What are the advantages and disadvantages of using

the distinction between ‘best practice’ and ‘best

fit’ as the means of examining the relationship
between hrm and organisational performance?
The current ongoing debate discusses the added value of HRM in relation to best
practice versus best-fit. Best practice suggests the universal success of certain HR
practices, while best-fit acknowledges the relevant impact of contextual factors. This
paper will discuss the impact they have on the employee and the organisation.

The exploration for the effect of types of HRM on organisational performance has
focused on a universally applicable best practice model of high commitment
management. There are fundamental problems with this approach in the theory on the
lack of a link with the organisational strategies. Recently authors have demonstrated
that good practice in HRM has an affect on the bottom line. The Sheffield study
Patterson et al, (1998) suggests that “if managers wish to influence performance of
their companies, the most important area they should emphasise is the management of
people” (Patterson et al, (1998) cited in Purcell, J 1999:27).

The concept of human resource management has emerged from the 1980s into a core
consideration of corporate strategy in the 1990s, (Legge, L 1995). There is no single
definition of HRM in the literature yet the emphasis has to a large extent been on the
strategic role of human resource management in organisations. Some research has
identified HRM with strategic aspects of ‘best-fit’ or aligning people to the needs of
the organisation as expressed in corporate strategy and others have examined HRM as
a means of gaining enhanced organisational performance, (Golding, N (2004) cited in
Beardwell, I. et al 2004). However the contribution that human resource may make to
an organisation’s performance and effectiveness has been linked closely to the
changes in different business environments including macro and micro contexts.

Recognition of the importance of HR has increased in recent years; this is a result of

competition from overseas economies. In countries for example Japan, Germany and
Sweden investment in employee development is higher that the UK. This has led to
some organisations reviewing their policies on training introducing continuous
investment in their employees. Although when multi national organisations have
entered the UK, they have introduced their global HR policies (Beardwell, I. et al
2004).

For HR to succeed it must take on a proactive role within the organisation. Strategic
HR creates value by providing opportunities for organic learning, development of
intellectual capital and enhances core competencies. This value is crucial to the
organisation’s future success (Treen, D. 2000). Employers are increasing extorting
the best possible performance from employees. Best practice will increase the skills of
the current workforce, and with recruiting it will reinforce the culture of a highly
skilled work force (Mullins, L. 2005). Strategic HRM has gained both credibility and
popularity over the past decade, specifically with respect to its impact on
organisational performance (Paauwe, J & Boselie P. 2003).
There is a need for a higher value to be placed on employees, and therefore get the
best performance from the employees. This resource requires development to gain and
maintain competitive advantage According to Delany (2001) “successful
organisations keep people issues at the fore front of their thinking and at the core of
their decision making and planning”. Delany adds “organisations that get the people
things right are the organisations likely to be around in the future” (Delany (2001)
cited in Mullins, L. 2005:748).

There are fundamental differences in the approach to HR. Storey (1987) discussed
these as ‘hard’ and `soft’ versions of HRM. The ‘hard’ version places little emphasis
on workers’ concerns and, therefore, within its concept, any judgments of the
effectiveness of HRM would be based on business performance criteria only. In
contrast, ’soft’ HRM, while also having business performance as its primary concern,
would be more likely to advocate a parallel concern for workers’ outcomes (Storey
cited in Guest, D. 1999).

These models of HR theory, will justify why there has been an increase in this
management practice. Walton (1985) defined HR as “mutual goals, mutual influence,
mutual respect, mutual rewards, and mutual responsibility” Walton further added that
the ‘psychological contract’ under this unitarist, high commitment model is one of
mutuality, but it is a mutuality strictly bounded by the need to operate within an
essentially unitary framework (Walton cited in Beardwell, l. et al 2004)

This view reflects a longstanding capitalist tradition in which the worker is viewed as
a commodity. The consequential exploitation may be paternalist and benevolent; but,
equally, it may operate against the interests of workers. Essentially, workers are
simply resources to be squeezed and disposed of as business requirements dictate.
More importantly, the interests of workers and their well-being are of no significance
in themselves. As John Monks (1998) stated “In the wrong hands HRM becomes both
a sharp weapon to prise workers apart from their union and a blunt instrument to bully
workers” (Monks (1998) cited in Guest, D 1999:258).

Although some commentators have argued that the role of human resource what ever
model is used explicitly views employees as another resource for managers to exploit.
In the past, managements had failed to align their human resource systems with
business strategy and therefore failed to exploit or utilise their human resources to the
full. The force to take on HRM is therefore, based on the business case of a need to
respond to an external threat from increasing competition (Guest, D 1999).
Today’s HR departments will recruit and develop the real strategic human resource
needs of a modern business. The image of recruiting, training and development has
changed and can be used a key driver for delivering shareholder value (Rogers
2004:25). Employers are increasing extorting the best possible performance from
employees. Best practice will increase the skills of the current workforce, and with
recruiting it will reinforce the culture of a highly skilled work force (Mullins, L.
2005). Organisational strategy is at the heart of the best fit/best practice debate.
Therefore if best fit prevails, then it is possible to model the type of HR required for a
given type of business, and this practice can be adopted in a wide number of firms in
similar circumstances (Purcell, J 1999).

Commentators now agree that there is no need to look any further than the human
resource to gain competitive advantage, although the models use vary. Pfeffer (1998)
discharges all other models in the search for alternative sources of organisational
competitive advantage, arguing that the only advantage is to “manage people right” in
an employee-centred approach, introducing a model of “seven practices of successful
organizations” This is the foundation for best practice, demonstrating how human
resource practices can be aligned with the skills and behaviours needed for business
strategy. These practices includes employment security, selective recruiting, self-
managed teams and the decentralisation of decision-making, comparatively high
compensation contingent on organizational performance, extensive training, reduced
status distinctions, and extensive sharing of financial and performance information
throughout the organisation (Pfeffer, J 1998).

Pfeffer (1998) further suggests that effective performance depends upon the link
between HR policies and the business strategies. Firms with a cost minimisation
approach to HR can be successful in cost-competitive markets whereas adopting high-
performance work practices may match competition on the basis of quality and
service. The role of HR managers in identifying and building core competencies,
there is a close fit between strategy and human resources. Competencies are complex,
multidimensional, interrelated and interdependent knowledge systems. Consequently,
if HR managers design HR policies to match the core competencies of an
organisation, they may also build in rigidities that simultaneously work against future
change (Pfeffer, J 1998).

Johnson and Scholes, (1997) discussed “organisations which successfully manage

change are those which have integrated their human resource management policies
with their strategies and the strategic change process… training, employee relations,
compensation packages and so on are not merely operational issues for the personnel
department; they are crucially concerned with the way in which employees relate to
the nature and direction of the firm, and as such they can both block strategic change
and also be significant facilitators of strategic change”. Concluding that aligning HR
practices with organisational strategy will add value to the organisations resources
(Johnson G & Scholes K 1997:494)
Both models advocate the value that is placed in the human resource and aligned to
the organisational strategy. Best practice will place the emphasis on the core
competencies of the employee and develop these to address the overall organisation’s
strategy. Whereas Best fit HR will compliment the strategy and fit in with the
organisations culture. Neither model is a panacea; organisations should choose HR
practices and strategies that fit with their culture, and requirements. The employee
should be a valued resource, integrated into the organisational strategy.