Dynamic capability and staff induction practices in small firms

The current issue and full text archive of this journal is available at www.emeraldinsight.com/1746-5680.htm Dynamic capability and staff induction practices in small firms Deborah E.M. Mulders Staff induction practices 155 Department of Industrial Engineering and Innovation Sciences, Eindhoven University of Technology, Eindhoven, The Netherlands Peter A.J. Berends Organization and Strategy Group, Faculty of Economics and Business Administration, Maastricht University, Maastricht, The Netherlands, and A. Georges L. Romme Department of Industrial Engineering and Innovation Sciences, Eindhoven University of Technology, Eindhoven, The Netherlands Abstract Purpose – The dynamic capability view serves to explain how particular practices ensure the firm’s performance and competitiveness within a continuously changing environment. In this paper, the staff induction processes of two small firms in The Netherlands (management consultancy and biotech (BT) start-up) are examined from a practice-based view. The authors explore whether the staff induction processes of these firms can be regarded as practices, and if so, whether and how these firms have developed a dynamic capability in staff induction. Design/methodology/approach – Case studies are conducted in the management consultancy and biotechnology sectors to explore the practising of dynamic capability. Findings – The findings suggest small firms can effectively develop and master their staff induction processes (as practices), but do this on the basis of ad hoc problem solving rather than a dynamic capability. If small firms develop any dynamic capability at all, they apparently do so towards specialized resources and processes that are perceived as most critical to the firm’s continuity and performance (e.g. product development in the case of the BT firm). As such, this study confirms Winter’s hypothesis about the fundamentally different cost structures of dynamic capabilities and ad hoc problem solving, which explains why dynamic capabilities tend to be rare and ad hoc problem solving prevails in many small organizations. Originality/value – The paper examines the interaction between staff induction practices, dynamic capabilities, learning strategies, and ad hoc problem solving in two small firms. Implications for practitioners are that consciously engaging in learning strategies helps to adapt practices and build a dynamic capability in staff induction. Keywords Induction, Small enterprises, Learning, Problem solving Paper type Research paper The authors would like to acknowledge financial support received from Eindhoven University of Technology (Department of Industrial Engineering and Innovation Sciences) as well as the UK Research Funding Councils – ESRC/EPSRC Advanced Institute of Management Research, as part of the AIM International Project “Practice and practising: a comparison across organizations, industries and countries” under Grant No. RES-331-25-0024 led by Professor Elena Antonacopoulou. Society and Business Review Vol. 5 No. 2, 2010 pp. 155-169 q Emerald Group Publishing Limited 1746-5680 DOI 10.1108/17465681011055578 SBR 5,2 156 Introduction This paper focuses on the development of dynamic capabilities from a practice-based view. We adopt this particular perspective to explore the topic, using a growing body of a practice-based research within the field of social science. The focus here is on the set of actions or activities (praxis of practitioners) and the mediating objects that constitute part of that practice (Gherardi, 1999; Johnson et al., 2003; Schatzki et al., 2001). A practice focus on staff induction also fits in with (and extends) recent contributions which have stressed that routines – intended as repeated application of a specific practice – can be a source of change and adaptation (Feldman, 2000; Zollo and Winter, 2002; Feldman and Pentland, 2003). The notion of dynamic capability, which has taken center stage in the strategic management as well as organization theory literature, points at the capabilities of firms to purposefully change organizational practices grounded in knowledge and skills (e.g. staff induction) to respond to environmental requirements (Eisenhardt and Martin, 2000; Helfat and Peteraf, 2003; Teece et al., 1997; Winter, 2003; Zollo and Winter, 2002). In this paper, we define dynamic capability as a capability: [. . .] that conveys deliberate knowledge, invoked on a repeated basis, on how to question purpose and effectiveness of routines; this deliberate knowledge serves to generate and modify these operating routines and processes to address changing environments and/or create market change (Mulders and Romme, 2009). Dynamic capability has been predominantly subject to a theoretical debate (Eisenhardt and Martin, 2000; Teece et al., 1997; Zollo and Winter, 2002) and empirical research in this area is still rare and exploratory in nature (Sher and Lee, 2004; Verona and Ravasi, 2003). In addition, the notion of dynamic capability has almost exclusively been developed towards large firms (Petroni, 1998; Shamsie et al., 2006; Tripsas, 1997; Verona and Ravasi, 2003). The dynamic capabilities of small firms are therefore largely unexplored in the literature. We try to add to the existing literature by empirically examining how small firms have developed a dynamic capability in staff induction practices. As such, this paper explores the interaction between practices, dynamic capability, and learning strategies. We also try to make a distinction between these concepts and the notion of ad hoc problem solving, which does not constitute a dynamic capability. Winter (2003) argues that dynamic capabilities do not necessarily exist, in fact, they may be quite rare, while ad hoc problem solving as a different mode for change tends to prevail in many firms (Winter, 2003). Ad hoc problem driven search involves non-repetitious and non-routine responses to create or change operating routines in pursuit of enhanced organizational effectiveness (Zollo and Winter, 2002). Dynamic capabilities involve long-term commitments to specialized resources, for example, new product development or account management. The ability to sustain a particular approach and commitment to, for example, account management depends to some extent on continuity in staff experience, information systems, and client networks involved. However, “the costs of ad hoc problem solving largely disappear if there is no problem to solve” (Winter, 2003, p. 993). These costs, if any, tend to be opportunity costs of staff with alternative productive roles in the organization. The fundamentally different cost structures between dynamic capabilities and ad hoc problem solving may explain why dynamic capabilities tend to be rare and ad hoc problem solving prevails in many organizations. Zollo and Winter (2002) suggest three related learning processes to create dynamic capability, as a complement to ad hoc problem solving. The first process relates to tacit experience accumulation as an important element in the development of dynamic capabilities because “routines reflect experiential wisdom in that they are the outcome of trial and error learning and the selection and retention of past behaviors” (Gavetti and Levinthal, 2000, p. 113). Second, knowledge articulation plays an important role because collective learning happens when implicit knowledge is articulated. Implicit knowledge must therefore be articulated to be able to create collective learning (Zollo and Winter, 2002). Knowledge articulation occurs when individuals express their opinions and beliefs, engage in confrontations and challenge each other’s viewpoints (Duncan and Weiss, 1979). Finally, knowledge codification contains the codification of the understandings of individuals in written tools – such as manuals, blueprints, spreadsheets, and so forth. To develop a manual for the execution of future tasks, the individuals “need to form a mental model of what actions are to be selected and under what conditions” (Zollo and Winter, 2002, p. 342). So, individuals have to discover what works, what does not work and why it (not) works (Zollo and Winter, 2002). Therefore, knowledge codification is important because it provides a supporting mechanism for the entire knowledge evolution process (Zollo and Winter, 2002). Thus, dynamic capabilities are fundamentally different from ad hoc problem solving. Dynamic capabilities involve a conscious process in which tacit experience is systematically and repetitiously articulated and possibly codified, whereas ad hoc problem solving is non-repetitious in nature. Deliberate efforts to articulate and codify a practice may help to increase the level of consciousness of this practice so that it can be scrutinized, and, most importantly, changed. The question how to develop a dynamic capability then arises. In order to find an answer to that question, we first need to explore the concepts of practice and practise. Practise versus practice The literature on practice-based research distinguishes between practise (with an “s”) and practice (with a “c”), following Antonacopoulou (2008). To avoid any misunderstanding, we will use practice with a “c” to refer to the noun and practise with a “s” to refer to the verb. Both practice and practise invoke notions of craftsmanship (as in the case of artists, black smiths, carpenters), but also of professional expertise (e.g. doctors, lawyers, and researchers). Several authors have expanded the notion of practice, more specifically by stressing the centrality and malleability of a practice to organizations. For example, Zollo and Winter (2002) define a practice as a specific routine aimed at fulfilling the purpose of the firm (Nelson and Winter, 1982). Antonacopoulou (2008) argues that practice is not only what agents do, what actions they take, but also how they learn to discover the intricate aspects and meanings of their practices. Moreover, by practising in terms of re-hearsing a practice one refines, improves, changes elements of one’s praxis and ultimately elements of one’s identity (Antonacopoulou, 2008). So, those activities that are not repetitive, or are not being rehearsed, cannot be attributed to a practice. Without some level of consciousness from the practitioners towards the activities constituting the practice, practitioners face severe barriers in repeating, and possibly changing, these activities. Moreover, without some level of consciousness these activities, especially complex ones, cannot be easily transferred, copied or imitated by others (e.g. in a community of practice). Thus, activities that practitioners are completely unaware off are not part of our notion of practice. We acknowledge that certain Staff induction practices 157 SBR 5,2 158 professional activities can become so automated that the practitioner is unaware of them. For example, the way an experienced carpenter holds and uses his tools is no longer a conscious act, but at an earlier stage it has been learned at a more conscious level (as is evident when people hold a hammer for the first time). We especially emphasize three aspects of practice. A practice implies performing professional activities that: are characterized by repetition or rehearsal (i.e. practising), involve a certain level of consciousness of the activities, and can only be mastered by also engaging in them. In sum, we define a practice as a set of repetitive activities and processes that human agents in the organization are (at least to some extent) conscious of, and that can only be mastered by directly engaging in it. Staff induction Historically, organizations have regarded employees as factors of production (Benham, 1993). However, human resources (HRs) may serve as a critical differentiating factor for organizations, not least because competitive advantages embedded in technological or physical resources have become easier to imitate (Richard, 1999; Wright and McMahan, 1992). It seems thus important to devise ways in which organizations can facilitate a valuable HR base. In recent years, scholars have studied how employees can be transferred from factors of production into forces of contribution (Benham, 1993; McMillan-Capehart, 2006; Shipton et al., 2005). A special focus has been given to staff induction, defined as: “the process of familiarizing new employees with whatever is necessary for them to feel at home and to understand and perform their duties efficiently” (St John, 1980, p. 373). Wanous (1992) divides staff induction into a pre-entry and post-entry phase. Pre-entry can again be divided into selection and recruitment, and post-entry can be divided into orientation and socialization. The aim of orientation is to help newcomers cope with entry stress experienced upon entering an organization. Orientation refers to specific programs aimed at providing competence on a preliminary level in order to start working. As a result of this, Wanous (1992) claims, orientation is planned for a short-term period, and the people involved are not necessarily part of the newcomer’s work team, peer group, or management. HR professionals, trainers, external consultants are all in principal capable of providing sufficient information to newcomers. In addition, introduction courses, videos, handbooks, e-learning programs, etc. are widely used to orient the newcomers towards the organization (Wanous, 1992). Wanous (1992) contrasts induction from socialization. The latter is seen as a long-term process, involving a totality of the surrounding colleagues, the organization, the informal structures and implicit knowledge in practice. Socialization focuses on how newcomers adjust to their new surroundings and learn the behaviours, attitudes, and skills necessary to fulfill their new roles and functions effectively as members of an organization (Fisher, 1986; van Maanen, 1976). Socialization processes do not contain specific programs and are not goal directed, but require participation in the work practices in order to adjust to the norms and values, as well as to the routines of the organization (Wanous, 1992). In their seminal paper, van Maanen and Schein (1979) describe socialization as a reproductive and necessary process in order to not disturb the ongoing activity and the established organizational routines. They argue that: [. . .] new members must be taught to see the organizational world as do their more experienced colleagues, if the traditions of the organization are to survive. The manner in which this teaching/learning occurs is referred to here as the organizational socialization process (van Maanen and Schein, 1979, p. 211). Staff induction practices This raises the question whether staff induction and socialization processes can be regarded as practices, as previously defined in this paper, and whether and how firms may develop a dynamic capability in staff induction. 159 Research method Dynamic capabilities are difficult to measure directly because they are higher order capabilities, that is patterns in first order capabilities (Winter, 2003). As such, dynamic capability is a nasty beast to tackle in a quantitative manner (Adner and Helfat, 2003; Daniel and Wilson, 2003). Empirical studies of dynamic capability thus often draw on secondary data to explain performance differences between firms. Direct measurement of dynamic capability can more likely be done through qualitative data collection. With Winter’s caveat about distinguishing dynamic capability from ad hoc search in mind, dynamic capability involves those practices in a firm: . through which this firm generates and modifies operating routines and processes (Eisenhardt and Martin, 2000; Teece et al., 1997; Zollo and Winter, 2002); . to address changing environments and/or create market change (Eisenhardt and Martin, 2000; Teece et al., 1997); . that are invoked on a repeated basis (Cepeda and Vera, 2007; Helfat et al., 2007; Sher and Lee, 2004; Zollo and Winter, 2002); and . that convey deliberate knowledge on how to question purpose and effectiveness (Helfat et al., 2007; Winter, 2003; Zollo and Winter, 2002), which includes the search for and selection of options for the future course of the firm (Helfat et al., 2007; Zollo and Winter, 2002). In the case studies reported in this paper, we thus looked for practices that: . are conducted in a routinized way (so not inspired by performance or imposed by external force); . specifically deal with reflecting upon operating routines; . convey knowledge on how to question purpose and effectiveness; and . contain information feedback on how experimentation and retention processes influenced the operating routine in question. We will draw on data from the staff induction processes of two case studies of small firms in The Netherlands: a management consulting (MC) firm and a biotech (BT) start-up. These two industries were selected because within the population of small firms knowledge intensive firms are more likely to invest in (some form of) dynamic capability than other, less knowledge intensive, small firms. We examine if the staff induction processes of these firms can be regarded as practices, and if so (how), these firms have developed a dynamic capability in staff induction. The qualitative data in this case study are obtained through semi-structured interviews, document study, and participant observation. This combination of methods allows for triangulation of the data. In 2005 and 2006, we conducted interviews across all SBR 5,2 160 staff levels. In addition, documents were gathered on site as well from external sources (e.g. publishers, internet). Moreover, we participated in meetings and other events on site. In the analysis of the data, we have pursued an open coding approach, whereby first all data have been scanned. That is, the primary data were coded but we also hypothesized about data and phenomena a little removed from the immediate phenomena (Strauss, 1987). To check for researchers’ biases, we asked firm representatives to look at the codified output and inquired whether they recognized it as authentically theirs. Overall, we obtained a 95 percent recognition rate (defined as the percentage of items that went un-annotated). The following section describes the main findings from our case studies, with illustrations taken from the interview transcripts. We used the other two data sources primarily to corroborate our findings or put them in perspective. Research setting Most R&D intensive firms in the biotechnology sector are specialized in niche-markets, niche-technologies, or specific activities within the pharmaceutical R&D process such as lead optimisation, drug discovery or drug delivery. These dedicated biotechnology firms are often research partners of large pharmaceutical or biochemical companies. BT, founded in The Netherlands in 2003, is one of these small dedicated biopharmaceutical firms, focusing on enhancing treatment and relieving discomfort of patients by developing highly innovative drug delivery systems. The main focus of BT is developing an implant that is capable of the local and on demand delivery of a drug in the human body by means of a small instrument attached to the skin. To develop this implant solution, BT was created from a two million euro subsidy of the Dutch Ministry of Economic Affairs. The firm collaborates with a technical university in The Netherlands and several medical specialists of the university hospital in Maastricht. Since it was founded in 2003 by the current chief executive officer (CEO), BT grew to six people in 2006. The Dutch consulting industry includes a group of large international firms that operate globally and a large number of medium-sized and small firms that primarily operate in The Netherlands. About 3,700 management consultancy firms operate in The Netherlands, employing a total population of about 10,500 management consultants (FAECO, 2003). As a professional implementation consultancy founded in 1995, MC has been supporting organizations in change and improvement issues for almost over 15 years. The firm employs 14 people in two offices in The Netherlands, a large office in Maastricht, and a small one in Den Hague. As a niche player in the Dutch consulting industry, MC focuses on the process aspects of MC which may distinguish the firm from many competitors, particularly the larger consulting firms that tend to focus more on content (e.g. of strategic decisions and system solutions). Moreover, the firm typically does not engage in client projects at the strategic level, but focuses on projects with predetermined targets. The firm’s key approach towards client assignments involves a focus on direct (predetermined) results as well as process management and consultancy; the latter includes coaching individual people and teams in implementing major organizational changes. The firm thus tries to develop and sustain a competitive edge around result-oriented process consulting skills. Findings BT start-up There is a very strong (perceived) significance of the staff induction practice for organizational functioning because the firm’s few employees are very important for product development. Hiring the right people is necessary so that each individual brings in their expertise for the product development process. In addition, immediately immersing inductees is essential for BT’s product development processes. As a high tech start-up, BT had to develop its staff induction practice from scratch. At the moment it consists of two phases; a short period of formal induction and a socialization phase. This socialization phase consists of immediately immersing inductees in operating routines and mentoring in informal conversations. Mentoring involves knowledge sharing and articulation between seniors and juniors and building tacit experiences (learning by doing, learning by watching a colleague practise). There is however a differentiation in mentoring based on inductees’ level of education and experience. Since BT is a very small firm, there is no central HR function involved in coordinating the induction. The firm’s staff induction practice currently operates without any specific induction procedure because the CEO believes investing in any procedure is inefficient in view of the few people the firm currently employs as well as the low turnover. As such, new staffs are almost immediately immersed in operating routines (which is the core element of the staff induction practice). During this phase, the senior product-developer and product-manager mentor the inductee through informal conversations, mostly on practical issues around product development. These informal interactions take place at the laboratory or in the office where the senior and inductee are located. The CEO deliberately chooses to place inductees in the same offices as seniors who are fulfilling similar activities and tasks as the inductees will in the future, so that communication and mentoring become more easy. Although an induction procedure currently is absent, the CEO does have his own checklist for practical matters that he has to take care for when a new staff member arrives (e.g. make sure that there is an available computer). Without such a formal procedure, the staff induction practice consists of two phases. First, there is a short period of formal induction (when an inductee arrives). This short period of formal induction involves the following activities and takes about one to three days, depending on the function and tasks of the newcomer: . an introduction round in which the newcomer meets every staff member and others who are involved in the firm; . the CEO explains what has been done in the past concerning the product development and what is done at the moment; and . after this introduction story the CEO sends the inductees to seniors who describe their own disciplines. In the second phase, inductees are almost immediately immersed in operating routines because the firm does not have enough employees available at the moment to do all the practical tasks of the product development work. In other words, the firm needs everyone fully engaged in product development. “Socialisation” thus largely takes place in this second phase; a long-term process by which the newcomer “acquires the social knowledge and skills necessary to assume an organizational role” (van Maanen and Schein, 1979, p. 211). In this respect, the inductee acquires the organizational norms and values through participating in the ongoing operations of the organization. Mentoring supports this second phase. In the mentoring system of BT, inductees learn by doing; they watch seniors practise and learn to practise by imitation. In addition, individuals learn by watching Staff induction practices 161 SBR 5,2 162 a colleague practise. Individuals learn by being exposed to the experiences of others by watching a colleague practise and then imitating this practice. As such, inductees develop tacit experiences. The firm differentiates between level of education and experience: an inductee with an undergraduate degree and extensive previous work experience as well as those with a master or PhD degree will not follow a mentor-system. The latter group usually starts with reading business and technical documents (codified knowledge) and studying relevant professional and scientific literature; they are motivated to start conversations with colleagues as well as experts outside the firm to acquire the information they need to develop new ideas for the product development processes at BT. The CEO plays the main role in the first phase of the staff induction practice. In the second phase, seniors are the main contributors: the senior product developer and product manager fulfill the largest roles in mentoring in this phase, and the CEO fulfills a rather limited role. At regular intervals, he discusses with the inductee his/her personal development (e.g. asking questions as: “what are your personal career goals?” and “what do you think you can contribute to the firm?”). As a high tech start-up, BT had to develop its staff induction practice from scratch. Therefore, the induction routine has not changed significantly (yet). What has changed is that inductees are nowadays more effectively mentored in processes that the company has gained experience in. In this respect, the organization has become more experienced in product development, and is better able to pass this knowledge and experience to inductees. Tacit experience accumulation (learning by doing and learning by watching a colleague practise) causes the firm’s staff induction practice to gradually reconfigure; inductees learn from knowledge and experience of the organization. As a result of individual learning from inductees and additional employees, the firm has become more experienced in product development and thus, mentoring has changed in that it is nowadays requires less effort from both inductees and mentors. The firm’s staff induction practice currently operates without any specific procedure because the CEO believes investing in any procedure is inefficient in view of the few people the firm currently hires and employs as well as the low turnover. The staff induction practice is characterized by several key activities. First, there is a short period of introduction to other staff members, their disciplines, and to the history of the firm. This takes about one to three days, depending on the function and tasks of the newcomer. After this formal induction, new staffs are immediately immersed in key operating routines of the product development process. During this period, the senior product-developer and product-manager mentor the inductee in informal conversations, mostly on practical issues around product development. In this mentoring system, inductees learn by doing; they watch seniors practise and learn to practise by imitation, and as such develop tacit experiences: What the new junior product-developer has done is learning-by-doing. He is linked to the senior product-developer, who has a bachelor degree and is highly experienced. He has seen her practise. In this process he has learned more and more (CEO). However, an inductee with an undergraduate degree and extensive previous work experience as well as those with a master or PhD degree did not engage in such a mentoring system. The latter group usually started with reading business and technical documents (codified knowledge) and studying relevant scientific literatures; they are motivated to start conversations with colleagues as well as experts outside the firm to acquire the information they need to develop new ideas for the product development process. In addition, individuals learn by watching a colleague practise: I knew from my previous job how to coat. I bought an instrument and built it. I showed once how it worked and afterwards he ( junior product-developer) started doing it (Senior Product-developer). Evidently, opportunities for this type of learning have increased since the firm was founded several years earlier: When I arrived in this firm we were at the beginning of the product development process. Now we already have developed certain processes. You can train someone more easily in these processes than if you have to start from scratch with product development. I think this is partly the result of accumulating knowledge and experience (Product Manager). In sum, the induction practices in BT involve a very short formal introduction period, after which inductees are almost immediately immersed in operating routines. Inductees are mentored in this process. The inductee thus acquires the organizational norms and values through participating in the ongoing operations. Overall, the induction practice has not changed significantly since the firm was established, although it has become more effective over time as a result of accumulating experience and knowledge in product development. As such, BT’s CEO and key staff members have been engaging in extensive efforts to articulate and codify knowledge on product development, as the key practice in this BT startup. Thus, the (emerging) dynamic capability of BT appears to be tied its product development practice, rather than induction practice. Management consulting firm Over time MC has developed an induction practice involving several key activities. A key element of the induction practice is to immediately immerse newcomers in business operations linked to projects for major clients. As such, newcomers at the junior level develop their personal style and approach by figuring out what works and what does not work. In this respect, tacit experiences develop through learning-by-doing. Learning by directly engaging with colleagues doing their work is another way to develop tacit experience. In other words, individuals learn by exposing them to the experiences of others, either by listening to stories of events experienced by a colleague or watching a colleague practise. For example, in the training program for new staff, the latter are exposed to background knowledge, theories and tools the senior staff are working with. In addition, the diversity of role models causes juniors to learn different ways of approaching their work. This type of learning occurs within MC without significant articulation of learning outcomes. In this respect, every senior in MC engages in the task of immersing a junior in what it is that he does. Knowledge articulation and codification play a more important role with regard to other key elements of the induction practice. First, each junior is mentored by one of the senior people in formal as well as informal conversations. In these conversations knowledge is shared and articulated between senior and junior people (incl. newcomers). In addition, senior staff crafts, updates and circulates several internal documents about project and process management. These internal documents help Staff induction practices 163 SBR 5,2 164 speed up the induction process of newcomers, by providing an accessible overview of the intellectual capital accumulated within MC. MC’s induction practice involves a set of activities that have been quite stable over time (that is, at the time we conducted the interviews they had existed for more than five years). However, the induction process itself was recently codified in a small document. One of the partners observes that: We now have something on paper about how the development from junior to senior has to look like; we will ask everybody to make a personal development plan each year. A second aspect of the induction approach that changed involves the ideal profile of new staff. Because several attempts to recruit juniors without any consulting experience or senior people with substantial consulting experience failed in the past few years, MC’s management started thinking about a middle road. The idea of standardizing the profile of new staff therefore dissolved and was replaced by a more flexible approach. The firm’s management decided to hire a professional athlete – although he lacked the academic credentials MC normally would look for. MC hired him on a part-time basis, so he could continue to engage in professional sport activities. While the firm’s management acknowledged the disadvantages arising from the candidate’s background and commitment, they believed he could add something significant to the firm’s expertise in team development and coaching. As such, they changed the criteria that were used for selecting and hiring new staff members. Therefore, the staff induction practices at MC show several changes throughout the years. Moreover, ad hoc problem solving appears to be the main driver of changes in its staff induction practice; in turn, ad hoc problem solving draws on knowledge articulation as the main deliberate learning strategy. In terms of the framework of Hansen et al. (1999), this implies MC has adopted a “personalization” strategy towards knowledge management, with knowledge codification in a supporting role. Over time MC has developed an induction practice involving several key activities that have been quite stable over time (that is, at the time we conducted our interviews). A key element of induction that remained stable over time involves, for example, immediately immersing newcomers in business operations linked to projects for major clients. In this respect, newcomers have their own projects, and are going to clients by their own. As such, they develop their personal style and approach by figuring out what works and what does not (i.e. learning by doing). However, newcomers are guided by seniors. A second stable key element of induction over time is that newcomers learn by watching a colleague practise. Every senior of MC engages in the task of immersing a newcomer in what it is that he does (i.e. mentorship). A critical issue regarding mentorship is the way senior people include or exclude newcomers they would (not) like to mentor and involve in their projects. In choosing a particular newcomer, “chemistry” seems to be a critical factor. The diversity of role models causes newcomers to learn different ways of approaching their work. The one with whom the newcomer works with, determines for a large part what style the newcomer develops. After a while, however, inductees need to learn different skills from another mentor: At a certain moment in time, I tell him or her “you need someone different for your further development”. Why? Because you need to learn new skills as you’re beginning to look too much like me. A third key element of induction that remained stable over time is the rollout of a training program for new staff, where newcomers learn by listening to stories of events experienced by a colleague. In this training program, newcomers are exposed to background knowledge, theories and tools the senior staff is working with. MC also consciously developed its induction practice. First, the idea of standardizing the profile of new staff dissolved and was replaced by a more flexible approach. Also hiring criteria such as educational background were dropped from its original standard profile for hiring new staff, demonstrating flexibility so as to attract candidates who would not have considered earlier. A partner describes this process as follows: We have had conflicts over what is the “right” inductee. First, we just hired people, now we are looking for talent. Every partner, with no exceptions, needs to be convinced that the potential job candidate has the talent they are looking for, otherwise this person will not be hired. Second, newcomers are these days more emerged into external trainings, instead of only internal trainings. Third, theory became more important. That is, senior staff members of MC have invested in writing several popular management books published by established Dutch publishing houses as well as a series of papers made available to anyone interested. These writings address core ideas and perspectives on project, process and team management. A junior consultant perceives one of the books to be “a kind of bible which describes the project management methodology as we use it.” Finally, newcomers have started writing their own personal development plan, and guidelines for this were subsequently codified into a small document. In changing the induction practice, formal (management) meetings played an important role. One of the partners of MC sees formal meetings as a necessary condition for investigating one or two problems in-depth, because they provide an environment in which individuals take time for dialogue and thinking; as a result, deep understanding can arise more easily than in informal meetings: The eureka moments always take place when you and others can raise one or two real problems, for which time is set apart to investigate this problem in depth. This can take up to two hours before you have fully discussed it. [. . .] We will also have some conversations about it, but big breakthroughs will never be realized in small talk, for example, during coffee breaks. Nevertheless, the attempts to change the ideal profile of new staff largely draws on ad hoc problem solving. For example, at first only junior people were exclusively hired, and when that did not work, hiring only seniors also did not appear to work. Also, searching and recruiting new talents by way of consultancy days failed so far. However, hiring a person with a different kind of educational background who could bring extra added value for the company, did work. Changing the ideal profile of new staff thus raised substantial tensions and conflicts (i.e. regarding the criteria of educational background and “talent”). For example, one senior consultant went to great lengths to convince the second generation of leaders that a certain candidate could add value to the firm, regardless of his non-academic background. Moreover, the second generation of leaders has not agreed on what kind of talent they are looking for, because each partner has different ideas on the “right” person to hire. These tensions and disagreements clearly slow down the change process and undermine firm performance. Staff induction practices 165 SBR 5,2 166 In sum, the data on MC show that there are several stable elements in the induction practice: newcomers are immediately immersed into MC’s business operations, engage in learn-by-doing by watching a colleague practise, and participate in a training program. Moreover, MC also engaged in finetuning the induction practice: the ideal profile of new staff changed, external trainings were introduced, theorizing on consulting work became more important, and personal development plans were introduced. MC has also deliberately created the routine of formal meetings to engage in dialogue on wicked (policy) problems. Discussion and conclusion We examined the interaction between staff induction practices, learning strategies, ad hoc problem solving, and dynamic capabilities in a small management consultancy and research-driven biotechnology firm. The induction processes in both firms can be considered to be a “practice” as defined earlier in this paper: a set of repetitive activities and processes that human agents in the organization are (at least to some extent) conscious of and that can only be mastered by practising. The two case studies also suggest that small firms tend to rely on ad hoc problem solving (with regard to their induction practices), in view of the relatively low resource commitments this learning strategy implies. Both small firms studied in this paper, however, appear to be able to engage in knowledge articulation and codification to develop a dynamic capability, but tend to do so for organizational practices that are perceived to be more critical to the vitality and continuity of the firm (e.g. product development in the case of a BT firm). With respect to Zollo and Winter’s (2002) learning strategies, we observed that both small firms thrive on tacit experience development. In this respect, the development of tacit experience may also feed knowledge articulation and codification processes, since tacit experience is the basis for any sense-making effort (Dhanaraj et al., 2004; Weick, 1995). For example, Uzzi (1997) argues that the articulation and codification of knowledge of a (e.g. emerging) market is often facilitated through the kind of strong social ties that promote experiential learning between buyers and sales staff. Our findings in this paper also suggest that knowledge articulation may be the key learning strategy adopted by small firms to leverage their experiences and change operating routines in response to environmental imperatives. Small firms tend to be under resourced, and therefore managers and employees in these firms can only engage in knowledge codification on a selective basis. The data on the two cases in this paper suggests that knowledge is codified primarily to support knowledge articulation in team meetings, mentoring conversations, and so forth. Moreover, our results show that the BT firm has developed a straightforward induction practice since it was founded in 2003. As a research-driven start up in a high tech sector, the firm draws on an extensive set of knowledge articulation efforts as well as some codification efforts. The staff induction process in the BT case developed from point blanc (as a startup), initially mainly driven by ad hoc search and problem solving. We also observed that this firm appears to be engaging in developing a dynamic capability with regard to its product development practices. The MC firm’s staff induction process can also be regarded as an emerging practice. The staff induction practice at this firm underwent several changes throughout the years, and ad hoc problem solving have been driving these changes. Similar to the BT case, this firm does engage in knowledge articulation and codification, but these efforts are largely tied to its key business practices (i.e. consulting clients). Our study thus suggests that small firms can effectively develop and master their staff induction processes, but tend to do so on the basis of ad hoc problem solving rather than a dynamic capability (Winter, 2003). If small firms develop any dynamic capability, they tend to do so by building such a long-term commitment – in the form of knowledge articulation and codification – to specialized resources and processes that are perceived to be most critical to the firm’s continuity and performance. As such, this study confirms Winter’s (2003) hypothesis about the fundamentally different cost structures between dynamic capabilities and ad hoc problem solving, which may explain why dynamic capabilities tend to be rare and ad hoc problem solving prevails in many small organizations. 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(1995), Sensemaking in Organizations, Sage, Thousand Oaks, CA. Winter, S.G. (2003), “Understanding dynamic capabilities”, Strategic Management Journal, Vol. 24, pp. 991-5. Wright, P. and McMahan, G. (1992), “Theoretical perspectives for strategic human resource management”, Journal of Management, Vol. 18, pp. 295-320. Zollo, M. and Winter, S.G. (2002), “Deliberate learning and the evolution of dynamic capabilities”, Organization Science, Vol. 133, pp. 339-51. Further reading Antonacopoulou, E.P. (2004), “The virtues of practising scholarship: a tribute to Chris Argyris a ‘timeless learner’”, Management Learning, Vol. 35 No. 4, pp. 381-95 (special issue “from Chris Argyris and beyond in organizational learning research”). About the authors Deborah E.M. Mulders is a PhD student at the School of Industrial Engineering, Eindhoven University of Technology. She holds an undergraduate as well as MSc degree in Organization Studies of the University of Tilburg (The Netherlands). Peter A.J. Berends is an Assistant Professor at the Faculty of Economics and Business Administration, University of Maastricht. He obtained an undergraduate degree at Nijenrode University, and a MSc and PhD degree in business administration at University of Maastricht. A. Georges L. Romme is a Professor of Entrepreneurship and Innovation at Eindhoven University of Technology; he currently also serves as dean of the Industrial Engineering and Innovation Sciences Department of this university. He holds undergraduate and MSc degrees of the University of Tilburg, and obtained a PhD degree at the University of Maastricht. A. Georges L. Romme is the corresponding author and can be contacted at: a.g.l.romme@tue.nl To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints Staff induction practices 169