Association for Public Policy Analysis & Management

Much of the literature on public sector cutback management is normative and suggests how to implement cutback strategies as part of strategic management. The paucity of empirical research is striking, given the importance of cutback management in assessing future employment needs of public sector agencies. Such research is crucial in providing sufficient levels of services to fulfill the missions the public has come to expect from government. Using a mixed methods approach, this study explored various human resource (HR) strategies used to deal with cutbacks and examined the consequences of using these strategies.

Drawing on in-depth interviews with 17 directors in 9 local governments in New York, New Jersey, Connecticut, and Pennsylvania, this study identified the use of various HR strategies, including increasing employees’ contributions to pensions or health benefits, employee salary freezes, restructuring, and alternative work arrangements. Furthermore, this study explored the subsequent consequences of using these various strategies, with a focus on budgets, capacity and employee morale. To test these grounded hypotheses systematically, survey questionnaires were administered to health and human service directors of counties with populations over 10,000 residents, with an adjusted response rate of 32.8%.

The results showed that multiple factors had varied influences on their decisions about human resource strategies in cutback situations. Utilizing ordered logistic regression to explore this effect, the analytic results indicated that employee salary freezes had a negative effect on trust in management, employee morale and job satisfaction. The findings of this study indicated as well that restructuring was associated strongly with lower budgets, capacity, trust, employee morale and job satisfaction. The regression analyses also found some empirical evidence that alternative work arrangements had a negative relationship with trust in management and job satisfaction. However, we find no effects of increasing employees’ contributions to pensions or health benefits.

The negative effect of HR strategies on employee morale implies the application of survivor syndrome in the public sector. The lack of significant findings is also important, as these null findings suggest that the effects of HR strategies may be strategy-specific. This study suggests the negative effects of HR strategies in cutback situations while identifying efficient and effective new ways of doing business through continuous quality improvement is one key to address future budget shortfalls. Furthermore, maintaining the discipline to build trust, employee morale and job satisfaction, both targeted, dedicated and general is a gateway to minimizing the negative effect of budgetary shortfalls caused by perioding economic recessions.

The study has implications for human resources practices and theories, as well as important implications for the changing policies in developing and achieving the strategic goals of their organizations.