Best fit or contingency model of HR
– focused on strategies like operations strategy, marking strategy and HRM. Best fit model argued that HR strategy become more efficient when it is linked to its surrounding context or environment of the business (Baird and Meshoulam, 1988). The surrounding environment means that external and internal fit. The external fit linked to the operations strategy, marking strategy, competitive strategy and financial strategy etc for example the competitive strategy of the overall business and strategic configurations. Internal fit focused on HR policies and practices which must be coherent (Baird and Meshoulam, 1988). Competitive strategy to HRM argues that employers have three basic strategic options in order to gain competitive advantages: cost reduction, quality enhancement and innovation (Porter, 1985). Competitive strategy includes with no frills and an emphasis on minimising costs (Guest 2001), with no systems for independent worker voice and no evidence of high commitment HRM. Recruitment and selection is likely to be ad hoc, especially for low grade tasks and the employer. (Marchington et al 2004). Training is likely to be poor or non existent, with no recognition of employees. Pay levels are unlikely to be much above the minimum wages (Marchington et al 2004).
In contrast in a recent review of theory and research in strategic management, Hoskisson et al (1999, p417) conclude that the resource-based view of the firm has now become the dominant framework in the area. At least five important issues have emerged from the application of RB ideas to HRM: managers or workers as the key resource, Wright et al (1994, p314) are clear it is the former because employees as a whole are directly involved in making products or delivering a service, and are typically less mobile, less wages for their efforts. Secondly, focus on people practices or processes RBM combined together, they form human resource advantage the idea that competitive advantage can be achieved by employing better people and using better HR processes. Thirdly, the importance of path dependency RBM provide a particularly useful framework for analysing HRM because it recognises the importance of historical conditions and the different paths taken in organization over time, as well as industry movements (Boxall, 1996, p65). Fourthly, tackling the neglected of institutional forces and networks beyond the firm and in the last viability and industry leadership.
Drawing on Penrose (1959), they argue that a focus on the internal resources at the disposal of the firm has produced a useful corrective from earlier paradigms that analysed performance interm of external competitive forces. In simple terms, while theories of best fit take an outside-in approach, those from the RB perspective analyse strategy from the inside out (Paauwe and Boselie 2003, p58). In best fit studies it was assumed that internal decisions such as those about recruitment or training were unproblematic operation concerns. By contrast, these are precisely the sorts of issues that RB regards as strategic because they can and do influence performance (Boxal and Purcell, 2003, p73). Of course RB can be criticise for failing to take sufficient notice of forces external to the organisation, both in terms of competitive strategies and institutional forces but it is now widely accepted that this approach constitutes on the third dominant strand in strategic HRM along with best practice and best fit. It is the mix of resources, including human resources, that gives each firm it unique character and any lead to differences in performance (Rugman and Verbeke, 2002).
Moet Henness Louis Vuitton (LVMH) is a worldwide leading company, based in Paris since 1987 and employs 56,000 people. LVMH is a financial and commercial group specialized in the profitable market of luxury goods. LVMH has international business with 260 expatriates and 650 foreign employees by 2001 in 1,400 stores. LVMH based on best fit model of HR because of it international business with out source environment or external fit. In LVMH the role of corporate HR is to normalize certain procedures for example in mobility strategy. To meet the external requirements employees deals directly with company he or she works for because there is no information flow and no harmonized procedure. HR operates at four levels corporate, regional, business group and company level, mostly decision are given by the company, up to a point and recruitment is done by the Regional HR director.
As it is discussed already LVMH is a global business from the start and use term International Mobility rather than Expatriation. LVMH international human resource strategy is the management of internationally mobile staff. It is call ethnocentric approach where expatriates are sent form the headquarters out to subsidiaries to assure control and implementation of central policy, and to facilitate communication from the centre to the local subsidiary. Such transfers may also be part of management development for headquarter nationals.
In best fit model less emphasises on training and development on employees because this model focused on coast reduction policy and also out source based strategy where training and development are not problems for organisation. However the international mobility is main strategy of LVMH but less focused on training and development of employees only training are given few top managers even most employees and HR managers are lack of skill and talent. Most of employees sent through headquarter to control subsidiaries and protect its interests and those sent out to develop their skills. Organization development accounts for a quarter of expatriates while the rest is part of management development scheme. Most expatriates are in change of small subsidiaries for three years on average, very few of them stay longer. They are senior expatriates those role is to manage the local business, train to host country nationals and transfer corporate culture majority of them having lack of English language skill and experience. Once the company head sent one shoe factory officer as expatriates to handle big branch in Italy.
LVMH does not want to create a legion of expatriates who live out their career outside their home base, often in the same country maintaining their benefits (local contracts). In such cases, expatriates are disconnected from their home base. Moreover, such practices are not cost effective. It also fellow hard model of HR or best fit resource model which has a harder, less humanistic edge, holding that employees are resource in the same way as any other business resource. People have to manage in a similar manner to equipment and raw materials. They mush be obtained as cheaply as possible use sparingly, and develop and exploited as much as possible. In LVMH strives to attract managers to international assignments through exciting career development prospect and not through economic incentive.
Learning and development have been said to be indispensable components of strategic human resource management as well as a mean of reducing uncertainty in the market place and achieving organisational goals (Starkey, 1996) Harrison’s definition of employee development assumes that the min point of development is to help the organisation achieve its mission and business goals as is proposed in hard HRM. Further Harrison (1992) described that employee development as part of the organisation overall human resource strategy means the skill full provision and organisation of learning experiences in the workplace in order that performance can be improved that work goals can be achieved and that through enhancing the skills, knowledge, learning ability and enthusiasm of people at every level, there can be continuous organisational as well as individual growth. Employee development must, therefore, be part of a wider strategy for the business aligned with the organisation corporate mission and goals (Harrison, 1992).
Training, learning and education are often used interchangeable. The distinctions are less clear cut, there is sometimes overlap between the concepts, and one may feed into the other. Education is the system that aims to develop people intellectual capability, conceptual and social understanding and work performance through the learning process. Training is a narrow concept defines as a process which is planed to facilitate learning so that people can become more effective in carrying out aspect of their work (Bramley, 2003, p4). There are different approaches to learning for example behaviourist approach based on the work of B. F Skinner the second one category of learning is cognitive, which is based not up stimulus-response theories set up stimulus connections and third one is social learning theory, which work on the principle of learning by imitation. There are different training approaches in different company for mentoring/coaching, networking, teams, learning groups, performance review, 360 degree feedback, buddying, informal discussion, observations, work shadowing and deputising (Bramley, 2003, p4).
The main methods used for management training and development include formal education and training such undergraduate management degrees. Internal or externally provided training courses, outdoor managing development, and coaching and mentoring. Outdoor MD remains a popular choice for teambuilding exercises and for development of problems-solving techniques, despite criticism that some providers include extreme and dangerous activities (Reid et al 2004, p243). Action learning is encompassed within many methods, and is influenced by the work of Revans (1982) who proposed that learning equals programmed knowledge plus the ability to ask good questions. This fit well with MD as well as with the model of the learning organisations.
Action learning is also the most common approach used within SME, although the CENL (2002, p2) identified particular problems in relation to SMEs (and the professions) According to Storey (2004) this may be because the government tends to favour formal learning methods because they are easier to measure. Using coaching, feedback and performance review, mangers are assisted to determine their own development needs.
As mention in the case study LVMH those higher up in the organisation HP1 are likely to receive more training than those at the bottom or those move to international assignments. Very little training is provided even for cultural tough countries like Brazil or Mexico where people are expected to adjust on their own. Being as consultant I will recommend to LVMH following recommendations.
It is assumed that global managers required high level of training in order to meet increasingly rigorous demands. Before sending to international assignments the management should ensure they have enough skill to meet the foreign office challenges. Before offering him or her a more challenges job better take test or interview against skill are needed. If someone doesn’t have enough update skill send him or her for training. Secondly, before sending direct to company given him or her time to get on well with culture to understand their role in the organisation and also be able to work autonomously.
LVMH should make training and development professional like coach/mentor who have close contact with all company branches to know what is company need and were the problems are coming in future. The training and development professionals have responded those challenge and become involved with teaching people how to learn, and encouraging them to become lifelong learners, as part of a business strategy to retain completive advantage.
Recruitment is the process of attracting candidate for vacant jobs, and selection is the process of choosing the right person for the job from among a pool of candidates (Wright and Story, 1997). Recruitment and selection are an important part of achieving strategic goals and have significant impact on employment stability and employee turnover. Recruitment is typically regarded as the poor relation of selection while selection has caught the attention of organisational psychologists keen to improve reliability and validity of selection methods, recruitment has received scant attention. There are different types of recruitment methods used by employer for example closed searched, word of mouth, links to schools, colleges and universities, recruitment agencies, responsive methods, speculative application, open searches, local newspaper adverts, job centres and employers website. For selection methods for example traditional interviews, competency-based interview and test for specific skills are in most employers (CIPD, 2004).
LVMH recruitment and selection strategies are based on ethnocentric approach, where the majority of managers are recruited from the home country. 79% employees are from home country France and recruitment is very attractive for those candidates who having early career with less than five years of professional experience. Selection process is based on seniority, talent and ready to move. The main source of recruitment is company website. Through company website, candidates from any country can apply directly to any of LVMHs subsidiaries in a country not their own and obtain a local employment contract. By the international mobility policy most of employee transfer to different subsidiaries and it is increasing yearly 1998 the number of expatriates was 115 in 1999 and in 2001 260 expatriates were transfer to other countries.
To support international business LVMH should more focused on polycentric and geocentric approached during recruitment and selection. In polycentric approach where local nationals are appointed and in geocentric, where managers are not appointed according to their country. In ethnocentric approach head office made sure that every individual recruit with international profiles who know the culture of organisation, extensively travelled, at least three languages and opened minded. But mostly employees during selection for international mobility will not ask to move their selection based on company requirement and when company management observed that employee has surplus skill which is not need in home country.
Motivational factors also ignore during recruitment and selection. Employees are selected more challenges job but salary or incentive are given according to country where expatriates is moved. HVMH is aware that a good package is necessary but that is not main incentive to go abroad. During selection it is not ensure from HR that expatriates lose or gain form their move. The home based salary is mark up at the time of departure according to international assignment. The mobility salary is compared to local labour market averages in compatible countries roughly including OECD countries and incompatible countries.
LVMH should like to expand its labour source to a more international level. It should focus on polycentric approach. Because of expatriates recruitment and selection more costly. Majority of employees are French national who are have problems regarding languages and skill and less motivated because of LVMH is not giving salary according to their home countries. If company failed to recruit according to polycentric approach due to skill and experience they need. Company then should adopt geocentric approached where manager are not appointed according to their country of origin but from countries other than the host or home country. In last company can send someone from France if company local HR office failed to find someone best according to company need.