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The term human resource management (HRM) has a wide definition and there is still no universal agreement on it. (Beardwell and Claydon, 2007) As the advent of the new economy, HRM had a deeper and wider development in order to support the businesses operates in a more complex environment. “It is concluded in both theory and practice that employees matter and that HRM is a potential source for achieving organizational goals.” (Boselie, 2010, P2) Kellogg (2010) argues that employees are more than a resource. For most contemporary organizations, organizational changes have become a common practice. Strategic human resource management (SHRM) focuses on issues of linking HRM to the business strategy to gain and sustain competitive advantage. “Fit” is likely the most important word in SHRM. There is a debate linked to the issue of ‘fit’ between two competitive schools: the best-practice school and the best-fit school.
The best-practice school advocates a universalistic perspective – all firms will see performance improvement if they adopt it. (Boselie, 2010) There are three main gist of best-practice theories should be mentioned. First of all, the models enhance employee ability and knowledge through good recruitment and training. The second one is motivating desired behaviour through strong incentives. The last one is encouraging ideas and contribution from motivated and better trained workers. (Boxall and Purcell, 2003)
Pfeffer (1998) claims seven HRM practices that all firms could success if they apply these seven. The first one is selective recruitment and selection. The ‘selective’ is a central part of it and a sophisticated way to recruit and select the talents. The second one is extensive training-employees get development through training programmes. The third one is performance-related pay (PRP). PRP related to personal and team performance and the best-performance employees in a department will get yearly bonuses. The forth one is teamwork. Employees take responsibility to work design and planning for a group of employees. It is an effective way to break through the hierarchical model and decentralize responsibility. The fifth one is information sharing and communication through the Internet, newspaper, face-to-face talks and, last but not least, top management presentations. The sixth one is reduction of status differences, avoiding status symbols, such as special parking spaces for high management. The last one is employment security. Pfeffer (1994) also lists 16 practices for ‘competitive advantage through people’.
The advantages of the best-practice models can be defined as, firstly, much agreement on basic best practice. The second one is the recognition of ‘bad’ practice. The third one is establishing rules of thumb for selection; training; appraisal methods. The last one is that no need to re-invest.
Some evidences in reality can prove that there is a positive relationship between the best-practice and organizational performance. Richardson and Thompson reported that: “there are 30 empirical studies that have sought to address the relationship between HR practices and business performanceâ€¦ The published research generally reports positive statistical relationships between the greater adoption of HR practices and business performance.” (Richardson and Thompson, 1999) According to another paper reported by West, Patterson, Lawthom, and Nickell (1997) firms could gain a substantial and measurable improvement to organizational performance if they invest in developing and maintaining effective HRM policy and practice.
Some criticisms also should be mentioned. The first criticism of best-practice models is diversity of best-practice. Lists of desirable practices vary significantly. (Becker and Gerhart 1996, Dyer and Reeves 1995, Youndt et al. 1996) Secondly, the collective issues of work organization and employee voice may be lost. (Marchington and Grugulis, 2000) Thirdly, Legge (1978) argues that supporters of ‘best-practice’ try to fabricate the question of interests and goals. There are some other criticisms that should be considered. One is that it might be difficult when we go beyond these practices. Another one is that these models may not be suitable for every situations or sections of same business.
“The Best-fit school argues that HRM is more effective when it is aligned with its internal and external context.” (Boselie, 2010, P21) The notion of a linkage between business strategy and performance of every employee in the organization is central to ‘fit’. (Beardwell and Claydon, 2007) There are two most common fit in HRM- external and internal.
External fit refers to that HR practices should fit the organization’s strategy, development, and goals. (Boxall and Purcell, 2003) Golden and Ramanujam (1985) present a model to distinct four linkages: administrative linkage, one-way linkage, two way linkage, and integrative linkage. The internal context represents the organization’s history, culture, and the administrative heritage. Porter (1985) presents a typology of competitive strategies, advising firms to specialize carefully in competitive strategies. Schuler & Jackson (1987) developed a linkage between competitive advantage, employee behaviours and HR practices. (Boselie, 2010) There are some criticisms that should be mentioned. The first one is that they can overlook employee interests. In other words the need to align employee interests with the firm is generally failed to recognize. The second criticism is that some firms are good at everything so HR practices likely to be based on more than one strategies. “There is evidence that the most resilient firms in some sectors are good at everything: they are superb ‘all rounders’, not just good at differentiation or cost leadership.” (Boxall and Purcell, 2003, P55) However, the criticism dose not invalidates the idea of a fit between HR strategies and competitive strategies. Boxall and Purcell argue that: “there are some supports for the argument that firms try to relate a variety of HR practices to their competitive strategy.” (Boxall and Purcell, 2003 P57) The last, but not the least, one is the leak of attention of dynamics. “A useful model for practice if one in which fit with existing competitive strategy is developed simultaneously with flexibility in the range of skills and behaviours that may be needed to cope with different competitive scenarios in the future.” (Boxall and Purcell, 2003, P56)
Internal fit refers to the linkage between individual HR policies, and is thought to be a crucial part to gain success. Internal fit emphasize that HR policies must be aligned with HR practices. Policies which work in opposite directions should be avoided. There is an example, encourage teamwork then rewarding individual performance. Eaton (2000) examined issues of HRM and organizational performance in 20 nursing homes in the USA. In her report she argues that a new set of practices, including cross-training and job enlargement results a better performance in some homes. “Rondeau and Wagner examined the impact of HRM practices and the best-fit models on 283 Canadian nursing homesâ€¦They reported that the best-performing homes were found to be more likely to have implemented ‘high performance’ HRM practices and to have a workplace climate that strongly values employee participation.” (Buchan, 2004, 2:6) Baron and Kreps (1999) define 3 types of desirable fit. The first one is ‘single employee consistency’ which emphasizes that make sure selection approaches aligning with the investment in training and promotion policies. The second one is the fit across employees doing the same kind of work. The last one is ‘temporal consistency’ which is consistency of employee treatment across a reasonable period of time. There are some criticisms should be considered. Firstly, HR managers should avoid policies which against the directions. For example, a firm emphasizes teamwork but operates a reward system which focuses on individual performance. Secondly, firms should avoid duplication of practices.
Boselie (2010) argues that there are two important mechanisms that determine the external context faced by the organization: market mechanisms and institutional mechanisms. The HR strategy scan model, developed by Boselie, contains six components: the external general market context, the external population market context, the external general institutional context, the external population institutional context, the internal organizational context, and HR strategy. (Boselie, 2010, P30-36) External context is a crucial part in most contemporary organizations. It has a significant impact on HRM activities. The unique culture and history in different countries always require different HRM policies and practices. (Boxall and Purcell, 2003)
It is impossible to isolate HR policies from the context whatever internal and external. However, it is also sensible to take best practice models because of the existing of generic processes, such as recruitment and appraisal. HRM in production industries are of more concern to financial sector or the high tech industries. An analytical distinction between the surface level of HR policy and practice in a firm and an underpinning level of processes and principles could be made for this debate. The surface layer refers to those HR policies and practices that are driven by context. The underpinning layer refers to those HR policies and practices that are generic processes and principles with essential applicability. (Boxall and Purcell, 2003, P69)
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