Institutional pressures and HRM: developing institutional fit

Abstract

PurposeResearch in strategic human resource management (HRM) has focused mainly on the effects of HRM practices or systems on organizational effectiveness. However, institutional theory argues that besides being financially successful, organizations also need legitimacy to survive. Owing to the tension between competitive and institutional pressures, organizations balance between the degree of conformity and the degree of differentiation from competitors regarding HRM. The purpose of this paper is to address how institutional pressures help shape HRM.Design/methodology/approachUsing the concepts of leeway, human agency and strategic choice, differences in three types of institutional fit are highlighted: innovative, conformist and deviant. A comparative case study approach is used in order to illustrate the framework, using document analysis and 43 interviews in three organizations in The Netherlands.FindingsThis paper shows how balancing competitive and institutional pressures in organizations affects HRM. The cases illustrate the proposed theoretical framework, showing leeway, human agency, strategic choice and the nature of institutional fit. The organizations each illustrate a type of institutional fit. Moreover, not the institutional context itself, but the organization's response seems to make a difference for the nature of institutional fit.Originality/valueWhile previous studies focus on the effects of HRM on organizational effectiveness, this paper examines how the balance between competitive and institutional pressures affects HRM and aims to show that institutional fit can contribute to strategic HRM by providing insight in this more balanced goal setting of organizations.

The role of strategic groups in understanding strategic human resource management

“…Therefore, the capacity of firms to pursue distinctive practices for competitive advantage may be limited by constraints, such as organisational inertia and forms of isomorphism (Reger & Huff, 1993;Boon et al, 2009). Strategic groups are then another important aspect of the structural dimensions which foster this organisational sluggishness.…”

“…The 'table stake' concept suggests there are established (HRM) practices adopted by all businesses in an industry which serve to legitimise their position in that industry. This concept has thus been recognised as an adaptation of the 'best practice' SHRM approach (Boon et al, 2009;Bjorkman, 2006;Boxall & Purcell, 2003;. The 'table stake' version of best practice SHRM approach is based upon the institutional assimilation literature where organisations struggle to distinguish themselves from their industry associates whilst simultaneously achieving legitimacy (institutional fit) in their sector (DiMaggio & Powell, 1983;Oliver, 1997).…”

The Impact of Strategic Human Resource Management on Institutionalization Process

“…Organizations are embedded in institutional environments and as a result, most of the organizational practices which include human resource management practices come into being from the reflections of structures and laws in these environments as well as the responses given to these environments. Organizations need to adapt their practices to the rules and necessities of these institutional environments in order to get support and be legitimate (Boon et al, 2009). DiMaggio and Powell (1983) state that when rational actors try to change their organizations, they become more similar to each other.…”

“…Institutional demands and requests influence the selection of human resources systems in organizations. For instance, the regulations of government related to basic salary levels for workers and collective job contracts can limit the salary change in certain sectors (Boon et al, 2009). Barley and Tolbert (1997) define institutions as shared rules and typifications that identify categories of social actors and their appropriate activities or relationships.…”

“…Research in strategic human resource management (SHRM) to date has focused mainly on the effects of HRM practices or systems on organizational productivity and effectiveness (Boon et al, 2009). Productivity and effectiveness however, are not the only sources of organizational success.…”