Under the rapid
modernization in the business world lately, firms and organizations tend to
realize that employees are a crucial asset to the establishment. In order to
integrate these assets, organizations 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. According to Morris & Maloney (2005), there are two perspectives
for the strategic pay literature.
Best Fit
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. Main focus of
the organizations with the best fit approach is to be cost conscious. Armstrong
(2012), explained three models that included to the ‘best fit’ approach as,
·
Life Cycle
·
Competitive Strategy
·
Strategic configuration
Leading companies such as IKEA and Walmart use this practice in their Strategic Human Resource Management (Kats, 2014). The story behind the success of IKEA is, their high quality, well designed and functional products, in affordable prices and great variety. IKEA keep their cost to the minimum by, use of flat packaging and ready to assemble products, as well as the use of product communality reduces their transportation, inventory and manufacturing costs (IKEA USA, 2014).
Best Practice
Best Practice approach of SHRM can be described as a
number of specific HR practices that are universal and have the potential to
bring about enhanced performance for all organizations (Marchington and
Wilkinson, 2006, p. 72). Best practice
is recognized to give superior outcomes, whatever the situation (Delery and
Doty, 1996).
Pfeffer (1998), pointed out seven universally accepted
practices which would help the organization to thrive among other competitive
and increase the organization’s profit.
·
Providing security to employees.
·
Selective hiring: Hiring the right people
·
Self-managed and effective teams
·
Fair and performance-based compensation.
·
Training relevant skills.
·
Creating a flat and egalitarian
organization.
·
Making information easily accessible to
those who need it.
Michelle Reynolds pointed out that leading organizations
such as Google, Apple and FedEx use this approach in their Strategic Human
Resource Management to be competitive among other relative organizations.
Applying above approaches to the reward system.
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). Lawler (1995, p.14), 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.” Furthermore, 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.”
List of References,
· 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.
· Delery, JE and Doty, DH 1996, Modes of
Theorizing in Strategic Human Resource Management: Tests of Universalistic,
Contingency, and Configurational Performance Predictions.
· IKEA, USA 2014, The IKEA Group – The Story
of How We Work, viewed 9 November 2020, <https://youtu.be/1jn2_nZrivQ>.
· Kats, C 2014, What Management Lessons
IKEA’s HR Strategy can teach us
· Lawler, E. 1995, ‘The New Pay: A Strategic
Approach, Compensation and Benefits Review’, 27 (4), p.14-22.
· Marchington, M and Wilkinson, A 2006,
People Management and Development: Human Resource Management at Work.
· Morris, D. & Maloney, M 2005;
“Strategic Reward Systems: Understanding the Difference between ‘Best Fit’
& ‘Best Practice’.
·
Pfeffer, J 1998, Seven Practices of
Successful Organizations.
· Schuster, J. and Zingheim P. (1993) ‘New
pay strategies that work,’ Journal of Compensation & Benefits, 8 (6), p.
5-9.
Most organizations don’t place a high enough focus on human capital management as a component of core competence. In order for organizations to be successful in any market, they must have a strategic approach in managing human resources which will lead in creating a workforce that provides a sustainable competitive advantage. The relationship between performance and human resources management can be linked into two strategic approaches which are the “best practice” & “best fit" (Reda, 2019).
ReplyDeletewhist agreeing to your statement, the concepts of ‘best fit’ and ‘best practice’ in strategic human resource management share some common points. In the most general sense, both approaches view HR as having an important role in supporting organizational strategy and objectives. Both approaches agree that reward practices should be consistent with other HR practices. There is a shared view that an externally competitive reward system has an important role in attracting appropriate candidates and retaining employees. Both see rewards as a way of reinforcing organizational culture and structure (Conway, 2003).
DeleteIt is often said that best fit is better than best practice but this statement can only be accepted with reservations. As Stavrou et al (2010: 952–53) 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
ReplyDeleteI completely agree with your last statement, the CIPD (2010), talking about strategic human resource management, writes: “There is no single HRM strategy that will deliver success in all situations. Organizations need to define a strategy which is unique to their own situation in terms of context, goals, and the demands of organizational stakeholders. CIPD members will find our tool on HR strategy will be useful in carrying out such an activity.” Therefore, It is useful for all organizations to management their people within a planned and coherent framework which reflect the business strategy.
DeleteBest practice is that certain practices will ultimately result in better performance regardless of the business, and should be applied in almost all cases and the Best fit is more flexible, taking into account the business, the team, the products, services and point of difference(Gorokhova, et al., 2018).
ReplyDeleteAdding further to your comment, for best fit, organizational strategy comes first and all organization systems and practices follow. Whereas for best practice a prescriptive set of practices, precede strategy but provide the human resources needed to fulfil the organization’s objectives, whatever they are. We can see that the two concepts differ in their method. Within the ‘Best practice’ model the HR manager starts by identifying best practice, then give HR a high profile, get top level commitment, sell it, do it, measure it, reward champions (David Morris, 2007).
DeleteAccording to Boxall and Purcell (2003), the organizational strategy plays a major role in motivating the employees towards accepting best practices through expressing the expected levels of performances of the employees. The employee is the precious resource within the organization and to achieve the goals and objectives within the dynamic and uncertain business world, the human resource must handle well through adapting perfect best practices and best fit approaches (Workline et al, 2017).
ReplyDeleteThe concepts of best fit and best practice are applied in strategic human resource management to the articular policy section of reward structures. Each of the approaches endeavors to explain the manner in which human resource policies generally and reward policies particularly can lead to better organizational efficiency (Zupan & Kaše, 2007).
DeleteThe ‘best practice’ approach has so many criticism from many scholars as every industry is different and each has different management practices to face different situations (Armstrong, 2009).
ReplyDeleteAccording to Beh & Loo (2013), The universalistic academicians consider strategic HRM practices to positively influence firm performance and help firms improve their human resource cost benefits, improve operating efficiency, increase innovation, and increase overall organizational performance benefits (Dyer & Reeves, 1995).
DeleteOrganizations with a passion for growing the right leaders, appropriate organizational structures and culture, and a strategic plan to implement leadership programs will be better prepared for future challenges (Miller et al., 2001)
ReplyDeleteThe ‘best practice’ highlights the relationship between ‘sets’ of good HR practices and organisational performance, mostly defined in terms of employee commitment and satisfaction. These sets of best practice can take many forms; some have advocated a universal set of practices that would enhance the performance of all organisation they were applied to. Pfeffer ( 1998) Pfeffer, J. (1998). Seven Practices of Successful Organizations. California Management Review , 40 (2), pp. 96-124. , listed seven HR practice for competitive advantage, ” Employment security, selective hiring, self-managed teams, high pay contingent on company performance, extensive training, reduction of statute difference and sharing information”. Tim Claydon (2007), argues that: ” A key element of best-practice is horizontal integration and congruence between policies.”
ReplyDelete