Best Practice Policy

Best Practice Policy in HR is the school of thought that argues a defined set of universal HR practices – sometimes called ‘bundles’ or ‘High Performance Work Systems’ (HPWS) – improve organisational performance regardless of industry, geography, or strategy. Popularised by Jeffrey Pfeffer and reinforced by Mark Huselid’s research. Also called: universalist HR approach, best practice HRM, High Performance Work Systems (HPWS).

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The origins of best practice policy

The best practice school emerged in the 1990s from two parallel streams of research. Jeffrey Pfeffer at Stanford argued in ‘Competitive Advantage Through People’ (1994) and ‘The Human Equation’ (1998) that certain HR practices consistently produce competitive advantage across industries. In parallel, Mark Huselid’s 1995 study published in the Academy of Management Journal empirically linked bundles of HR practices to firm-level financial outcomes – turnover, productivity, and corporate financial performance.

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The opposing ‘best fit’ or contingency school – Boxall, Purcell, and others – argued the universalist approach ignored strategic and cultural context. A practice that works in Silicon Valley software firms may not work in German manufacturing or Indian BPO. The debate has played out in HR research for two decades. AIHR’s foundational guide provides a current practitioner-level treatment.

Pfeffer’s seven HR practices for competitive advantage

Pfeffer’s most-cited contribution distilled his original 16 practices down to 7 in ‘The Human Equation’ (1998). These are the canonical ‘best practices’ in HR strategy literature:

1. Employment security. Long-term commitment to employees, with layoffs as a last resort. Signals investment back to employees and supports the long-term investment in capability and culture that other practices require.

Selective hiring. Rigorous, validated selection processes that hire for the long term. Skills assessments, structured interviews, and multi-stage screening, prioritising fit and capability over speed-to-hire.
Self-managed teams and decentralised decision-making. Empowering teams to make decisions about their own work, reducing dependence on hierarchical approval cycles.
Comparatively high compensation tied to organisational performance. Above-market pay reduces turnover and attracts top talent; profit-sharing or gain-sharing aligns employee outcomes with company outcomes.
Extensive training. Significant investment in continuous learning, capability development, and cross-functional exposure. Treated as investment, not cost.
Reduction of status differences. Flattened hierarchies, shared facilities, transparent communication. Symbolically and operationally reduces ‘them and us’ dynamics.
Sharing information. Transparent communication of financial performance, strategy, and business context. Information sharing is what enables decentralised decision-making.

Best practice vs best fit: the central debate

These two approaches are the central organising lenses in strategic HRM. The differences run deeper than surface terminology – they imply different starting points, different evaluation criteria, and different change paths.

Dimension	Best practice (universalist)	Best fit (contingency)
Core claim	Universal HR practices improve performance in any context	HR practices must align with specific business strategy and context
Key proponents	Pfeffer, Huselid, Delery & Doty, Becker & Huselid	Boxall & Purcell, Wright & McMahan, Schuler & Jackson
Starting point	Implement validated practices proven elsewhere	Analyse business strategy and context, then design HR
Strength	Evidence-based; clear playbook; lower design cost	Strategically integrated; context-sensitive; adaptable
Weakness	Ignores strategic context; one-size-fits-all risk	Less empirical grounding; harder to operationalise
Best for	Mature organisations with clear gaps against industry norms	Strategic transformations, M&A integration, new business models
Failure mode	Implementing practices that conflict with business model	Endless analysis without operational HR foundation

In contemporary practice, the academic dichotomy has largely given way to hybrid thinking. Most experienced CHROs combine both lenses: install evidence-based foundational practices (best practice) while customising implementation to fit the specific strategy and culture (best fit). This hybrid view is the dominant working model per CIPD’s strategic HR guidance.

High Performance Work Systems (HPWS): the operational expression

In practice, best-practice HR is operationalised as ‘High Performance Work Systems’ – coherent bundles of HR practices that reinforce each other to produce superior workforce outcomes. The HPWS framework typically includes:

Selective hiring. Validated, multi-stage selection with strong skills assessment.
Extensive training. Continuous capability development across the employee lifecycle.
Performance-based compensation. Above-market base, variable pay tied to outcomes.
Performance management. Frequent feedback, clear goals, multi-source input.
Employee voice. Engagement surveys, town halls, suggestion systems, and acted-on feedback.
Job design and autonomy. Decentralised decision-making, team-based work, meaningful autonomy.
Information sharing. Transparent communication of strategy, performance, and context.

Per Huselid’s 1995 study and replications, organisations implementing coherent HPWS bundles show measurably higher productivity, lower voluntary turnover, and stronger financial performance than peers.

Where best practice approaches fail

Practices that conflict with the business model. ‘Employment security’ as a best practice has obvious tension with seasonal labour, project-based consulting, or hyper-growth tech requiring rapid restructuring.
Cultural transferability. Practices proven in US Silicon Valley do not always transfer to German manufacturing, Indian services, or Japanese keiretsu.
Implementation without coherence. Adopting selective hiring without compensation alignment creates expensive hires who leave. Best practices work as bundles, not in isolation.
‘Best practice’ as competitive imitation. If every firm in an industry adopts the same practices, there is no competitive advantage – just a higher cost floor.
Static framing. Pfeffer’s 7 were articulated in 1998. The labour market, technology, employee expectations, and regulatory landscape have shifted significantly.

How to apply best practice thinking without dogma

1. Audit your current state against the bundle. Where do you have selective hiring? Above-market comp? Information sharing? Material gaps against the HPWS bundle are credible improvement targets.

Test for coherence before isolating practices. If your hiring is selective but compensation is below market, the hiring investment is wasted.
Translate to your context. ‘Employment security’ in a startup may be ‘transparent runway communication.’ ‘Selective hiring’ in a high-volume retailer may be ‘validated skills assessments at scale.’
Measure outcomes, not adoption. ‘We adopted the bundle’ is not a result. Productivity, voluntary turnover, engagement, and financial performance are.
Pair with best-fit analysis. Layer the universalist baseline with a contingency analysis: what does your specific strategy require that the universal bundle doesn’t capture? See agile HR for an operating-model example.

Frequently asked questions

A best practice policy in HR is the school of thought that argues a defined set of universal HR practices improve organisational performance regardless of industry, geography, or strategy. Popularised by Jeffrey Pfeffer in “The Human Equation” (1998) and supported by Mark Huselid’s 1995 empirical research. Operationalised as High Performance Work Systems (HPWS).

Pfeffer’s seven practices for competitive advantage through people are: (1) employment security, (2) selective hiring, (3) self-managed teams and decentralised decision-making, (4) comparatively high compensation tied to organisational performance, (5) extensive training, (6) reduction of status differences, and (7) sharing information.

Best practice argues universal HR practices improve performance in any context. Best fit argues HR practices must align with the specific business strategy and context – there is no universal best. The current dominant view combines both: install evidence-based foundational practices (best practice) while customising implementation to fit strategy and culture (best fit).

High Performance Work Systems are coherent bundles of HR practices that reinforce each other to produce superior workforce and organisational outcomes. Typical components include selective hiring, extensive training, performance-based compensation, performance management, employee voice, job design with autonomy, and information sharing. Per Huselid and successor research, organisations with strong HPWS show higher productivity, lower turnover, and stronger financial performance.

No. Best practices fail when they conflict with the business model, when they don’t transfer culturally, when they’re implemented in isolation rather than as bundles, when adoption commoditises the practice across an industry, or when the framework is treated as orthodoxy without refresh. Best practice thinking is most useful as a starting baseline, paired with contingency analysis.

The intellectual origins trace to Jeffrey Pfeffer’s “Competitive Advantage Through People” (1994) and “The Human Equation” (1998), and Mark Huselid’s 1995 paper in the Academy of Management Journal. These works established the empirical and theoretical case for a universalist HR approach. The opposing “best fit” school was developed in parallel by Boxall, Purcell, Wright, and others.

The universalist approach in Human Resource Management is synonymous with best practice policy – the position that certain HR practices improve organisational performance in any context, regardless of strategy, industry, or culture. The main alternative is the contingency/best-fit approach, which holds that HR practices must be aligned with the specific strategic and organisational context.

Best practice HRM is one school within strategic HRM – the broader discipline of aligning HR strategy with business strategy. Strategic HRM encompasses both the universalist (best practice) and contingency (best fit) schools, plus resource-based views, institutional theories, and other frameworks. Most strategic HR practitioners draw from multiple schools rather than adhering to a single paradigm.