Strategic Human Capital Responses During Economic Downturns


One of the fundamental challenges that managers face is how to best manage the human capital stock of their company during an economic downturn. Research over the past decades in the fields of Strategic Human Capital, Strategic Human Resource Management and Turnaround Literature has shown that downsizing as a singular response does not necessarily lead to long term performance benefits (Cascio, 2010; Datta, Guthrie, Basuil, & Pandey, 2010; Trahms, Ndofor, & Sirmon, 2013). Interestingly, neighboring fields such as Economics have investigated counter-cyclical human capital responses, such as labor hoarding at a Macroeconomic level. In the field of Strategy and HR, the basic ground-work for investigations into counter-cyclical human capital responses by firms has been laid by some very fascinating studies (Greer, Ireland, & Wingender, 2001; Kim & Ployhart, 2014; Knudsen & Lien, 2015, 2019). Yet, there is a need for investigating whether and in what ways, existing employee characteristics within the firm influence the choice of strategic response during crisis and the performance outcomes of such choices. The aim of my thesis will be to contribute to this small, but growing field. In Paper 1, I will investigate whether characteristics of the shock and perceived characteristics of the human capital stock influence the degree of labor hoarding through reallocation of employees in the firm. In Paper 2, I will consider the objective human capital characteristics of the employees in the firm and whether this influences labor hoarding. Labor hoarding will be studied using both subjective and objective measures. Paper 3 will consider the performance impact of counter-cyclical hiring during economic downturns.