Employee Slack: Wealth and Organizational Adaptation

The resource availability explanation of organizational adaptation and performance hinges upon the idea of buffering the technical core against uncertainty through the strategic management of financial and human resources to create a cushion of slack. Our paper complements those explanations by investigating the concept of employee slack — resources in excess of current consumption needs — and its influence on organizational adaptation and performance. Using the population of Norwegian residents and for-profit firms from 2010-2017 and leveraging the repeal of inheritance tax as a quasi-natural experiment, we assess to extent to which employee slack contributes to organizational adaptation and its successful execution. Our findings reveal that employee slack a) is a critical resource that affects both the willingness of employees to engage in and successfully execute adaptive actions and b) amends and complements our understanding of the relations between organizational slack and organizational adaptation and performance. Collectively, our findings highlight the importance of individual-level resources in shaping organizational outcomes. We advance our knowledge of various forms of organizational slack, the antecedents of organizational adaptation and performance and the little-explored wealth dynamics within organizations.