Preserving employee capabilities in economic turbulence

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.