives focusing on the relationship between HRM and performance (Samnani and Singh 2013). The first perspective is the universalistic theory, which suggests that certain key HR practices will lead to firm performance regardless of the organizational context (Del Valle and Castillo 2009). This theoretical stream thus assumes that the positive impact on performance of some HR practices is so well documented in multiple contexts that managers can adopt these ‘best practices’ in their own firms in order to maintain or increase performance (Grünhagen et al. 2013).
DeleteAgree with you. According to Armstrong (2014) best fit will be more effective if perfectly adopt to the policy of strategic configuration. For that adaption employees should be found that matched with the organization strategy. Selection of employees & rewarding them takes a huge part when considering this adaption.
ReplyDeleteThe 'best fit' advocates that HR strategy will be more effective if appropriately integrated in its organizational and environmental context. This approach covers a range of models focusing either on linking HR strategy to the competitive strategy or on 'bundles' or 'clusters' or HR practices that are designed to fit and support each other (Majovski, 2007).
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 models imply a close connection between HR practices and organizational performance and are often associated with high commitment management (Paauwe & Boselie, 2003).
ReplyDeleteBoxall and Purcell (2003) argue that the 'best practices' have become ends in themselves, apparently disconnected from the company's goals in its specific context. In that context, Becker and Gerhart (1996) point out that the concept of best practices can be accepted for identifying the principles underlying the choice of practices, however human resource practices should be embedded in organizations in a way that they fit organization's needs. Purcell et al. (2003) in their research of people and performance link show that there is no universal 'best practice'. On the contrary, they argue that all successful companies have broad and integrated clusters of practices that are tailored to the needs of the organization.
DeleteThe best fit approach is also in line with contingency theory and the theory emphasizes that HR strategies should be congruent with the context and circumstances of the organization(Mendes, et al., 2019).
ReplyDeleteThe best fit model seems to be more realistic than the best practice model and it is often said that ‘best fit is better than best practice’. But as Stavrou et al (2010: 952-73) argued; There may be merit in both approaches where the debate is between general principles/bundles and the manner in which they are carried out. It seems that the ‘best fit’ and ‘best practice’ approaches of the HR performance relationship are not necessarily mutually exclusive. On the contrary, they may be combined to provide a more holistic picture.
DeleteIt is the responsibility of the management of the organization to enhance the strengths and minimize the weaknesses for the success and the sustainable development of the organization (Charles, 2001). It is evident that there is no universally accepted and definite one best practice or best fit model (Armstrong, 2006). Application of suitable best practices and best fit model is one of the key roles of the management and it's obligation of management shape are responsible to shape them according to the organizational strategy subject to the changes happen within the dynamic business environment.
ReplyDeleteArmstrong and Brown (2019) compared the universalistic (best practice) with contingency (best fit) perspectives of SHRM in a study conducted using a sample of 97 plants in a manufacturing setting. Results generally supported the contingency approach. It was found that an HR system focused on human capital enhancement improved operational performance.
DeleteAdding something to your content, the best fit approach is in line with contingency theory. It emphasizes that HR strategies should be congruent with the context and circumstances of the organization. ‘Best fit’ can be perceived in terms of vertical integration or alignment between the organization’s business and HR strategies. There are three models, namely: lifecycle, competitive strategy, and strategic configuration (Armstrong, M 2017).
ReplyDeleteMichie and Sheehan (2005) tested the best practice, best fit, and integrated HR practices perspectives on a sample of UK manufacturing and service-sector firms. They found that the relationship between HR policies and practices and performance is dependent upon business strategy (the contingency perspective) and that companies pursuing an integrated approach to HR perform best.
DeleteThe challenge to promote learning processes and establish feedback linkages; the need to address public concerns, such as environmental concerns, which go beyond agricultural knowledge and information transfer; the problem to ensure political commitment and fiscal accountability; and the influence of the wider policy environment
ReplyDeleteThe individual performance-system was designed by Lincoln as the key component of employee development to become its core strength through invincible motivation and quality-drive (Millgram and Roberts, 1995).
ReplyDeleteThe best practice approach states that certain bundles of HR activities occur which exclusively support companies in reaching a competitive advantage irrespective of the organizational setting or industry (Redman and Wilkinson 2009). Best practice models involve a close connection between HR practices and organizational performance and are habitually allied with high commitment management (Paauwe & Boselie 2003). Empirical research in the best-practice field shows similar groups of HR polices which are especially appropriate for exploiting performance irrespective of market and product strategies (Peffer 1998; Guest 2001). Best practice combines of activities are characterized as mutually compatible HR activities which counterfeit high levels of workforce competence, encourage motivation and introduce a work design enhancing employee commitment (Maloney and Morris 2005). Based on concepts from expectancy theory (Vroom 1964 ; Lawler 1971) best practice HR will result in higher levels of quality, productivity and low rates of absenteeism and wastage (Guest D 2001).
ReplyDelete