Preserving employee capabilities in economic turbulence

Abstract

This paper examines how, in times of austerity, employee capabilities can assist firms in augmenting their human capital and at the same time meeting their financial obligations. Real option theory, a concept borrowed from economics, is used to provide a theoretical framework to demonstrate that management has choices when making decisions in times of austerity. The framework provides a means of understanding how decisions can be made to both maintain employee capabilities and at the same time focus on company profit maximisation, typically demanded by shareholders in times of austerity. The study establishes the benefits of a continuous approach to capability development in an environment of economic turbulence. Most importantly, it paves the way for future research in this increasingly critical area.

Sustainable expatriate compensation in an uncertain environment

“…A decade later during the global financial crisis (GFC), Christine Lagarde, the IMF Managing Director, highlighted this problem when she observed in respect of the impact of macro uncertainty on micro HR issues: “there is a level of uncertainty which is hampering decision makers from investing in employees and from creating jobs” ( IMF, 2012 ). While there are high profile examples of MNCs (such as American Express, Google, Accenture, AT&T, IBM, GE and Proctor and Gamble) that seem to have exemplary expatriate programs which appear to ride the cycles of economic crisis reasonably well ( Staff, 2016 ); many others fail the challenge to effectively manage employees' compensation systems and other attributes ( Luo, 2000 ; Maley, 2019 ). Typical exemplars of Mrs. Lagarde's sentiments can be seen in MNCs as diverse and successful as Boeing, Walt Disney, Sun Microsystems, Caterpillar, Sprint-Nextel, Texas Instruments, and Microsoft who all announced SGHRM restructurings, signalled drastic cost reductions and significant layoffs at the commencement of the GFC ( Mohrman and Worley, 2009 ).…”

“… Foote and Folta (2002) argue that austerity measures in a crisis often include the use of temporary labour which often encourages the employer not to invest in training. A situation which, according to Maley (2019) , diminishes employee capabilities in the long-term. However, when investment in employees is maintained during an economic uncertainty, workforce productivity losses are found to be minimized ( Zatzick and Iverson, 2006 ).…”

“…A central part of the problem with expatriate remunerations is that many MNCs have a short-term profit-driven focus ( McNulty, 2014 ), particularly in uncertain business conditions and economic uncertainty ( Maley and Kramar, 2014 ; Maley, 2019 ). Irrefutably, uncertain business conditions provide a pervasive reflex reaction to cost-cutting in MNCs ( Bloom, 2014 ), global mobility ( Salt and Wood, 2012 ), and expatriates in the form of salary and benefits ( Tornikoski, 2011 ), due to their higher overall cost relative to national staff.…”

COVID‐19 and the uncertain future of HRM: Furlough, job retention and reform

“…For individual workers, practices focused on retention management are likely to have a positive impact upon discretionary effort, worker morale and job satisfaction. Recent work by Maley ( 2019 ) argues that investment in employee capabilities during periods of economic turbulence, including actively retaining staff and investing in training, can lead to improvements in individual motivation, commitment, productivity and longer‐term organisational performance. Studies of furloughing in other countries and contexts (notably the US, where workers are often placed on unpaid leave during crisis periods) reveal how workers perceive it as preferable to longer‐term wage cuts or redundancies (Baranik et al., 2019 ; Lee & Sanders, 2013 ), with firms undertaking furloughing seeing minimal reductions in satisfaction, and little negative effects on long‐term performance.…”

Austerity, resilience and the management of actors in public hospitals: a qualitative study from South Africa

“…Health spending as a percentage of gross domestic product (GDP) declined on average by 3% in 128 LMIC's from 2008 to 2010. [1][2][3] Numerous governments instituted austerity programmes to address the increasing deficits and unsustainable debts. 4 5 With the current COVID-19 pandemic, the accompanying fiscal stimulus packages and resulting debt, austerity is likely to be a common experience in many settings over the next decade, affecting many health systems.…”