This paper combines two different studies of performance in order to more fully understand the effect of pace on performance. (The variable being studied is pace. It represents rate of growth for the organization and rate of work for the individual. The underlying phenomenon, defined later in the discussion section, is sense of urgency.) There have been a number of typologies that cluster firms into categories based on the degree to which they are growing or changing (e.g. Miles & Snow, 1978 ). However, these types of categorization schemes do not address the effect of rate of change on firm performance. Therefore, in order to more fully understand how rate of change (or pace) affects performance, this research utilize a dual level research strategy, and in both cases, pace is measured as a continuous variable. The first study investigates how organizational rate of growth affects company stock price, while the second study focuses on the effect of pace on individual employee performance scores. The dual level research strategy is used to demonstrate the generalizability of the moderating effect of valuing employees and pace on performance.
This paper contributes to what we know about fast growth in several ways. First, the research further develops work in population ecology by examining the concept of inertia and its effect on firm performance. Second, this paper applies protection motivation theory in order to understand how individual pace affects employee performance. Although the paper utilizes two different theories in order to develop hypotheses for two different levels of analysis, the resulting hypotheses are similar due to the fact that underlying process at the individual and firm level are similar.
POPULATION ECOLOGY, INERTIA, AND FIRM PERFORMANCE
In prior research that I conducted with Alice Andrews (Welbourne & Andrews, 1996), we found that initial public offering (IPO) firms that valued their employees were more likely to survive five years after the IPO. The theoretical work behind this study was developed using population ecology. As noted in our earlier paper:
At the core of population ecology is the concept of inertia (Hannan & Freeman, 1984). Although inertia conjures up images of stale, immobile organizations, the term does not necessarily mean standing still. Newton's first law of physics states that an object at rest tends to stay at rest and an object in motion tends to stay in motion. This overall tendency to stay at rest or in motion is called inertia. Webster's dictionary defines inertia as property of matter by which it remains at rest or in uniform motion in that same straight line unless acted upon by some force... Inertia keeps an organization moving during a change, even though the direction has changed. We know that initial public offering firms are not at rest because they are entering the public market in order to grow; therefore, for IPO firms, inertia is a desirable characteristic because it helps them to continue moving forward.
Population ecology claims that companies exhibiting higher levels of inertia are more likely to survive. Thus, we assumed that the IPO firms in our sample were moving (vs. at rest), and we then utilized population ecology to assess the characteristics of firms that should be associated with increasing inertia and survival. We suggested that inertia within growing organizations results in structural cohesion. Structural cohesion is an employee generated synergy that propels a company forward. Based on the population ecology literature (Hannan & Freeman, 1977), we then suggested that a company could enhance structural cohesion by using employment practices that reflect employee value (or placing a high value on employees). Thus, population ecology arguments led to our hypothesis that employee value increases structural cohesion, which improves survival chances. Our hypothesis was supported with the data.
We alluded to, but did not test, the fact that growth or movement is an important part of the performance equation. Thus, firms that are standing still may not necessarily obtain a performance gain by valuing employees. In fact, according to population ecology, valuing employees would tend to increase inertia, thus further encouraging being at rest. Given that today's environment is one in which all organizations need to move at a rather rapid pace, employment practices geared toward standing still should not, by themselves, improve firm performance. Therefore, rate of movement, or pace, becomes an important variable for understanding performance. This study only investigates pace in a positive direction (growth vs. downsizing), even though the negative form (reducing size) may have similar effects.
In this research, I expand our application of inertia to IPO firms. We assumed in our earlier paper (Welbourne & Andrews, 1996) that all the firms in our IPO sample were in motion. But, needless to say, the rate of motion for organizations differs; therefore, rate of change (or motion) should also have an effect on firm performance. Structural cohesion should have a stronger and more positive impact on firm performance as a company's rate of movement, or pace, increases. This is due to the fact that structural cohesion helps employees propel the company forward, even when tasks becomes more complex due to increased pace. Thus, both rate of change and valuing employees are important, and I hypothesize that the two will interact in predicting firm performance.
Hypothesis 1: Valuing employees will interact with rate of change to predict firm performance. Valuing employees will be more effective for firms that are experiencing a faster rate of change.
The dynamics of valuing employees and rate of change at the organization level assume an underlying process that involves individual employees. Those individuals who work in fast growth environments are assumed to be more likely to work towards the goals of the company when they feel they are valued. Although this is an assumption, population ecology does not focus on the effects on individual workers, therefore, the next section utilizes protection motivation theory to understand the individual process.
PROTECTION MOTIVATION THEORY AND INDIVIDUAL PERFORMANCE
Protection motivation theory has been used in both communications and marketing research to understand how advertisers can create communications t hat influence behavior (Tanner, Hunt & Eppright, 1991). The theory focuses on the necessary balance of energy and coping ability (Welbourne, 1995). Energy is derived from a strong emotional need to change behavior. Applied to the marketing research, this energy directed toward change results from communications aimed at triggering a strong emotional response. Protection motivation theory has specific applications to the emotion of fear, and advertising campaigns aimed at dental hygiene, safety, cigarette smoking, and alcohol have all attempted to make appropriate use of fear in their campaigns to change behavior. Lazarus and Folkmann (1984) refer to fear inducing messages, such as those used in these types of communications as hot information that people cannot ignore. The goal of a fear inducing message is to raise the awareness of an individual through triggering an emotional response. When awareness is raised, it should be accompanied with energy directed at changing behavior.
But, protection motivation theory is clear in stating that in order to obtain a behavioral reaction the emotion associated with the fear appeal must be combined with the ability to cope. For example, an effective anti-smoking campaign should have a strong fear appeal associated with smoking, but it should also be combined with a message about how one can quit smoking (e.g. use the nicotine patch). Therefore, high energy associated with the emotional need to stop smoking (due to advertisement), combined with a perception that one can quit smoking (coping via the patch) should result in the desired behavior (they attempt to quit smoking).
How can this theory be used to predict individual work-related performance? Employees who are higher performers in fast-growth firms should be those who personally have a high level of energy around getting their work done and who feel that they can cope . In fast growth firms, the fast pace of the organization parallels an advertising campaign in that the fast growth encourages an emotional response. In this case, the emotional response is a high need for accomplishment, which results in energy around goal attainment. Thus, the inertia concept of rate of change at the organizational level becomes pace of work at the employee level. Working at a fast pace is associated with being driven to accomplish a task. However, this fast pace needs to be associated with coping in order to obtain high performance. Although coping can be operationalized in a number of ways, the organizational level conceptual arguments from population ecology provides a clue about coping strategy. I suggest that employees who feel that they are valued by the management team are those who are more likely to feel that they can cope with the a fast-paced environment. Thus, paralleling the organizational level work, employee value interacts with pace to predict individual performance.
Hypothesis 2: Perceptions of being valued by management will interact with pace of work to predict individual performance. Being valued by management will be more important for employees who work at a faster pace.
SUMMARY OF CONCEPTUAL ARGUMENTS
Two theories, population ecology and protection motivation theory, are used to state that fast pace and creating an environment where employees feel valued affect both individual performance and firm performance. I argue that this process works at the individual employee level and at the organizational level. Thus, fast growth firms will be more successful if the management team creates an atmosphere where employees feel like they are valued. In that type of environment, employees will be energized, and because they personally feel valued, that energy and sense of value will combine and result in their contributing to the firm's success through exceptional performance. The two hypotheses will be tested with two different samples. The first is a sample of firms that conducted their IPO in 1993, and the second is a sample of workers who are employed by a fast growth firm that conducted its IPO in 1996.
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Last Updated 06/01/98