Deal of Downsizing in Corporations, Businesses and Other Organizations

Abstract: In recent years, there has been a great deal of downsizing in corporations, businesses and other organizations throughout the United States. According to the two papers noted below, the negative effects of such layoffs cannot be completely eliminated, but they can be helped or reduced moderately through specific actions such as increased communication and counseling and trust- and team-building. Amundson (2004) notes that corporate downsizing has become an important area of study due to the increasing impact on the American workforce. Most companies do little to prepare their employees for such negative measures. The majority of studies on this topic have focused on the victims of the layoffs; few have centered on the survivors. The studies that focused on survivors primarily used survey methods that assessed commitment, motivation, level of performance, job satisfaction, stress symptoms, and coping mechanisms and how these are related to self-affirmation, gender and organizational level, self-esteem, self-efficacy, and intent to leave the organization. In Amundson's review of literature, he found only two related studies in which a semi-structured group interviewing format was used. Evans (1995) studied U.S. soldiers in the downsized military and Noer (1993) interviewed employees of a downsized private organization. Similar themes emerged from both of these studies: increased stress; decreased motivation; reduced performance with extra workload, distrust/withdrawal of management/leader; and experiencing the emotions of anger, sadness, guilt, insecurity, and fear. Research by Armstrong-Stassen (1998) used mail-in questionnaires to analyze the individual traits and support resources that helped 82 managers in a Canadian federal government department over a 2-year period cope with downsizing. Acknowledging that â€Å"reactions of the remaining employees will largely determine the effectiveness and quality of the services provided by the federal government in the future† (p. 310), she found managers reported a significant decrease in r job performance and commitment. To add to the literature regarding both positive and negative impacts to downsizing, Amundson (2005) interviewed 31 employees from a variety of organizations, including a federal human resources department, hospital, retailer, private employment consulting group, and two oil and gas companies. All individuals had remained in their organizations throughout the time of restructuring. Thirteen of the participants were men, and 18 were women. Their ages ranged from early 20s to mid-50s. Participants were interviewed within six months of the completion of downsizing in their organization. Participants were asked to describe, in behavioral terms, the positive and negative incidents they experienced during the downsizing period. The interviews highlighted three major questions: (a) What recent changes have you experienced in the organization? (b) What helped you to adjust to these changes (the positive incidents)? and (c) What hindered your adjustment (the negative incidents)? The responses by the interviewees of both negative and positive incidents demonstrated the mixed and sometimes confused reactions that survivors have to the downsizing experience. Participants reported both hindering and helpful aspects, regardless of gender or line of work. No event or concern was experienced as negative by everyone, although there definitely were more negative incidents. Throughout the interviews, survivors explained their experiences during the notification and implementation of the layoffs and the downsizing process and the way it was communicated. As the ramifications to downsize became clearer, workers reacted to the possible loss of their own position, changing coworker relations, organizational support programs, leadership, and the effect work changes had on their home life. The survivors cited 102 critical incidents (75 negative, 27 positive) about the restructuring process. The high participation rate, 65 percent for negative and 42 percent for positive incidents, demonstrated the survivors' desires to be knowledgeable and part of developing the restructuring process. These individuals saw themselves playing a major role in a successful transition. Survivors felt better when involved. They felt frustrated when their input was ignored. Survivors also criticized counter-productive and wasteful processes. Nineteen survivors reported 31 negative incidents and 12 reported 18 positive incidents regarding fellow employees prior to the downsizing. The vast majority of negative incidents concerned grieving for laid-off peers. Survivors who were transferred away from their coworkers felt isolated and lonely and expressed guilt and envy. Positive incidents involved coworkers supporting each other through the uncertainty of the situation and seeking methods to communicate with one another after downsizing. Survivors also discussed the manner in which the organization treated their colleagues during the layoffs. Fair and sensitive treatment was reassuring to survivors; unfair or insensitive treatment resulted in resentment and anger. Management's actions to facilitate or hinder the downsizing are significant. A total of 48 incidents–36 negative and 12 positive–were reported, with participation rates of 18 (58 percent) for and 8 (26 percent) respectively. Many employees were concerned about company leadership. They felt ambivalent when managers would look out for employees but, ultimately, had their own best interests at heart. Managers were perceived as untrustworthy when withholding information. Employees were angry when supervisors did not offer direction, guidance and information required by employees, but appreciated supervisors who were proactive and showed a positive attitude toward the change. Effective communication could calm fears, conflicting communication increased confusion and anxiety. Although survivors had jobs, their sense value diminished. Morale also decreased, with high incidents of people feeling angry, fear and anxiety. Although employees received support from family many experienced problems outside of work, including illness. Most employees considered the possibility of job loss currently or the future. Negative and positive critical incidents regarding job loss were reported by 13 (42 percent) and 9 (29 percent) of survivors, respectively. Survivors, found efforts to support employee mental health helped and that they would choices if they lost or left their jobs. Amundson concluded that the negative aspects of the downsize can be reduced or helped during downsizing by certain actions, since the integrity of the downsizing process can either destroy or build new loyalties: the trustworthiness of management is imperative, there is a real need for clear and open communication during all stages of the process.. The importance of support from family members is critical, as is ongoing counseling from the company in regards to the issues they face in the new environment. As Amundson finds, there are ways to help or reduce the â€Å"downs† of downsizing. Amabile (1999) decided to see how such aspects as creativity and teamwork could be improved in downsizing environments. If creativity usually declines during downsizing, the work environment plays a central role. Context encompasses all elements of the psychological climate of both the formal organization of policies and procedures and informal organization of values, norms, and interpersonal relationships. Research has shown that context can be important not only in affecting survivors' reactions, but also in determining the impact of those reactions on job performance. A threatening situation ranks high as problematic. Threats are defined as external events or circumstances in which individuals, groups, or organizations perceive negative or harmful consequences for their vital interests. This leads to dysfunctional employees and organizations. However, studies of creativity stress the role of an organization's environment in affecting creative behaviors. The componential model of creativity and innovation shows that five environmental components affect creativity: encouragement of creativity: autonomy or freedom in the day-to-day conduct of work; resources, or the materials, information, and general resources available for work; pressures including both positive challenge and negative workload; and organizational impediments to creativity such as conservatism and internal strife. High-creativity projects were generally higher on work environment stimulants to creativity and lower on work environment obstacles to creativity. Thus, it appears that there is indeed a relationship between the work environment and the level of creativity produced by individuals in teams. Amabile's study (1999) examined the work environment for creativity at a large high-tech firm before, during, and after downsizing. Most creativity-supporting aspects of the work environment decreased greatly during the downsizing but increased somewhat later: The opposite occurred for creativity-undermining aspects. Stimulants and obstacles to creativity in the work environment mediated the effects of downsizing. These results suggest ways in which theories of organizational creativity can be expanded and ways in which the negative effects of downsizing might be avoided or alleviated. Although Noer (1993) suggested that survivors may not recover from the negative effects of downsizing, this research suggests the perceived work environment can improve modestly. Perhaps, some people eventually accept ongoing change within this company, as Noer suggested. However, it is also seen in his study that experienced downsizing was a less a predictor of work environment than was work group stability or downsizing. Thus, suggests Amabile, future research should focus attention here. The work group stability results are largely consistent with the theory of the need to belong suggesting that ongoing relational human bonds are a strong, basic, and pervasive motive that has long-lasting positive effects on emotional patterns and cognitive processes. The anticipated downsizing results suggest that, even if an employee's work unit has been eliminated, the certainty of knowing the process is over leads to a generally more positive work environment than the expectation of future downsizing in a presently intact unit. That is, the anticipation of the negative event may be less tolerable than the actual experience. This study's results suggest the possibility of adding a dynamic element to the componential model of organizational creativity. Presently, the componential model is static and specifies relationships between the perceived work environment and creative behavior at any one point in time. It does not address the dynamics of change in the work environment or how events within organizations might lead individuals to perceive their work environments as creativity-supporting or creativity-undermining. What types of events give rise to such environments, and what sorts of events lead to change in those environments? If this is so, events may prove to have a particularly powerful effect on the work environment for creativity. In future research, there could be an investigation of the mechanisms by which anticipated downsizing and work group instability might lead to degraded work environments. The threat theory could be especially helpful in guiding such studies, because it directly addresses possible changes in organizational environments under negative circumstances. Specifically, the following effects could be predicted: a centralization of control would lead to perceptions of lower autonomy/freedom, (2) a conservation of resources would lead to perceptions of less sufficient resources, (3) restriction of information flow would lead to perceptions of less encouragement of creativity from the organization overall (organizational encouragement), from one's own supervisor (supervisory encouragement), and from one's work group (work group supports), and (4) reliance on familiar routines would lead to perceptions of more organizational impediments to creativity, through a generally greater conservatism. Researchers may use this information to understand how downsizing and other organizational events bring about change in the perceived work environment for creativity. Most important, reports Amabile, â€Å"first, and most obviously, it is important to do it right.† Since downsizing decreases creativity, managers must first be sure that downsizing is a truly necessary. Second, when it is not possible to maintain team stability, it may be helpful to undertake team-building efforts as soon as new groups are formed–especially when high levels of creativity are desired. Finally, organizational creativity will be less apt to suffer in a downsizing if the process is concluded in a timely manner and if a downsizing moratorium can be identified for some meaningful period of time afterward. Overall, concludes Amabile, â€Å"Our study †¦suggests that corporate decision makers of the future should approach downsizing with great caution. The long-term negative effects of such actions on creativity and innovation may only retrigger the corporate woes that started the cycle in the first place.†