Vertical Fit Theory
A condition of this effectiveness is that the pattern of HR practices that must achieve both horizontal (internal) and vertical (external) fit (Ericksen & Dyer, 2005). Horizontal fit refers to the idea of consistency among all HR practices. For example, an organization’s recruiting practices, selection practices; compensation practices, etc. are all aligned with and complement one another. Vertical fit refers to how the entire HR system (all practices in combination) is aligned with organizational characteristics, such as, the strategy of the organization.
The configurational approach has been purported to help explaining the basis behind how various HR practices impact organizational outcomes (Ericksen & Dyer, 2005). Research has attempted to demonstrate that through systems (i.e., configurations, patterns of unique practices) of HR practices rather than through single HR practices, a better explanation of how HPWPs contribute to performance can be explained (Chan et al, 2004). Additional findings in the literature have also provided some support for the configurational perspective (Delery & Doty, …show more content…
Indeed, many studies have shown that ability is positively related to performance (e.g., Gottfredson, 1986; Hunter, 1986). Applications of human capital theory focus directly on the knowledge, skills, and abilities of human beings in organizations (Flamholtz & Lacey, 1981; McKelvey, 1983). Wright et al. (1994:315-6) proposed that higher levels of human capital lead to greater capabilities to develop more efficient means of accomplishing tasks and greater capability to respond to environmental changes leading to a sustained competitive advantage. HRM practices are the levers through which human capital can be developed to increase