In strategic human resource management literature, the terms ‘best fit’ and ‘best practice’
are used in the specific policy area of reward systems. Each approach attempts
to explain how it’s going to impact on the organization’s effectiveness
(Morris, 2005). Lawler (1995, p. 14) states that all organizational systems
must come up with a business strategy because “it specifies what the company
wants to accomplish, how it wants to behave, and the kinds of performance and
performance levels it must demonstrate to be effective.” Business strategy,
driving individual and organizational behaviors, is the touchstone for the
development of the reward strategy.
The contingent nature of the reward
system is emphasized by Lawler (1995, p. 14) when he argued, “indeed the ‘new
pay’ is not a set of compensation practices at all, but rather a way of
thinking about the role of reward systems in a complex organization, it argues
against an assumption that certain best practices must be incorporated into a
company’s approach to pay.”
Schuster and Zingheim (1993, p. 6) also
follow a contingent approach but stated that “Merit pay
and traditional performance appraisal make it impossible to view employees as
key elements of organizational strategy and tactics.” According to Conway (2003), research examining ‘high commitment
management’ in HRM has its roots in both the configurational and the universal
theoretical frameworks. Marchington and Wilkinson (2002, p. 177), claim that
“most of the interest over the last two decades or so has been in models of
‘high commitment’ or ‘best practice HRM. Both approaches believe that HR
practices should be complimentary. However, according to Purcell (1999, p. 27),
‘what is most notable about the best practice model is there is no discussion
on company strategy at all.
Advocates suggest there are mutually
compatible ‘bundles’ of HR policies that promote high levels of employee
motivation and commitment that positively impact on organizational performance
(Morris, 2005).
One of the main points of contradiction
is in the area of pay linked to performance appraisal. Pfeffer (1998, pp.
203-204) criticizes merit pay on five grounds:
1. “Subjectivity and capriciousness that
reward political skills, rather than performance.
2. An emphasis on the success of the
individuals, consequently undermining teamwork.
3. An absence of concern for
organizational performance.
4. Encouragement of short-term focus.
5. The tendency of such systems to
produce fear in the work place.”
However, when discussing specific HR
practices that are linked to the creation of firm-specific competitive
advantage, Huselid (1995, p. 637) states, “Examples of firm efforts to direct
and motivate employee behavior include, performance appraisals that assess
individual or work group performance, linking these appraisals tightly with incentive
compensation systems.”
The purpose of the reward system in most
organizations is to attract, retain, and motivate qualified employees. The
organization’s compensation structure must be equitable and consistent to
ensure equality of treatment and compliance with the law (Gregg, 2018).
Video 01: Reward Systems in Organizations
Source: (Gregg, 2020)
In conclusion, there is striking lack of
consistency in reward systems reported by companies using high performance work
practices (Huselid, 1995). Although Pfeffer and Velga (1999) clearly states
that a firm pay high wages in relation to it industry competitors, their list
of ‘contingent compensation’ used by organizations runs the gamut from
gain sharing to individual incentives.
List of references,
· Conway, E. 2003, Relating
Career Stage to Attitudes Towards HR Practices and Commitment: Evidence of
Interaction Effects? Paper presented to the European Congress on Work and
Organisational Psychology. Lisboa: May14-18.
· Gregg Learning, 2020, Reward
Systems, viewed 02 December 2020. <https://www.youtube.com/watch?v=6F56s8diTrk>.
· Huselid, M. (1995) The
Impact of Human Resource Management Practices on Turnover, Productivity and
Corporate Financial Performance. Academy of Management Journal, 38 (3), p.
635-72.
· Lawler, E. 1995, ‘The New
Pay: A Strategic Approach, Compensation and Benefits Review’, 27 (4), p.14-22.
· Marchington, M. &
Wilkinson, A. 2002, People Management and Development. London: Chartered
Institute of Personnel and Development.
· Morris, D and Maloney, M.,
2005, Strategic Reward Systems: Understanding the Difference between ‘Best Fit’ and ‘Best Practice’.
· Pfeffer, J. 1998, The Human
Equation: Building Profits by Putting People First. Boston: Harvard Business
School Press.
·
Pfeffer, J. and Velga, J. 1999,
Putting people first for organizational success, Academy of Management
Executive, 13 (2), p. 37-48.
· Purcell, J. 1999, Best
practice and best fit: chimera or cul-de-sac? Human Resource Management
Journal, 9 (3), p. 26-41.
· Schuster, J. and Zingheim P.
(1993) ‘New pay strategies that work,’ Journal of Compensation & Benefits,
8 (6), p. 5-9.
Employee benefits are bonuses offered to employee members based on individual success, team performance, or organization performance. These benefits can come in the form of commission payments, one-time bonuses, salary increases, stock option, and "swag" such as company incentives (Stephen, 2013).
ReplyDeleteSchuster and Zingheim (1993), propose that employee rewards must constantly be attached to firm's performance.
DeleteThe best fit method focuses on the financial aspect and uses it as a driver for corporate human resource.David Morris (2007) says, “Best fit proponents see rewards as the stick and the carrot. Since pay varies with performance, poor performers ‘vote with their feet’. Excellent performers are attracted to the large pay differentials that reward their performance"(Boxall and Purcell, 2000). Best practice, they do not really believe in the great influence of pay(Morris, D 2007).
ReplyDeleteThe best fit approach boasts of the composition of its reward package attracting many and various kinds of applicants. This argument holds water because drawing example, an organization offering a straight base salary and no chance for incentive earnings, naturally attracts and retains quite different individuals that as compared to one that gives big amounts of incentive pay. Organizations rewarding their employees with different performance related pay incentives have increased chances of attracting employees who are more problem solving and entrepreneurial compared to those offering a base salary (Dowling & Welch, 2006).
DeleteBut best practices usually fall short of this ideal. They are not a panacea, not always horizontal, and often, at least in effect, not really voluntary. In short, although best practices purport to be "best," there is nothing particularly "best" about them. The rulemaking technique is a way of obtaining common practices, not ideal ones. There are, accordingly, some contexts in which best practices may be appropriate and effective forms of regulation, and other contexts where they are not (Zaring, 2006)
ReplyDelete