HUMAN RESOURCE MANAGEMENT PROBLEMS OVER THE …

1 HUMAN RESOURCE MANAGEMENT . PROBLEMS OVER THE LIFE CYCLE OF. SMALL TO MEDIUM-SIZED FIRMS. Matthew W. Rutherford, Paul F. Buller, and Patrick R. McMullen This study uses a sample of 2,903 small to medium-sized firms to examine the manner in which HR PROBLEMS vary over the organizational life cycle. We found that a four-stage model was appropriate. Interestingly, firm age did not emerge as a significant indicator of stage the firms' HR PROBLEMS varied across stages defined by growth. Training PROBLEMS were highest in high-growth firms and lowest in low-growth firms; compensation PROBLEMS were highest in moderate-growth firms and lowest in high-growth firms; and recruiting PROBLEMS were high- est in no-growth firms and lowest in low-growth firms.

2 2004 Wiley Periodicals, Inc. Introduction MANAGEMENT , and regulation. It is the gen- eral people or HUMAN RESOURCE (HR). It is widely held that new ventures experi- PROBLEMS facing firms in various stages that ence different kinds of PROBLEMS as they grow we intend to examine. However, the specific and mature. This so-called life cycle or stage types of people PROBLEMS or issues are not model of organizational growth has received well defined or well documented in previous considerable empirical support (Dodge & research.)

3 This article adds to the literature by Robbins, 1992; Hanks & Chandler, 1994; examining specific HR PROBLEMS across the Kazanjian, 1988; Kazanjian & Drazin, 1989). life cycle of small and medium-sized enter- Most previous studies of the life-cycle model prises (SMEs). have identified or examined different types of Another important feature of this work PROBLEMS based on the size, age, and/or is based on the fact that we address a pri- growth rate of the firm. Examples of these mary weakness of other life-cycle studies.

4 PROBLEMS include the following: strategic po- Researchers often decide upon a number of sitioning, sales/marketing, product develop- stages and then force firms into a prede- ment, production, accounting/financial man- termined stage. The problem with this is agement, external relations, people/ HUMAN that there has been no agreement upon the RESOURCE MANAGEMENT , organization, general correct number of stages in a life-cycle Correspondence to: Matthew W. Rutherford, The Hogan Entrepreneurial Leadership Program, Gonzaga Uni- versity, Spokane, WA 99258, 509-323-3406, HUMAN RESOURCE MANAGEMENT , Winter 2003, Vol.

5 42, No. 4, Pp. 321 335. 2004 Wiley Periodicals, Inc. Published online in Wiley InterScience ( ). DOI: 322 HUMAN RESOURCE MANAGEMENT , Winter 2003. model models range anywhere from three are unique PROBLEMS (content factors) asso- to ten stages depending upon the study ciated with various stages. (Stubbart & Smalley, 1999). We will over- For example, Kazanjian's (1988) study come this problem by using a novel, power- based on four life-cycle stages in technology ful exploratory classification analysis called new ventures conception and development, There is no a self-organizing map (SOM).

6 Similar to a commercialization, growth, and stability . clear evidence cluster analysis, the SOM approach will found differences in the types of dominant regarding the group cases together based on their similar- PROBLEMS across these stages. Six general sets number of stages a firm ity to one another. However, when compared of PROBLEMS were identified using a ques- to cluster analysis, the SOM provides a more tionnaire methodology: strategic positioning, rigorous grouping procedure through learn- sales/marketing, people, organizational sys- ing iterations and does not bias the data by tems, production, and external relations.

7 Assuming a certain number of groups (Jain, Some PROBLEMS ( , strategic positioning Mao, & Mohiuddin, 1996). and sales/marketing) were found to be domi- First we will examine what we know nant across all stages, while other PROBLEMS about the SME organizational life cycle. We ( , external relations and organization). will then investigate the limited research ad- were more important in some stages and less dressing the intersection of life-cycle and so in others. People PROBLEMS appeared to be HUMAN RESOURCE PROBLEMS .

8 This will lead to moderately important across all stages. specific propositions, which we will test Using a different research method using the SOM and multivariate analysis of (open-ended classification rather than variance. Finally, we will report results and forced-choice), Terpstra and Olson (1993). provide a discussion for these results. identified ten different types of PROBLEMS . obtaining external financing, internal finan- The SME Organizational Life Cycle cial MANAGEMENT , sales/marketing, product development, production, general manage- Theory and research on the organizational ment, HUMAN RESOURCE MANAGEMENT , eco- life cycle (OLC) and stages of development nomic environment, and regulatory environ- indicates that firms progress through vari- ment over two stages (start-up and growth).

9 Ous stages over time. Life-cycle models typ- Consistent with Kazanjian (1988), some ically reflect a sequential progression PROBLEMS ( , sales/marketing and internal through stages such as birth or start-up, financial MANAGEMENT ) were dominant in growth, maturity, and even decline. There is both stages. Other PROBLEMS ( , obtaining no clear evidence regarding the number of external funding and HUMAN RESOURCE man- stages a firm experiences scholars have agement) were more important in some submitted models varying between three stages than others.

10 Huang and Brown (1999). and ten stages (Churchill & Lewis, 1983; conducted a follow-up to the Terpstra and Dodge & Robbins, 1992; Greiner, 1972; Olson (1993) study using a sample of 973. Kazanjian, 1988; Kazanjian & Drazin, 1989; small Australian firms. Their results gener- Kimberly & Miles, 1980; Miller & Friesen, ally supported the classification framework 1984; Quinn & Cameron, 1983; Scott, put forth by Terpstra and Olson (1993). 1971). The controversy regarding the proper number of stages is made apparent Life-Cycle and HUMAN RESOURCE by examining the overview of OLC studies MANAGEMENT PROBLEMS presented in Table I.