BEST PRACTICE VS BEST FIT METHODS

Definition 

With the rapid changes that keep taking place in today’s global business world and with the environment becoming increasingly competitive, more and more companies and organizations have realized that their employees are considered as one of their biggest assets, as well as one of the most important resources in their establishments (Swindall,2007). That is why HR is considered one of the most important factors in a company, as Human Resource is needed to manage its people. The overall purpose of Human Resource Management (HRM) in a company or organization is to ensure that the company achieves success and growth through its “People”. The main logic behind this is for Companies to use new innovative and up to date technologies to achieve the outcome they are looking for while managing their human assets “the People” more effectively (Brechner, 2011). In today’s world most Company Human Resource heads struggle with two key areas when implementing SHRM (Strategic Human Resource Management) in their Companies. The first being Human Capital, HR Heads are challenged in finding ways to use the competencies of its employees in a positive way to achieve values, company goals and capabilities while making the company more superior than that of their competitors. The second being, the Company’s systems, especially HR policies which are there to develop company employees (Amit and Barney, 1993).

Modern day researchers have identified several SHRM practices that are required for a company to achieve a company’s overall performance. Career advancement and career development, learning and training of employees, reward and recognition, job security, innovation, employee feedback and multi-skilled capabilities of its employees, these are recognized as factors which give a company a competitive advantage over their competition (Lengnick-Hall, 2003). The connection between HRM and company performance can be related to whether a company is using Best Practice or Best Fit methods in their day to day operations. Best fit debates that HR policies should be aligned with a company’s business strategies. While Best Practice is defined as when a company’s human resource policies and systems, have a positive connection and effect on the company’s performance and growth. Creating alignment between HRM and the company’s business goals is the first step towards increasing valued HR Best Practices (Brockbank, 2015). During this study, we would look at the difference between Best Practice and Best Fit as well as modern methods that are being fast adopted in today's business world. 

Best Practice  

The Best Practice approach claims that certain HRM activities exist which collectively support the company in achieving its goals, as well as a competitive advantage over its competition, regardless of the company’s industry or location. One of the main objectives and goals of an HRM is to increase the performance of the company (Pfeffer, 1998). Furthermore, the Best practice is connected to the leadership or management of the Company being of high commitment to the company’s performance and goals, and where there is a close connection between HRM strategies and the company’s goals. A company needs to have the right people in the right place (Watkins, 2013). In much theoretical research, it has been proven that companies that are recognized as Best Practice companies have similar HRM policies, which are implemented to capitalize and maximize on performance, regardless of product, location or target market. The appearances of a Best Practice company is when employee development, career enhancement, a well-structured hiring/recruitment process plus employees demonstrating teamwork, is in place. Training and development of employees create a path for employee improvements and employee engagement. Investing in human capital is an advantage for any company that practices this (Lencioni, 2016). Google is marked as one of the top companies internationally that has an innovation-driven culture with Best Practice Human Resource systems. It has grown tremendously and the organization has spread out internationally keeping a uniform culture between its main head office and off-shore offices. This culture is seen even within the different internal divisions of the company. The larger a company becomes the more the culture must reinvent itself to accommodate more employees and the need for management. Google is known to be a company that offers great pay, benefits and career advancement. The culture at Google is focused on Innovation. (Girard, 2009).

When companies or organizations need to deliver superior services, Best Practice methods will help achieve this and further by implementing Best Practice methods in a company quality management, stock control/delivery, supply chain integration, ordering and purchasing as well as information management could be improved (Modore, Douthitt, and Carson, 2011). In using Best practice SHRM methods, a Company is looking at ways to improve quality, speed, and performance to achieve the company’s goals within the budget that is in place. As well as to have a competitive advantage over its competition. There are some situations where companies are unable to achieve this and therefore fail. Some of the limitations these companies face are where the company’s human resource management lacks the direct linkages with the company’s goals and strategies. As those HRMs believe that an outstanding high performing HRM will inspire strategies (Shapiro, 2011). Businesses have a lot to gain from adopting Best Practices. Some Best Practices will require only a minimal structure or organizational change, while others may need substantial transformation. Whichever way, it is up to the company’s HRM to ensure that they have a solid HR infrastructure in place to accept change and move forward. Pepsi Co., the food, and beverage company presents its sustainability strategy and identifies to climate change, water shortage, and community health issues, as core sustainability challenges. Ford Motor Company, the car company that has established requirements for first-tier suppliers to drive its environmental and social expectations further down the supply chain. Star bucks, the coffee company, where the company's efforts engage with suppliers and local communities where they operate demonstrating consumer dialog. These are some examples of companies that operate and have benefited from Best Practice methods.

Best Fit

The Best Fit model stresses that the HRM strategies of a company and the company’s business strategies are aligned. It is important to make sure that HR strategies are suitable in other circumstances, like the organizational culture and the company’s operational processes as well (Armstrong, 2006). The Best Fit approach is where the employees of the company know the company’s strategies and goals, therefore they would find a way to work efficiently and effectively to achieve those goals. This approach promotes the idea that strategic HRM should closely be linked to the execution of business strategies (Wilton, 2011). Further researchers have identified that employees are connected to the effectiveness and profitability of the Company they are employed to and this output can be maximized through effective human factors, engineering programs and training (Adjibolosoo, 2018). Human resource is one of the most important assets in a company or establishment, proper management is a critical need in any organization. An organization effectiveness depends on the quality of its employees, their competences and their effectiveness (Armstrong, 2000). On the other hand, the Best Fit method is confined to several limitations as well (Boxall and Purcell, 2003). Researchers have criticized that this method limits the strategy, this method would make it difficult to handle new challenges as the HR system would not adjust entirely to accommodate this.

Furthermore, the flaws are focused on the limitation of the possibility as well as the difficulty in showing the connections in-between (Armstrong, 2000). By the help of Porter’s Generic Strategies, we can identify three HR practices that “Fit” well with those Competitive Strategies. Table 1.0 Illustrates the different characteristics of employee behavior and what is required for each competitive strategy.

 Table 1.0: Porter’s Generic Strategies and HR Policies.

  

Competitive Strategies	Employee Role Behavior	HR Policies
i.  Overall Low-Cost Provider	• Relatively repetitive and predictable behaviors • A rather short-term focus • Activities performed are primarily independent or individual • Modest concern for quality • High concern for the quantity of output • The primary concern for results • Low risk-taking activity • A relatively high degree of comfort with stability	• Relatively fixed and clear job descriptions allowing little room for ambiguity • Narrowly defined jobs and narrowly defined career paths that encourage specialization, expertise, and efficiency • Short-term results-oriented performance appraisals • Close monitoring of market pay levels for use in making compensation decisions • Minimal levels of employee training and development
ii.  Broad Differentiation	• Relatively repetitive and predictable behaviors • A more long-term or intermediate focus • A modest amount of cooperative, interdependent behavior • A high concern for quality • A modest concern for the quantity of output • High concern for the process (how the goods or services are made or delivered) • Low risk-taking activity • Commitment to the goals of the organization	• Relatively fixed and explicit job descriptions • High level of employee participation in decisions relevant to immediate work conditions and the job itself • A mix of individual and group criteria for performance appraisal that is mostly short-term and results oriented • A relatively egalitarian treatment of employees and some guarantee of employee security • Extensive and continuous training and development of employees
iii.  Focus (Niche)	• High degree of creative behavior • A longer-term focus • A relatively high level of cooperation and interdependent behavior • A moderate degree of concern for quantity • An equal degree of concern for process and results • A greater degree of risk-taking • A high tolerance of ambiguity and Unpredictability	• Jobs that require close interaction and coordination among groups of individuals • Performance appraisals that are more likely to reflect longer term and group-based achievements • Jobs that allow employees to develop skills that can be used in other positions in the firm • Compensation systems that emphasize internal equity rather than external or market-based equity • Pay rates that tend to be low, but that allow employees to be stockholders and have more freedom to choose the mix of components that make up their pay package • Broad career paths to reinforce the development of a broad range of skills

Source: Schuler and Jackson (1987)

Vertical Fit

Most companies that are now using the Best Fit method, however, these companies are also adopting Vertical Fit. Maslow Hierarchy of Needs clearly displays the aim of these companies.

Figure 2.0: Maslow Hierarchy of Needs.

(Source: Kotler and Keller (2006). Marketing management (12th edition), New Jersey, Pearson Prentice Hall, p. 185)  

These companies altered the traditional way of using Best Fit and took it a step higher, using the Best Fit methods as a Vertical Fit. All over the world, especially in Europe and America, companies have moved production over to low-cost countries such as China, maximizing their profits. Particular attention to position developing countries to sell to large, global buyers (Humphrey and Schmitz, 2002). However, these companies still need the esteem skill of the leadership that was in their organizations. Using this method these companies could shift production to low-cost countries but keep the leadership they required while offering these individuals the esteem benefits that would convince them to stay on. It is known that the service offered to customers would differ from industry to industry (Gilbert and Veloutsou, 2006) Even in Sri Lankan many leading Corporate companies that are using Best Fit methods have switched over to Vertical Fit. These companies have moved their production to low-cost Countries, such as Cambodia, Ethiopia, Haiti, and Vietnam. In working with these low-cost Countries these companies can have low labor cost, while they provide employment to the people of that Country, by giving them stable jobs. Providing these employees with only physiological needs at the lowest level. Which in return can help the company provide higher benefits to its leadership level (Edirimuni, Gunaratne and Sirimanna, 2007). Some of the benefits provided to the management and leadership of these companies are foreign training, business class travel, entertainment allowances, housing allowances, high-end vehicles and very high salaries, which are benefits above the normal industry standards. Internationally, a very good example of Vertical Fit would be Walmart. Walmart branched out using more vertical fit methods. It moved production over to China which is a country known for forced labor/cheap labor. Walmart is one company that gives us an intimate look at a business that is vividly restructuring our lives (Fishman, 2006). The company maximized its profits. However, it wasn’t seen as a company that demonstrated proper ethics due to using these methods.

Conclusion 

Taking all the above facts into consideration and as researched there is no single HRM strategy that will deliver success in all situations. Companies need to define a strategy which is unique to their own situation in terms of context, goals and the demands of the Company’s stakeholders. Therefore, it is useful for all companies to manage their people within a planned and rational framework which reflects the business strategies (The CIPD, 2010). Further studies and research results have shown that the SHRM practices that give the best performance are employee training and career development as well as compensation and reward systems, companies that practice these are recognized as the leading and key establishments that people would like to be employed at. The connection between the use of SHRM practices and the company’s performance is directly or indirectly connected with employee motivation. 

There are companies that sadly fail to understand the importance of employee motivation. Researchers have studied that many companies disengage employees with low motivation; where sometimes as low as only 13% of employees are engaged at work. There are several reasons why employee motivation is important, one of the main reasons is because it allows the management of the company to meet the company’s goals and growth plan. Without motivated employees or a culture that practices motivation, companies could be placed in a very dangerous and harmful position. Motivated employees can lead to improved productivity and allow a company to achieve higher levels of output. Therefore, whether an organization uses Best Fit or Best Practice, motivation and employee engagement together with HR strategies will improve the overall performance of a company. (Isaac, Wilfred and Douglas, 2001).

 

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