A Multilevel Appraisal and Conceptualization of Company Downsizing

Downsizing is widely used to improve corporate efficiency and competitiveness. Although downsizing can be useful, the process has a number of associated disadvantages, and companies commonly overlook the negative impact on society, the business profession, the company, and employees' collective attitudes and perceptions. Consequently, the purpose of this study was to present a multilevel framework that examines the impact of societal, institutional, organizational, and individual factors on corporate downsizing. The potential negative effects of downsizing on each of these domains are also examined, and recommendations regarding the successful implementation of employee reduction programs are presented based on information highlighted in the framework.     

Relationships between self-concepts,aspirations, emotional responses,and intent to leave a downsizing organization

This study examines how individual-level factors, such as task self-confidence, self-esteem, personal goals, job satisfaction, and organizational commitment affect workers' decisions concerning intent to leave the downsizing organization. Results indicate that task self-confidence and role self-esteem had positive, largely direct effects on intent to leave, which can be contrasted with the inverse relationship between the self-concept and intent to leave typically found in non-downsizing organizations. From this investigation, several implications for managing human resources in the downsizing organization are drawn and discussed in the context of planning for downsizing, implementing downsizing, and managing the downsized organization.     

Survivors' reactions to downsizing: the importance of contextual factors

Downsizing has been a recurrent theme in corporate life for the last 20 years. Literature in this area has evolved sporadically and covers many aspects of it. Although this has resulted in rich data, there is a lack of robust research that integrates the strategic and operational elements of downsizing. Furthermore, downsizing results in negative outcomes such as loss of skills, learning and innovation. It can also result in negative emotions including anger, frustration and guilt. However, there is insufficient data about the specific conditions or contextual factors that influence survivors reactions. This article presents the findings of a study conducted in four large organisations in the UK that have undergone downsizing. It proposes a theoretical model encapsulating the organisational context, and argues that the two key factors that determine the context are frequency of downsizing and the degree of control that the organisation exercises in making the decision to downsize. A broad set of propositions is presented as to the likely reactions of ‘survivors’ in the various organisational contexts of downsizing.     

Labor union negotiations: stepping stones or stumbling blocks for a responsible downsizing strategy? Empirical tests in Taiwan

Firms have used organizational downsizing strategies for years. But organizational downsizing not only cannot surely improves firm performance, but also harms thousands of employees and their families. A number of scholars investigating organizational change suggest that ‘a responsible downsizing strategy’ can mitigate or solve this issue. As the major stakeholder in downsizing, labor unions naturally negotiate with firms to protect employee rights and benefits. Their negotiation, therefore, may either enhance or mitigate the effect of responsible downsizing strategy on firm performance. This study used a sample of 154 downsized local firms and multinational corporations in Taiwan to examine the research construct, and invited focus groups to have a further validated explanation. The findings show that labor union negotiation may act as either stepping stones or stumbling blocks. The results indicate that firms employing labor union negotiation experience higher downsizing performance than non-unionized firms do. However, labor union interventions can also become stumbling blocks. Labor union negotiation neutralize the positive effect of employee-caring practices on downsizing performance, leading to a decline in downsizing performance when firms increase employee participation and justice consideration in the downsizing process. The research findings provide implications for further scholarly research and management practices in terms of organization change, stakeholder management and labor–management relationship.     

Workforce Downsizing and Firm Performance: An Organizational Routine Perspective

While there is an extensive body of work on how organizational routines emerge and evolve over time, there is a scarcity of research on what happens when routines are disrupted or disbanded through the elimination of key individuals involved in them. This study is the first to theorize and empirically examine the relationship between the magnitude of workforce downsizing and firm performance applying an organizational routine perspective. Consistent with prior research on organizational routines, we posit that small‐scale downsizing leads to efficiency improvements without disrupting the existing routines. While larger routine disruptions occur in both medium‐ and large‐scale downsizing, we further argue and find that large‐scale downsizing tends to be more beneficial than medium‐scale downsizing. Building on prior research on routines, we reason that in medium‐scale downsizing employees try to salvage the impaired, partially functioning routines, while large‐scale downsizing requires a more fundamental rethinking and re‐creation of routines leading to more positive outcomes. Our study contributes to downsizing research through the application of the organizational routine perspective to explain the financial outcomes of downsizing. In doing so, we depart from the widely held assumption in the downsizing literature that the relationship between the magnitude of downsizing and firm performance is linear. Our study also extends prior research on organizational routines by highlighting the usefulness of conceiving routines as mindful accomplishments where the pressure to engage in path‐breaking cognitive effort may lead to better results than path‐dependent repairing of routines.     

Slash and burn or nip and tuck? Downsizing,innovation and human resources

Workforce downsizing has become a popular human resource practice by management over the last few decades. But surprisingly its impact on a number of organizational outcomes remains ambiguous. In this study we examine the link between different types of employee downsizing and organizational innovativeness. Our results, based on a survey of UK firms, indicate that the impact of workforce downsizing on innovation is contingent on the speed of implementation and the motive for downsizing. Contrary to expectations, the results reveal that the size of the workforce reduction has no significant impact on innovation.     

Organizational Transformation in Transition Economies: Resource-based and Organizational Learning Perspectives

ABSTRACT The capitalist and socialist societies of the twentieth century assigned firms different roles within their economic systems. Enterprises transforming from socialist to market economies thus face fundamental organizational restructuring. Many former state-owned firms in the transition economies of Central and Eastern Europe have failed at this task. These firms have pursued primarily defensive downsizing, rather than strategic restructuring, as a result of both internal and external constraints on restructuring strategies.
Building on the organizational learning and resource-based theories, we analyse strategies available to management in privatized, former state-owned enterprises in transition economies to restructure their organization. Both internal forces promoting or inhibiting the restructuring process, and external constraints arising in the transition context are examined. A model and testable propositions are developed that explain post-privatization performance. Implications of our research point to the ways in which firms should manage and develop their resource base to transform to competitive enterprises.     

Downsizing and the hyper-effective manager: The shifting importance of managerial roles during organizational transformation

This article describes how managerial roles change in importance during periods of significant organizational transition. An interdisciplinary approach reveals that (1) the competing values framework is a useful framework for examining this question; (2) the transformational roles increase as expected during downsizing; (3) three of four transactional roles also increase during downsizing. This last counterintuitive finding is illuminated by the interdisciplinary model developed. Overall, managers show significant evidence of hyper-effectivity—a state of high performance that is likely to be unsustainable in the long term. Implications for human resource practitioners and researchers are discussed. © 1996 by John Wiley & Sons, Inc.     

Downsizing and survivor reactions in Malaysia: modelling antecedents and outcomes of psychological contract violation

This study provides an empirical test of a model of antecedents and consequences of psychological contract violation (PCV) caused by the experience of downsizing. A longitudinal survey method was used to collect data at two different points in time (a month after downsizing, and eight months later) from a sample of 281 survivors from a large Malaysian organization going through downsizing. Respondents were from the headquarters (HQ), factories and subsidiaries located across the country and were employed across hierarchical positions including managers, supervisors, technical, operating and administrative staff. A causal model is proposed and tested. The model proposes that the perception of justice and negative affectivity at time 1 (T1) predict PCV, which in turn predicts three attitudinal and behavioural outcomes of commitment, organizational citizenship behaviours (OCBs) and turnover intentions at time 2 (T2). Three variations of the model (fully-mediated, partially-mediated and unmediated) were tested with structural equation modelling. The results show that both the perception of justice and negative affectivity significantly predict PCV, and that there is a direct effect between PCV and commitment, an indirect effect between PCV and OCBs, and both direct and indirect effects between PCV and turnover intentions. The findings demonstrate the utility of psychological contact framework in explaining survivor reactions to downsizing.     

Does downsizing improve organisational performance? An analysis of Spanish manufacturing firms

The objective of this study is to examine the effect of downsizing on corporate performance, considering a sample of manufacturing firms drawn from the Spanish Survey of Business Strategies for the 1993–2005 period. No significant difference in post-downsizing performance arises between companies that downsize and those that do not. Likewise, we find that substantial workforce reductions through collective layoffs do not lead to improved performance levels either. Downsizing may not, therefore, be a way for managers to enhance performance. This is particularly true of Spain, where the labour market is characterised by the ring-fencing of employees' rights and substantial severance costs.     

Antecedents and measures of organizational effectiveness: A systematic review of literature

The purpose of this paper is to systematically review the academic literature on organizational effectiveness (OE) through an analysis of 134 contributions. While OE is the most important goal for an organization, research views on this construct are diversified. Over time, the literature has increasingly focused on antecedents, measures, and more diversified approaches to OE. This paper contributes to the OE literature by developing an integrated conceptual model that considers the levels of antecedents (individual, group, and organizational) as well as measures of OE (financial, operational, structural, and attitudinal). Previous research has focused primarily on organizational-level antecedents and non-financial measures of OE. The paper also discusses the barriers hampering the measurement of OE. An agenda for future research is also provided.     

Strategies for successful organizational downsizing

This article reports the results of a study of 30 organizations that engaged in downsizing over a four-year period. Three questions were investigated: (1) What general strategies are used by organizations to downsize? (2) What are the effects of downsizing on organizational performance? (3) What are downsizing's “best practices?” or, What are the differences between organizations that effectively downsize and those that do not? Three main strategies for downsizing are explained, the managerial actions to overcome the negative effects of downsizing are enumerated, and the best practices of successful downsizing firms are presented.     

Career success after stigmatizing organizational events

This article examines the effect of six types of stigmatizing organizational events on employees' career moves to another employer: criticism of the organization in the media; resignation of key individuals from the organization; downsizing; a drop in net income; lawsuits launched by the Securities and Exchange Commission, competitors, or customers; and lawsuits launched by employees. Stigmatizing events that signal the decline of corporate performance are the most devastating for professional career success. Outsiders, on the other hand, are less sensitive to an organization's involvement in lawsuits launched by public authorities or employees. Stigmatizing events affect the career success of every professional in the organization, irrespective of his or her hierarchical level. © 2007 Wiley Periodicals, Inc.     

Commitment before and after: An evaluation and reconceptualization of organizational commitment

A review of the organizational commitment literature has pointed out several advantages as well as some limitations of the approach advanced by Meyer and Allen (Meyer, P.J. and Allen, J.N. (1997). Commitment in the workplace: Theory, research, and application. Thousand Oaks, CA: Sage.). The advantages include good psychometric properties of the current scales, acceptable discriminant validity of the three dimensions, and research findings that showed the usefulness and acceptable content validity of the three-dimensional approach. Some of the limitations are limited predictive validity, conceptual ambiguity of continuance commitment, and concept redundancy between normative and affective commitment. This paper suggests a conceptualization that builds upon the strengths of the current approaches and minimizes their limitations. The proposed theory contends that organizational commitment is two-dimensional. One dimension is instrumental in nature and the second is affective. In addition, a sharp difference needs to be made between commitment propensity that develops before one's entry into the organization and commitment attitudes that develop after one's entry into the organization. The advantages of the suggested theory and its implications for the understanding of organizational commitment and future research on it are discussed.     

Work-force cutback decisions of Israeli managers: a test of a strategic model

This study investigates the decision-making pattern of managers in the Israeli electronics industry. The purpose of the study is to examine whether decisions regarding work-force cutbacks in this industry follow Greenhalgh, Lawrence and Sutton’s (1988) model of work-force reduction. Their model proposes that such decisions are made incrementally and hierarchically, ranging from lay-offs with no severance pay (the most severe strategy for employees’ well-being), to hiring freeze (the least severe strategy for employees’ well-being). The study hypothesis was that cutback decisions of Israeli managers followed this hierarchy, and that the likelihood of the hierarchical decision- making pattern was increased in groups characterized by non-Israeli national affiliation, public sector affiliation, corporate guaranteed employment policy and employment of temporary labour. It was also hypothesized that these characteristics determined the point at which cutback decisions enter the cutback strategies hierarchy. The results of the present study showed that Israeli managers, unlike their American counterparts, generally have not followed this strategic model. However, in a sub-group analysis it was found that the incremental model was used in those organizations characterized by affiliation with the public sector, by use of temporary labour and by guaranteed employment policy. The only characteristic found significantly to determine the entering point in the cutback hierarchy was sectoralaffiliation. These findings are explained using four different theoretical approaches: (a) downsizing decision making (there is little evidence in literature of rational decision making under conditions of organizational stress); (b) cultural differences (Israeli managers, unlike their American counterparts are characterized by last-minute solutions and improvisations); (c) organizational context (the nature of the high-tech industry studied and its lack of downsizing experience); and (d) organizational politics (strong involvement of government and labour unions in the cutbacks process).     

Do Institutionalized Traditions Matter During Crisis? Employee Downsizing in Korean Manufacturing Organizations

This study examines the downfall of the permanent employment tradition in South Korean manufacturing organizations in the aftermath of the 1997 East Asian economic crisis. We explore whether organizations abandon their traditional institutionalized practices under discontinuous environmental change or despite the change continue these time‐honoured practices. We examine both the organizational factors that inhibit lay‐offs and performance indicators that trigger organizations to re‐evaluate their lifetime employment practices under drastic environmental upheaval. We test our hypotheses on 574 Korean manufacturing organizations and find that under discontinuous change: (1) economic and institutional factors simultaneously apply opposite forces on organizational actions; (2) organizational factors such as poor performance on productivity and export create a need for headcount reductions while factors such as size, domestic ownership, government support, and unionization create social and institutional pressures that inhibit downsizing; and (3) prior experience with downsizing moderates the relationship between institutional factors and further downsizing.     

Strategies for Improving Codes of Ethics Implementation in Construction Organizations

It is necessary to reconsider the assumptions upon which the process of implementing compliance with ethical programs rests, in both theoretical and practical terms. These assumptions should hinge on organizational enablers that allow embeddedness of codes of ethics in the web of an organization's processes. This article sets out to describe an approach that will facilitate implementation of codes of ethics in construction organizations and a comprehensive literature survey approach is adopted to achieve this. The paper equally employs the application of the European Foundation for Quality Management (EFQM) model as a tool to stimulate ethical behavior in an organization, with the focus on the enabler criterion of the model. The authors discuss organizational enablers in relation to the implementation of ethical codes. The study demonstrates how ethics can be managed in an organization by proposing a framework to enhance codes of ethics embeddedness in the web of an organization. The paper indicates current research gaps and future opportunities for both academics and practitioners.     

Why doesn’t downsizing deliver? A multi-level model integrating downsizing,social capital,dynamic capabilities,and firm performance

Firms downsize to improve their bottom line results often in reactive response to negative external shocks, such as economic downturns, but even in proactive efforts to enhance organizational performance when they are financially ‘healthy’, such as restructuring. Research reveals, however, that not only does downsizing generally fail to improve a firm’s financial performance, but that it may even lead to reduced financial performance. To investigate this puzzling outcome, we build on previous research and integrate the concepts of downsizing, social capital, dynamic capabilities and performance in a multi-level model as well as discuss how social capital mediates the relationship between downsizing and dynamic capabilities. Thereafter, we develop (a) four propositions to elucidate how changes to the structural dimension of social capital due to downsizing, i.e. the removal of three key social network positions and changes to the firm’s network structure, negatively mediate the relationship between downsizing and a firm’s dynamic capabilities, and (b) two propositions incorporating internal (knowledge intensity) and external (institutional pressures) contextual variables in our model. We conclude by discussing how our research contributes to the downsizing and SHRM literature as well as the resource-based view and social capital literature before providing suggestions for future research and practitioners.