The Role of Organizational Slack and Human Capital in Managing Performance Shocks: An Analysis of US Nursing Homes and Hurricane Katrina

Public service organizations employ buffers to ward off disruptive performance shocks such as disasters, budget cuts, and uncertain events. Existing applications on buffering focus on how slack human resources are reallocated to high-risk areas during times of uncertainty to dampen the impact these events have on core organizational processes. Besides slack, the quality of human capital is also important. Skilled personnel have the technical acumen and expertise to help managers navigate through treacherous times and still deliver public services. Yet, existing work does not disentangle the distinct impact of these two buffers. Using a panel dataset of nursing homes in Louisiana and Mississippi, I explore how personnel slack and human capital helped mitigate the devastation that Hurricane Katrina had on a very fragile, dependent, and sensitive segment of the population. The findings suggest that human capital buffers the impact of Hurricane Katrina on health deficiencies and physical dependency. In contrast, slack capacity amplified the impact of Katrina on health deficiencies.