Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- Foreword
- Preface
- Part I Overview
- Part II Human outcomes
- Part III Organizational outcomes
- 7 Employee downsizing and organizational performance
- 8 Executive perceptions
- 9 Reducing costs and enhancing efficiency or damaging the company
- Part IV Post-downsizing implications
- Index
- References
9 - Reducing costs and enhancing efficiency or damaging the company
Downsizing in today’s global economy
Published online by Cambridge University Press: 05 July 2014
Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- Foreword
- Preface
- Part I Overview
- Part II Human outcomes
- Part III Organizational outcomes
- 7 Employee downsizing and organizational performance
- 8 Executive perceptions
- 9 Reducing costs and enhancing efficiency or damaging the company
- Part IV Post-downsizing implications
- Index
- References
Summary
We have all seen the headlines: “The Worst Recession since the 1930s,” “More Foreclosures, More Bankruptcies, and More Layoffs.” Although the recent economic decline in the global economy has spawned many attention-grabbing news stories of job loss, organizational downsizing in reality has been implemented in large numbers for the past 25 years. It has been estimated that roughly 2,000 employees were downsized in American corporations each business day throughout the 1990s (De Meuse and Marks, 2003). According to the US Department of Labor (2011), this number rose to more than 4,000 employees each business day between 2000 and 2007. And certainly, layoffs have increased markedly during the past few of years of economic difficulty – not only in America but around the globe.
Nearly two decades ago, we delivered a presentation at Cornell University entitled, “Is lean and mean really better than fat and happy?” (De Meuse, Vanderheiden, and Bergmann, 1993). The research tracked the financial performance of corporations that downsized during a five-year period relative to those firms that did not. Although the findings were not a ringing endorsement of large-scale layoffs, they point out an interesting observation. Given the length of time organizations have been implementing downsizing and the frequency in which they occur, one would expect companies to be highly effective at it. And yet, this does not appear to be the case. Numerous studies have reported that downsizing can lead to several adverse organizational outcomes, such as decreased employee morale and commitment, increased employee stress and involuntary turnover, and reductions in employee creativity and innovation (see Datta, Guthrie, Basuil, and Pandey, 2010; De Meuse, Marks, and Dai, 2011). In addition, several studies have found that an organization’s financial performance frequently does not improve in the near term (Cascio, 1998; Cascio and Young, 2003; De Meuse, Bergmann, Vanderheiden, and Roraff, 2004; De Meuse, Vanderheiden, and Bergmann, 1994). Cascio and Young (2003) concluded that “managers must be very cautious in implementing a strategy that can impose such traumatic costs on employees, both on those who leave as well as on those who stay” (p. 153).
- Type
- Chapter
- Information
- DownsizingIs Less Still More?, pp. 258 - 290Publisher: Cambridge University PressPrint publication year: 2012
References
, , , , and 2001. “Survivor reactions to organizational downsizing: Does time ease the pain?” Journal of Occupational and Organizational Psychology 74: 145–164.CrossRefGoogle Scholar
and 1999. “Changes in the work environment for creativity during downsizing.” Academy of Management Journal 42: 630–640.Google Scholar
and 2000. “The realistic downsizing preview: A management intervention in the prevention of survivor syndrome (Part 1).” Career Development International 5: 333–350.CrossRefGoogle Scholar
2008. One Foot Out the Door: How to Combat the Psychological Recession that’s Alienating Employees and Hurting American Business. New York: AMACOM.Google Scholar
1992. “Amputating assets.” May 4, US News and World Report, pp. 50–51.
1989. “The effects of work layoffs on survivors: Research, theory, and practice,” in and (eds.), Research in Organizational Behavior, Vol. X. Greenwich, CT: JAI Press, pp. 213–256.Google Scholar
, , and 1995. “Decision frame, procedural justice and survivors’ reactions to job layoffs.” Organizational Behavior and Human Decision Processes 63: 59–69.CrossRefGoogle Scholar
, , and 1996. “Downsizing the firm: Answering the strategic questions.” Academy of Management Executive 10: 38–45.Google Scholar
2000. “Organizational types and organizational innovation: Downsizing among industrial, financial and utility firms.” Sociological Forum 17: 307–342.CrossRefGoogle Scholar
2003. “The hidden costs and benefits of organizational resizing activities,” in and (eds.), Resizing the Organization: Managing Layoffs, Divestitures, and Closings. San Francisco, CA: Jossey-Bass, pp. 306–346.Google Scholar
1994. “Strategies for successful organizational downsizing.” Human Resource Management 33: 477–500.CrossRefGoogle Scholar
, , and 1991. “Best practices in white-collar downsizing: Managing contradictions.” Academy of Management Executive 5: 57–73.Google Scholar
1998. “Learning from outcomes: Financial experiences of 311 firms that have downsized,” in , , and (eds.), The New Organizational Reality: Downsizing, Restructuring, and Revitalization. Washington, DC: American Psychological Association, pp. 55–70.CrossRefGoogle Scholar
2009. Employment Downsizing and Its Alternatives: Strategies for Long-Term Success. Alexandria, VA: Society for Human Resource Management.Google Scholar
and 2003. “Financial consequences of employment-change decisions in major US corporations: 1982–2000,” in and (eds.), Resizing the Organization: Managing Layoffs, Divestitures and Closings. San Francisco, CA: Jossey-Bass, pp. 131–156.Google Scholar
, , and 1997. “Financial consequences of employment-change decisions in major US corporations.” Academy of Management Journal 40: 1175–1189.Google Scholar
, , and 2004. “Effects of downsizing practices on the performance of hospitals.” Strategic Management Journal 25: 405–427.CrossRefGoogle Scholar
and 1992. “Relationships of work stressors with aggression, withdrawal, theft, and substance use: An exploratory study.” Journal of Occupational and Organizational Psychology 65: 177–184.CrossRefGoogle Scholar
, , and 1987. “How to reduce the size of the organization but increase effectiveness.” Journal of Business Strategy 8: 66–70.CrossRefGoogle Scholar
2001. “RIF a la carte: Using reported cases to develop effective reduction-in-force criteria.” Employee Relations Law Journal 27(3): 7–47.Google Scholar
. 2009. “The employee engagement crisis.” Retrieved from
, , , and 2010. “Causes and effects of employee downsizing: A review and synthesis.” Journal of Management 36: 281–348.CrossRefGoogle Scholar
, , , and 2004. “New evidence regarding organizational downsizing and a firm’s financial performance: A long-term analysis.” Journal of Managerial Issues 16: 155–177.Google Scholar
, , , and 2006. “Downsizing and upsizing in Japan: Its frequency, magnitude, and effects on financial performance.” Paper presented at the Academy of Management Annual Meeting, August, Atlanta.
and 2003. Resizing the Organization: Managing Layoffs, Divestitures, and Closings. San Francisco, CA: Jossey-Bass.Google Scholar
, , and 2011. “Organizational downsizing, mergers and acquisitions, and strategic alliances: Using theory and research to enhance practice,” in (ed.), APA Handbook of Industrial and Organizational Psychology, Vol. III. Washington, DC: American Psychological Association, pp. 729–768.Google Scholar
and 1990. “The tie that binds – has become very, very frayed!” Human Resource Planning 12: 203–213.Google Scholar
, , and 1993. “Is lean and mean really better than fat and happy?” Paper presented at the Human Resource Planning Society Research Symposium, Cornell University, New York.
, , and 1994. “Announced layoffs: Their effect on corporate financial performance.” Human Resource Management Journal 33: 509–530.CrossRefGoogle Scholar
, , , , and 2008. “How different team downsizing approaches influence team-level adaptation and performance.” Academy of Management Journal 51: 182–196.CrossRefGoogle Scholar
and 2002. “Downsizing: Employee threat or opportunity? An empirical study on external and internal reorientation practices in Belgian companies.” Employee Relations 24: 389–402.CrossRefGoogle Scholar
2007. “Public sector downsizing and employee trust.” International Journal of Public Administration 30: 249–271.CrossRefGoogle Scholar
2003. “The impact of layoffs on family, friendship, and community networks,” in and (eds.), Resizing the Organization: Managing Layoffs, Divestitures, and Closings. San Francisco, CA: Jossey-Bass, pp. 188–219.Google Scholar
and 2006. “Fears of dot-com crash, Version 2.0.” Los Angeles Times, July 16. Retrieved from .
2009. “Don’t let layoffs ruin customer service.” Harvard Business Publishing, 3–5.
and 2008. “Dumb and dumber: The impact of downsizing on firm performance as moderated by industry conditions.” Organization Science 19: 108–123.CrossRefGoogle Scholar
, , and 2002. “Business-unit level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis.” Journal of Applied Psychology 87: 268–279.CrossRefGoogle ScholarPubMed
, , and 1994. “Corporate divestiture intensity in restructuring firms: Effects of governance, strategy, and performance.” Academy of Management Journal 37: 1207–1251.Google Scholar
2003. “Leadership and the psychology of turnaround.” Harvard Business Review 81(6): 58–67.Google Scholar
and 2002. “Stock prices’ reactions to layoff announcement.” Journal of Business and Management 8(2): 99–107.Google Scholar
, , , and 2000. “Factors underlying the effect of organizational downsizing on health of employees: A longitudinal cohort study.” British Medical Journal 320: 971–975.CrossRefGoogle Scholar
and 1996. “Reaching and changing front-line employees.” Harvard Business Review 74(3): 95–104.Google Scholar
and 1992. Coping with Job Loss: How Individuals, Organizations, and Communities Respond to Layoffs. New York: Lexington Books.Google Scholar
, , and 2010. “Firm downsizing and satisfaction among United States and European customers.” Journal of Business Research 63: 697–706.CrossRefGoogle Scholar
and 2003. “Downsizing and de-knowledging the firm.” Work, Employment, and Society 17(1): 73–100.CrossRefGoogle Scholar
2003. “Revitalization after resizing,” in and (eds.), Resizing the Organization: Managing Layoffs, Divestitures, and Closings. San Francisco: Jossey-Bass, pp. 275–305.Google Scholar
and 2005. “Resizing the organization: Maximizing the gain while minimizing the pain of layoffs, divestitures, and closings.” Organizational Dynamics 34(1): 19–35.CrossRefGoogle Scholar
and 1990. “Lateral communication as seen through the eyes of employees.” Communication World 7(12): 32–35.Google Scholar
, , and 1988. “Downsizing: Practices in manufacturing firms.” Human Resource Management 27: 145–161.CrossRefGoogle Scholar
, , and 2000. “A sociocognitive interpretation of organizational downsizing.” Academy of Management Review 25: 227–243.CrossRefGoogle Scholar
and 2010. “A study of the association between level of slack reduction following downsizing and innovation output.” Journal of Management Studies 47: 483–508.CrossRefGoogle Scholar
, , and 2009. “Downsizing the company without downsizing morale.” Sloan Management Review 50(3): 39–44.Google Scholar
1993. Healing the Wounds: Overcoming the Trauma of Layoffs and Revitalizing Downsized Organizations. San Francisco, CA: Jossey-Bass.Google Scholar
, , and 2010. “The impact of positivity and transparency on trust in leaders and their perceived effectiveness.” The Leadership Quarterly 21: 350–364.CrossRefGoogle Scholar
1998. The Human Equation: Building Profits by Putting People First. Boston, MA: Harvard Business School Press.Google Scholar
. 1992. The Economist, March, p. 79.
and 2001. “The effects of job insecurity on employee safety outcomes: Cross-sectional and longitudinal explorations.” Journal of Occupational Health Psychology 6(2): 139–159.CrossRefGoogle ScholarPubMed
, , , and 2007. “Productivity, counterproductivity and creativity: The ups and downs of job insecurity.” Journal of Occupational and Organizational Psychology 80: 479–497.CrossRefGoogle Scholar
2002. “Look before you lay off: Downsizing in a downturn can do more harm than good.” Harvard Business Review 80(4): 20–21.Google Scholar
1995. Psychological Contracts in Organizations: Understanding Written and Unwritten Agreements. Thousand Oaks, CA: Sage.Google Scholar
, , , and 2009. “Downsizing strategies and organizational performance: A longitudinal study.” Management Decision 47: 950–974.CrossRefGoogle Scholar
and 2002. “To stay or go: Voluntary survivor turnover following an organizational downsizing.” Journal of Organizational Behavior 23: 707–729.CrossRefGoogle Scholar
and 2008. “Keeping your headcount when all about you are losing theirs: Downsizing, voluntary turnover rates, and the moderating role of HR practices.” Journal of Management Journal 51: 259–276.Google Scholar
. 2011. “Extended mass layoffs – fourth quarter 2010, annual totals – 2010.” Press release, February 11. Retrieved from .
, , and 1997. “Effect of organizational downsizing on health of employees.” Lancet 350: 1124–1128.CrossRefGoogle ScholarPubMed
, , and 1999. “And the beat goes on: Corporate downsizing in the twenty-first century.” Human Resource Management 38: 261–268.3.0.CO;2-R>CrossRefGoogle Scholar
2008. “Going beyond the basics: The effects of mergers and acquisitions on employee retention and engagement.” Symposium presented at the Society for Industrial and Organizational Psychology Conference, Multiple Perspectives on Retaining and Engaging Employees suring Organizational Transitions, M. L. Marks (Chair), San Francisco.
- 3
- Cited by