ISSUES OF FIT IN STRATEGIC HUMAN RESOURCE - IMPLICATIONS FOR RESEARCH
John E. Delety University of Arkansas
There is a growing body of research showing that the methods used by an organization to manage its human resources can have a substantial impact on many organizationally relevant outcomes. Human resource management (HRM) practices have been linked with turnover (Arthur 19941, productivity (Ichniowski, Shaw, & Prennushi 1997; MacDufYie 1995), financial returns (Delcry & Doty 19961, survival (Welbourne & Andrews 19961, and firm value (Huselid 1995). This growing area of research has been labeled strategic human resource management (SHRM) in that it emphasizes the strategic role of human resources management in meeting business objectives. Estab~shing that HRM practices are linked with firm effectiveness is an important first step in this line of research, however, there is still little understanding of the mechanisms through which HRM practices influence effectiveness. For instance, Delaney and Huselid (1996) stated that researchers still do not know “how HRM practices affect org~izational outcomes, whether some practices have stronger effects than others, and whether complemtarities or synergies among such practices can further enhance organizational performance” (p. 950). This line of research has been interesting in that it points to the importance of human resources, but it has provided few real insights for organizations wishing to gain a competitive advantage through human resources. The purpose of this article is twofold. First, I provide a brief review of the major theoretical and empirical work completed to date in SHRM, focusing most closely on the fit of HRM practices into a coherent system. Second, I present several issues critical to empirical research in SHRAiI on which researchers must focus greater attention. To date, there is clearly no consensus as to how researchers must address these issues. It is argued throughout this article that the conceptual foundations of SHRM have been relatively weak and many of the empirical investigations have made assumptions not driven Direct ail correspondence to: John E. Delery, Department of Management, University of Arkansas, Fayettevi& AR 72701. E-mail: jdelery@comp.uark.edu Human Resource Management Review, Copyright Q 1998 Volume 8, Number 3,1998, pages 289-309 by JAI Press Inc. AI1 rights of rewoduction in any form reserved. ISSN:1053-4822 290 HUMAN RESOURCE MANAGEMENT REVIEW VOLUME 8, NUMBER 3.1998 by, or consistent with, the theoretical base. Given that this research has produced results that suggest overwhelming benefits from effectively managing human resources (Huselid 1995), I believe that we have only begun to realize how important human resource management is to competitive advantage. After all, what would an organization be without people? THEORY IN STRATEGIC HUMAN RESOURCE MANAGEMENT In explaining the significance of human resources to firm performance, the majority of work in SHRM has either implicitly or explicitly adopted the resource-based view of the firm proposed by Barney (1991) (Lade, & Wilson 1994; Wright, McMahan, & McWilliams 1994). The resource-based view proposes that an organization can gain a competitive advantage from the resources it possesses. This shifts the focus from the external environment and how the firm positions itself in a competitive market, to the internal resources of the firm and how the firm is able to use these resources to gain a competitive advantage. For a resource to be a source of competitive advantage, however, it must be rare, valuable, inimitable, and non-substitutable. While the HRM practices of a firm can lead to competitive advantage through developing a unique and valuable human capital pool (Barney & Wright 19971, they may also lead to competitive advantage as part of organizational capital by providing firms with both increased fit and flexibility (Wright & Snell in press). Using the criteria of valuable, rare, and inimitable, both Wright et al. (19941, and Barney and Wright (1997) have proposed that human resources can indeed be a source of competitive advantage. Human resources, for instance, can clearly add value to a firm. This is evidenced in much of the micro HRM research and in that of utility analyses that show increases in profits with the use of a particular HRM practice. Valuable human resources are also rare to the extent that knowledge, skills, and abilities are normally distributed in the population. A firm’s human capital may also be inimitable to the extent this capital has developed a unique history and culture within the organization. This focus on firm resources is important to SHRM research in that it represents a shift in focus from simply the HRM practices to the actual human resources of a firm. That is, a firm does not gain a competitive advantage from HRM practices, per se, but from the human resources that the firm attracts and retains. While the resource based view provides a nice backdrop, explaining the importance of human resources to firm competitiveness, it does not specifically deal with how an organization can develop and support the human resources it needs for competitive advantage. I believe that most of the work in SHRM acknowledges that human resource management practices and policies are the main tools that org~izations employ to develop and sustain the necessary human resources. Along these lines researchers have focused on various HRM practices organizations should use to achieve their objectives, and how these practices work together to enhance performance.
STRATEGIC HUMAN RESOURCE MANAGEMENT 291 Consistent with this idea, SHRM has been based in large part on the notion that a firm must align its human resource management (HRM) practices to support business objectives. As such, researchers have focused predominantly on two forms of “fit,” vertical and horizontal (Baird, & Meshoulam 1988; Wright & McMahan 1992). Horizontal fit refers to the alignment of HR practices into a coherent system of practices that support one another. Vertical fit refers to the alignment of HR practices with the specific organizational context. Although there have now been several empirical investigations of the effectiveness of both forms of “fit,” there is relatively little empirical evidence to suggest that such alignment is necessary or beneficial. There are several possible explanations for the lack of strong empirical support for notions of fit in SHRM that will be explored in this article. First, however, it is important to understand the theoretical framework suggesting “fit.” Because the notion of vertical fit has received the most attention inthe literature and there are now relatively thorough reviews of the most important issues surrounding this fit (Chadwick, & Cappelli in press), I focus here only on the horizontal or internal fit of HR practices. This area is critical for the future of research in SHRM, however, it has received substantially less attention in the literature. HORIZONTAL FIT OF HRM PFUiCTRlCES Horizontal “fit” in SHRM research deals with the internal consistency, and complementa~ty of HRM practices. Specifically, how HRM practices work together as a system to achieve organizational objectives. This horizontal notion of fit shifts the focus from individual HRM practices to the entire HRM system. This systems focus is discussed below. Human Resource Management Systems The following discussion explores the notion of horizontal “fit” in SHRM research. This fit deals with whether the practices used by an org~zation fit into a coherent system’or “bundle” (Delery & Doty 1996, MacDuffie 1995) of practices that enhance and support the effectiveness of one another. The basic assumption is that the effectiveness of any practice depends on the other practices in place. If all of the practices fit into a coherent system, the effect of that system on performance should be greater than the sum of the individual effects from each practice alone (Ichniowski et al. 1997). To test this “fit” it is important to describe in detail how practices may work together to achieve organizational objectives. Although many authors have proposed systems of internally consistent practices (Arthur 1992; Delery & Doty 1996; Miles & Snow 1984), few if any have sufficiently described how the practices support and enhance one another. Ad~tionally, tests of ho~zon~ fit have been limited and have shown very little support for these fit OF systems effects (Delaney & Huselid 1996; Delery & Doty 1996; Huselid 1995). Complicating the study of such systems is the fact that there is no agreement as to 292 HUMAN RESOURCE MANAGEMENT REVIEW VOLUME 8, NUMBER 3,1998 which practices make up a system (Becker & Gerhart 1996). This may in large part be due to the lack of a solid theoretical framework when choosing practices, and the fact that many practices may result in the same outcomes (e.g., work force characteristics). The following discussion will explore the essential components of an effective HRM system, and highlight how these components work together to achieve performance. In an attempt to clarify issues of internal fit, Doty and Delery (1997) argued that there are countless combinations of practices that will result in the identical organizational outcomes (i.e., a high performance work force). For instance, there are several selection techniques, and combinations of techniques that should result in an equally skilled work force. To study the internal fit of practices, therefore, closer attention must be paid to whether an organization has practices in place to ensure a skilled work force, rather than focusing on whether an organization is using a particular type of selection device (e.g., a cognitive ability test). This highlights the fact that the level in the HRM system at which HRM activities are measured has important implications (Becker & Gerhart 1996). It