- A Lincoln Electric case study analysis -
The discussion between promoters of best practice and best fit approaches has sparked widespread controversy in the human resource management (HRM) area. The topic has gained much scholarly attention because it not only addresses a theoretical controversy but also possesses a high degree of practical managerial significance. The essay has the aim to analyse best practice and best fit approaches in HRM of a multinational enterprise. The reader receives insight into Lincoln Electric's organization through a case-study analysis of practical HR approaches serving as a basis for developing practical managerial implications in the last part of the paper.
2. Critical evaluation of "best practice" and "best fit" practices in HRM
2.1 Best practice approach
The best practice approach claims that certain bundles of HR activities exist which universally support companies in reaching a competitive advantage regardless of the organizational setting or industry (Redman and Wilkinson 2009). Best practice models imply a close connection between HR practices and organizational performance and are often associated with high commitment management (Paauwe & Boselie 2003). Empirical research in the best-practice field shows similar groups of HR polices which are especially suitable for maximizing performance irrespective of market and product strategies (Peffer 1998, Guest 2000). Best practice bundles of activities are characterized as mutually compatible HR activities which forge high levels of workforce competence, encourage motivation and introduce a workdesign boosting employee commitment (Maloney and Morris 2005). Based on concepts from expectancy theory (Vroom 1964, Lawler 1971) best practice HR will result in higher levels of quality, productivity and low rates of absenteeism and wastage (Guest 2000).
The best practice approach suffers from a series of limitations. Firstly, when implementing best practice standards organizations run risk of introducing mutually prohibitive combinations like team working and compensation based on individual performance resulting in a deterioration of employee collaboration through overexaggerated competition (Delery 1998 in Redman and Wilkinson 2009). Secondly, high commitment management systems are generally a complex undertaking requiring large inputs of planning and top level management commitment. Thirdly, critics like Milkovich and Newman (2002) argue that best practice HR lacks direct linkages with organizational strategies and is minted by the belief that outstanding high performing human resources will influence strategy. By making HR policy precede corporate strategy an organization risks prescribing standardized sets of "one size fits all" best practice approaches which will not support the particular needs of employees and be detrimental to overall strategic objectives (Maloney and Morris 2005). Fourthly, discussions with regard to the appropriate choice of best practice measures resulting from an insufficient research methodology and theoretical definition exist (Marchington and Grugulis 2000 in Redman and Wilkinson 2009).
2.2 Best fit approach
The best-fit model is considered as a variant from precedent models of Harvard, Michigan and York and is called "matching model" for HRM (Sparrow and Hiltrop 1994). It is based on developing HRM policies according to business strategy. Strategy involves planning future activities, performances objectives, and policies towards reaching the corporate aims. HRM strategy should be designed and applied to support the given corporate strategy (Lawler 1995). The "best-fit" approach questions the universality assumption of the best-practice perspective. It emphasizes contingency fit between HR activities and the organization's stage of development, an organization's internal structures and its...