Essay: Best Fit Model

Pages: 10 (3541 words)  ·  Bibliography Sources: 10  ·  Level: Master's  ·  Topic: Business - Management  ·  Buy This Paper

Best Practices or Best Fit

Is the Best Fit Model a Best Fit?

Srategic reward systems were developed as a part of the human resources management (HRM) department. The purpose of strategic human resources management is to complement the strategy and to help management achieve its goals. Thinking of human resources strategically helps the company to be more productive and to eliminate waste. Long ago human resources departments began to realize the value of their employees. They realized that without their employees and without employees who were productive they would be unable to compete on the open market. The key to a sustainable competitive strategy is managing employees. Companies began to realize that employees were more than bodies, they were a more valuable asset than any piece of equipment that they owned or any other asset. This realization led to the HRM department being incorporated into the overall company strategy.

Human resources strategies have developed into either the "best practice" model or the "best fit" model. Boxall and Purcell Argued that in order for HRM to be effective, its policies nad practices must fit with the work system. This research will explore the issue further and will examine this insight in terms of its value to managers. It will examine whether the statement is valuable, or whether it is simply stating the obvious.

Strategic HRM

In order to examine this issue it is important to understand the differences between best practices and best fit. The best fit method proposes that the reward system should be in alignment with the organization's business strategy to achieve the maximum competitive advantage. Best practice holds that there is a certain set of HR policies that will lead to highly motivated and committed employees. The best practice model surmises that finding the proper reward system will lead to highly committed employees that will increase the company's competitive advantage. However, the differences between these two models go further than these simple definitions.

The idea that pay should be linked to corporate strategy is not a new idea. It first began to appear in literature in the mid 1990s (Morris & Maloney). The best fit practice advocated that every department in the business must be in alignment with the corporate strategy. If one of the departments were out of alignment, it would harm the effectiveness and competitiveness of the entire organization. The human resources department was no exception and it was soon realized that the company's pay approach and reward system must be part of this overall strategy.

The best practices approach is largely associated with the U.S., but more recently, managers in Britain have adopted this approach as well (Morris & Maloney). It stands to reason that both HR practice models should be complementary, but scholars and managers are divided as to whether best practices or best fit will result in the most effective company strategy. Rather than being complementary, theorists either support one model or the other. Current thinking within the organizations themselves is that their strategy must either be best practices or best fit. It is not considered to be possible to use both best practices and best fit within the same organization under the current paradigm.

Understandiug Best Practices and Best Fit Policies

Now let us examine the best practices model and its affects on employees and strategy. As we stated earlier, best practices suggests that there are certain "bundles" of human resources policies that will promote overall higher employee motivation and commitment. It is suggested that these bundles are responsible for organizational performance. The contents of these bundles differ, but most agree that selective hiring, extensive training, employment security, encouragement of employee participation, and pay scales that are in alignment with others in the same industry are the best way to motivate employees (Morris & Maloney). The effectiveness of pay as a sole means of motivation has been challenged in academic sources (Hasan, 2009). Research suggests that pay can only go so far, but a sense of satisfaction and enjoyment with one's work is the best motivator. It has been found that items such as performance appraisals that link closely with pay raises and other compensation are more effective at motivating employees than pay alone (Park, Appelbaum, & Kruse, 2010). One of the latest trends is to give employees incentives for taking steps to improve their health and to take steps to reduce absences and avoid things that compromise productivity (Donnelly, 2009).

Research suggests that performance related pay systems can actually undermine the development of commitment to the organization. When goals are not reached the employee can be left feeling incompetent or as if they're not in control of their own destiny within the organization. They might feel as if they did their best, but despite all their efforts they did not receive the expected pay raise. This may lead to the thought that putting extra effort into work is useless, because their efforts will go unrecognized. This type of pay system can undermine their sense of self-control and ability to determine their own levels of achievement within the organization.

The best practices method of incentive pay is a normative model that treats all employees the same and does not encourage individual achievement. Incongruency of pay and rewards systems with other areas such as employee selection, training and performance based appraisal systems was a key disadvantage found by Morris & Maloney with the best practices system.

Best fit policies have a different drawback. They are not as static as best practices and are often amended as the company's strategy changes in response to competition. Changing expectations and policies can be frustrating for employees. Best fit policies are a continual work in progress because they are able to respond to changing business strategies, actions by competition, and changes in management. By comparison, best practices policies can be considers static. They do not change over time unless there are major adjustments to be made within the organization. Best practices policies do not change when the organizational strategy changes. They remain the same and do not show the same ability to change as best practices policies. This is one of the key differences between the two strategies.

The best fit approach is most effective in the area of attracting employees and in employee retention (Gordon & Kaswin, 2010). This can be especially problematic during times of economic expansion when labor markets providing for increased employee mobility between organizations. During a recession, companies become increasingly concerned with finding and securing qualified employees.(Morris & Maloney). This is where the best fit model has an advantage over best practices. The best fit model allows the company to develop a specific reward package that will attract different types of applicants. The best fit approach takes the approach of tailoring the rewards package to their target of audience of applicants that they wish to attract. This is a key advantage of the flexibility that is found within the best fit method.

Studies have confirmed that companies that pay more often attract a higher quality workforce than those who pay average to below average pay for their industrial group (Morris & Maloney). However, good company policies are a key component for retaining those employees once they attract them. The best practices method focused on policies that are long-term and seldom changing.

Researchers found that people do not work just for money. They are more likely to stay with a job that adds meaning to their lives. Employees who are in a job that adds meaning to their lives are likely to have low turnover over rates. Research suggests that employees are likely to stay with the company, regardless of the pay, if they feel that the job contributes to their overall satisfaction and quality of life (Hasan, 2009).

Both of these types of models have supporters and opponents. They are in agreement that competitive reward packages are a key element in attracting and retaining their best employees (Morris & Maloney). Another key point of disagreement is which model offers companys the greatest competitive advantage. The best fit model tends to focus on those who are the highest achieverst or who would cost the most to replace. The idea is that employees will be satisfied when their pay package meets or exceeds that which they would earn if they were working for a competing organization. Best practices supports the idea that a standard set of interrelated policies will be the best approach to attracting individuals. They believe that all employees should be carefully chosen because all the employees are a part of what determines competitive advantage.

Expectancy theory states the people make choices based on their expectations that their efforts will lead to a certain level of performance and performance pay. They must feel that their efforts will lead to an outcome that they feel that has value. Employees may place different levels of value on different and they prioritize their expectations in order of personal preference, particularly in diverse populations (Khan,… [END OF PREVIEW]

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