This essay strives to critically discuss the Best Fit approach to strategic human resource management (SHRM). To begin the essay key terms such as ‘best fit’ and ‘strategic human resource management’ will be defined. This will follow with provided examples of ‘best fit’ in SHRM. Pros and cons of the model will be identified in the essay in order to make effective analysis of all the aspects of the subject that will follow with critical evaluation. For successful essay key points will be presented in the main body and backed up with empirical evidence or real life examples that will aid in providing constructive criticism.
In order to examine the approach on a broader scale the essay will also mention another dominant normative model in HRM, ‘Best Practice’ approach. It is important to look in to similarities and differences between the two to highlight the areas of possible improvement of the approach. The essay will also look in depth at best fit models diversity at different stages of organisation’s development.
Starts up organisations are more likely to have informal and more flexible style of HRM and through stages of firm’s development and maturity it changes mutually.
Organisation adapts more formal and professional attitude and increase volume and variety of employees simultaneously. The difficulty that organisations face while diversifying will be analysed later in the essay. As well as the complexity and tension that large firms have to overcome when try to diversify rapidly when being inflexible. The paper will conclude with assessment of how this research into strategic human resource management (SHRM) should be developed from this point forward and its implementation in real life.
HRM includes everything associated with management employment relations in the firm. ‘Strategic’ implies to be critical in HRM for organisational effectiveness. How firm should make strategic choices in labour process is widely debatable topic that attracts international attention. Best Fit approach proposes that HR strategy will benefit if it is properly integrated with its specific organisational and environmental framework. However it is challenging to identify the most important contingencies in certain complex organisation and effectively bond them.
Armstrong (2001) describes that there are two types of fit that are external and internal fits. External fit focuses on how the HR strategies and practices are matching with the developmental stage and the strategic course of the firm. In new enterprises or newly opened firms, HR practices focus on pay, recruitment. But as the firm matures and grows in complexity, then managers are less able to carry out the expanding HR roles and a personnel so human resource department is created to facilitate hiring, training and compensating employees (Baird & Meshoulam, 1988). Also in external fit HR strategies tend to harmonize with business strategies.
This ‘fit’ can be classified as contingency model. On other hand internal fit indicates HR policies to be designed to fit with and support each other and it can be accomplished by using shared process such as performance management, employee development and reward. Best fit models support HR policies and practices with the business strategy. Certain different HR strategies match certain different business strategies (Pilbeam and Corbridge 2002). This leads to (Sels et al, 2003) that states the following: “Contingency approaches, tend to start with the assumption that the selection of a combination of HRM practices is determined by the strategy used”.
Also well matched business strategy to the human resource policies will lead to overall performance boost (Kinnie et al, 2005). This was supported by Baird and Meshoulam (1998) argument that states, organisation’s development stage is crucial for the business future success. Structure and system has to be in relation to organisation’s competitive strategy and not only with its stage development. This means that concept of this model involves SHRM adapting to business requirements.
However Jackson (1987) argues that there is also another way to improve organisation’s performance. It involves HR practices to be reassembled to strengthen the behavioural implications of the various ‘generic strategies’ that are not firm or industry dependent and were defined by Porter in 1985. Strong firm’s positioning within the industry it operates and adaption of strategic HR practices like preset choice of cost leadership, differentiation and focus as its competitive position will lead towards generation of greater returns.
Marks and Spencer, established 1894 in Leeds, UK and as one of the most recognized brands in the UK and worldwide, had been hugely successful in terms of both profit and market share until the late 1990s. M&S has previously tried to implement best fit approach. It has tried to design competitive strategy that would involve innovation, quality enhancement and cost leadership by utilising employees efficiently.
Marks & Spencer’s used Michael Porter’s generic use of ‘low-cost’, ‘differentiation’ and ‘focus’. Porter’s competitive strategy involved a unique set of responses from workers or ‘needed role behaviours’ and a particular HRM strategy that might have generated and reinforced a unique pattern of behaviour (Schuler and Jackson, 2004). Therefore, any problem in internal HRM practices was likely to result in ‘role conflict or ambiguity that can affect individual performance and organisational successes.
Efficiency will increase if HR practices match competitive strategy. One of the advantages of low cost leadership is that it is effective. M&S organisation will gain competitive advantage because of charging lowest price in the market however it can be difficult to implement this strategy in a high cost organisation. This risky cost-controlling strategy will lead to overhead decrease. This strategy assumes effective mass production and wage cut to save costs.
M&S human resource strategy involved the following practices. Relatively fixed and explicit job descriptions that lead to employee’s relatively repetitive and predictable behaviours. In addition narrow job design created monotonous work and caused a short term focus and de-motivation. And minimal levels of employee training and development that was crucial and caused concern for quality and overall results. This shows that lack of investment in employees leads to failure. A good empirical example that supports this statement is ‘Call centres’ in US telecommunications industry where best fit approach in increasing performance was very effective (Batt ; Moynihan, 2004)
Differentiation strategy can be profitable if targeted at costumers that are not particularly concerned with price. But this strategy is costly to implement in real life because of the finance required for research and development and well as marketing. The last but not the least is focus strategy. It benefits from quick returns but it takes time to identify a target area and group (Maund, 2001). Simultaneously M;S implemented quality enhancement strategy. This was an equivalent of a ‘deadly bundle’ that must be avoided (Delery, 1998).