Strategic Staffing and Small‐Firm Performance

• Author: Charles R. Greer,Jon C. Carr,Lisa Hipp
• Date: 01 July 2016
• DOI: http://doi.org/10.1002/hrm.21693
• Published date: 01 July 2016

Human Resource Management, July–August 2016, Vol. 55, No. 4. Pp. 741–764

© 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI:10.1002/hrm.21693

Correspondence to: Charles R. Greer, Professor of Management, Department of Management, Entrepreneurship,

andLeadership, Neeley School of Business, Texas Christian University, Fort Worth, TX 76129, Phone: 817-257-7565,

Fax: 817-257-7227, E-mail: c.greer@tcu.edu

STRATEGIC STAFFING

AND SMALL-FIRM PERFORMANCE

CHARLES R. GREER, JON C. CARR, AND LISA HIPP

Although staffi ng can be a critical determinant of whether small businesses suc-

ceed or fail, there has been less research in this area than might be expected,

given the large numbers of such fi rms. While there has been some research on

specifi c recruiting and selection practices, there has been little attention to the

strategic aspects of staffi ng. We investigated relationships between strategic

approaches to staffi ng and small-fi rm performance using lagged survey data

from 139 founders and owners of small fi rms. Results indicate that recruiting

approaches imitating the practices (processes) of larger businesses are posi-

tively related to a perceptual measure of fi rm performance. Selection approaches

stressing a growth orientation are also positively related to fi rm performance.

Finally, founders’ and owners’ perceptions of the strategic importance of human

resources moderate the relationship of fi rm performance with imitative recruiting

practices as well as with growth-oriented selection practices. An important con-

tribution of this article is that contextual knowledge facilitates our understanding

of the performance implications of staffi ng practices in small fi rms. ©2015 Wiley

Periodicals, Inc.

Keywords: recruitment, selection, strategic HR

Staffing is a critical issue for the found-

ers or owners of small firms (Heneman,

Tansky, & Camp, 2000) and is com-

monly viewed as their most important

and challenging human resource (HR)

issue (Cardon, 2003; Hornsby & Kuratko, 1990;

Taylor, 2006). Resource constraints and the inher-

ent “liabilities of smallness” are often serious

problems for small businesses (Cardon & Stevens,

2004, p. 297). With fewer financial resources,

human resources may be the key to a small

firm’s ability to compete. Small firms often have

employees with unique skills and jobs in which

there is only a single incumbent (May, 1997) and

the effects of mistakes in selection are magnified

(Messersmith & Guthrie, 2010) under such cir-

cumstances. Staffing success or failure in even one

position can enhance a small firm’s performance

or threaten its very existence. Ultimately, HR

effectiveness in employee selection may be the

most critical determinant of whether small firms

obtain value from their HR investments (Cardon

& Stevens, 2004).

It is through staffing that firms acquire the

employees or human capital having the knowl-

edge, skills, abilities, and other attributes (KSAOs)

needed to pursue their strategies and goals

(Subramony, 2009). Staffing is critical to the firm’s

ability to obtain rare, valuable, nonsubstitut-

able, and inimitable (human) resources that the

resource-based view identifies as necessary for

obtaining competitive and sustained firm per-

formance (Barney, 1991; Barney & Wright, 1998;

Ployhart, 2006). While firms seek to develop such

human capital through training and develop-

mental initiatives, the quality of people acquired

742 HUMAN RESOURCE MANAGEMENT, JULY–AUGUST 2016

Human Resource Management DOI: 10.1002/hrm

Our study makes a

unique contribution

by investigating

whether small

firms that are more

strategic in their

staffing have better

performance than

their less strategic

counterparts.

These concerns prompt the question of

how HR staffing strategies affect small-firm per-

formance. Currently, the implications of dif-

ferent strategic approaches to staffing and the

performance outcomes for small firms are not

fully understood (Cardon & Stevens, 2004). In this

article, we respond to Cardon and Stevens’s (2004)

call for research on the strategies that small firms

use in staffing. More specifically, their work points

to the need to determine the impact of emphasiz-

ing a unique message in recruiting that communi-

cates the advantages of working for the small firm

(content) as well as the imitation of recruiting

practices (processes) of larger firms. Additionally,

they call for research that also examines the

implications of emphasizing cultural fit and the

applicant’s potential for growth in the selection

process in small firms. Given the potential impact

of employing these strategies in small firms, this

topic is important and particularly relevant to

both practitioners and researchers.

Researchers have also pointed to the strategic

importance of HR in explaining the relationship

between strategy formulation and firm perfor-

mance (Wai-Kwong, Preim, & Cycyota, 2001).

As will be developed later, the attention-based

view (ABV; Ocasio, 1997) predicts that when top

executives see an issue or function, such as HR,

as being important, they devote more atten-

tion to it. This attention becomes diffused in the

thought processes of other decision makers within

the firm, and thus the strategic emphasis associ-

ated with that issue becomes salient. In the case

of small firms, because the leadership team often

performs much of the HR function (Welbourne &

Katz, 2002), performance effects are likely to be

dependent on how important HR is to the own-

ers or founders and how well they subsequently

focus on the HR function. Thus, we also examine

whether the founders’ and owners’ perceptions of

the strategic importance of HR moderates the rela-

tionship between strategic staffing practices and

firm performance.

Our study makes a unique contribution by

investigating whether small firms that are more

strategic in their staffing have better performance

than their less strategic counterparts. In this arti-

cle, we analyze data obtained from 139 founders

and owners of small firms having no more than

100 employees, which we define as small firms.

Using insights from several theoretical founda-

tions, we develop a conceptual framework that

investigates whether there is a performance rela-

tionship with (1) an emphasis in recruiting mes-

sage (content) on the unique attributes of small

firms, (2) imitation of the recruiting practices

(processes) of larger firms, (3) an emphasis in

through staffing provides the HR foundation

on which these initiatives become possible.

Effective recruiting produces larger pools of

qualified applicants that enable greater selec-

tivity in hiring and enhancement of the firm’s

stock of human capital (Carlson, Connerley,

& Mecham, 2002; Ployhart, 2006; Subramony,

2009). Such human capital is positively related

to financial performance (Hitt, Bierman,

Shimizu, & Kochhar, 2001). Likewise, stud-

ies have found that selective staffing is related

to perceptual measures of firm performance

(Delaney & Huselid, 1996; Vlachos, 2008) and

that good staffing practices are positively related

to sales and profit measures of firm performance

(Terpstra & Rozell, 1993).

However, it is unclear whether these relation-

ships between staffing practices and

firm performance apply to smaller

firms, because they may lack the

resources and specialized HR exper-

tise needed for such practices (Allen,

Ericksen, & Collins, 2013; Klass,

Semadeni, Klimchak, & Ward, 2012;

Messersmith & Guthrie, 2010).

Moreover, few studies have exam-

ined the relationship between

staffing practices and small-firm

performance. For example, Terpstra

and Rozell (1993) excluded small

firms, and the Delaney and Huselid

(1996) and Vlachos (2008) studies

were based on data from both large

and small firms.

There has been even less research

on the strategic aspects of HR in

small businesses than might be

expected, with several scholars noting the paucity

of such studies (Allen etal., 2013, Hayton, 2003;

Klass etal., 2012; Messersmith & Guthrie, 2010).

The lack of strategic HR studies is meaningful, as

there is evidence that firms (in general) are better

at the technical rather than the strategic aspects

of HR (Huselid, Jackson, & Schuler, 1997). There is

also evidence that strategic considerations in staff-

ing are important to small businesses. For exam-

ple, founders or owners of small businesses appear

to be very interested in whether applicants have

the ability to handle new duties as the firm grows.

They may also be more interested in strategic flex-

ibility because of the greater uncertainty within a

small firm’s environment (Hayton, 2006). Finally,

founders may be less interested in an exact match

of applicants with job requirements than their fit

with general needs and the organization’s values

and culture (Cardon & Stevens, 2004; Heneman

etal., 2000).