How can human resource management help organizations to compete and survive in an environment of continuously changing technology, economy and society?
Adaptive capacity / The flexible firm
Innovative capacity / Exploitation and exploration
Contested versus supported careers
Key HR Practices
Planned change management
Human resources scalability capability
Organizational capability for innovation
Career management practices
Twenty-first century organizations are facing challenges that did not exist half a century ago. Internet technologies have changed the communication and collaboration within and across organizations. The other side of the world is only one click away and knowledge is more easily accessed than ever before. Within this landscape, the competition in markets is fierce and the speed of innovations is fast. These circumstances force organizations to adapt their workforce to meet such continuously changing demands of technology, economy and society.
To adjust their workforce, organizations can use many change strategies such as cut staff, hire temporary employees or use subcontractors, hire new staff with new knowledge, train current staff to become able to take on new tasks, reorganize jobs, tasks and business units, delegate responsibilities and allow employees more autonomy to deal with new demands, or seek to replace standardized jobs with automated processes or robots, just to name a few. A century of research on organizational change has provided some good evidence to shed light on the question of how organizations that desire to stay ahead in an environment of continuous change can best shape employment relationships.
There are essentially two types of organizational change theories which pervade the literature. On the one hand, there are scholars like Lewin (1947) and Kotter (1995) who conceptualize change as a planned strategy, where the current situation (the ‘Ist’ situation) is unsuitable to meet the changing demands that challenge the organization and the desired situation (the ‘Soll’ situation) is well defined. Take for example an organization that is implementing a new technology. In the ‘Ist’ situations, employees work with old software. In the ‘Soll’ situation, all employees embrace the new software and all (internal) customers are happy with the more efficient processes. This is a change that can be planned and organized, by carefully taking social processes into account that interfere with the willingness of employees to accept the planned change. Here, the view on employees is that they have to be managed through the change process to overcome their initial resistance. Hence, human resource management’s role in planned change initiatives is to prepare employees for the changes ahead by involving them in the change, getting to know their concerns, examining their knowledge gaps and providing training and making sure all communication goes smoothly.
The other view on change management holds that change is very difficult to plan ahead because in practice there are many changes happening simultaneously. For example, right after planning the introduction of new software, economic turmoil requires budget cuts that make employees uncertain about their positions. Indeed, in the course of the implementation of change, managers and colleagues often change jobs, and new legislation challenges the requirements of the new system so that it needs adaptations even before it has been launched. Such is the nature of modern organizations: changes do not happen in isolation but are connected to an ongoing flow of change, which make step-by-step planning for change an endless and ineffective Sisyphus task (Sisyphus was an ancient Greek king who was punished by the gods for his vanity and had to push a rock uphill only to see it roll back just before it reached the summit – for eternity). The alternative view of ‘planned change’ as a strategy to move organizations forward is to ‘be prepared for change’. This holds that if the organizational structures and the people working within those structures have the capability to easily adjust to change, no planned changes are needed anymore. By having the right capabilities, organizations are capable of efficiently dealing with dynamic changes while staying ahead in the market (Eisenhardt & Martin, 2000; Teece et al., 1997). For employees, the consequence of continuous change is that lifelong employment at the same employer is unlikely. Career development is more likely to happen in various organizations and in order to move along, employees need to invest in their knowledge, skills and abilities to easily take on a new role or a new job. For human resource management, capabilities for continuous change are developed in practices like flexible workforce configurations and knowledge management.
As research evidence seems to be largely in favor of the capability for change approach when it comes to the question of what is most effective change strategy, the emphasis in this chapter is on theories of dynamic capabilities, which explain how organizations are prepared for continuous change and on theories of dynamic careers that explain how employees are prepared for changes in jobs throughout their careers. What both these theories about dynamism share, is that in order to stay in the market (for organizations) or to find another job (for employees), a capability to act in a proactive manner is essential. Proactive means that reacting to change alone is not sufficient anymore to survive the fierce competition. Instead, both organizations and employees need to actively explore opportunities and act upon those in order to endure ‘in the market’.
What follows is an economy in which organizations require flexibility in knowledge and number of employees, and a society where individual employees move in and out of organizations and employment. Finding a match between the supply and demand for employees when job requirements change all the time, calls for theory on the capabilities of sectors or even societies to deal with change. The capability of socio-economic systems to deal with continuous fluctuations in the labor market, involves examining the role of governments and institutions in terms of designing social security and education policies to optimize the labor demand and supply for continuous change (Hipp et al., 2015).
In the next section, the key theories concerning planned change and dynamic capabilities of organizations and employees are presented.
The theory section will first briefly describe the heritage of Kurt Lewin’s thinking on organizational change, which greatly influenced thinking about planned organizational change and which is still common in textbooks and consultancy practice today. The focus will then shift to organizational, employee and societal dynamic capability approaches that underlie much of the present thinking about dealing with continuous change.
Organizational change, even if designed as a strategy that departs from point one to arrive at point two, is an uncertain process because it involves all kinds of social processes. Some individuals may be uncertain about what the change in the status quo will bring them, others may feel that the change will be good for their power position in the group, and those who may lose power will seek coalitions with others who resist the change and form a force that goes against the planned change. As a German Jew who fled to the United States in 1933, social psychologist Kurt Lewin was intrigued by the question what was needed to move social groups from one state-of-being (such as an authoritarian Nazi state) to a next state (such as a true democracy) (Burnes, 2004). In the very first issue of the authoritative journal Human Relations, Kurt Lewin described a number of socio-psychological processes that contribute to keeping groups at a certain state or that can make change in groups happen (Lewin, 1947). His theory of planned change has been very influential in the development of group dynamics theories and in organizational change management practice. Lewin’s key thoughts are summarized below. First, Lewin reasoned that the current state-of-being in groups only exists as long as there are social forces that keep it at a certain equilibrium (see Figure 4.1, time 1). This is the level where all share the same values and where there is stability. If the majority likes the way they do things in the group (or instead of group, read: organization), there is no reason for change. When a minority (for example, a manager) wants to move the group to do other things, she is likely to meet resistance from the majority who are quite happy with the current state of affairs. In fact, all those who benefit from the current state of the group will use their power to keep things as they are (see Figure 4.1, time 2). Lewin proposed that before initiating change, it is helpful to perform a force-field analysis, to understand who may support the change and who may resist it. The trick to making a change initiative successful, is to find a critical mass of individuals who favor the change and who will welcome and support the change in the status quo. Hence, for successful change, the manager will need to find support for her change initiative in the organization. Knowing which social processes keep the equilibrium (current state of affairs) going, is therefore the first step in a planned change initiative. In order to mobilize a majority to favor the change, the manager will have to understand what the advantages of the desired situation are as compared to the status quo. She can use these advantages to ‘sell’ the change initiative to those who may resist it. Lewin called this the ‘unfreezing’ phase of planned change. Once the majority favors the change, the initiative can be rolled out quickly. This phase of the planned change is called the ‘move’. The sooner everyone works according to the new way of doing things, a new equilibrium will establish in the group (see Figure 4.1, time 3). The change has ‘landed’ and the equilibrium will ‘refreeze’ until a new change challenges the status quo.
This view of preparing change by taking time to understand and manage social processes was further developed in the seminal work on change management by John Kotter, who popularized the original abstract theory of Lewin to become a tool on how to perform a planned change in organizations (Kotter, 1995). Many organizational change initiatives are still planned according to Kotter’s guidelines (also see the section on HR practice at the end of this chapter). The value of Lewin’s theory of planned change is that it shows that successful organizational change comes slowly because it is embedded in social structures and that emotions, organizational politics and pressures should be taken into account before and during change initiatives to make it a success.
Criticisms on the theory of planned change started to mount in the late 1980s. Critics held that market dynamics originating from the speed of technological innovation, regulatory changes, economic up- and downturns and the ongoing competition are too turbulent to allow for slow and securely planned change (Mintzberg, 1993). Instead, changes and external disruptions happen so fast that organizations hardly have time to finish one change initiative before the next is needed. Thinking about change management shifted to theories advocating a ‘preparedness for change’ management strategy rather than planned change management, which largely built on the work of Edith Penrose.
In 1959, economist Edith Penrose proposed that organizations should not be viewed as bureaucratic structures that have to be designed and managed to reach business objectives in a planned way, but more as enterprises: a word that ties to entrepreneurs and entrepreneurship and to business growth and innovation. Penrose wrote that an enterprising organization acts like a successful entrepreneur who continuously scans the environment and seeks opportunities to innovate, to find new markets and to improve her products and services. However, successful entrepreneurs are also believed to be clever with respect to their organization, because they understand that opportunities can only be seized if they are backed up by good resources like organizational and human capital.
Accordingly, organizations that aspire growth need to have an aspiring management team that is capable of behaving in an entrepreneurial way (Penrose, 1959), who can put together an organization that is capable of doing the two key tasks of successful entrepreneurs: scanning for opportunities and realizing that the organization is capable of seizing these opportunities. However, resources that an organization has at its disposal can limit the opportunities that can be dealt with. Hence, an entrepreneurially oriented management invests in a set of organizational resources that allow for growth through seizing opportunities when they come along.
The work of Edith Penrose greatly contributed to the development of resource-based theories. However, whereas the original resource-based theories concentrated on the quality and uniqueness of resources that organizations have at their disposal to perform at their best (e.g. physical, organizational and human capital; see chapter ‘Investing in People’), in this chapter we concentrate on resources that allow organizations to ‘enterprise’: dynamic capabilities.
Dynamic capabilities are an organization’s competence to continuously integrate, reconfigure, renew and recreate its resources (Teece et al., 1997). The competence to rapidly create situation-specific new knowledge, adapt to it and use this to lead change is the core of dynamic capability theory (Eisenhardt & Martin, 2000). An organization’s level of dynamic capabilities determines the extent to which it can move along with the changing environment to attain and sustain competitive advantage (Wang & Ahmed, 2007). Thus, dynamic capabilities theory is about the organizational competence in changing and adapting its resources to deal with dynamic environments. Although dynamic capabilities may look different in every organization, it is possible to find some organizational processes that contribute to having dynamic capabilities (Eisenhardt & Martin, 2000; Wang & Ahmed, 2007). These are:
Adaptive capability: The capacity of the workforce to quickly adapt to new ways of doing things and the preparedness to give up old ways of working. Adaptive organizations can respond to changes in the market by swiftly adjusting business priorities, management systems and organization structures.
Absorptive capability: The capacity of organizations to bring new information and knowledge into the organization and making it part of the own knowledge base, and using it to improve products, processes, services and the business in general. Absorptive organizations have a high level of learning capacity, which helps the organization to understand and react to changes in the environment.
Innovative capability: The capacity of organizations to develop and create new products and/or new markets. This requires management systems that support knowledge creation and proactive behavior at all levels of the organization, and a strategy oriented towards innovation.
All three dynamic capability processes have a strong foundation in human behavior and interactions. It is therefore easy to understand that human resources play a vital role in achieving organizational dynamic capabilities.
Given that the grassroots of dynamic capabilities theory rest in social and behavioral processes (Teece, 2007), human resource management has an important contribution to make. For example, a flexible workforce contributes to an organization’s adaptive capacity, while knowledge management, training and development are the pillars for achieving absorptive capacity and, finally, investing in people will result in a skilled, proactive and motivated workforce capable of contributing to innovations (Garavan & Shanahan, 2016). Table 4.1 summarizes how human resource management is at the core of achieving organizational dynamic capabilities. Organizations that increase their human resources’ adaptive, absorptive and innovative capabilities are nowadays referred to as ‘agile organizations’ (Dyer & Shafer, 1998). Theories about the flexible firm (Atkinson, 1984), absorptive capacity (Cohen & Levinthal, 1990) and innovation (March, 1991) explicate the important contribution of human resources in fostering organizational agility.
Table 1 Contribution of human resource management to the dynamic capabilities of agile organizations
Dynamic capability processes1
Human resources’ contribution2
Flexible adjustment of business priorities, management systems and organization structures
Human resources scalability capability
The flexible firm (Atkinson, 1984)
Bring in and use new information and knowledge
Organizational learning capability
(Cohen & Levinthal, 1990; Zahra & George, 2002)
Develop and create new products and markets
Organizational capability for innovation
Exploitation and exploration
(Eisenhardt & Martin, 2000; Wang & Ahmed, 2007)
(Garavan & Shanahan, 2016)
The human resource scalability capability indicates the speed with which companies can adjust their workforce quantitatively (in terms of employee numbers), but also qualitatively (in terms of employee knowledge and skills) (Dyer & Ericksen, 2005). Timing is an important aspect of human resource scalability. For example, when rules for laying off people are complex - as is the case in many European countries - it is difficult for organizations to quickly adapt the size of their workforce. But growth requirements can also be hard to meet due to a lack of skilled employees on the labor market. The task to optimize the size and quality of an organization’s workforce is therefore not just a matter of hiring and firing, but of strategic planning for the right numbers of the right quality employees. Hence, human resource scalability implies developing strategies to ensure that the right numbers of the right types of employees are there at the right times.
A first model to describe the different options for increasing human resource scalability was introduced by John Atkinson of the Institute of Manpower Studies in 1984. At the time, the British economy was facing a dark recession, resulting in shutdowns and masses of layoffs in traditional manufacturing industries (steel, coal, machines). At the same time, the economy was changing from industry-based towards a service economy (e.g. banking and consulting) and many employees found themselves with qualifications that were no longer valued by employers. In his essay called “The flexible firm”, Atkinson (1984) stated that a strategy that combines an increase in flexibility of the current workforce with the use of a layer of flexible temporary employees would optimize the scalability capability of organizations. He reasoned that workforce flexibility based on a combination of numerical, functional and financial flexibility would make organizations better able to deal with economic turmoil (see Figure 4.2).
Numerical flexibility is the organization’s capability to shrink and grow the number of employees doing the same kinds of jobs. This can be achieved by hiring temporary employees who are not employed by the organization itself (external), but also by changing the number of hours that current employees work in their jobs (internal). Examples are overtime (temporarily working more hours), zero-hour or on-call contracts, or compressed working weeks (temporarily working fewer hours).
Functional flexibility is the organization’s capability to move employees across the organization to different jobs if needed. To be able to do so, employees should have the knowledge, skills and motivation that allow them to take on different roles in the organization. Organizations that desire a qualitatively flexible workforce have to invest in training and development to upskill their employees (internal). If such investments lack, qualitative flexibility may be insourced on demand, for example by temporarily contracting an expert with specific knowledge, or by outsourcing part of the organizational processes to another organization that has the expert knowledge (external).
Financial flexibility. Numerical and functional flexibility can thus be realized either within the organization with the current employees, or by calling in outsiders. In either case, organizations should save some financial leeway to allow for organizing flexibility. For example, functional and numerical flexibility could demand for changes in pay and remuneration systems that promote numerical and functional flexibility.
Atkinson’s plea for flexibility in employment modes was the beginning of a stream of research and theories on the effectiveness of a workforce consisting of groups of employees with different employment modes (Lepak& Snell, 1999).This included for example employees with fulltime, permanent contracts with the organization and all types of temporary workers. In particular, the question concerned how to distribute the financial means for investing in employees. For example, training investments are likely to pay off for internal employees (with a full-time permanent contract), but in the case of temporary agency workers it is unlikely that organizations will see the returns of investment in training. The idea of differentiating human resource investments for people with more or less strategic value to the organization builds on Atkinson’s distinction between core and peripheral workers. Core workers are those who are employed by and important to the organization, while peripheral workers contribute only marginally and therefore hold a lower strategic value for the organization. The HR practice section addresses this issue of workforce differentiation in a bit more detail.
Dealing effectively with change largely depends on the capacity to envisage what is coming. Organizations that only react to change when the sales start to drop, have probably missed signals about market changes and technological developments. For example, retail organizations have faced tremendous changes in customers’ shopping behaviors since the availability of online shopping. Instead of going to buy their clothes and household necessities in big department stores, customers nowadays scroll the internet and buy at, for example, Amazon while sitting on their couch. Some department store organizations timely adjusted their concept and survived, while other long-standing stores failed to adapt or were too late. This led to the collapse of some well-known department stores that have now disappeared from the retail landscape altogether. The example illustrates a need for organizations to scan and learn from what is happening in their environment in order to adapt and survive.
Organizational learning capability emphasizes the capacity of the organization as a whole to access information from outside the organization, bring it into the organization, learn from it and convert that learning into new knowledge (Cohen & Levinthal, 1990). Organizational learning capacity is similar to absorptive capacity, the capacity of organizations to face external events by bringing new knowledge to the organization and making it part of the knowledge base (Zahra & George, 2002). Learning happens first and foremost because individuals go out and acquire new knowledge. By sharing individual knowledge, group and organizational learning happens and new knowledge develops (see chapter on knowledge management). Organizational learning capacity depends on the social process of knowledge transfer, and the effectiveness of this rests in the organization’s human capital, social structures and organizational policies and procedures. These determine if the organization as a whole has the capacity to look outside, to learn from it and use new knowledge to its benefit. From the understanding of conditions for effective knowledge transfer it follows that organizations with high-level learning capabilities are characterized by a workforce that has a willingness to share and acquire knowledge not only within but in particular outside the organization.
The organizational capability for innovation concerns management systems that encourage knowledge creation and proactive behavior at all levels of the organization, and a strategy oriented towards innovation. The origins of this dimension come from organizational decision-making and organizational learning theories developed by professors James March and Hubert Simon. In 1958, James G. March, emeritus professor at Stanford University in the social sciences, together with his tutor professor Herbert Simon, a Nobel Prize-winning economist, published their shared interest in organizational problem-solving and decision-making in their now classic book ‘Organizations’ (March & Simon, 1958). In this book, they addressed innovation as a means for organizations to tackle the challenges and problems they face.
In particular, they wondered to what extent it pays off to be innovative by doing things radically different, or to specialize and become the best by building on existing experience. Doing things radically different bears a larger risk of failure, because radical changes are likely to meet resistance and misunderstanding if they do not connect to the experience and structures that already exist in the organization. Innovations should therefore always be integrated with existing knowledge in the organization to be used and appreciated. Innovations should therefore strike a balance between exploitation and exploration (March, 1991).
Exploitation means becoming better at what you do. Organizations that exploit their current knowledge by explicating it, and using the insights from explication to even further improve their specialism can become the very best. Being the best at what you do can provide competitive advantage to organizations. However, organizations using exploitation strategies are inward focused since it only involves improving what has always been done. This may blind them with regard to what is happening in the external environment of the organization.
Exploration on the other hand is the act of going out and trying and using new knowledge. A focus on exploration means being aware of changes outside the organization and experimenting with new ways of working. However, organizations have limited means in terms of finance, time and knowledge. Pursuing an exploration strategy only will come at the expense of becoming good at something, which, as mentioned above, is also important for organizations.
The dilemma about the advantages of exploitation and exploration can be illustrated in the example of professional musicians. If musicians want to book performances, they have to be really good at what they do. For instance, for a classical piano player, the best strategy is exploitation: practice, practice and practice until Rachmaninov’s second has been mastered. Many pianists try to master Rachmaninov, and only a handful master his work so well that they book performances. For that reason, many musicians specialize in a genre or composer. Their specialization helps them to become top performers in their area. Trying to explore another genre at the same time, such as heavy metal, is possible but costs time and effort as well. The time and effort put in the exploration of a new genre comes at the expense of the time needed to master the other genre. A musician who often explores new genres, faces the risk of never becoming really good at anything. The chance of booking performances is likely to drop significantly if the musician frequently changes from classical to hard rock to rap. However, when the musician would experiment just a little bit outside his specialism and let this new knowledge merge with his existing skills, his performance would be ‘innovative’: he maintains the high levels of mastery of classic piano, but mixes it with knowledge explored in other genres.
This example illustrates that successful innovation is not about radical shifts and doing something completely differently, but about the integration of existing expertise (exploitation) with knowledge acquired in the broader context (exploration). The highest pay-off between both happens when there are still sufficient resources dedicated to exploitation, while stimulating an open mind towards the outside world to find knowledge that helps to incrementally mix change with experience (Argote & Miron-Spektor, 2011). The same is true for organizations. Organizations too have limited means and time to exploit and explore at the same time. They have to make sure that sufficient time is dedicated to specializing in their core activity. At the same time, some inflow of new knowledge needs to be managed as well, both at the level of individual employees, and at the level of the workforce composition. The HR practice section at the end of this chapter illustrates which HR practices help build an organization where a balance between exploitation and exploration is maintained.
This section has illustrated how three theories about people management (workforce flexibility, knowledge transfer and exploitation and exploration) contribute to achieving dynamic capabilities in organizations to be prepared for continuous change. Implicit in these theories on organizational dynamic capabilities is the preparedness of individual employees to be available to organizations when needed, with the right skills and motivation to contribute to learning and innovation. As such, organizational change and flexibility influence the careers of individual employees. Employees in continuously changing organizations often change positions, or employers, or become temporarily unemployed. Moreover, they have their own dreams and ambitions about work – and being a lifelong peripheral worker may not be the ultimate career dream of most individuals. Moreover, employees cannot always follow their dreams because often they are restricted in developing their experience, for example when being laid off or when they do not have access to training. In other words, the availability of an experienced and flexible workforce directly ties to career theories. Careers are all individual patterns of work experience in subsequent or parallel jobs - sometimes interrupted by periods of non-employment - in the time between labor market entry and retirement. Careers are important to individuals because successful careers promise wealth, status and personal well-being. However, organizations and societies also take an interest in individual career success, because a workforce in which many have successful careers indicates that organizations are doing well and unemployment expenses are low. For these reasons, organizations and policymakers are taking serious interest in career management strategies in this era of change and flexibility. Where organizations are primarily interested in the flexible availability of excellent human capital, policy makers are facing new labor market dynamics that necessitate new strategies to ensure that demand and supply of labor can timely adapt to the speed of change in organizations. The next section illustrates how career theorists have answered to the call for dynamic capabilities by suggesting pathways to balance individual careers with the request for continuous change and flexibility.
Like for organizations, the context for careers has become more unpredictable. Whereas before many employees stayed at the same employer for their entire career, nowadays all employees are vulnerable to organizational change and workforce reductions. Moreover, technological changes happen fast and job demands change accordingly, putting pressure on employees to stay up to date by continuously participating in professional development and learning.
Career theories deal with questions such as what career success entails and which factors contribute to career success. Traditionally career success was defined as an upward linear pattern along the organizational hierarchy. Modern careers, however, are more unpredictable. Because organizations embraced workforce flexibility, the traditional upward career path in one organization has become available for only a lucky few core employees. In fact, a substantial amount of the workforce finds themselves employed under some kind of non-permanent work arrangement (Connelly & Gallagher, 2004). Within this group, a growing group find themselves hopping from one temporary job to the next for their entire career. Planning a career under such conditions is less under the control of a single organization, and individuals are also less in control because of the uncertainty of opportunities. While some may prosper and grow an impressive linear career moving from one rank in an organization to a higher rank in the next organization, others may find themselves struggling to find employment that fits their aspirations. Following dynamic capabilities theory, it would be wise for individuals to develop adaptive, absorptive and innovative capability skills to be prepared for the unpredictability of their career context. Dynamic career capabilities are an individual’s competence to continuously integrate, reconfigure, renew and recreate career resources (Finch et al., 2016), meaning that individuals over the course of their entire career timely develop the skills, knowledge and experience needed to find employment while pursuing their own ambitions for career success and personal well-being.
In the next parts, three influential theories on career progression within and between organizations are presented to shed light on the question of successful careers in a context of change and flexibility. First, the contested versus sponsored mobility theory (Turner, 1960) contrasts the possibility for individual achievement versus ‘getting help from others’ as key factors in explaining career success. Then, the protean career theory (Arthur, 1994) envisions how changes in the career landscape enfold opportunities rather than challenges for individual careers. Finally, the concept employability links individual achievement and career sponsorship in an effort to explain which factors make up the capabilities for dynamic careers.
Career success of those in the higher ranks of professions or management is often attributed to individual achievement: getting the best grades at school and good performance records are individual attainments believed to be crucial to move up. However, if these were the only ingredients needed for career achievement, one would expect the highest professional and management ranks to be a bit more diverse in terms of gender and race than they currently appear to be. Apparently, there are differences in hindrances and opportunities for various groups in the way to the top. In 1960, sociologist Ralph Turner took an interest in the causes for differences in upward mobility – the chance of every individual in a society to achieve a higher social status than they currently have. His theory on contested versus sponsored mobility explains why in some situations individual achievement does matter for upward mobility while these remain unnoticed under other circumstances (Turner, 1960).
Turner (1960)’s analysis of the chances for upward mobility started with comparing school systems in two countries: the United States and the United Kingdom, where the first represent a system of contested mobility, and the latter one of sponsored mobility. In a social system based on contested mobility like the United States, upward mobility is the result of individual achievement similar to a sports contest: the best will win the race. Good performance is a prerequisite to move up the ranks in society. In a sponsored mobility system however, moving up the ranks is principally the result of being selected into the elites. The United Kingdom is a traditional class-based society, with elites speaking their ‘upper-class’ English and keeping hold of key positions in the country. Those who are born in upper-class elite families are selected to join the elite community that eventually gets the opportunities to move up the hierarchy. In such a society, selection processes do not relate much to individual performance but much more to social status. Elite selection systems filter out potential good performers to fill the higher ranks in society and in organizations because they are not allowed to compete to start with. For example, those attending public schools have smaller chances of getting accepted into the elites. Once entering the right boarding school (sponsored by elite parents), the chance of getting accepted into a good college at university almost guarantees a good position among the elite in society. The group with whom to compete is much smaller if one has already been selected in an elite group. In contrast, everyone can join the competition in a contested mobility system, which makes the chance of success for each individual entering the competition smaller as compared to those who are selected into the competition in a sponsored mobility system.
The question of the relative importance of contest and sponsorship for upward mobility is easily applied to the context of careers in organizations. Traditional career success implies moving up the ranks in an organization. Under a contested mobility career system, good performance would be the sole criterion for getting ahead in an organization. Under a sponsored mobility career system, management (who represent the elite group in an organization) selects a group of ‘high potentials’ who get more resources to develop themselves than other employees and thus have a greater chance to be promoted in the organization (Ng et al., 2005).
The two systems are not mutually exclusive. For example, organizations may have a formal high potential program to prepare a select group of employees for future managerial positions. Once accepted in this program, employees are part of the elite within the organization. However, the selection to get into the high potential program may be open to all well-performing employees, which would represent a contested mobility system. In this situation, the career system at first is based on contested mobility, and then turns into a sponsored mobility system for the higher ranks.
Also note that the concept of ‘elites’ in organizations does not have to be recognized or represent formal groups, but may be social constructions of how things are normally done. Subtle social processes involving social comparisons and stereotypes of those in higher positions influence selection decisions and reinforce an elite group. For example, managers are likely to prefer candidates who are similar to themselves. Hence, even in organizations that have a policy of fair hiring and equal opportunities for all, candidates who are similar to the current elite occupying the managerial ranks will have a greater chance to get sponsored to enter the elite (Merluzzi & Sterling, 2017). This is an explanation for the observation that the higher ranks in organizations and in society as a whole are less diverse than would be expected based on the diversity of the population.
The theory of contested versus sponsored mobility illustrates how the career development of individuals is not just a matter of individual performance and motivation, but it is often dependent upon some help by influential others. This understanding has consequences for the design of career management policies under conditions of continuous change: whenever there are opportunities for career advancement, it is likely that not all employees will benefit equally due to more or less access to networks that matter.
The contested versus sponsored mobility theory has influenced the recent theories on career dynamics such as employability and flexicurity theory. Before introducing those, the next section addresses the distinction between traditional ‘objective’ career success and the ‘subjective’ meaning of career success in the era of change.
In the late 1970s, the career landscape slowly began to change. From the end of the Second World War up to then, organizations predominantly adhered to an internal labor market model, which emphasizes loyalty between employees and employers. In an internal labor market model, individuals pursue their career within only one organization, where loyalty is rewarded by salary growth based on tenure rather than performance. Good performance was rewarded by opportunities to grow through the hierarchical ranks of the organization. Pursuing a career by moving between organizations was frowned upon, while progression from production to top management was highly valued. Economic and societal change at the end of the 1970s led organizations to slowly leave this model in favor of an external labor market model, where employees are recruited from outside the organization and dismissed if their contribution is no longer needed. Employment became uncertain; having multiple subsequent employers or even becoming self-employed was more accepted. Under this new model, it became normal for individuals to pursue career growth through working at a series of different employers. In 1976, management professor Tim Hall wrote an influential book in which he projected this change in career expectations would lead to the rise of employees favoring protean careers over traditional careers (Hall, 2004).
Traditional careers comprise pursuing one’s career in one organization, working hard and moving up within the ranks of the organization. The psychological fulfillment of traditional careers lies in employer recognition of employee loyalty and performance, with salary growth and internal promotions as the tangible outcomes of this recognition. However, perhaps due to the inability of the majority of employees to pursue such traditional career paths, the expectation about psychological fulfillment from career development shifts from being employer centered to individual centered.
Protean careers involve a new mindset of career expectations. Such careers no longer include a desire for achievement and recognition within a single organization, but a desire for personal growth and fulfillment and the expectation that work will contribute to living a fulfilling life. Hence, jobs should add to one’s feeling of living a fulfilling life, instead of adding to the organization in return for monetary recognition. This expectation of growth and fulfillment means that employees may change jobs during their careers depending on their interests, their life stages and their personal development. Such a mindset where individuals strive for job change depending on their lifestyle and aspirations has become known as a Protean career, named after an ancient Greek god that could transform himself into anything he liked. Hall says that protean careers are ‘the path with a heart’, while traditional careers rather emphasize the path that is favored by others. When employees pursue protean careers, their employment relationship with their employers becomes more equal, as both remain partners as long as their interests are equal. Employees have the mindset to depart if the organization no longer provides psychological fulfillment. A protean career also implies that individuals can have multiple subsequent careers in different domains. Career growth is therefore not automatically linear, but it meanders along with changing life goals. Figure 4.3 contrasts a traditional career with a protean career path. The steps in a protean career involve growth within each step, with an exploration phase marked by the dotted end of a phase that marks the beginning of a next career.
Of course, pursuing a protean career demands a new mindset of individuals because it puts personal initiative to the fore. The individual mindset associated with protean careers resemble characteristics of entrepreneurship: having a learning orientation, being open to change and actively exploring opportunities. Albeit with a different focus on individuals rather than organizations, the theory on protean careers resembles theories on organizational dynamic capabilities due to its focus on an entrepreneurial mindset to find career opportunities and seize them to maximize life satisfaction.
The contribution of the protean career theory is that it emphasizes the characteristics of a proactive, entrepreneurial individual mindset needed to build a satisfactory career under conditions of continuous change. Together with the idea of sponsorship from the contested versus sponsored mobility theory, a proactive mindset is part of the employability theory addressed in the next section.
The notion that employers can no longer provide job security has become a central theme in modern career theories (Baruch, 2006). Modern careers involve more change dynamics than traditional careers. The essential conditions for career success under conditions of continuous change are laid out in employability theory (Hillage & Pollard, 1998) and flexicurity theory (Wilthagen & Tros, 2004).
The concept employability builds on the idea that rather than reacting to job changes in retrospect, employees should be prepared for changes in their careers to come. Employability means ‘being employable’, being able to initially find a job, being able to keep it, and being able to obtain new employment if needed (Hillage & Pollard, 1998). Employability contrasts with being unemployable; a situation where finding and performing at a job is impossible due to a mismatch in qualifications, motivation or personal circumstances.
Although the essence of employability is easy to explain, it is more difficult to try and operationalize when someone is actually ‘employable’, because this is not just a function of individual skills and characteristics, but also dependent on requirements induced by organizational needs and technological changes. Employability is not an end state, but a process that needs maintenance throughout one’s entire career. Comparable to organizational dynamic capabilities, employees need their own set of dynamic career capabilities. Employability theories therefore focus on all resources that help employees develop their dynamic career capabilities (Finch et al., 2016). Employability definitions comprise a set of resources consisting of the potential offered by one’s current employability (employability radius), individual resources for future employability (employability competences) and resources in the employees’ environment (contextual constraints and opportunities) (Thijssen et al., 2008).
Employability radius. This is the range of jobs and tasks that one is able to perform based on current education and experience. An example of small employability radius is a machine operator who performed the same a job on the same analog machine for over twenty years and who had no opportunities nor interest in taking part in training and development opportunities. Once an employee with such a profile is confronted with potential job loss due to digitalization of production, finding a new job will not be easy. The requirements for similar jobs in other organizations probably changed as well. In contrast, someone who kept on studying after leaving school and who took part in various projects outside his core job, will find it easier to find new employment if needed.
Employability competences. Future employment does not have to be limited to the current employability radius. Employability competences are a set of resources that helps individuals broaden their employability radius even when they are not actively looking for new employment. Examples of employability competences consist of knowledge development (to keep education and experience up to date with labor market demands), skills to find new employment (know how to present yourself and how to apply for a job), networking skills (to meet people and find out about employment opportunities) and having a proactive mindset (want to change, adapt, having ideas about your own career aspirations – all ingredients that reflect a protean mindset (Hall, 1976). Together, these employability competences enable individuals to broaden their employability radius and work beyond their current job.
Contextual constraints and opportunities. Individuals are sometimes hindered by their context even if they are able to perform a range of jobs (employability radius) and have employability competences. For example, the workload at a job may be so high that it allows little time for career development activities. Economic downturns may also reduce the number of job openings. Similarly, societal expectations about desirable careers for specific social groups can lead to discrimination in hiring (e.g. women, parents, older employees, migrant workers), and reduce career opportunities for individuals in these groups. Changing contextual constraints are difficult to tackle for individual employees. Success is more likely when some support is offered to mobilize career transitions (Turner, 1960). Support can be offered through human resource management policies for fair hiring, career development opportunities for all throughout all career stages and facilitating transitions of jobs between organizations.
The overview of resources for employability illustrated above clearly indicates that employment transitions under conditions of continuously changing demands of organizations are not entirely under the control of individual employees. Many individuals need some kind of guidance to find their way into employment, to update their competences while working and to transition between jobs if needed. Although organizations can offer resources to facilitate career transitions, for a growing group of employees hopping between temporary positions, such organizational policies are not sufficient. Their tenure at organizations may be too short to benefit from career support policies. But more often, employers are reluctant to invest their limited resources in those employees who only briefly work at their premises. Training temporary employees is unattractive for employers because the returns on those investments will be grasped by another employer.
The risk of this situation is that temporary employees (who are so badly needed to allow human resource scalability capability) lack access to resources to invest in their employability (Forrier & Sels, 2003). However, when larger groups of workers lack employability resources, organizations will find themselves facing difficulties in finding the right quality employees. This illustrates how employability is not just a question for employees or for organizations, but for the constitution of the entire labor market.
Professor Ton Wilthagen, labor market expert at Tilburg University, proposes in his flexicurity theory that employability should be a joint responsibility of employees, employers and of social welfare policies (Wilthagen & Tros, 2004). He suggests a series of policy measures to motivate employees and employers to invest in employability. Flexicurity is an integral whole of labor market policies that allow maximum flexibility in hiring for employers, while at the same time offering maximum security for employees to be employed and have an income. The essence of the model is employment security – the likelihood to be employed throughout one’s career, which is to replace job security, which was at the core of traditional careers.
Figure 4.4 illustrates how flexicurity policies support the employability of individuals and secure human resource scalability capabilities of employers at the same time. According to flexicurity theory, the responsibility for the execution of career transition policies should be organized centrally, to ensure that all actors (employees and employees) take their responsibility in keeping flexible workers employable. The execution of flexicurity policies can be organized by the government, or by institutions that are sponsored by employers- and employee organizations such as labor unions and employers’ associations.
Because flexicurity theory integrates career theories with theories on change dynamics, it provides a holistic view on what it takes to maintain the performance of organizations under conditions of change while safeguarding the ability of employees to find employment when careers demands are changing as well.
The evidence of organizing human resources to prepare for effective responses to change points in the direction that investing in dynamic capabilities is more effective than planned change initiatives that involve workforce reductions through organizational restructuring or downsizing initiatives. However, some caution is needed in interpreting research on change. Even more than other research questions, change questions revolve around time. Longitudinal research designs involving multiple observations of the independent variables (e.g. dynamic capabilities, or a planned change program) and the dependent variable (performance) give a better indication of the causal relationship than studies that involve only one measurement of the variables. However, longitudinal research is complex to execute and therefore less available than cross-sectional studies. Hence, some caution needs to be exercised in the evaluation of cross‐sectional findings with respect to change.
Effectiveness of planned workforce reductions. The most common reaction to negative external events, such as economic turmoil, is to cut the workforce and save expenses on salaries. However, management can also plan to restructure the workforce and ‘right-size’ it for the future. A meta-analytic study by Park and Shaw (2013) relying on a sample of over 300,000 organizations and units, indicates that a reduction in workforce (or ‘downsizing’) is negatively related to later organizational performance. Not only did they find that downsizing generally fails to improve the financial performance of organizations, but also that it may even lead to reduced financial performance (overall effect size of -.15). Even in case of financially healthy organizations that decide to restructure the workforce for proactive reasons (an example of a strategically induced planned change), the initial goals of the restructuring are generally not met and fail to improve the financial performance of the organization. These findings indicate that planned workforce reductions are very difficult to manage well.
Effects of dynamic (HR) capabilities for organizational performance. An increasing number of empirical studies support the claim that organizational performance benefits from having dynamic HR capabilities. Unfortunately, however, there is a lack of true longitudinal studies to substantiate such results.
Human resource scalability capability: In a sample of 117 US organizations, it was found that the level of qualitative flexibility of the workforce contributed to the financial performance of organizations in terms of cost-efficiency with a substantial effect size of .28 (Bhattacharya et al., 2005). Hence, in organizations where employees are motivated and able to take on multiple positions within the organization and where there is a system of HR practices supporting internal qualitative flexibility (internal recruitment and job rotation practices that facilitate employees to change tasks or jobs within the organization), the largest levels of cost efficiency were achieved (Bhattacharya et al., 2005). Similar findings are reported in a sample of more than 600 Spanish organizations: investing in employees was shown to enhance the flexibility in skills and behaviors of employees, which in turn related positively to organizational performance (Beltrán-Martín, Roca-Puig, Escrig-Tena, & Bou-Llusar, 2008). However, meta-analytic research shows that organizations need some slack financial resources to make workforce flexibility work (Daniel et al., 2004). This finding is in line with Atkinson’s prediction that financial flexibility is needed to benefit from employee flexibility. Without some financial reserves to invest in employees, cutting people to improve organizational performance will not be effective.
Organizational learning capability. Human resource practices that are found to relate to increased levels of learning capability are shared decision-making, job rotation, cross-functional collaborations and practices that increase social relations between employees and units (Jansen et al., 2005). The presence of such practices leads to an increase in knowledge transfer and innovative capacity in organizations, which are in turn beneficial to organization performance, as is shown in a meta-analysis of 241 studies (Zou et al., 2018).
Organizational capability for innovation. The contribution of employee training programs, induction programs to get new employees involved in a culture of continuous learning and exploration, team working, appraisal of innovative behavior and the stimulation of exploratory on-the-job learning by employees were all found to positively relate to product and technological innovation in a longitudinal study involving 22 UK manufacturing companies between 1992 and 1999 (Shipton et al., 2006).
Dynamic career capabilities. A meta-analysis was performed using data from 140 studies to find the most important predictors of objective and subjective career success (Ng et al., 2005). The key predictors for objective career success in terms of salary growth and number of promotions are one’s level of education (r = .29) and having skills to find your way into the right networks and opportunities (r = .29). This corresponds with contested mobility theory: the most qualified and cleverest employees have the best careers. But the sponsored mobility perspective was found to be equally important for career success: having access to career sponsorship (r = .22) and getting opportunities for training and development (r = .24) are also important for objective career success. The importance of career sponsorship for career success is particularly important for workers in temporary jobs, as they face the immediate need to find another position as soon as their contract ends. However, employers are often reluctant to invest in training and education expenses for their temporary workforce, fearing that their investment in these workers will not pay off for their organization but rather for the temp worker’s next employer, as a study under Belgian organizations shows (Forrier & Sels, 2003).
Looking after the human side of change management has always been one of the core responsibilities of human resource management, as can be understood from the abundance of popular literature on planned organizational change. After briefly referring to planned change management, the HR practice section turns to interventions that emphasize the dynamic capabilities theory and aim to prepare the organization and its employees to be prepared for continuous change.
When practitioners talk about change management, they often refer to planned change initiatives. There is an abundance of books on ‘how to’ do planned change initiatives. Much of this literature loosely builds on the ideas of Lewin (Burnes, 2004). In 1995, an article by John P. Kotter in the management magazine “The Harvard Business Review” succeeded to popularize Lewin’s change theory into a hands-on ‘how to’ do change in organizations. Kotter translated Lewin’s stages of change into a few practical steps, inspired by his observations of over 100 companies that were more and less successful in terms of change initiatives (Kotter, 1995). Kotter stresses that planned change initiatives should pay attention to organizational politics, while being sensitive to negative emotions, mobilizing support and trying to keep the majority of employees on board in making the change a success. His steps are often used to guide change management initiatives.
There is a range of HR practices that contribute to an organization’s dynamic capabilities. Following Table 4.1, we provide a few examples of HR practices that are used to contribute to human resources scalability, organizational learning capacity and organizational capability for innovation.
Many organizations have adopted Atkinson’s model of core and peripheral workers, enabling them to fit the quantitative and qualitative workforce needs of the organization.
Quantitative flexibility involves managing all kinds of flexible work contracts. In practice, flexible labor can either be hired directly (for example temporary workers, self-employed workers on projects and day laborers), or obtained by making use of the services of flexible work suppliers, like temporary work agencies and subcontractors. A modern, flexible workforce is characterized by employees with different types of employment contracts working alongside each other (Cappelli & Keller, 2012). This situation invokes a number of practical challenges for HRM:
Coordination challenges. Workers from flexible workforce suppliers report to their agency and to the organization that hired the agency. In practice this can result in unclear reporting structures. Who do hired workers report to? Who is responsible when something goes wrong? What are the consequences of flexible work for the maintenance and loss of crucial knowledge? Miscommunication and unclear responsibilities can lead to product failures, customer complaints and even litigation. To prevent such risks, hiring organizations have to invest in coordination structures to ensure that all workers contribute to the goals of the organization. Compared to the coordination costs for employees with permanent contracts with the organization, coordination cost can be substantial in organizations relying on a workforce hired from many suppliers.
Employee fairness challenges. Levels of employment standards may vary between the hiring and supplying organization, causing differences between employees doing similar work with respect to wages and perks, but also opportunities for participation, training and development, health and safety conditions, feedback and appraisal (Wright & Kaine, 2015). The presence of employee fairness issues can reduce workforce morale and result in lower motivation to perform.
To consider the right balance between the need for scalability and coordination costs involved in the management of a flexible workforce, human resource management can use ‘strategic workforce planning’: a methodical process of comparing the current workforce (numbers, roles, skills) against organizational goals and objectives, and then determine the workforce needs (numbers, roles, skills) to meet these goals and objectives (Mayo, 2015). In planning the size of the core workforce compared to the size of peripheral rink, any interventions to meet future needs should take coordination and fairness costs into account.
Qualitative flexibility can be realized in both core and peripheral workers. Human resource practices to improve qualitative flexibility aim at increasing the employability radius of workers: the range of jobs and tasks that one is able to perform in the organization. This can be obtained by:
Investing in employee development: offer training and development opportunities.
Internal recruitment: announce job openings to all employees in the organization.
Job rotation practices: stimulate a culture in which employees are open to taking on new roles in the organization every few years, and offer the opportunity to temporarily try out another role in the organization
Job enrichment: give employees more complex tasks and responsibilities in their jobs
Organizational learning largely results from creating opportunities for knowledge transfer. Consider for example organizing weekly team meetings to stimulate information sharing and shared decision-making. Extending the possibilities for employees to acquire new knowledge, for example by means of job rotation and participating in cross-functional collaborations, would also be useful. Moreover, all interventions aimed at networking and communication between units will contribute to organizational learning.
Innovation in the workplace should be a mixture of HR practices that stimulate exploitation and exploration behaviors of employees.
Exploitation behaviors of employees contribute to the organization becoming better at what it already does. Since employees have the best knowledge of their own jobs and the work processes they are involved in, they are best able to notice potential improvements in the organization. By allowing employees job autonomy - the freedom to learn and experiment on how their jobs can be performed best - they will contribute to organizational exploitation. Job autonomy can be paired with teamwork practices that stimulate team learning. By inviting employees to work together (teamwork) and to come up with suggestions (participation in decision making), they exchange the tacit knowledge needed to improve product or service quality. Hence, job autonomy, teamwork and participation in decision-making contribute to optimizing the current organizational work processes and outputs – the essence of exploitation.
Exploration behaviors involve actions to do something new. HR practices can stimulate employees to look outside their jobs and their organizations to acquire new insights. Examples of practices stimulating exploration behaviors are cross functional teamwork, stimulating employees’ life-long learning, and allowing employees some time to acquire new knowledge by organizing visits to other organizations or conferences. All these practices stimulate individuals and teams to have an open mind towards new knowledge which can be integrated with their expert knowledge and be used to innovate.
In addition to HR practices addressing the behavior and attitudes of employees, the composition of the workforce can also contribute to the right balance between exploitation and innovation. Organizations can seek a balance in their composition of employees, such that there is a certain level of exploitation and a certain amount of exploration at the same time. Core employees typically have the best knowledge of the organization and are needed for exploitation. But bringing in new employees may also be a source of new knowledge entering the organization. However, to achieve the best mix of exploitation and innovation, there should be a continuous inflow of new employees on top of a stable majority of experienced employees.
Career management involves all interventions aimed at developing the employability of all employees. The interventions can be clustered into four domains (Baruch, 2006):
Work experience interventions. One’s employability radius is predominantly affected by one’s work experience. Work experience can be extended by offering learning-on-the-job opportunities. This can be done by ensuring that supervisors pay attention that all employees (core and peripheral) get challenging job assignments that allow them to add to their experience. On-the-job learning can be increased by training supervisors in delegating responsibilities to individuals and teams and by stimulating participation in decision-making. Moreover, communication about the importance of quality and innovation will stimulate individuals to examine their jobs and find learning opportunities.
Organize resources for formal training and education. Transitions between jobs are easier once employees have the right qualifications in terms of education. However, due to workload and restricted budgets, not all employees have access to resources to improve their human capital. An organizational strategy that stimulates lifelong learning should therefore be accompanied by a budget that facilitates financial and time investments in education.
Opportunities for career counselling. Having a dialogue about the range of jobs and tasks that one is able to perform, the aspirations for one’s career and the opportunities and needs inside and outside the organization can help individuals plan for their employability. Career counselling can take many forms, ranging from talking to peers or a direct manager, to consulting with a professional career coach. The aim of such counselling is to find out about individual aspirations and opportunities, and about potential needs for development. Career counselling can be supported by training managers to pay attention to the careers of their subordinates, supported by a professional unit offering information about development opportunities and support for developing employability competences.
Information about future opportunities. To stimulate transitions between jobs, management should aim to reduce hindrances for employees to change jobs. This starts with providing information about job openings on electronic job boards and can be extended with organizing career networking events. Providing information about future opportunities also contributes to employee awareness about the need to continuously invest in one’s career development.
At the center of this chapter is the question how organizations can react to and act on continuous change in changing economic, technological and political circumstances. The theory of planned change explicates how organizational change should be well-prepared, taking emotions and organizational politics into account. Dynamic capabilities theory proposes that change is continuous and cannot be planned for. Organizations should therefore organize their resources in such a way that they can adapt quickly. Dynamic capabilities rest in characteristics of the workforce – the ability to grow and shrink the number of employees, the drive to continuously reach out to new information and the willingness to cooperate in creating innovation capabilities which were related to the theory of the flexible firm, to absorptive capacity and to exploitation and exploration.
In the second half of the theory section, the focus shifts to the requirements of employees in changing organizations. Career theories on the contested versus supported nature of career success and the changing attitude of employees in dynamic labor markets illustrate that employees need some support and a flexible mindset to find employment throughout their careers. Employability and flexicurity theory illustrate the conditions under which lifelong employment is feasible. Employability theory approaches lifelong employment from the needs of employees, in terms of skills, mindset and support. Flexicurity theory emphasizes the need for labor market reforms to ensure flexible employment for organizations and employability of all employees in the long run.
The research evidence largely favors investing in dynamic capabilities for human resource management over reactive planned change initiatives. Similarly, career success for employees is more feasible when employees, employers and labor market institutions invest in the development of employability of all workers.
The HR practices section focuses on practices that contribute to dynamic capabilities of organizations and to the employability of individual employees.