This guest blog is written by Dr Tinkuma Edafioghor, Senior Lecturer Human Resource Management – Programme Leader Msc HRM. This research was completed in collaboration with colleagues from Leeds University Business School and York Management School.
Organizational resilience capability, or a firm’s ability “to cope with unanticipated dangers as they become manifest” (Wildavsky, 1988, p.70), has emerged as an important internal capability that organizations need to develop if they are to survive and succeed in turbulent business environment (Hillman & Guenther, 2020; Linnenluecke, 2017). Some scholars propose that HRM is critical to building organizational resilience (Carvalho & Areal, 2016; Lengnick-Hall, Beck, & Lengnick-Hall, 2011). Supporting this notion, empirical research, based mainly on case studies, has shown that HR practices such as job security and employment relations (Gittell, Cameron, Lim, & Rivas, 2006), and staffing level (Meyer, 1982) can contribute to organizational resilience.
Despite these efforts, there are two important limitations in the existing literature. First, prior research has predominantly used restropective case analysis revealing how resilience unfolds in specific events or organizational contexts to identify influential factors. While these findings are informative, the overreliance of the case study approach has resulted in a collection of potentially impactful HR practices that are context specific and therefore limited in their generalizability to other contexts or future events (Linnenluecke, 2017). Moreover, such an approach does not lend well to a systematic HRM approach for organizational resilience capabilities that has long been proposed by scholars (Lengnick-Hall et al., 2011).
Second, studies examining organizational resilience capabilities in SMEs have been rare, and even fewer have been done to understand how HRM contributes to organizational resilience capability. Although much research has shown that the systematic HRM approach in SMEs can contribute to desirable organizational outcomes such as firm performance (Patel & Conklin, 2012; Patel, Messersmith, & Lepak, 2013; Sheehan, 2014) and innovation (Shahzad, Arenius, Muller, Rasheed, & Bajwa, 2019), there is a lack of development of a comprehensive understanding of how HRM systems can accumulate relevant resources for organizational resilience, resulting in optimal performance in the SME context. This is a surprising omission as relative to large organizations, SMEs are more prone to disruptive and challenging situations (e.g., Aleksic, Stefanovic, Arsovski, & Tadic, 2013; Allas et al., 2021). Also, SMEs, having relatively less employees, rely more on HRM practices to develop a unique and innovative knowledge pool that gives them a sustainable competitive advantage (Patel & Conklin, 2012).
Therefore, we were interested in examining how high-performance work systems (HPWS) build organizational resilience by developing relevant human capital in the SME context. To achieve this objective, our study clarifies the conceptual confusion regarding organizational resilience in the existing literature and provides empirical evidence for two distinct forms of organizational resilience capabilities: ‘bounce-back’ and ‘bounce-forward’ resilience capabilities. Bounce-back resilience refers to an organization’s capability to recover and resume normal operations after disruptive events while bounce-forward resilience can be defined as an organization’s capability to learn and develop new strategies or organizational operations through disruptive events.
Our study deviates from currently existing research which only focuses upon identifying individual HRM practices in specific situations and demonstrates how HRM can systematically impact different aspects of human capital (human capital value and heterogeneity) contributing to organizational resilience and firm performance. Human capital value refers to a combination of employee knowledge, skills, ability and others (KSAOs) that has “potential to improve the efficiency and effectiveness of the firm, exploit market opportunities, and /or neutralize potential threats” (Lepak & Snell, 2002, p. 519), whereas human capital heterogeneity refers to the variety of or differences in the composition of employees’ KSAOs that offer potential alternatives and skill flexibility for business needs (Way et al., 2015; Wright and Snell, 1998). Hence, different from extant research which only focuses on the relationship between HPWS and human capital in general, our study distinguishes between human capital value and heterogeneity, and examine them as two resource pathways through which HPWS build bounce-back and bounce-forward resilience capabilities.
Our findings suggest that HPWS can build SME’s bounce-back resilience capability through cultivating human capital value and build bounce-forward resilience capability through accumulating human capital value and heterogeneity. In turn, bounce-forward resilience contributes to firm performance. This suggests that HPWS can be an effective management approach to promote SME’s preparedness and resilience for unexpected crises in the future. Meanwhile, given the different antecedents and consequences of bounce-back and bounce-forward resilience capabilities uncovered in our study, SMEs and their managers can use the distinction between these two types of resilience capabilities to diagnose their current resilience capability levels and develop interventions accordingly.
Also, if SME managers feel that their companies are not effective in recovering from disruptions or are weak in building new capabilities from the disruptions, they can assess the levels of human capital value and heterogeneity in the company respectively. If the analysis suggests that employees’ KSAO do not meet the needs of the current business strategy, the managers can adjust relevant HPWS components such as recruitment, training and development, and performance appraisal, to purposefully enhance the specific, required knowledge and skills among employees. However, if the analysis indicates that the problem is with human capital heterogeneity, i.e., a lack of variety and flexibility in employees’ knowledge and skills, which hinders organizational learning, knowledge creation, and creativity, the managers can modify some other relevant HPWS components such as empowerment, team working and reward policies for innovation. Following this logic, SMEs can target relevant HR practices to improve their bounce-back and bounce-forward resilience capability.
