The best fit approach emphasizes that HR strategies should be contingent on the context; the circumstances of the organization and its type. Best fit can be perceived in terms of vertical integration or alignment between the organization’s business and HR strategies. There is a choice of models, namely: life-cycle, competitive strategy, and strategic configuration.
The life-cycle model
The life-cycle model is based on the theory that the development of a firm takes place in four stages: start-up, growth, maturity and decline. This is in line with product life-cycle theory. The basic premise of this model was expressed by Baird and Meshoulam (1988: 117) as follows:
Human resource management’s effectiveness depends on its fit with the organization’s stage of development. As the organization grows and develops, human resource management programmes, practices and procedures must change to meet its needs. Consistent with growth and development models it can be suggested that human resource management develops through a series of stages as the organization becomes more complex.
Buller and Napier (1993) explain that in a start-up phase, management of the HR function may be loose and informal; it may even be performed by the founder/owner. As the organization experiences high growth in sales, products and markets, the demand for new employees increases. This demand is beyond the capacity of the founder and line managers to handle. The organization typically responds to this pressure by adding more formal structure and functional specialists, including HR. The role of HR in this high-growth stage is to attract the right kinds and numbers of people, but it is also the time for innovation and the development of talent management, performance management, learning and development and reward policies and practices. As the organization matures, HR may become less innovative and more inclined to consolidate and develop existing practices rather than create new ones. In the decline stage HR may not have the scope to engage so wholeheartedly with the programmes operating in maturity. HR might well be involved in the difficult decisions that follow downsizing and being taken over.
This is a plausible picture of what may happen and it is backed up by some empirical research. For example, a study by Schuler and Jackson
(1987) found evidence that firms with products in the growth stage placed higher priorities on HR management innovation and planning than firms with products in the mature phase. But it is a model of what might happen rather than what should happen. There seems to be no good reason why the HR function in a mature firm should rest on its laurels; quite the opposite. Perhaps the model can serve most usefully as an analytical tool that can be used to alert HR planners to what is happening in the firm and what they might do about it.
Lengnick-Hall and Lengnick-Hall (1988: 460) believe that the whole issue of fit deserves reassessment: ‘Research has shown that achieving fit is not always desirable. Further, a focus on maximizing fit can be counter-productive if organization change is needed or if the firm has adopted conflicting competitive goals to correspond to a complex competitive environment.’
Best fit and competitive strategies
Three strategies aimed at achieving competitive advantage have been identified by Porter (1985):
- Innovation – being the unique producer.
- Quality – delivering high quality goods and services to customers.
- Cost leadership – the planned result of policies aimed at ‘managing away expense’.
It was contended by Schuler and Jackson (1987) that to achieve the maximum effect it is necessary to match the role characteristics of people in an organization with the preferred strategy.
Another approach to best fit is the proposition that organizations will be more effective if they match one of the ideal types defined by theories such as those produced by Mintzberg (1979) and Miles and Snow (1978). This increased effectiveness is attributed to the internal consistency or fit between the patterns of relevant contextual, structural and strategic factors.
The typology of organizations produced by Mintzberg (1979) classified them into five categories: simple structure, machine bureaucracy, professional bureaucracy, divisionalized form, and adhocracy. Miles and Snow (1978) identified four types of organizations, classifying the first three types as ‘ideal’ organizations:
- Prospectors, which operate in an environment characterized by rapid and unpredictable changes.
- Defenders, which operate in a more stable and predictable environment than prospectors and engage in more long-term planning.
- Analysers, which are a combination of the prospector and defender types. They operate in stable environments like defenders and also in markets where new products are constantly required like prospectors.
- Reactors, which are unstable organizations existing in what they believe to be an unpredictable environment. They lack consistent,
well-articulated strategies and do not undertake long-range planning.
Research conducted by Doty et al (1993) established that the Miles and Snow theory had a high level of predictive validity. In other words, it indicated a reasonably powerful link between the extent to which there was fit in terms of context, structure and strategy and organizational effectiveness. The same research failed to establish any significant link between organizational effectiveness and the Mintzberg typology.
Comments on the concept of best fit
The best fit model seems to be more realistic than the best practice model. As Dyer and Holder (1998: 31) pointed out: ‘The inescapable conclusion is that what is best depends’. It can therefore be claimed that best fit is more important than best practice. But there are limitations to the concept of best fit. Paauwe (2004: 37) argued that: ‘It is necessary to avoid falling into the trap of contingent determinism’ [ie acting as if the context absolutely determines the strategy]. There is, or should be, room for making strategic choices’.
There is a danger of mechanistically matching HR policies and practices with strategy. It is not credible to claim that there are single contextual factors that determine HR strategy, and internal fit cannot therefore be complete. As Boxall (2007: 61) pointed out: ‘It is clearly impossible to make all HR policies reflective of a chosen competitive or economic mission’.
Purcell (1999: 35) refers to the concept of ‘idiosyncratic contingency’, which ‘shows that each firm has to make choices not just on business and operational strategies but on what type of HR system is best for its purposes’. He also commented that: ‘The search for a contingency or matching model of HRM is also limited by the impossibility of modelling all the contingent variables, the difficulty of showing their interconnection, and the way in which changes in one variable have an impact on others, let alone the need to model idiosyncratic and path dependent contingencies’ (ibid: 37).