Strategy - HR fit: does it really matter? Citation metadata Author:Patrick M. Wright Date: Dec. 1, 1998 From:Human Resource Planning(Vol. 21, Issue 4.) Publisher: Human Resource Planning Society Document Type: Article Length: 1,776 words Abstract:  Researchers on human resource management that failed to provide proof on productivity gains from linking business planning with human resource strategies were using inappropriate parameters. The effectiveness of human resource strategies may be assessed from the vantage point of goals and principles, motivation schemes, key competencies gained by employees and encouragement of innovation. Focusing on just one of these aspects would result in skewed findings. Since the formal advent of the field of Strategic Human Resource Management (HRM), probably with the publication of Devanna, Fombrum & Tichy's (1981) article titled "Human Resources Management: A Strategic Perspective," academics, consultants, and executives have assumed the need to "fit" HR to the strategy of the firm. Even prior to this article, authors such as Walker (1978) called for a better link between business planning (though not specifically strategy) and human resource planning. In fact, in large part, this need to find ways to fit HR to the strategy of the firm formed the foundation for the creation of The Human Resource Planning Society (Dyer, personal communication). The basic theory behind "fit" is that the effectiveness of any HR practice or set of practices for impacting firm performance depends upon the firm's strategy (or conversely, the effectiveness of any strategy depends upon having the right HR practices). Academic definitions and theories of Strategic HRM clearly emphasize the link between HR and strategy (c.f. Fombrum, Tichy & Devanna, 1984; Ulrich, 1998; Wright & McMahan, 1992). Consulting models emphasize the need for congruence between HR and strategy, and HR executives spend a large part of their time trying to ensure an alignment between HR and strategy. Given the assumption of a need for a link and the preoccupation with attempting to develop it, one would think that the efficacy of fit between HR and strategy has found overwhelming empirical support. Think again. Over 10 years ago, after reviewing the earliest Strategic HRM research, Lengnick-Hall and Lengnick-Hall (1988: 468) concluded, "There is little empirical evidence to suggest that strategic HR directly influences organizational performance or competitive advantage." In 1995 Dyer and Reeves reviewed four studies of the effects of "bundling" HR practices on firm performance and stated that there was "no convincing evidence that more effective HRM practices are those that fit the business strategy." Gerhart, Trevor, and Graham (1996) argued that there was little empirical evidence supporting the value of achieving synergy between strategy and HR practices. Both Delery and Doty (1996) and Huselid (1995) found much more support for a best practices a.

1. Strategy - HR fit: does it really matter?
Citation metadata
Author:Patrick M. Wright
Date: Dec. 1, 1998
From:Human Resource Planning(Vol. 21, Issue 4.)
Publisher: Human Resource Planning Society
Document Type: Article
Length: 1,776 words
Abstract:
Researchers on human resource management that failed to
provide proof on productivity gains from linking business
planning with human resource strategies were using
inappropriate parameters. The effectiveness of human resource
strategies may be assessed from the vantage point of goals and
principles, motivation schemes, key competencies gained by
employees and encouragement of innovation. Focusing on just
one of these aspects would result in skewed findings.
Since the formal advent of the field of Strategic Human
Resource Management (HRM), probably with the publication of
Devanna, Fombrum & Tichy's (1981) article titled "Human
Resources Management: A Strategic Perspective," academics,
consultants, and executives have assumed the need to "fit" HR
to the strategy of the firm. Even prior to this article, authors
such as Walker (1978) called for a better link between business
planning (though not specifically strategy) and human resource
planning. In fact, in large part, this need to find ways to fit HR
to the strategy of the firm formed the foundation for the
creation of The Human Resource Planning Society (Dyer,
personal communication).
The basic theory behind "fit" is that the effectiveness of any HR
practice or set of practices for impacting firm performance
depends upon the firm's strategy (or conversely, the

2. effectiveness of any strategy depends upon having the right HR
practices). Academic definitions and theories of Strategic HRM
clearly emphasize the link between HR and strategy (c.f.
Fombrum, Tichy & Devanna, 1984; Ulrich, 1998; Wright &
McMahan, 1992). Consulting models emphasize the need for
congruence between HR and strategy, and HR executives spend
a large part of their time trying to ensure an alignment between
HR and strategy. Given the assumption of a need for a link and
the preoccupation with attempting to develop it, one would
think that the efficacy of fit between HR and strategy has found
overwhelming empirical support. Think again.
Over 10 years ago, after reviewing the earliest Strategic HRM
research, Lengnick-Hall and Lengnick-Hall (1988: 468)
concluded, "There is little empirical evidence to suggest that
strategic HR directly influences organizational performance or
competitive advantage." In 1995 Dyer and Reeves reviewed four
studies of the effects of "bundling" HR practices on firm
performance and stated that there was "no convincing evidence
that more effective HRM practices are those that fit the business
strategy." Gerhart, Trevor, and Graham (1996) argued that there
was little empirical evidence supporting the value of achieving
synergy between strategy and HR practices. Both Delery and
Doty (1996) and Huselid (1995) found much more support for a
best practices approach (high-performance HR practices that are
related to performance regardless of strategy) than for the
benefit of fitting practices to strategy. Finally, Wright and Snell
(1998) recently reviewed all of the studies attempting to
demonstrate that fit between HR and strategy resulted in
increased firm performance. They found that while some studies
provided minor support for the efficacy of fit, overall the
results were far from conclusive.
Reviews such as these have led to the question of whether, in
fact, fitting HR to strategy really matters. For example, while
Becker and Gerhart (1996) found considerable evidence that HR
practices were related to firm performance, little evidence
existed that these relationships were contingent on strategy.

3. Pfeffer (1994; 1998), after reviewing the lack of empirical
evidence in support of fitting HR and strategy, concluded that
there is a set of HR practices that, if properly implemented, will
universally positively impact performance across all strategies.
If we stop now, one might conclude that the Strategy-HR fit
model is outdated, and that we can go back to developing the
best in HR practices without the tiresome burden of trying to
understand the business. However, this results in two problems.
First, from a practical perspective, try telling your CEO that
your HR systems do not need to be tied to the firm's strategy
and see how long your employment lasts. Second, from a
theoretical/empirical perspective, just because those of us in
academe have failed to prove something true in no way makes it
false. An old scientist friend used to advise, "If the facts don't
fit the theory, fix the facts." This describes the recent work on
fit in Strategic HRM.
Becker and Gerhart (1996) provide the first step toward
understanding how to begin fixing the facts. In addition, recent
examinations by Wright and Sherman (forthcoming) and Delery
(forthcoming) have further clarified how the level of abstraction
at which HR is conceptualized helps in creating an
"architectural" approach to reconciling the best practice vs. fit
debate. Becker and Gerhart proposed that the system
architecture forms the highest level abstraction, and consists of
the guiding principles. For example, IBM's move from an
"entitlement" culture to a "performance" culture implied a
change in the guiding principles for the development of HR
systems toward ones that reward performance. Notice that at
this level of abstraction, little reason exists for thinking that the
effectiveness of such principles might vary across strategies.
At the next level of abstraction one finds the policy alternatives
- in essence, the different techniques or practices through which
the guiding principles can be promoted. So if the firm seeks to
develop a performance culture through rewarding performance,
it has a plethora of incentive mechanisms available for
achieving this. The system could include stock options, merit

4. pay, performance bonuses, piece-rate pay, gainsharing, profit
sharing, etc., or any combination of these. At this level of
abstraction, one sees how fit with strategy might take on
importance. For example, if a firm is strategically seeking fast
growth, then stock options might be more beneficial than simple
merit pay.
The next level of abstraction might be referred to as the
"product" level. This refers to the immediate product the HR
practices aim to produce. For example, Wright and Sherman
(forthcoming) note that a policy alternative of incentive pay
may differ by the aspect of performance to which the pay is
tied: One could use bonuses to produce cost cutting (if the finn
is competing on cost), new product development or innovation
(if the firm is competing via differentiation), or revenue growth
(for a firm seeking growth). Similarly, most competency-based
models of leadership depict this level of abstraction. For
example, Debbie Smith, SVP of HR at Merck, noted that the
company sought to identify the competencies Merck would need
in its leaders given the firm's strategies for the next five to 10
years. The company then developed HR systems aimed at
producing those competencies among its existing executives and
high potentials. Thus, at this level, a strong need to tie HR to
strategy exists.
Finally, Becker and Gerhart (1996) identify practice-process as
the lowest level of abstraction. This level refers to the best-in-
class implementation and/or technique of the principles,
practices, and product systems. For example, a firm might seek
to create a performance culture (principle) by instituting a
bonus plan (policy alternative) to promote innovation (product).
However, the plan might fail because of a lack of good
measures of innovation, or because the plan is not supported by
other HR practices (e.g., other reward practices promote cost
cutting, or training and staffing systems do not result in the firm
having innovative people - this issue of internal fit will be left
for a future article).
This architecture approach provides insight as to the lack of

5. empirical support for fit. Most research testing the "fit" effect
has used measures of HR that are at the guiding principle level
of abstraction. These measures might ask firm respondents to
indicate the percentage of employees who are covered by
performance-based pay, are given formal performance
appraisals, are hired with valid selection systems, or are
provided with more than 40 hours of training each year. Readers
of this journal probably agree that such practices, if
implemented correctly, will benefit organizations regardless of
the strategy. Thus, one should hardly find results failing to
support the need to fit such practices to strategy surprising.
So, how will the facts be fixed in the future? Becker and
Gerhart (1996) called for Strategic HRM researchers to bear
such distinctions in mind in future research. More specifically,
Wright and Sherman (forthcoming) called for researchers to
develop better theoretical models for how different strategies
might imply differences in HR, and then to be much more
specific in their development of the measures of HR. For
example, they argued moving from simple measures of
performance-based pay to assessing the aspects of performance
to which pay is tied. Also, Delery (forthcoming) advocated the
development of more valid measures of HR practices, paying
significant attention to the level of abstraction at which these
practices should be measured given the specific research
question.
Thus, while empirically, the jury might still be out on research
demonstrating conclusively the need to fit HR practices to the
strategy of the business, considerable theoretical and practical
evidence exists for making such a link. Given the considerable
attention paid to the critical examination of past research and
calls for refining future measures, our empirical knowledge base
should soon achieve much more consistency with our theoretical
and practical beliefs.
References
Becker, B. & Gerhart, B. 1996. "The Impact of Human Resource
Management on Organizational Performance: Progress and

6. Prospects." Academy of Management Journal, 39: 779-801.
Delery, J. Forthcoming. "Issues of Fit in Strategic Human
Resource Management: Implications for Research." Human
Resource Management Review.
Delery, J. & Doty, H. 1996. "Modes of Theorizing in Strategic
Human Resource Management: Tests of Universalistic,
Contingency, and Configurational Performance Predictions."
Academy of Management Journal, 39: 802-835.
Dyer, L. Personal communication, November 19, 1998.
Devanna, M., Fombrum, C. & Tichy, N. 1981. "Human
Resources Management: A Strategic Perspective."
Organizational Dynamics, Winter: 51-67.
Gerhart, B., Trevor, C. & Graham, M. 1996. "New Directions in
Employee Compensation Research." In G.R. Ferris (Ed.)
Research in Personnel and Human Resource Management, Vol.
14, 143-204. Greenwich, CT: JAI Press.
Huselid, M. 1995. "The Impact of Human Resource Management
Practices on Turnover, Productivity, and Corporate Financial
Performance." Academy of Management Journal, 38: 635-672.
Pfeffer, J. 1994. Competitive Advantage Through People.
Cambridge, MA: Harvard Business School Press.
Pfeffer, J. 1998. The Human Equation. Cambridge, MA:
Harvard Business School Press.
Walker, J. 1978. "Linking Human Resource Planning and
Strategic Planning." Human Resource Planning, Vol. 1.1: 1-18.
Wright, P., & Sherman, S. Forthcoming. "Failing to Find Fit in
Strategic Human Resource Management: Theoretical and
Empirical Problems." P. Wright, L. Dyer, J. Boudreau & G.
Milkovich (Eds.) Research in Personnel and Human Resource
Management: Supplement. Greenwich, CT: JAI Press.
Wright, P., & Snell, S. 1998. "Toward a Unifying Framework
for Exploring Fit and Flexibility in Strategic Human Resource
Management," Academy of Management Review, 23: 756-772.
Ulrich, D. 1998. Human Resource Champions. Cambridge, MA:
Harvard Business School Press.
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