Best Fit and Best Practice in HRM
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Published: Tue, 02 Jan 2018
Today, many organizations are facing an increasingly competitive and hastily changing environment illustrated by various labor market, deregulation, globalization, improved information technologies, uninterrupted labor markets among other factors. For success in its operations, a company/firm should improve its performance through reduction of its operation costs, creation of new processes and products, increasing quality, productivity and speed market. Consequently, organizations have to center on their workforce’s capabilities. If a firm manages its human resources effectively, it will be able to generate and enhance commitment, synergy and motivation that will to a sustained competitive advantage. Studies have shown that human resource management is one of the avenues that an organization can use to shape her employees behavior and attitude.
Human resource management practices form forums that ensure employees get highly involved in the activities of the organization and work hard to achieve her goals. The manner in which an organization manages her human resource institutes the conditions and tone that will govern the relationship between employers and employees. There are many ways of defining human resource management (HRM) practices. Bowman & Swart (2007) looks at it as organizational activities directed at managing the pool of human resources and ensuring that they are directed towards fulfilling the goals of the organization. It has also been looked at as a set of internally consistent policies and practices that are developed and upon implementation, they will guarantee that the human capital of an organization add to the achievement of its business objectives. The approach to definition of human resource management practices may vary slightly but the bottom line of it all is organizing and managing the man power in an organization.
The connections between a firm’s performance and its human resource management practices are based on two approaches namely best fit (contingency) and best practice (universal) approaches. In best practice, a set of HRM practices are argued to be associated with improved firm performance in all types of organization and by allusion for al types of employees (Nahapiet & Ghoshal, 1998). Conversely, the best fit approach argues that performance of a firm is maximized if the human resources policies are constant with the firm’s business strategies. Both the best fit and the best practice have an assumption that human resource policies take on will be implemented and as projected and have the same consequence on all employees that work in the firm. Researches on human resource management however show that that there is no consensus on which human resource management approach is looked at as suitable.
Notwithstanding the inconsistence in both the best fit and best practice approaches, there is a momentous effect of human resource management practices on attitudes and behavior of employees based on the idea of social change. Studies reveal that employees of an organization infer organizational actions like human resource practices as indicators of how much an organization is committed to their welfare (Abraham et al., 2001). In response, the employees counter this gesture through improving their obligation to the organization. Particularly if the human resource practices of the an organization are professed as supportive, the employees will take it as their employer being committed to them through concern and high level of care , consequently they will work hard to and get very much engaged in the organization expressing their enthusiasm in hard work to achieve the goals of the organization.
The concepts of best fit and best practice are applied in strategic human resource management to the particular 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). Organizations can wok within the framework both the best fit and best practice. I agree with the best fit that suggests that a close alignment between organizational strategy and different systems that it employs like the rewards will go along way in improving the efficiency of the organization. The idea that pay should be linked strategy is not new but it got momentum from scholars in the 1990 talking about its merits as the “new pay”. It is evident tat all organizational systems have to start with a business strategy to achieve the goals it has set, failure to which it may face difficulties to carry on its operations. This is because the strategy will clarify what the organization wants to achieve over a specified period of time. It will also set the conditions on the manner in which the organization will behave to achieve them; this means that the organization sets cope of standards on the way it is run (Boxall & Purcell, 2008). Additionally
the strategy will express the types of performance and the levels of performance it wants to employ to run in a organized and effective way. This is as a result of business strategy, organizational behavior and diving individuals being the benchmark for the reward strategy development. The contingent nature of a reward system should not be looked at as a set of compensation practices at all. Nonetheless, it should be treated as one way of thinking about role of a reward system in a complex organization setting. This goes against an assumption that is often made to mean that certain best practices have to be incorporated into an organization’s approach to pay (Simons, 2002).
Having looked at best fit, the attention now is on best practice. This premise has been popular in human resource management over the last decade. Studies show that this model otherwise known as high commitment was initially stimulated by work of some United States of America academics, although it was recently developed by those in Britain (Kaše et al., 2009). Although both the models of best fit and best practice are assumed to be complimentary, the later is arguably seen as not having an element of discussion on the organizations strategy at all. Its fundamental benchmark is that all organizations who adopt the best practice strategy will attract super human resources, competencies and talent. According to the views of its proponents, the super human resources available has an effect of influencing the strategy that an organization adopts hence acting as the source of its viable advantage. Consequently for this approach, the organization’s policy precedes its strategy.
Coff (1997) asserts that there are mutually compatible bundles of human resource policies that sustain high standards of motivation of employees and also their commitment that has a positive impact on the performance of the organization. This is the approach that advocates of best practice say it stands for. However, there is no common ground on which these practices are, on a general scale they are composed of: extensive training, selective hiring, and structure to encourage employee’s participation, employment security and pay policies which lead in relation to industry competitors (Lengnick-Hall & Lengnick-Hall, 2003). There is apparent point of disagreement between in the sector of pay linked to performance appraisal. Researchers have criticized merit pay in a number of ways as: there is subjectivity and unpredictability that reward political skills instead of performance, there is no concern for performance of the organization, it encourages short term focus, there is an emphasis on the individual success that undermines teamwork and lastly there is a tendency of such like a system to create fear at work place.
Those who support either side of the human resource management approaches argue that both approaches, hest fit and best practice, will help an organization to achieve its goals and objectives. There are several ways that an organization employs when it comes to organizing its human resources that will help it achieve what it was set up for. The methods of achieving the objectives are: attracting and retaining employees, motivating the performance of employees, promotion of skills and culture in an organization, contribution to corporate culture of an organization among other things There are differences in which the two approaches handle attracting and retaining employees. The capability of an organization’s reward systems in attracting and retaining its employees is of cardinal concern to many organizations (Cullinane & Dundon, 2006). During economic expansions, times when the labor markets are tight and organizations are struggling to fill vacancies at the same time trying very to hold on to hold on to their qualified employees, this becomes a very crucial issue. This also happens during recessions as organizations sometimes become keen on getting the services of qualified employees.
To cope with this, the 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. The best fit proponents basically assume that it is in organizations where good performance is recognized and rewarded that good performers tend to seek or employment. This is a correct observation because skilled personnel will take pleasure in working where they will be appreciated as good performers. Systems have a way of identifying poor and a good performer as not all employees turn over is harmful to performance of an organization. To this effect, a reward system has to promote the retention of good performers at the same time aiding the decision of poor performers leaving the organization.
According 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. However caution must be taken here because some studies have shown that in some organizations, it is more cost effective in keeping the wages low and accepting high employee turnover, particularly if the cost of replacing them is low as it is the in unskilled labor. Despite the fact labor markets are far from being perfectly efficient, it is evident that there is some relationship between the quality of a work force and organization attracts and how it pays its employees. This is quite true and it is convincing for the best fit approach as it gives the facts on the behavior of employees and pay.
Looking in the manner in which the best practice deals with attracting and retaining the employees, it emphasizes on employees that will assist an organization in gaining and sustaining competitive advantage. It achieves this through externally competitive pay levels. According to this however, a combination of a number of a number policies that are interrelated are responsible for highly qualified individuals apply and remain in an organization. The recruiting procedures which provide a huge pool of qualified applicants, coupled with a dependable and valid routine has a significant influence on the quality and type of skills the new employees will have. The thorough process of selecting employees will make the selected candidates feel that they are joining privileged organization with elevated prospects. The best practice approach advocates for positively value low turnover with no cautions whatsoever as opposed to the best fit approach. This happens so as other related procedures and policies make sure that the employees chosen are the right ones for the job and are taken in at first instance (Galpin & Skinner, 2004). The best practice takes into consideration today’s global business employment to be of key importance in attraction and retention of employees as opposed to the other approach which that claims that employment security does not reflect the realities of today’s competitive global business. This is due to employees being unlikely to make suggestions to increase the productivity whenever they fear that it will make them loose their job. Researchers assert that the cardinal concern in the design of a reward system is the plan works in employee motivation. There are various theories of employee motivation and there is no one particular that has been accepted universally. The different theories that exist handle different types of reward systems. The best fit approach believes that the payment system of an organization should reflect individual employee contributions (Fitz-Enz, 1993). Employees may at times cut down their efforts to look for employment in highly paying jobs in other organizations due to dissatisfaction originate from negative inequity and some other consequences. It is observed that highly dissatisfied companies are more strongly attracted towards an external market orientation. On the other hand, organizations that are based on a single industry or technology will naturally find themselves much calm with an internal-equity basis.
Both types of inequity in an organization have serious consequence for an organization but the implications for external equity like absenteeism and turnover are more rigorous for a particular organization and should be given chief consideration (Lepak & Snell, 199). This is clear evidence that the best fit approach in human resource practice has support for the contribution principle. It therefore has an implication that employees who remarkably contribute to the success of an organization ought to be able to compare themselves with significant others form both outside and inside the organization and still get contented with the pay they get. The best fit practice for that matter looks at it as an obligation of the design to promote development and make use of employee inputs that will promote the organization. The best fit approach also makes use of expectancy theory of behavior. The theory utters that individuals make choices depending on some factors like: there expectancy that there efforts will make them achieve certain standard of performance, believing that their performance will result significant upshots and the scale of value they place on those upshots (Intagliata, et al., 2004). It is line with best fit thinking as it gives a design framework for each element of a reward system to utilize to its best advantage. The best practice advocates depend on the content theories of motivation as the foundation of their system of reward. It is apparent that factors that get drawn in to produce job satisfaction and motivation are different from those ones that lead to job dissatisfaction.
Motivators are the source of job satisfaction and are intrinsic to the particular encompassing recognition for the achievement, the work itself, responsibility and advancement or growth. The potential source of job dissatisfaction is extrinsic and is made up hygiene factors like salaries. The approach does not advocate for incentives for as it results to spiralling of wages and employees who search for the next pay increase. Research has shown that firms block the development of some behavior that front competitive advantage by picking on incentives. Looking at the above discussion, it is apparent the both the best fit and best practice approaches as employed in human resource management practices are all directed towards ensuring that an organization achieves its goals and objectives through organizing its strategies and man power. Through striking a balance between the contingent and universal approach, an ideal or more comprehensive model can be developed by looking at their limitations and merits. The value of the universal (best practice) framework depends in the demonstration of the strategic significance of human resource management. High rates of significance in their tests were achieved by its proponents but it has limitations in both its methodological and theoretical domain. There is compatibility between the two approaches as the contingency approach comes in handy here to complement the universal model encompassing the external relationships
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