Article

Build or Buy? The Individual and Unit-Level Performance of Internally Versus Externally Selected Managers Over Time

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Abstract

At some point, hiring managers in all organizations face the decision of whether to fill open positions with internal candidates (e.g., through promotions) or to hire external candidates (e.g., from competitors or new entrants into the labor market). Despite this ubiquitous choice, surprisingly little research has compared the effectiveness of internal and external selection or has identified situations in which 1 approach may be better than the other. The authors use theory on human capital resources to predict differences between internal and external hires on manager- and unit-level outcomes. Analysis of data from a quick-service retail organization (N = 3,697) suggested that internally hired managers demonstrated higher levels of individual job performance and commanded lower starting salaries than externally hired managers. At the unit-level, operations led by internal hires demonstrated higher performance on organization-specific criteria (i.e., service performance), whereas no internal–external differences were found on more general criteria (i.e., financial performance). They also found some evidence that differences in unit service performance decreased over time (but did not diminish completely) as external hires improved at a slightly faster rate than internal hires. Overall, these findings underscore the complexity of the recurring “build or buy” decision. The results also suggest that internal hires generally outperform external hires, both individually and collectively, and they do so for less money.

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... Yet a tension exists in that growing evidence has suggested that worker performance may be imperfectly portable across firm boundaries (Groysberg, 2010). Indeed, a number of studies have provided evidence of a "portability paradox"-workers frequently experience a decline in performance upon moving to new firms (Campbell, Saxton, & Banerjee, 2014;Dokko, Wilk, & Rothbard, 2009;Groysberg & Lee, 2009;Groysberg, Lee, & Nanda, 2008;Huckman & Pisano, 2006) and internal hires tend to outperform external hires even when external hires exhibit stronger signals of general quality (Bidwell, 2011;DeOrtentiis, Van Iddekinge, Ployhart, & Heetderks, 2018). This paper takes a new perspective on the portability paradox by underscoring that performance within a firm is implicitly linked to the degree to which employees can be integrated and utilized in an organization's value creating activities. ...
... We find no consistent effect linked to human capital resource similarity. In addition, our post hoc exploratory analyses further exploit the richness of our data to investigate how the integration and utilization of external hires into firms may manifest in firm-level outcomes (Ployhart & Moliterno, 2011), thereby adding to recent work linking the dynamics of human capital resources and external sourcing with unitlevel outcomes (e.g., DeOrtentiis et al., 2018;Hale, Ployhart, & Shepherd, 2016). While the effect sizes of our analysis are modest, they underscore a number of implications for employees and firms. ...
... These expected frictions are worth reemphasizing because managers often overestimate their ability to integrate employees into their workforce (Bidwell & Keller, 2014). Second, our study suggests that firms should be cognizant of the differences between similarity and complementarity, and consider prioritizing complementarity over similarity if the ability to quickly integrate and utilize the employee is the firm's objective (DeOrtentiis et al., 2018). Third, managers also need to be aware that the ability to integrate employees into firm activities will also relate to how well external hires can retain the value of their social capital, either with existing colleagues or with clientele. ...
... Not surprisingly, then, scholars have devoted considerable attention to the design, the consequences, and the decline of the internal labor markets that have historically provided predictable avenues for career advancement (see, for example, Rosenfeld 1992, Osterman et al. 2001, Dohmen et al. 2004, Cappelli 2008, Bidwell and Briscoe 2010, Bidwell et al. 2013. Prior studies, primarily relying on subjective evaluations, have generally found that internal hires outperform their externally hired counterparts (Groysberg et al. 2008, Groysberg 2010, Bidwell 2011, DeOrtentiis et al. 2018. ...
... We begin by focusing on the two most central theoretical processes in this literature: firm-specific skills (Becker 1962, Mincer 1962, Jovanovic 1979) and contextual learning (Arrow 1962, Bartel 1995. Firm-specific skills have been invoked in each of the studies to date using subjective performance data on internal and external hires (Groysberg et al. 2008, Bidwell 2011, DeOrtentiis et al. 2018, while contextual learning has been referenced in the internal labor markets literature and among practitioners to describe internal hires' faster "ramp-up" periods and rate of performance growth relative to external hires (Doeringer and Piore 1971, Rollag et al. 2005, Krell 2015). 2 ...
... 2 Other mechanisms have also been advanced in this literature as processes that may shape the internal-external hire performance gap. These mechanisms include internal hires' greater social connections with coworkers, which have been categorized by some authors as a form of firm-specific skills (Groysberg et al. 2008, DeOrtentiis et al. 2018. Elsewhere, scholars have detailed processes that might shape selection at the point of hire, including the advancement of higher-ability internal hires, potentially because of managers' superior information about this group (Greenwald 1986, Baker et al. 1994, DeVaro and Morita 2013, Bidwell and Mollick 2015 and differences in visible qualifications (Bidwell 2011, DeVaro et al. 2019. ...
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We develop and test a theoretically informed and generalizable empirical framework for evaluating the performance gap between internally and externally hired workers. First, human capital theory predicts that internal hires will be immediately more productive than external hires. Second, contextual learning predicts that internal hires will be more productive with time. Finally, theories of commitment, which are rarely applied to this literature, predict that internal advancement enhances retention among high performers (“positive retention”). Applying a general empirical framework for quantifying the relative contributions of these mechanisms to a retailer with 109,063 commissioned salespeople and their 12,931 managers, we find that the gap in our setting is primarily driven by positive retention: high performers and internal hires are less likely to quit, and crucially, high performing internal hires are especially unlikely to quit. When high performing internal hires do quit, they tend to cite reasons unrelated to work rather than advancement opportunities. By typically examining performance and retention in isolation, researchers and organizations may be underestimating the importance of internal advancement as a means of retaining of high performers.
... Second, we begin to insert boomerang employees into the staffing literature that has, to date, focused primarily on two sources of employees available to organizations: internal applicants (e.g., employees promoted from within) and external applicants (e.g., recent college graduates) (Bidwell, 2011;DeOrtentiis et al., 2018;Rosenbaum, 1979;White, 1970). In doing so, we address a key question that appears to have received no attention in organizational scholarship: How do rehires perform compared to internal hires and first-time external hires, both initially and over time? ...
... On the basis of human capital theory (Becker, 1964), we expect that boomerang managers may initially outperform externally hired managers due to the organization-specific human capital rehires retained from their initial time in the organization. Whereas general human capital represents knowledge, skills, abilities, and other characteristics that impact performance regardless of the organization (e.g., intelligence), organization-specific human capital reflects knowledge and skills tied to a particular firm (DeOrtentiis et al., 2018). For example, boomerang employees may better understand the routines and processes required to perform their jobs, as well as possess established relationships with other organizational members that external hires would not yet possess. ...
... For example, internal hires are less likely to turn over (20.9%) than both rehires (36.6%) and external hires (33.5%). Further, internal hires tend to require lower starting salaries than external hires, and organizations are thought to feel less pressure to promote internal hires due to their commitment to the firm (e.g., Bidwell, 2011;DeOrtentiis et al., 2018). Thus, there appear to be several reasons why organizations should consider promoting from within (although this practice also has limitations, such as having to fill the position from which internal hires were promoted). ...
Article
“Boomerang” employees are workers who leave an organization and are later rehired by that same organization. Although many organizations rehire former employees, only a handful of studies have examined this phenomenon. The present study uses a large, longitudinal data set to examine the performance and turnover of boomerang employees rehired into management positions (n = 1,318). Further, we provide some of the first comparisons between boomerang employees and two traditional sources of employees: external hires (n = 20,850) and internal promotions (n = 8,546). Evaluations of job performance before and after being rehired revealed that boomerang managers’ performance tended to remain the same—rather than increase or decrease—after being rehired. Furthermore, boomerang managers performed similarly to internally and externally hired managers in the first year on the job, but both internal and external hires improved more than rehires over time. Internal and external hires were also less likely to turn over from the organization than rehires. Finally, supplemental analyses indicated that boomerang managers who turned over a second time tended to do so for reasons similar to their initial turnover reasons. The overall results call into question some of the assumed benefits of rehiring and suggest that organizations consider factors such as the reason for initial departure, the time horizon of performance, and the availability of other types of hires before considering boomerang employees.
... Second, we begin to insert boomerang employees into the staffing literature that has, to date, focused primarily on two sources of employees available to organizations: internal applicants (e.g., employees promoted from within) and external applicants (e.g., recent college graduates) (Bidwell, 2011;DeOrtentiis et al., 2018;Rosenbaum, 1979;White, 1970). In doing so, we address a key question that appears to have received no attention in organizational scholarship: How do rehires perform compared to internal hires and first-time external hires, both initially and over time? ...
... On the basis of human capital theory (Becker, 1964), we expect that boomerang managers may initially outperform externally hired managers due to the organization-specific human capital rehires retained from their initial time in the organization. Whereas general human capital represents knowledge, skills, abilities, and other characteristics that impact performance regardless of the organization (e.g., intelligence), organization-specific human capital reflects knowledge and skills tied to a particular firm (DeOrtentiis et al., 2018). For example, boomerang employees may better understand the routines and processes required to perform their jobs, as well as possess established relationships with other organizational members that external hires would not yet possess. ...
... For example, internal hires are less likely to turn over (20.9%) than both rehires (36.6%) and external hires (33.5%). Further, internal hires tend to require lower starting salaries than external hires, and organizations are thought to feel less pressure to promote internal hires due to their commitment to the firm (e.g., Bidwell, 2011;DeOrtentiis et al., 2018). Thus, there appear to be several reasons why organizations should consider promoting from within (although this practice also has limitations, such as having to fill the position from which internal hires were promoted). ...
... Adding squared independent variables to a model is currently the dominant practice for modeling nonlinear relationships in organizational research; out of the 18 (17%) articles that stated some kind of nonlinear hypothesis, just one did not use a squared independent variable (Bamberger et al., 2018). Out of the 19 (18%) studies that did use a power transformation, just two did not state a nonlinear hypothesis (DeOrtentiis et al., 2018;Hou et al., 2017), but even these articles used power terms to model nonlinearity. 11 Thus, there is a strong convention that nonlinear effects should be tested by adding power terms to the model and that power terms should be used only for that purpose. ...
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... Similarly, I found that internally promoted workers outperformed new hires in similar jobs in a study of an investment bank (Bidwell, 2011). I have replicated these findings in my own work, and other studies have also found a performance penalty for new hires (DeOrtentiis, Van Iddekinge, Ployhart & Heetderks, 2018). Second, the improved information that companies have about their own employees seems to benefit the firm during the process of staffing, the main benefit is accrued by reducing salaries of the internal hires. ...
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We initiated a conversation between two prominent scholars in the field of employee mobility who come from different disciplinary backgrounds: Rajshree Agarwal—from the human capital research perspective—and Matthew Bidwell—from the human resource management research tradition. Their cumulative work leads to vastly different conclusions. In this chapter we had an opportunity to explore their differences and share the roots of their motivations, interests and research philosophies. The discussion provides diverging, yet insightful directions for future research.
... Were workers to spend a longer period in their first job, we might eventually see the performance of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 new hires and boomerangs converge. Indeed, studies comparing internal and external hires have shown that external hires typically "catch up" to internal hires over time, but this catching up takes between two-and-a-half to three years (Bidwell, 2011;DeOrtentiis, Van Iddekinge, Ployhart, & Heetderks, 2018). ...
... In contrast to previous research with line employees by Bidwell (2011) Although the focus of this study shifted to employees in a managerial role, similar results using Human Capital Theory as a predictor suggested that internal hires outperform external hires for less money while demonstrating higher performance on organization specific criteria (i.e., customer service) (DeOrthentiis et al., 2018). ...
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... Given the indicators of trainability of cultural competence and the large amount of training available that purports to be able to help individuals increase their cultural competence, it is important to consider whether it is better to "buy or build" when it comes to staffing on cultural competence. For managerial skills, work by DeOrtentiis et al., (2018) suggests building managers (i.e., using internal hires and developing them) is cheaper and more effective, but the answer to this question for cultural competence may be complex. Mol et al. (2009), for instance, showed that expatriation willingness of prospective employees of MNC could be predicted based on personal dispositions like core self-evaluations, personality traits (i.e., emotional stability, extraversion, openness, and conscientiousness), foreign language ability, biodata (e.g., countries visited on holiday), and expatriate specific predictors (i.e., high cultural flexibility, intercultural sensitivity, uncertainty tolerance, category width and implicit cultural adaptability theories). ...
... En effet, le capital humain créatif reflète les capacités individuelles telles que les connaissances, les attributs sociaux, les compétences et les aptitudes qui constituent l'essence de la production créative. Des recherches académiques ont montré qu'il existe une relation positive entre la dynamique du capital humain, les sources externes et la production (Hale et al, 2016 ;DeOrtentiis, 2018). ...
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The strategy literature often emphasizes firm-specific human capital as a source of competitive advantage based on the assumption that it constrains employee mobility. We first identify three boundary conditions that limit the applicability of this logic. We then offer a more comprehensive framework of human capital-based advantage that explores both demand-and supply-side mobility constraints. The critical insight is that these mobility constraints have more explanatory power than the firm specificity of human capital.
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Strategic human resources management (SHRM) scholars recently have suggested that high-performance work practices (HPWP) implementation might serve as a critical mediator between HPWP and workplace outcomes. This study proposes and tests a model that positions line managers' perceptions regarding the extent to which they implement their organization's HPWP as a mediator of relations between HPWP and employee attitudes (i.e., turnover intentions and participative decision-making perceptions) and behavior (i.e., job performance). Using data from 507 line managers and 109 matched line manager-subordinate response sets, the results suggest that line managers' HPWP implementation perceptions fully mediate relations between HPWP and employee outcomes. The authors also found that line managers' human resources competency and political skill affect their HPWP implementation perceptions. Overall, these findings contribute to a more informed understanding of relationships between HPWP and work outcomes and suggest that additional SHRM research is needed to better understand whether and how HPWP are implemented. (PsycINFO Database Record (c) 2015 APA, all rights reserved).
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We examine which jobs are more likely to be filled by internal mobility (specifically, promotions and lateral transfers) than by hiring. Building on the assumptions of transaction cost accounts of employment, we develop a new theory that focuses on the interaction between the problems of evaluating and integrating external hires, on the one hand, and the incentive costs of failing to promote eligible workers, on the other. These arguments lead us to predict how three specific characteristics of jobs-demands for firm-specific skills, performance variability, and supply of internal candidates- affect how those jobs are staffed. Using seven years of personnel data spanning all jobs from the U.S. offices of a large investment bank, we find that jobs with higher performance variability and a larger grade ratio of junior to senior workers are more likely to be filled by internal mobility. We also find evidence that the effects of performance variability are contingent on the grade ratio, affecting staffing decsions only when the firm does not face strong pressures to promote junior workers in order to maintain incentives. Contrary to expectations, we find no effect for firm-specific skills.
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This article puts forth an agenda for the psychological study of strategy and competitive advantage. It centers this agenda within the microfoundations program, a program originating within strategy that seeks to understand firm heterogeneity and competitive advantage by examining individuals and their interrelationships. The article first reviews key theories and frameworks in strategy by taking a functionalist view, that is, by starting with a focus on organizational criteria (operational performance, organizational performance, competitive advantage). It then discusses the importance of resources and how psychology may contribute to an understanding of these resources. Organizational psychology and organizational behavior research that links to higher-level outcomes or resources is reviewed next. The article concludes with questions that we believe will fascinate scholars of organizational psychology and organizational behavior as well as with implications for practice. We hope this article helps stimulate a paradigmatic shift in organizational psychology and organizational behavior, as their theories and findings are much more strategic than is currently appreciated.
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We develop a framework of service-unit behavior that begins with a unit's leader's service-focused behavior and progresses through intermediate links (service climate and customer-focused organizational citizenship behavior) to customer satisfaction and then unit sales. Data from a sample of 56 supermarket departments provide at least moderate support for our mediational hypotheses. We discuss findings with a particular focus on the relationship between internal organization functioning and external effectiveness in service settings. In addition, several issues related to testing for mediation using quantitative analysis are identified and discussed.
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In this article, the authors illustrate how random coefficient modeling can be used to develop growth models for the analysis of longitudinal data. In contrast to previous discussions of random coefficient models, this article provides step-by-step guidance using a model comparison framework. By approaching the modeling this way, the authors are able to build off a regression foundation and progressively estimate and evaluate more complex models. In the model comparison framework, the article illustrates the value of using likelihood tests to contrast alternative models (rather than the typical reliance on tests of significance involving individual parameters), and it provides code in the open-source language R to allow readers to replicate the results. The article concludes with practical guidelines for estimating growth models.
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Modern organizations struggle with staffing challenges stemming from increased knowledge work, labor shortages, competition for applicants, and workforce diversity. Yet, despite such critical needs for effective staffing practice, staffing research continues to be neglected or misunderstood by many organizational decision makers. Solving these challenges requires staffing scholars to expand their focus from individual-level recruitment and selection research to multilevel research demonstrating the business unit/organizational-level impact of staffing. Toward this end, this review provides a selective and critical analysis of staffing best practices covering literature from roughly 2000 to the present. Several research-practice gaps are also identified.
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This paper integrates the theories and findings of micro-level organizational behaviour/human resource management research with the macrolevel resource-based view of the firm, specifically presenting a firm's human resources as an important potential source of sustained competitive advantage. Unlike practice-oriented discussions that assume the role of human resources as a source of sustained competitive advantage, we use the theoretical concepts from the resource-based view of the firm (Wernerfelt, 1984; Barney, 1991) to discuss how human resources meet the criteria for sustained competitive advantage in that they are valuable, rare, inimitable and non-substitutable. The implications for developing human resources as a source of sustained competitive advantage are discussed, particularly examining the role of HR practices and managers in this process.
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Service climate captures employees' consensual perceptions of organizations' emphasis on service quality. Although many studies have examined the foundation issues and outcomes of service climate, there is a lack of a comprehensive model explicating the antecedents, outcomes, and moderators of service climate. The current study fills this void in the literature. By conducting a meta-analysis of 58 independent samples (N = 9,363), we found support for service climate as a critical linkage between internal and external service parameters. In addition, we found differential effects of service-oriented versus general human resource practices and leadership on service climate, as well as disparate impacts of service climate contingent on types of service, measures of service climate, and sources of rating. Research and practical implications are discussed. (PsycINFO Database Record (c) 2013 APA, all rights reserved).
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This study contributes to the literature on why selection procedures that are based on the behavioral consistency logic (e.g., structured interviews and assessment centers) are valid predictors of job performance. We rely on interactionist theories to propose that individual differences in assessing situational demands explain true variance in performance in selection procedures and on the job. Results from 124 individuals in a simulated selection process showed that the assessment of situational demands was related to both selection and job performance. Individual differences in assessing situational demands also contributed to the criterion-related validity of assessment center and structured interview ratings, offering a complementary explanation as to why selection procedures based on the notion of behavioral consistency predict job performance. (PsycINFO Database Record (c) 2012 APA, all rights reserved).
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This study explores the relative growth rates in earnings of public restaurant firms for a 20-year period from 1981-2000. No significant differences were found in sales growth between multinational and domestic restaurant firms. However, multinational firms significantly outperformed domestic firms in growth of operating income and pre-tax profitability. Multinational restaurant firms also had significantly lower negative growth in domestic earnings when compared to domestic firms. The results imply that multinational restaurant firms are more efficient than domestic firms in converting sales into profits.
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a r t i c l e i n f o a b s t r a c t This paper provides a critical examination of the meaning of organizational politics (OP) for human resource management (HRM). We develop our discussion in three main sections. First, we explain the commonly negative image of OP and argue that it also has some positive dimensions useful for understanding HRM. Based on this rationale and on previous writings we present a balanced and non-judgmental approach towards politics in HRM. We extend the discussion to suggest a specific typology and model that, in our view, better explains the meaning of OP for HRM than current definitions. The model includes aspects of positive/ constructive HRM, negative/destructive HRM, ineffective HRM and virtual HRM. Finally, we examine the implications of the model in the context of the changing Israeli cultural environment. This historical–cultural analysis pertains to similar global shifts and points to future HRM challenges in Israel and around the world.
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Organizational performance is one of the most important constructs in management research. Reviewing past studies reveals a multidimensional conceptualization of organizational performance related predominately to stakeholders, heterogeneous product market circumstances, and time. A review of the operationalization of performance highlights the limited effectiveness of commonly accepted measurement practices in tapping this multidimensionality. Addressing these findings requires researchers to (a) possess a strong theoretical rationale on the nature of performance (i.e., theory establishing which measures are appropriate to the research context) and (b) rely on strong theory as to the nature of measures (i.e., theory establishing which measures should be combined and the method for doing so). All management research on performance should explicitly address these two requirements. The authors conclude with a call for research that examines triangulation using multiple measures, longitudinal data and alternative methodological formulations as methods of appropriately aligning research contexts with the measurement of organizational performance.
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Reporting effect sizes in scientific articles is increasingly widespread and encouraged by journals; however, choosing an effect size for analyses such as mixed-effects regression modeling and hierarchical linear modeling can be difficult. One relatively uncommon, but very informative, standardized measure of effect size is Cohen's f(2), which allows an evaluation of local effect size, i.e., one variable's effect size within the context of a multivariate regression model. Unfortunately, this measure is often not readily accessible from commonly used software for repeated-measures or hierarchical data analysis. In this guide, we illustrate how to extract Cohen's f(2) for two variables within a mixed-effects regression model using PROC MIXED in SAS(®) software. Two examples of calculating Cohen's f(2) for different research questions are shown, using data from a longitudinal cohort study of smoking development in adolescents. This tutorial is designed to facilitate the calculation and reporting of effect sizes for single variables within mixed-effects multiple regression models, and is relevant for analyses of repeated-measures or hierarchical/multilevel data that are common in experimental psychology, observational research, and clinical or intervention studies.
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As individuals change jobs more frequently, it is increasingly important to understand what they carry from their prior work experience that affects their performance in a new organizational context. So far, explanations about the imperfect portability of experience have primarily been about firm specificity of knowledge and skill. We draw on psychological theory to propose additional sociocognitive factors that interfere with the transfer of knowledge and skill acquired from prior related work experience. As we hypothesized, we find that task-relevant knowledge and skill mediates the relationship between prior related experience and job performance and that it acts as suppressing mediator of a negative direct relationship between prior related experience and current job performance. We also find that the positive effect of prior related experience on task-relevant knowledge and skill is attenuated by higher levels of experience within the current firm.
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This article identifies key dimensions of organizational politics as described in incidents of "political behaviors" experienced by people in workplaces. It rejects the idea that all political behaviors are "bad" and suggests that behaving politically is a necessary part of enabling organizations to run effectively and efficiently.
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Past research has not adequately considered the importance of interconnected human capital resources. Drawing on the resource-based view, we propose a dynamic model in which changes in generic human capital (personality and cognitive ability) lead to changes in unit-specific human capital (advanced training and experience), which in turn lead to changes in unit service performance behavior and effectiveness. We examined 238 units in a restaurant chain using data from different sources spanning ten quarters. The hypothesized causal sequence among the constructs was supported. These findings advance resource-based scholarship and highlight the value of understanding the relationships among human capital resources.
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In this article, we examine the history and development of job embeddedness, beginning with the story of the idea's conception, theoretical foundation, and original empirical structure as a major predictor of employee voluntary turnover. We then consider more recent expansions in the theoretical structure and empirical measurement of job embeddedness, exploring job embeddedness as a causal indicator model versus a reflective model. Next, we review some promising expansions of embeddedness to new domains (e.g., family embeddedness) as well as important contingency factors that enhance or diminish its impact. Finally, we describe how job embeddedness affects important organizational outcomes beyond turnover, including job performance, organizational citizenship behavior, innovation, and the development of social and human capital. Throughout the article, we provide our opinions on how the theory and research on embeddedness have progressed as well as ideas on how it can be improved.
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Blending theory on collective turnover and group adaptability, this paper develops a two-phase longitudinal model that explains how and why an individual-level turnover event has effects on collective performance. Phase 1 (disruption) is marked by a sudden and negative change in unit-level performance, while Phase 2 (recovery) entails a gradual increase in unit performance over time. We further propose that the positional distribution (manager or employee) of the turnover event and the amount of interdependence within the collective will influence the consequences of a turnover event. Using a sample of 524 branches of a U.S. bank, the results largely support the hypotheses as a turnover event leads to an immediate and negative change in branch-level performance. Notably, there is an interaction between manager and employee turnover events that significantly decreases performance. In the recovery period, branches recover more quickly after losing an employee than they do after losing a manager. However, the moderating effect of branch-level interdependence depends on the position, and there is no statistically significant recovery from a manager turnover event within our performance window. These results highlight the insights of our two-phase model and the need to study collective turnover dynamics over time and across different positions.
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Recognizing that not all employees possess knowledge and skills that are of equal strategic importance, we draw on the resource-based view of the firm, human capital theory, and transaction cost economics to develop a human resource architecture of four different employment modes: internal development, acquisition, contracting, and alliance. We use this architecture to derive research questions for studying the relationships among employment modes, employment relationships, human resource configurations, and criteria for competitive advantage.
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I present argument and evidence for a structural ecology of social capital that describes how the value of social capital to an individual is contingent on the number of people doing the same work. The information and control benefits of bridging the structural holes-or, disconnections between nonredundant contacts in a network-that constitute social capital are especially valuable to managers with few peers. Such managers do not have the guiding frame of reference for behavior provided by numerous competitors, and the work they do does not have the legitimacy provided by numerous people doing the same kind of work. I use network and performance data on a probability sample of senior managers to show how the value of social capital, high on average for the managers, varies as a power function of the number of people doing the same work.
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This study empirically examines the impact of the current recession on U.S. restaurant firms. Using financial ratio analysis, this study compares 14 financial ratios in 2006, the pre-recession year, with the same ratios in 2008, the during-recession year, to assess different aspects of restaurant firms' financial performance and conditions. The findings of this study indicate that U.S. restaurant firms in all three sectors, namely full-service, economy/buffet, and fast-food, have suffered severe negative impacts from the recession in terms of liquidity, leverage, solvency, efficiency, and profitability. To survive through the current recession, U.S. restaurant firms must raise sales and operating income, improve accounts receivable and inventory turnover, and reduce their reliance on debt financing.
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Studied changes across time in measures of organizational commitment and job satisfaction as each related to subsequent turnover among 60 recently employed psychiatric technician trainees. A longitudinal study across a 101/2-mo period was conducted, with attitude measures (Organizational Commitment Questionnaire and Job Descriptive Index) collected at 4 points in time. Results of a discriminant analysis indicate that significant relationships existed between certain attitudes held by employees and turnover. Relationships between attitudes and turnover were found in the last 2 time periods only, suggesting that such relationships are strongest at points in time closest to when an individual leaves the organization. Organizational commitment discriminated better between stayers and leavers than did the various components of job satisfaction. (36 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
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This article analyzes the costs and benefits of job rotation as a mechanism with which the firm can learn about the employees' productivities and the profitability of different jobs or activities. I compare job rotation to an assignment policy where employees specialize in one job along their career. The gains from adopting a job rotation policy are larger when there is more prior uncertainty about employees and activities. I argue that this firm learning theory fits the existing evidence on rotation better than alternative explanations based on employee motivation and employee learning.
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Social capital consisting of trust relationships between a community and its leaders can contribute to the effectiveness of neighbourhood regeneration partnerships. Engagement with partnerships can also generate vital new resources of social capital for the community. This depends on community leaders, as social entrepreneurs or community representatives. Social entrepreneurs resemble 'transformational leaders', combining entrepreneurial skills with a vision for the neighbourhood. Community representatives resemble 'transactional leaders' who interact with their followers. Ambivalence over trust between individuals and organisations in both partnerships and community reveals difficulties in accumulating social capital. The degree of social capital accumulated in a neighbourhood affects the path leadership succession takes as partnerships develop.
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The study of multilevel phenomena in organizations involves a complex interplay between methods and statistics on one hand and theory development on the other. In this introduction, the authors provide a short summary of the five articles in this feature topic and use them as a platform to discuss the broad need for work in the two areas of (a) multilevel construct validation and measurement and (b) statistical advances in variance decomposition. Within these two broad frameworks, the authors specifically discuss, first, the need to continue moving beyond notions of isomorphism in developing and testing aggregate-level constructs. Second, they discuss the potential value of using discontinuous growth models to understand transitions in longitudinal studies. Finally, they discuss some of the issues surrounding the ability to decompose variance in multilevel modeling of dichotomous and other nonnormal outcome data.
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We developed and tested a multilevel model of norm formation. Both leader expectations and staff expectations had a significant impact on the norms that teams adopted around collaborative problem solving. In addition, there was an interaction between the expectations of the leader and the staff. We found that when staff initially held low expectations of collaborative problem solving behaviors, leaders who held high expectations of such behaviors were able to significantly raise the collaborative problem solving norms established by their teams. Team problem solving norms significantly influenced individual team members' problem solving behaviors.
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This paper extends the meta-analysis of Verquer, Beehr, and Wagner by providing a meta-analytic review of the relationship between person–organization fit (PO fit) and behavioral criteria (job performance, organizational citizenship behaviors, and turnover). Results indicate that PO fit is weakly to moderately related to each of these outcome variables. Results further show that the way in which fit is measured is an important moderator of fit–outcome relationships; however, definition of fit did not moderate the relationship between fit and behavioral criterion. Implications of these findings and avenues for future research are discussed.
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Individuals often enter similar jobs via two different routes: internal mobility and external hiring. I examine how the differences between these routes affect subsequent outcomes in those jobs. Drawing on theories of specific skills and incomplete information, I propose that external hires will initially perform worse than workers entering the job from inside the firm and have higher exit rates, yet they will be paid more and have stronger observable indicators of ability as measured by experience and education. I use the same theories to argue that the exact nature of internal mobility (promotions, lateral transfers, or combined promotions and transfers) will also affect workers’ outcomes. Analyses of personnel data from the U.S. investment banking arm of a financial services company from 2003 to 2009 confirm strong effects on pay, performance, and mobility of how workers enter jobs. I find that workers promoted into jobs have significantly better performance for the first two years than workers hired into similar jobs and lower rates of voluntary and involuntary exit. Nonetheless, the external hires are initially paid around 18 percent more than the promoted workers and have higher levels of experience and education. The hires are also promoted faster. I further find that workers who are promoted and transferred at the same time have worse performance than other internal movers.
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Addresses two important and interrelated questions: (1) Do firms showing an identifiable set of organizational cultural values demonstrate superior strategic marketing effectiveness? (2) What effect does strategic marketing effectiveness have on business performance? The findings from 388 service firms located in Hong Kong suggest that organizational cultural values are related to dimensions of strategic marketing effectiveness. Furthermore, the findings suggest that dimensions of strategic marketing are related to profitability but not to market share. Finally, the findings further show that organizational cultural values affect both directly and indirectly the performance of the company through its impact on marketing effectiveness.
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This paper undertakes a selective review of theoretical and empirical studies of internal labor markets (ILMs). Three different conceptualizations of ILMs are identified in existing literature: (a) ILMs as all jobs within a firm; (b) variable describing firms or present in discrete clusters of jobs within firms; (c) and a phenomenon present in some occupational labor markets within and across firms. Some empirical research using each conceptualization is described. Evidence apropo sseveral arguments about the theoretical origins of ILMs is assessed and some topics of future research are indicated. This review documents the absence of consensus about the characteristics defining the 1LM concept; a resulting diversity of approaches to the measurement or location of ILMs further hinders both accumulation of findings and the comparative study of ILMs. The most promising of the theoretical origins of ILMs relates scarcities of highly skilled workers to job structures generating increasing skill and knowledge a...
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This article describes four approaches to the employee-organization relationship, as defined from the employer's perspective. An empirical study of employees from ten companies found support for the basic hypothesis that employee responses differ under the four types of relationship. In general, employees performed better on core tasks, demonstrated more citizenship behavior, and expressed a higher level of affective commitment to an employer when they worked in an overinvestment (by the employer) or mutual investment relationship than when they worked in a quasi-spot-contract or underinvestment relationship. These results were obtained even after we controlled for several other variables that could affect employee performance and attitudes.
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The present chapter is organized as follows. First, we offer a brief review of the meaning of effect size. Second, we describe the urban legend that is the focus of this chapter as well as the kernel of truth that drives it. Third, we describe relevant lessons from W. V. Quine, the foremost authority on the language of science. Fourth, we use these lessons to uncover situations in which small effect size values justify strong conclusions. Finally, we apply these lessons to the opposite situation in which large effect sizes fail to justify strong conclusions. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Article
Work experience and related concepts such as tenure and seniority have been and continue to be used extensively in a variety of human resource functions. However, research on experience has proceeded without a clear theoretical orientation, adequate consideration of contextual and individual factors, and appropriate attention to measurement and design. These issues are addressed and a model of the work experience construct is offered. Work experience is described as consisting of qualitative and quantitative components that exist at different levels of specification and which interact and accrue over time. The model provides a nomological net for the experience construct linking it to contextual and individual factors critical for the development of experience and its translation into immediate outcomes of work-based knowledge, skills, attitudes, and motivation, and secondary outcomes such as performance. The model provides a basis for specific research propositions and human resource applications that consider work experience as a multidimensional, multilevel, and temporally dynamic construct.
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While workplace learning includes formal and informal learning, the relationship between the two has been overlooked, because they have been viewed as separate entities. This study investigated the effects of formal learning, personal learning orientation, and supportive learning environment on informal learning among 203 middle managers in Korean commercial banks. To control the common method biases, the predictor and criterion variables were measured at different points in time with two separate sets of questionnaires. The results from using structural equation modeling showed that the proposed model indicated a better fit to the data than alternative models. It was found that formal learning and personal learning orientation have significant and positive impacts on informal learning. Although a supportive learning environment did not have a direct effect on informal learning, it had a modest but significant indirect effect on informal learning through formal learning. Implications for future research and practices are also discussed.
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It is common for service providers to collect data from customers as part of efforts to monitor quality. Often, this data is passively collected, meaning (a) any solicitation of feedback is done without direct customer interaction, and (b) the customer initiates any response given. Examples include customer comment cards, toll-free telephone numbers, and comment links on World Wide Web pages. This article compares passive data collection with active methods (e.g., interviews and mail surveys). Passive methods generally have lower response rates and are inherently biased, but have cost and sample frame advantages when used to monitor quality on a continuous basis. Despite the biased nature of passive methods, this article describes the successful validation of a common customer-response model with passively collected empirical data. The model is expanded to consider the impact of complaint and compliment solicitation on customers' evaluation of the service provider. Results show that this impact is negative, and that customers who spontaneously register complaints generally record higher ratings of the service provider than customers who complain in response to a complaint solicitation. Discussion and conclusions are given.
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This paper focuses on contracting problems in firms caused by asset specificity and investment incentives, particularly the problems that arise when employees make investments in "firm specific human capital." In such cases, employee investments will also be seriously at risk in the enterprise. Under the nexus of contracts theory of corporations, corporation law is viewed as providing a standardized solution to a central contracting problem, namely the agency problem between shareholders (who are assumed to be the "owners" of the firm) and their hired managers. All other relationships are seen as governed by ordinary, negotiated contracts. But where employees make important specific investments, it is no longer appropriate to assume that shareholders are, and should be, the hiring party, or the "owners." A broader view of what a firm is, and what corporation law accomplishes, is needed, one that permits exploration of why one set of participants in the firm might end up with certain control rights rather than some other set. For a firm in which such firm-specific employee investments are important, one would expect, for example, to find institutional arrangements that are central to the nature of the firm and that encourage continuity in the relationships between employees and the firm, as well as give employees the means to protect their stakes. Such institutions might include unions, severance pay, and social norms of lifetime employment, together with internal job ladders, career paths, seniority rules, and direct and formal control rights. The paper then reviews several new theories that view the firm alternately as a system of incentives, or as a nexus of specific investments. In other words, they conceptualize the firm as a mechanism for governing the relationships among all the participants (those who contribute labor as well as those who contribute capital), not just the relationship between shareholders and managers.
Article
In 1987, B. Schneider proposed a person-oriented model of organizational behavior based on the proposition that it is the collective characteristics of people who define an organization. He further proposed that, over time, organizations become defined by the persons in them as a natural outcome of an attraction-selection-attrition (ASA) cycle. We provide a brief overview of the ASA cycle and review literature relevant to two facets of the theory. The literature reviewed provides some indirect support for the proposal that founders and the members of top management have long-term effects on organizations through the ASA cycle. The literature reviewed provides both indirect and direct evidence supporting a central proposition of ASA theory–that organizations over time become relatively homogeneous with regard to the kinds of people in them. Suggestions for future research on ASA are presented.
Article
This meta-analysis investigated the relationships between person–job (PJ), person–organization (PO), person–group, and person–supervisor fit with preentry (applicant attraction, job acceptance, intent to hire, job offer) and postentry individual-level criteria (attitudes, performance, withdrawal behaviors, strain, tenure). A search of published articles, conference presentations, dissertations, and working papers yielded 172 usable studies with 836 effect sizes. Nearly all of the credibility intervals did not include 0, indicating the broad generalizability of the relationships across situations. Various ways in which fit was conceptualized and measured, as well as issues of study design, were examined as moderators to these relationships in studies of PJ and PO fit. Interrelationships between the various types of fit are also meta-analyzed. 25 studies using polynomial regression as an analytic technique are reviewed separately, because of their unique approach to assessing fit. Broad themes emerging from the results are discussed to generate the implications for future research on fit.
Article
Much of the current thinking about competitive strategy focuses on ways that firms can create imperfectly competitive product markets in order to obtain greater than normal economic performance. However, the economic performance of firms does not depend simply on whether or not its strategies create such markets, but also on the cost of implementing those strategies. Clearly, if the cost of strategy implementation is greater than returns obtained from creating an imperfectly competitive product market, then firms will not obtain above normal economic performance from their strategizing efforts. To help analyze the cost of implementing strategies, we introduce the concept of a strategic factor market, i.e., a market where the resources necessary to implement a strategy are acquired. If strategic factor markets are perfect, then the cost of acquiring strategic resources will approximately equal the economic value of those resources once they are used to implement product market strategies. Even if such strategies create imperfectly competitive product markets, they will not generate above normal economic performance for a firm, for their full value would have been anticipated when the resources necessary for implementation were acquired. However, strategic factor markets will be imperfectly competitive when different firms have different expectations about the future value of a strategic resource. In these settings, firms may obtain above normal economic performance from acquiring strategic resources and implementing strategies. We show that other apparent strategic factor market imperfections, including when a firm already controls all the resources needed to implement a strategy, when a firm controls unique resources, when only a small number of firms attempt to implement a strategy, and when some firms have access to lower cost capital than others, and so on, are all special cases of differences in expectations held by firms about the future value of a strategic resource. Firms can attempt to develop better expectations about the future value of strategic resources by analyzing their competitive environments or by analyzing skills and capabilities they already control. Environmental analysis cannot be expected to improve the expectations of some firms better than others, and thus cannot be a source of more accurate expectations about the future value of a strategic resource. However, analyzing a firm's skills and capabilities can be a source of more accurate expectations. Thus, from the point of view of firms seeking greater than normal economic performance, our analysis suggests that strategic choices should flow mainly from the analysis of its unique skills and capabilities, rather than from the analysis of its competitive environment.
Article
We question the common supposition that active acts of counterproductive work behavior (CWB) and organisational citizenship behavior (OCB) are negatively related in that people who perform one tend not to perform the other, and that they tend to relate oppositely to potential antecedents. We argue that under some circumstances these active behaviors may occur together or sequentially. Using an emotion focused framework, we discuss five situations that lead from one form of behavior to the other: Understimulation at work, co-worker lack of performance, organisational constraints, lack of expected rewards for OCB, and unjustified (to the actor) acts of CWB. Finally, we provide suggestions for studying these behaviors episodically as opposed to aggregating frequencies of behavior over extended periods of time. Nous mettons en doute l'idée commune selon laquelle les actions relevant d'un comportement professionnel contre-productif (CWB) et les conduites citoyennes dans l'organisation (OCB) sont négativement corrélées en ce sens que les individus qui adopteraient les unes auraient tendance à se détourner des autres et qu'elles seraient liées en sens contraire aux antécédents potentiels. Nous pensons que dans certains cas ces comportements actifs peuvent émerger conjointement ou à la suite les uns des autres. A partir d'un schéma centré sur l'émotion, nous analysons cinq situations qui orientent d'une forme de comportement vers l'autre: le manque de stimulants au travail, les médiocres performances d'un collègue, les contraintes organisationnelles, l'absence des gratifications attendues pour l'OCB et des actions de CWB injustifiées (contre l'acteur). Nous proposons enfin d'étudier ces conduites sur des laps de temps définis plutôt que d'additionner des occurrences de comportement sur de longues périodes.
Article
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable overtime this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage—value, rareness, imitability, and substitutability—are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.ABSTRACT FROM AUTHOR
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Recent findings of transfer and nontransfer in such areas as planning and problem management skills, computer programming instruction, and literacy-related cognitive skills reveal paradoxes that invite explanation. In this article, we separate the "how" of transfer—the mechanisms that lead to it—from the "what" of transfer—the kind of knowledge and skill that might get transferred. We argue that transfer occurs in two ways. Low-road transfer depends on extensive, varied practice and occurs by the automatic triggering of well-learned behavior in a new context. High-road transfer occurs by intentional mindful abstraction of something from one context and application in a new context. Such transfer can either be of the forward-reaching kind, whereby one mindfully abstracts basic elements in anticipation for later application, or of the backward-reaching kind, where one faces a new situation and deliberately searches for relevant knowledge already acquired. Findings of transfer or nontransfer reflect whether the conditions for either low-road or high-road transfer were met. Qualitative predictions stemming from this theory of the mechanisms of transfer are offered and discussed.