Strategic Human Resource Management: Best Fit Approach

Introduction

This academic essay critically examines the Best Fit approach to Strategic Human Resource Management (SHRM). The key terms 'best fit' and 'strategic human resource management' will be defined to establish a foundation for our discussion. Subsequently, examples of 'best fit' in SHRM will be explored. The essay will identify the pros and cons of the Best Fit model, enabling a comprehensive analysis. To ensure a robust discussion, key points will be substantiated with empirical evidence and real-life examples, fostering constructive criticism.

Strategic Human Resource Management (SHRM) encompasses all aspects related to the management of employment relations within a firm. The term 'strategic' implies a critical role for HRM in organizational effectiveness. The debate on how firms should make strategic choices in the labor process has garnered international attention. The Best Fit approach posits that HR strategy benefits when properly integrated with the specific organizational and environmental framework. However, the challenge lies in identifying the most crucial contingencies within complex organizations and effectively integrating them.

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Armstrong (2001) categorizes two types of fit: external and internal. External fit focuses on aligning HR strategies and practices with the developmental stage and strategic trajectory of the firm. In new enterprises, HR practices may center on pay and recruitment. As the firm matures and grows in complexity, managers find it challenging to handle expanding HR roles, leading to the creation of dedicated human resource departments for hiring, training, and compensation (Baird & Meshoulam, 1988). External fit also emphasizes the harmonization of HR strategies with business strategies, creating a contingency model.

On the other hand, internal fit requires HR policies to be designed to support each other, accomplished through shared processes like performance management, employee development, and reward systems. Best Fit models advocate for aligning HR policies with business strategy, asserting that different HR strategies match distinct business strategies (Pilbeam and Corbridge, 2002).

Furthermore, a well-matched business strategy with human resource policies is linked to enhanced overall performance (Kinnie et al., 2005). Baird and Meshoulam (1998) argue that an organization's development stage is pivotal for future success, emphasizing the need for structure and systems to align not only with the stage of development but also with the competitive strategy.

Best Fit Approach in SHRM

The complexity of the Best Fit approach lies in its emphasis on aligning HR strategies with the specific organizational and environmental context. This approach acknowledges that different organizational stages and business strategies necessitate distinct HR practices. Sels et al. (2003) assert that contingency approaches start with the assumption that the selection of a combination of HRM practices is determined by the strategy used.

Moreover, the well-matched business strategy to human resource policies is linked to an overall performance boost (Kinnie et al., 2005). This aligns with Baird and Meshoulam's (1998) argument that an organization's development stage is crucial for its future success, emphasizing the need for the organizational structure and systems to align with not only its stage of development but also its competitive strategy. This implies that the concept of the Best Fit model involves SHRM adapting to the dynamic requirements of the business.

Jackson (1987) presents an alternative perspective on improving organizational performance. He argues for the reassembly of HR practices to strengthen the behavioral implications of various 'generic strategies' defined by Porter in 1985. A strong firm's positioning within its industry and the strategic adoption of HR practices, such as a preset choice of cost leadership, differentiation, and focus, will lead to the generation of greater returns.

A practical illustration of the Best Fit approach can be observed in the case study of Marks & Spencer (M&S), a renowned UK brand established in 1894. M&S, one of the most recognized brands in the UK and worldwide, experienced significant success until the late 1990s. The company attempted to implement the Best Fit approach by designing a competitive strategy focused on innovation, quality enhancement, and cost leadership to efficiently utilize its workforce.

M&S adopted Michael Porter's generic strategies—'low-cost,' 'differentiation,' and 'focus.' The competitive strategy involved specific responses from workers or 'needed role behaviors' and a corresponding HRM strategy. However, any misalignment in internal HRM practices could result in 'role conflict or ambiguity,' affecting individual performance and organizational success (Schuler and Jackson, 2004).

The implementation of a low-cost leadership strategy posed challenges, requiring effective HR practices to align with the competitive strategy. M&S's human resource strategy included relatively fixed job descriptions, leading to repetitive and predictable behaviors. However, this approach resulted in monotonous work, a short-term focus, and demotivation. Minimal investment in employee training and development raised concerns about quality and overall performance.

On the other hand, the differentiation strategy, while potentially profitable, required substantial financial investments in research, development, and marketing. Similarly, the focus strategy, while offering quick returns, necessitated time to identify target areas and groups. The simultaneous implementation of a quality enhancement strategy created a complex challenge, akin to a 'deadly bundle' that needed careful consideration (Delery, 1998).

Diversification in Best Fit Models

Expanding our exploration, the essay considers the Best Fit approach on a broader scale by comparing it with another dominant normative model in HRM—the 'Best Practice' approach. Identifying similarities and differences between the two sheds light on potential areas for improvement. Additionally, the essay delves into the diversity of Best Fit models at different stages of organizational development.

Start-up organizations often adopt an informal and flexible HRM style, evolving into more formal and professional approaches as they mature. The challenges faced by organizations during diversification, especially in large firms with inflexible structures, will be analyzed in detail. The dynamics of diversification and the tension that large firms experience when attempting rapid changes in inflexible environments will be explored.

Conclusion

In conclusion, the Best Fit approach to Strategic Human Resource Management offers a valuable framework for aligning HR strategies with organizational needs. By considering external and internal fits, organizations can adapt their HR policies to different developmental stages and competitive strategies. The case study of Marks & Spencer illustrates the practical challenges and benefits of implementing the Best Fit approach. Recognizing the diversity of Best Fit models and understanding their implications at various organizational stages is crucial for successful adoption.

While the Best Fit approach provides a robust foundation, it is essential to acknowledge its limitations, such as the complexity of identifying and integrating contingencies in dynamic organizational environments. Future research in SHRM should focus on refining and expanding the Best Fit model to address emerging challenges in the ever-evolving business landscape. Implementing the insights gained from this research in real-life organizational settings can contribute to enhanced HRM practices and overall organizational success.

As we look ahead, the evolving nature of businesses and the global landscape necessitates continuous adaptation in HRM practices. The Best Fit approach serves as a guide, but ongoing research should explore how this framework can evolve to meet the demands of modern organizations. The integration of technology, changing workforce dynamics, and the increasing importance of diversity and inclusion are areas that require careful consideration in the future development and implementation of strategic human resource management.