Human resource management (HRM), although uncertain in definition, is said to be management of organizations’ people-related practices, including recruitment, selection, training, rewards, etc. Hendry & Pettigrew defined HRM as undermined by “‘philosophy’ matching HRM activities and policies to some explicit strategy and seeing people as ‘strategic resources’ for achieving ‘competitive advantage’.” (Farnham 2002 p.50) Basic HRM models initiate that when high commitment-high performance practices, integrated with organizations’ strategy, are implemented, organizations’ quality of working life, product, and customer service will improve. Although there are other approaches to HRM, namely the universalistic best-practice model and the resource-based model, the best-fit model indicates importance of aligning HRM practices with organizational goals, based on strategy, business lifecycle, and/or structure. For our purposes, strategy is the method organizations want to take in terms of “configuration of resources within changing environments, to meet market needs and to fulfill stakeholders’ expectations.” (Beardwell 2007). The approach embellishes congruence with strategy so organizations pick/choose which practices ‘fit best’.
Effectively, this paper will demonstrate that although HRM suggests the importance of integrating business strategy with HRM, firms do not always do this, indicated by in-depth critique of the best-fit model’s theory and empirical evidence.
Organizations’ strategy includes long-term goals and direction, incorporated with “planning, mechanisms, and structure.” (Beardwell 2007 p.34) The best-fit model, following contingency theory, accommodates these goals into HRM practices. This is an external fit –vertical integration that is- driving competitive advantage. Schuler and Jackson (1987) based their approach to the best-fit model on Porter’s three generic strategy types: innovation, quality enhancement, and cost-reduction, each calling for...