Human Resource Cuts During Financial Crisis: Deinstitutionalization of Cost-Cutting Practices

Abstract

In lieu of the company’s current performance, the market condition, and the changing institutional norm on cost-saving HR activities such as layoffs, a firm desires to strategically justify layoffs to influence investors’ perceived context of layoffs. Investigating how the good and bad performing companies justify mass layoffs differently before and after the financial crisis helps explain how organizations make tradeoffs between efficiency gains and legitimacy concerns to build, maintain, tarnish, and repair reputations. We also investigate whether the companies employed other alternative cost-saving HR practices such as wage cut, wage freeze, over time without pay, benefit cuts, and furloughs (unpaid leave) and compare how they justify them differently during the two periods.