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).
In achieving the goal of ‘close fit’ of business, matching model could be problematic again because of possible HRM strategy conflict with ‘soft’ HRM goals of commitment, flexibility and quality. Work organization as M&S may adopt a ‘soft’ version of HRM for managerial staffs, which is consistent with its current strategy, whereas simultaneously pursuing a ‘hard’ version of HRM for low-level worker, which might damage workers commitment. Therefore, the matching model suffers because of the wrong assumption that workers are unproblematic and will conform to managements’ outlook of the ‘needed role behaviours’. In addition, ‘excessive fit’ can be disadvantageous to gaining competitive advantage since it can make a company inflexible and incapable of adapting quickly to the external environment.
However in the end M&S has failed and closed its stores around the world. This is an example of poor HR strategy where was lack of correspondence between HR strategy and corporate strategy. M&S did not recognise that in order to have effective corporate strategy, it is crucial to exercise strategic SWOT analysis. M&S Used generalised view of the market instead of learning and researching about it and targeting various segments market. Eventually M&S understanding of environmental factors has lead to failure. Therefore M&S’s best fit approach was unsuccessful.
Than competitive strategy is in its developmental stage best ‘fit’ is defined for the organisation (Boxall and Purcell, 2003). This is done through adapting innovation that involves recruiting people with best skills for the job, quality enhancement through equity in rewarding people according to their performances and training them in order to achieve quality targets. Along with cost leadership that is effective tool in reducing the cost through productivity planning, finding and developing skilled people (Armstrong, 1999 ). This is supported by J and J (2003) that has also highlighted that in matching (best fit) “HR strategy with overall business strategy; organisation can gain competitive advantage from innovation, quality and cost reduction.” Organisations need to develop human capital resources in order to sustain competitive advantage and only by aligning HR to corporate strategy it is difficult to achieve (Pilbeam and Corbridge, 2002).
However competitive strategy is relative to the market organisation operates in.
For example for IT skill in highly competitive market it was observed that competitive strategy is unsuccessful. Criticism states that competitive strategy fails to recognise importance of employee’s role in the organisation. And some employee’s have some strong bargaining power as a result of important skills that they possess (Boxall 1998; Coff 1997).
Another weakness of the model is its oversimplification of competitive strategy explanation. Good competitive strategy is likely to be multidimensional and reflective of fluctuations in the industry. It is ineffective to have competitive strategy which is false in a specific environment (Boxall, 1998). The environment is constantly changing therefore it would be useful to implement competitive strategy that compliments flexibility in constantly changing and competitive environment that could serve well in the future. In practice this could be implemented by meeting set goals by the organisation through recruiting, training and motivating employees to be adaptive to competitive environment. It is effective to challenge employees and encourage ‘outside the box’ thinking and effective teamwork in order to stretch the horizon and create opportunities for the business as well as convert employees attitude towards change, from de-motivating factor into constant every day opportunity for improvement. This would also help to reflect what the employees want first and move away from corporate culture that restricts effective communication between employees and managers. But to guarantee that the theory is converted into practice front line managers must play a key role in the implementation and practice of HR policies (Purcell et al, 2003).
Internal fit is another side of HR policies and practices. MacDuffie (1995) claimed that ‘deadly bundling’ should be avoided. Policies that contradict each other must not be implemented. For example, encouragement and investment into teamwork training is inefficient if organisation actually rewards and recognises highly individualistic achievements and behaviour (Delery, 1998). Another issue is that organisations tend to have costly duplication of practices, like over-designed selection system where an organisation does not benefit from an extra obstacle or test (Delery, 1998).
These criticisms are not critical to contingency models of strategic human resource management. Knowing weak points it is possible to improve and strengthen the model. Most of the studies and research into contingency model tends to look at relationship among certain variables like Human Resource strategy verses competitive strategy. This leads to simplification and inaccurate application of the model in real life circumstances. Balance is required in identifying and improving models that could clarify key correlations. (Miller at al, 1995) has identified the following factors for successful business strategy. In order to improve a strategy all of the following elements must be linked together to design successful future for the organisation. Sectoral choice, competitive strategy, best suitable technology, structure and sources of finance and human capital.
Example of this would be an organisation operating in manufacturing. If an organisation implements advanced manufacturing technology it can continue with recruiting skilled staff or provide with training unqualified staff rather than adopting task specialisation and recruiting more people that is costly for capital intensive firms. By providing workers with variety of machinery and increased responsibility employees become empowered and motivated therefore productivity is likely to increase (McGregor, 1964).
Purcell (1999) observes that it would be very difficult to match all variables successfully to create perfect best fit. To gain some benefit from implementing approach at least five practices must be introduced in order to receive a positive impact. But multiple contingencies cannot all be isolated. If the organisation would like to try out the approach it would be difficult to identify the key practices that need to be changed. This means that it would be extremely difficult to implement the best fit approach in practice and real life circumstances. Even though best fit sees the culture of an organisation and the business strategies as equally important, the model still has a lot of disadvantages.
Also some characteristics like idiosyncratic contingency or casual ambiguity are impossible to model therefore the model has major weaknesses.
Changing HR policy creates problems of treating employees consistently over time. The organisation would have to research into their own employees to find out what do the employees want first? Professional employees want excellent communication as well as recognition for good performance at work. On other hand front line managers want good communication and involvement in decision making because it provides empowerment that is motivating at workplace. This change would shift organisation from corporate culture, require flexibility and encourage some serious change in structure.
Through last decades ‘Best Practice and Best Fit’ were always compared, contrasted and analysed with detail to which one is more effective and easier implemented in practice. In theory ‘Best Practice’ approach “promotes universalism claiming that identification and adoption of a certain ‘best practice’ can be applied universally to human resource management. The identification of best practice for managing an organisation is complicating and challenging” (Pfeffer, 1996) In practice if employers are for example 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, 2006).
In conclusion the essay supports the idea that HR practices should be praising and HR policies should be matching. Reward systems, as one policy area should link and harmonise other policies like employee selection, training and performance appraisal. However, there is also a fundamental disagreement. Best fit policies are contingent. They are developed or modified to sustain a strong strategy. This means that an organisation’s reward system and other practices will be matchless and should possibly change with major adjustments to organisational strategy so that organisation can benefit from its flexibility and adapt to constantly changing environment. It is best if ‘best fit’ model is implemented at the developmental stage of organisation planning. That way there would be no need to face difficulty of identifying and isolating multiple contingencies. Also the early start of its implementation to practice will affect the future of the organisation by making it flexible. Therefore ‘Best fit’ in HR will compliment the strategy and fit in with the organisations corporate culture. 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. And employee rewards should always be tied to organisational performance because people are extremely important in any organisation and employee’s satisfaction might open new horizons and opportunities for the organisation.
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