Best Practices or Best Fit

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, Farooq, & Ullah, 2010). When one considers the idea of personal expectancy into the reward system it would appear that the best fit model provides the framework to individualize reward systems in order to match the needs of and expectations of the individual employee. Expectancy theory supports that the one size fits all approach of best practices that does not result in the highest level of employee motivation. A system will only be effective if it results in a high level of innovation if the reward system happens to match an individual's values. Best fit theory supports the idea that rewards must be individualized to meet that person's specific needs of if they are to achieve maximum benefit. From the standpoint of expectancy theory it would seem as if best fit represents the most effective model.

Work Systems

Work systems refer to the processes that make up the daily business routines of the organization. The work system is dependent on the processes and represents a collection of them. Work systems are highly dependent on corporate culture and norms within the organization. The work system should reinforce the work culture. The purpose of the work system and the incentive program is to build a work atmosphere that promotes high performance, attracts the best employees, and that has ability to retain them. In order to this company has to create a culture that is conducive to these qualities. The real question when it comes to work systems and which model will be produce the greatest results I swhether work systems are static or dynamic.

In a dynamic work system environment, such as sales or product development, it would appear that the best fit method is the only model that could meet the needs of such the organization. However, what about the static system? Some business models hardly ever change, but does this mean that the best practices method will work for them? It would be easy to come to the inclusion if the system is dynamic, the best fit would be the correct choice and that best practices would fit more readily with a relatively static work system and environment. This is not always the case and if one looks at the work more closely, they will find that the individual defines the work system as much as policies and procedures. Systems change according to the employee and how their doing their jobs. The question is whether employee reward systems are more closely related to the work system itself, or whether they must cater to the individual needs of the employee, regardless of the work that they are doing. This type of work atmosphere would tend to favor the best fit the model.

Conclusion

The purpose of an incentive program is to motivate employees. Employees must feel that the program is equitable and that they can expect to receive fair treatment and proper reward for their efforts. Social norms within the organization also play a role in their feelings about how they have been treated with respect to others, thus affecting the effectiveness of the reward system (Festere, 2010).

The question of which model, the best fit our best practices is the better choice for human resources management is closely related to which one will have the greatest effect on positive employee motivation. Therefore, in order to answer this question, we must turn to which factors are most important in motivating employees. An examination of relevant literature found that employee involvement in the decisions surrounding their work environment had the greatest effect on stimulating ownership of the environment. Employees that felt they had some degree of control and that they played a role in determining their destiny at the company were happier and more likely to stay than those who felt that they had little ability to determine their own destiny in the work environment.

When one examines the highly competitive atmosphere of the global marketplace they will find that it is dynamic and ever changing. Some industries are affected by these characteristics more than others, but all of them must learn to compete in a dynamic environment. The dynamic nature of this environment calls for human resource strategies that are able to adjust to the needs of the global work environment (Schraeder & Becton, 2011). Let us consider for a moment the example of a company that wishes to attract an upper level executive that has been highly successful at another company. In order to do this they are going to have to offer a package that is much better than the one he has at the other company. This can be part of the overall company strategy.

Using this example it would appear that the best fit model is more an alignment with today's global marketplace than best practices due to its ability to adjust to changing work situations as neeeded. However, does that mean that best practices has no place in the global marketplace and the competitive environment? Best fit practices would give management the ability to adjust their practices to suit individual employees. This may be interpreted poorly by employees who might be afraid that the policies and practices show favoritism. This is where best practices would seem to have the advantage.

An examination of the differences between best practices and best fit model that can be easily summarized. Best practices that has several advantages over best fit. They include high pay that is contingent upon the performance of the entire company. This supposedly provides teamwork and a feeling of accomplishment within a higher purpose of the organization. It reduces the feeling of status and class differences within the organization because everyone has the same package. The differential packages used in the best fit model may create jealousy and feelings of a favorism. The best practices model promotes the sharing of information among employees so that they can achieve an overall higher performance, resulting in better pay and incentives for everyone.

However the best practices model has several key disadvantages as well. One of the key disadvantages is that the best practices is not as closely related to organizational strategy as the best fit model. Best practice says is universalist in nature without regard to individual differences, management practices within the organization, industry wide management practices, or corporate culture. Often the policies that result from the best practices that are general in nature and they can be interpreted in several different ways. This creates potential for miscommunication and ill feelings that could undermine the employee motivation and organizational performance. Employees are not as likely to feel connected to policies that are universal as they are with policies that that are based on their own personal preferences. This dramatically reduces the effectiveness of the best practices model.