Section Fiveapplication in appropriate organizational circumstances. Thus, a
company could obtain the greatest increase in performance
from selective staffing practices when it simultaneously pursues
a business strategy of differentiating itself from its competitors
by producing the highest-quality products. Selective staffing
practices would enable the firm to hire employees having
enough talent to manufacture such high-quality products.
The contingency approach is consistent with the
principles of strategic human resource management presented
earlier. These principles maintain that the practices or systems
of practices used to implement the firm’s human resource
strategies should fit with or conform to the firm’s competitive
business strategies. Examples of business strategies are
provided by Porter’s framework that specifies three strategies
for competition: (1) cost leadership as the low-cost product or
service provider; (2) differentiation, such as by superior quality
or service; and (3) focus or niche strategies that concentrate on
a narrow area of differentiation.^103
Thus, the contingency view would maintain that if a firm
has adopted a cost leadership strategy, then it should have
human resource practices consistent with this strategy. With
cost leader-ship, a firm would probably not have a
compensation system that offers extensive perks for executives
nor would it pursue a practice of wage leadership. Furthermore,