The dual pressures of youth and expansion: revisiting stage theories of growth in SMEs
| DOI | https://doi.org/10.1108/ER-12-2021-0525 |
| Published date | 31 May 2022 |
| Date | 31 May 2022 |
| Pages | 1393-1409 |
| Subject Matter | HR & organizational behaviour,Industrial/labour relations,Employment law |
| Author | Adrian Wilkinson,Olav Muurlink,Keith Townsend,David Peetz |
The dual pressures of youth and
expansion: revisiting stage
theories of growth in SMEs
Adrian Wilkinson
Griffith Business School, Griffith University, Brisbane, Australia and
Management School, University of Sheffield, Sheffield, UK
Olav Muurlink
Central Queensland University, Brisbane, Australia
Keith Townsend
Centre for Work, Organisation and Wellbeing, Griffith University,
Brisbane, Australia, and
David Peetz
Griffith University, Brisbane, Australia
Abstract
Purpose –The authors consider stage theories of human resource management (HRM) to explore how new
companies experiencing high levels of growth face the dual pressures of youth and expansion.
Design/methodology/approach –The firms in this study are a sub-group of small and medium enterprises
(SMEs) called “gazelles”. While this is a qualitativestudy, participants were chosen through a modified random
sampling approach that ensures that the sample is representative of a regional population of gazelle firms.
Findings –New companies experiencing high levels of growth face the challenge of expansion while
structurally immature. While the selected companieswere ill-equipped in formal knowledge of HR they reacted
to rapidly changing conditions and were forced to organisational flexibility meaning that few absolute rules
were adopted.
Originality/value –Gazelle literature tends to focus on impediments to growth, rather than HR staples such
as recruiting and retaining staff. But the studied cases showed an acute appreciation by gazelle managers of the
value of motivated, skilled staff able to turn their hand to the fluctuating requirements of the fast-growing firm
and a desire to establish formal HR mechanisms as part of the response to the stress of growth.
Keywords Small to medium-sized enterprises (SMEs), Human resource management, Growth
Paper type Research paper
Introduction
What happens to human resource management (HRM) when small firms grow rapidly? One
might expect the manager of such a firm to scramble to simultaneously attend challenges
brought on by “success”, ranging from the supply chains to finance. Where though, does
HRM stand in such managers’priorities? These questions relate to broader issues as to how
small and medium enterprises (SMEs) connect to mainstream HRM (Arthur and Hendry,
1990, p. 246; Katz et al., 2000;Wu et al., 2015;Lai et al., 2017).
It is now widely accepted tha t traditional (mostly larg e-firm) HRM does not apply to
SMEs in general, let alone high-growth SMEs (Heilmann et al.,2020;Harney and Alkhalaf,
2021). Some suggest that the ef fects of HRM are U-shaped, with employees init ially reacting
negatively to introductio n of nascent formal HRM, but then becoming more positiv e as a
firm moves to more developed sys tems (Bryson and White, 2019). But what triggers changes
The dual
pressures of
youth and
expansion
1393
This research was supported under the Australian Research Council Discovery Projects scheme
(DP0879923).
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0142-5455.htm
Received 1 December 2021
Revised 14 March 2022
5 May 2022
Accepted 6 May 2022
Employee Relations: The
International Journal
Vol. 44 No. 6, 2022
pp. 1393-1409
© Emerald Publishing Limited
0142-5455
DOI 10.1108/ER-12-2021-0525
in HRM and how does HRM change u nder the pressure of fast growth ? What is clear,
Rutherford et al. (2003, p. 332) argue, is that “as firms ac hieve increasing levels of growth, H R
issues seem to shift”. Yet dedicate d consideration of HR during SME growth is someth ing of
an exception. Harney and Alkhalaf (2021,p.13)notethat“the challenges of an
entrepreneurial, growth- orientated SME looking to scale-u p, will differ dramatically from
a life style business focused on r elative, local advantage, and success ion.”We agree, and our
primary aim here is to contrib ute to a presently small body of literature on the inters ection
between HRM and rapid growth w ithin SMEs. We consider stage theories o f HRM presented
by Rutherford et al. (2003) as a way of looking at c hange in five uniquely useful case studies
of fast-growing new SMEs. Ou r primary research question is a s follows: is a stage or life
cycle approach useful in understanding how HR evolves in high growth SMEs?W e usethe
notion of HR priorities, ide ntified in Rutherford’s stage theories, to explor e change in HR in
rapidly changing firms. In sh ort we explore whether high-gro wth SMEs conform to stage
theory expectations.
The next section of this article reviews relevant literature, including theories on the life
cycle of firms, followed by an examination of the HR challenges specific to fast-growing
SMEs (also known as “gazelles”). We present an overview of our methods and case study
firms. The results section then covers formalisation, as well as an overview of staples of HR,
that is recruitment, reward, development and voice mechanisms.
The life cycle of the firm
Some see the young, fast-growing firm as an organisation at the early stage of a life cycle,
implicitly presuming a predictable course (Ferreira et al., 2011) towards a foreseeable
destination that looks like the mature, large firm. Organisational researchers using life cycle
models build on the notion there are a distinctive set of challenges related to each stage of
maturation (e.g. Lewis and Churchill, 1983;Shim et al., 2000). Such accounts offer a finite
number of heterogeneous stages—often including at least four (start-up, growth, maturity
and decline) (Leung, 2003;Rutherford et al., 2003;Sisson and Storey, 2000) although life cycle
and organisational size and age can be conflated.
These models relate two sets of variables together (life cycle and HRM) in a static way that
ignores processes. Organisations do not always travel smoothly and seamlessly in the
direction indicated by the life cycle model (Baird and Meshoulam, 1988). It is difficult to gauge
when an organisation moves from one stage of the life cycle to the next, and at what point
there ought to be a change in HR practice to reflect this. Accordingly, if best-fit models are to
be effective, a clearer focus is needed on how changes take place, as well as what constitutes
the major influences over and obstacles to change, and on the actual processes of decision-
making. This paper attempts to develop a better understanding of this process.
We take as our framing study the Rutherford et al.’s analysis of 2,903 family businesses
with fewer than 500 employees that applied a life-cycle template to examining progression in
HR issues across stages of business development. They hypothesised that recruitment
problems would be at the forefront initially, staff development emerging during the growth
stage, with retention the principal concern once the firm reaches maturity. While support for
these hypotheses was mixed, the Rutherford study suggested a four-stage model was the best
fit, although age of the firm proved non-significant after size was controlled. Indeed
variations in the rate of growth proved to the most critical factor explaining HR problems.
The fastest growing firms reported the greatest problems in dealing with training and
development —intuitively plausible, considering the necessity to grapple with training and
development while still in heavy recruitment. These high growth firms (such as those at the
focus of this study) reported few retention problems, however, perhaps because existing staff
enjoyed the experience of working in a challenging but secure environment. Moderate growth
firms reported the greatest retention problems, possibly because workers became bored. Low
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