ArticlePDF Available


The business literature on the causes and consequences of downsizing has grown significantly over the last three decades. A multitude of causes has been identified. Downsizing is sometimes seen primarily as a cost-reducing response to various crises and external factors over which management has little or no control. Others see downsizing as a strategic management initiative in its own right. A considerable body of literature indicates workforce reductions often lead to negative financial and operational outcomes for the downsizing firm as well as negative psychological outcomes for victims, survivors, and executioners. This research paper represents a literature review on the causes and consequences of downsizing. It addresses a diverse body of literature and suggests an integrative framework on the typical causes and consequences of downsizing as well as outlines some challenges ahead for researchers seeking to advance the knowledge of downsizing.
Copyright © eContent Management Pty Ltd. Journal of Management & Organization (2011) 17: 498–521.
Causes and consequences of
downsizing: Towards an integrative
School of Global Leadership and Entrepreneurship, Regent University, Virginia Beach, VA, USA
Centre for Empirical Research on Organizational Control, Örebro University, Örebro, Sweden
The business literature on the causes and consequences of downsizing has grown signifi cantly over
the last three decades. A multitude of causes has been identifi ed. Downsizing is sometimes seen
primarily as a cost-reducing response to various crises and external factors over which management
has little or no control. Others see downsizing as a strategic management initiative in its own right.
A considerable body of literature indicates workforce reductions often lead to negative fi nancial
and operational outcomes for the downsizing fi rm as well as negative psychological outcomes for
victims, survivors, and executioners. This research paper represents a literature review on the causes
and consequences of downsizing. It addresses a diverse body of literature and suggests an integrative
framework on the typical causes and consequences of downsizing as well as outlines some challenges
ahead for researchers seeking to advance the knowledge of downsizing.
Keywords: downsizing, causes, consequences, literature review
The research on downsizing has emerged
largely from the 1980s onward after years of
being a neglected topic in organizational science
(De Meuse & Marks, 2003; Mellahi & Wilkinson,
2004; Whetten, 1980). A multitude of stud-
ies covering a wide range of different aspects of
downsizing in various countries and regions have
been conducted (Gandolfi , 2006a). Studies have
involved various elements and facets drawing
from several academic disciplines, including
Industrial Organization, Organizational Ecology,
Organizational Studies, and Organizational
Psychology (Mellahi & Wilkinson, 2004).
The body of literature on downsizing is sub-
stantial, refl ecting its prevalence in the U.S., the
UK, Canada, Europe, Australia, New Zealand,
and Japan in the 1980s, 1990s, and the early
days of the new millennium (Cameron, 1994;
Cameron, Freeman, & Mishra, 1991, 1993;
*Dedicated to Craig R Littler.
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 499
severance payments (Barker & Duhaime, 1997;
Barker & Mone, 1994; Downs, 1995; Robbins &
Pearce, 1992), failure in reducing costs (Gandolfi &
Hansson, 2010), and decreasing returns on assets
and return on common stock (Cascio, 1991, 1993;
Cascio et al., 1997).
Given the complex and multifaceted nature of
downsizing as a phenomenon and the cumulative
development of the associated literature spanning
over more than three decades, we argue that there is
a need for a review of the literature in order to gen-
erate a picture of what we know and what have we
learned (see also: Cascio, 1993). First, the literature
on downsizing has grown considerably and con-
tinues to expand at a rapid pace while less time has
been spent on capturing and covering the increasing
body of knowledge on this salient topic. Second, we
believe that the continued accumulation of the mul-
titude of fi ndings will support researchers and prac-
titioners in their understanding of the causes and
consequences of downsizing. By doing so, the review
proposes an integrative framework on the causes and
consequences of downsizing (see Figure 1).
This research paper begins by examining the
history, defi nition, and scope of downsizing.
Subsequently, the focus shifts to the causes of
downsizing and the fi nancial, organizational, and
human consequences following the conduct of
downsizing. In the fi nal sections, the paper pres-
ents contemporary downsizing practices, suggests
an integrative framework, and outlines the chal-
lenges ahead for researchers seeking to advance
the knowledge of downsizing.
Where did the term downsizing come from? A
considerable number of management terms have
originated with the automobile industry and, sur-
prisingly perhaps, downsizing nds its origin there
as well. By 1970, the average American family car
weighed 2 tons, stretched over 17 feet long, and
often sported a massive V-8 engine. Big was beau-
tiful, and bigger was better. The oil crisis of 1973
generated the need for smaller family cars with
reasonable performance and economy. Producing
Cascio, 1993; Dolan, Belout, & Balkin, 2000;
Gandolfi & Neck, 2003; Farrell & Mavondo,
2004; Littler, 2000). While downsizing has devel-
oped into a ‘popularist’ term (Littler, 1998) that
has arisen out of managerial press usage (Littler,
Dunford, Bramble, & Hede, 1997), it lacks pre-
cise theoretical formulation (Macky, 2004).
As is evident from the literature, there is a wide
range of downsizing causes, drivers, and driv-
ing forces, yet no single cause seems to be able to
explain and account for the emergence and per-
vasiveness of the phenomenon (Datta, Guthrie,
Basuil, & Pandey, 2010). So-called ‘classical’
causes of downsizing involve cost reducing efforts
(Radcliffe, Campbell, & Fogarty, 2001), ‘failures’,
including failures to adopt to changing technology,
niche dynamics, and insuffi cient management skills
(Mellahi & Wilkinson, 2004), responses to various
types of crises and external factors (Espahbodi,
John, & Vasudevan, 2000), and global competi-
tion (Mirabal & DeYoung, 2005).
Downsizing generates negative performance
outcomes, such as the failure to reduce costs, the
lack of signifi cant increase in return on assets and
return on common stock (Cascio, 1991, 1993;
Cascio, Young, & Morris, 1997), decreased levels
of worker commitment (Cameron et al., 1993) and
commitment (Zatzick & Iverson, 2006), and the
emergence of the ‘dirty dozen’ – a list of negative
attributes associated with organizational decline
(Cameron, 1994). A number of downsizing studies
address the ‘survivor syndrome’ as a cluster of nega-
tive workforce outcomes (Brockner, Davy, & Carter,
1985; Brockner et al., 1986a, 1986b; Brockner,
Greenberg, & Grover, 1988a). Downsizing research
reports decreased employee efforts and adaptability,
increased propensity to leave, and increased resis-
tance to change (Brockner, 1992; Brockner, Grover,
& Blonder, 1988b; Greenhalgh & Rosenblatt,
1984; Littler, Wiesner, & Dunford, 2003). Further,
studies on the fi nancial consequences of downsizing
raise problematic costs associated with downsizing
activities (Atwood, Coke, Cooper, & Loria, 1995).
These include deteriorating shareholder value
(Appelbaum, Everard, & Hung, 1999a), effects of
Franco Gandolfi and Magnus Hansson
In the early 1980s, downsizing came into
prominence as a topic of both scholarly and
practical concern. It became the management
‘catch-cry’ of the 1990s which subsequently
became known as the ‘downsizing decade’
(Dolan et al., 2000, p. 34). As a strategic mana-
gerial tool, it has changed tens of thousands of
companies and governmental bodies and the
lives of millions of blue and white-collar work-
ers around the world (Amundson, Borgen,
Jordan, & Erlebach, 2004).
How can downsizing be defi ned? According to
Cameron (1994, p. 192), downsizing is defi ned as:
a set of activities, undertaken on the part
of the management of an organization and
designed to improve organizational effi ciency,
productivity, and/or competitiveness.
these vehicles became known as ‘downsizing’ in
the U.S. auto industry. Thus, the term downsiz-
ing was coined to defi ne the scaling down of car
sizes by automobile manufacturers (Appelbaum,
Simpson, & Shapiro, 1987). In an organizational
setting, the term was fi rst applied to a process
of cutting back employees when business and
government in the U.S. began making major
reductions to their employee bases in response
to recessionary pressures in the 1980s. As a con-
sequence, downsizing became associated with
workforce reduction strategies (Halley, 1995)
and a strategy to streamline, tighten, and shrink
the organizational structure with respect to the
number of personnel employed by the fi rm. As
downsizing became more prevalent, the term was
applied to a broader range of managerial efforts to
improve a fi rm’s performance.
External factors:
• Global competition
• Globalization
• Financial crises and econo mic downturns
• Pressure from rival firms
• Poor industry conditions
• Detorioration of micro niche
• Loss of market share
• Changes in demographics
• Exit from international markets
• Mergers and Aquisit ions
• Change in legislation and regulatory frameworks
• Change in technology
Firm level:
• Cost reducing efforts
• Decreased financial resourc es
• Shareholder requirements
Manageri al:
• Crisis management
• Failing strategic initiatives
• Change of strategy
• Poor strategic investments
• Make use of human capita l
• Improve efficiency and productivity
• Market signalling
• Management faddism
• Return on Assets (ROA) ↓
• Return on Equity (ROE) ↓
• Profitability ↓/↑
• Profit margin ↓/↑
• EBDIT margin ↓/ ↑
• Operating performance ↑
•Costof sales↓
• R&D expenditures ↓
• Market-to-book ratio -
• Stock-market price
(short run) ↑
• Stock-market price
(long run) -/ ↓
• Innovativeness ↓
• Risk aversion↑
• Politicized climate↑
• Productivity ↓
•Numberof conflicts↑
• Speed of conflict
• Individualisation ↑
• Level of teamwork ↓
• Employee turnover ↑
• Resistance to change↑
• Distrust towards
management ↑
• Levels of product/
service quality ↓
• Level of learning ↓
• Competence level in
the organization ↓
Human: Executioners
• Guilt ↑
• Self-esteem ↓
• Earning power ↓
• Motivation ↓
• Propensity to leave ↑
• Level of committment ↓
• Loyalty ↓
Human: Victims
• Self-esteem ↓
• Helplessness ↑
• Earning power ↓
•Levelof committment↓
Human: Survivors
• Career consciousness ↓
• Organizational involvement ↓
• Organizational comittment ↓
• Level of work quality ↓
• Guilt ↑
• Level of anger ↑
• Level of arousal ↑
•Stress ↑
• Relief ↑
• Job satisfaction ↓
• Motivation ↓
• Propensity to leave ↑
• Resistance to change ↑
• Number of conflicts ↑
• Speed of conflict resolution ↓
• Absenteeism ↑
•Risk taking↓
• Loyalty ↓
• Distrust towards
Downsizing activity
resolution ↓
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 501
contraction of labor resources. Put differently,
companies resort to downsizing when they inten-
tionally eliminate positions or jobs.
Evidently, the majority of downsizing research
has been conducted in the U.S. (Chadwick, Hunter,
& Walston, 2004). Still, the contraction of work-
forces has not been confi ned to U.S. fi rms, but has
occurred throughout the world (Ryan & Macky,
1998). Empirical evidence shows that downsizing
and its many related concepts has been particu-
larly pervasive in North America (Freeman, 1994),
Britain (Thornhill & Saunders, 1998), Canada
(Dolan et al., 2000), Europe (Lamsa & Takala,
2000), Japan (Griggs & Hyland, 2003), Australia
(Gandolfi , 2006b), New Zealand (Macky, 2004),
South Africa (Littler, 1998), and Eastern Europe
(Redman & Keithley, 1998). Downsizing is also
prevalent in countries that are moving from a
state-dominated to a market system, such as coun-
tries in Latin America, Russia, and Eastern Europe,
where privatization often brings about the need
to reduce fi rms’ headcounts (Appelbaum et al.,
1999a,b). Downsizing has even become common
in certain industrialized countries, such as Japan
and Sweden, which have historically displayed
very stable employment practices (Mroczkowski
& Hanaoka, 1997). Cascio (2003) points out that
downsizing has also affected China, which has
become one of the world’s foremost manufactur-
ing hubs. In 2003 alone, over 25 million Chinese
lost their jobs from the transformation and priva-
tization of state-owned enterprises (SOE).
In sum, empirical and anecdotal evidence sug-
gests strongly that the intentional, purposeful
adoption of downsizing as a reactive or proactive
managerial strategy has occurred in all industries
and sectors and impacted businesses, govern-
ments, and individuals (Macky, 2004) around the
world (Mirabal & DeYoung, 2005) over the past
three decades (Gandolfi , 2008).
Research design
The key objective of this paper was to undertake
a comprehensive survey of the downsizing litera-
ture, covering the period from 1985 to 2009, and
Cameron’s defi nition embraces a holistic
approach in an attempt to increase a fi rm’s overall
performance. On the other end of the continuum,
Cascio (1993, p 95) asserts that downsizing is
essentially ‘the planned eliminations of positions
or jobs’. In other words, the primary purpose of
downsizing is not increased organizational perfor-
mance per se, but the reduction of the workforce.
In its narrowest sense, downsizing can be viewed as
a set of activities introduced to make a fi rm more
cost-effective. In its widest sense, downsizing may
be seen as a complete strategic transformation
intended to change an organization’s design, its
work processes, corporate culture, values and atti-
tudes, and mission (Kets de Vries & Balazs, 1997).
Downsizing in its most extreme form may turn
into an across-the-board cut in personnel (Kets
de Vries & Balazs, 1997) or imply a re-focus on
certain core businesses and a disposal of peripheral
ones (Crainer & Obleng, 1995).
A precise conceptual understanding of downsiz-
ing is required to adopt a cumulative approach to
academic research. Hence, four major attributes
have been identifi ed. First and foremost, downsiz-
ing is an intentional set of activities that strongly
implies organizational action. Second, downsizing
frequently involves a reduction in the number of
employees. Third, downsizing concentrates upon
improving the effi ciency of a company in order to
contain or decrease costs, to enhance revenues, or to
increase competitiveness. Fourth, downsizing inev-
itably infl uences work processes and leads to some
kind of work redesign (Cameron, 1998). According
to Mirabal and DeYoung (2005), downsizing con-
stitutes a reactive and defensive or proactive and
anticipatory strategy implemented by management
that inevitably makes a signifi cant impact upon a
company’s size, costs, and work processes, as well
as a fi rm’s shape and culture (Zemke, 1990). While
a single defi nition of downsizing does not exist
across studies, it is clear that downsizing means a
contraction or shrinkage in the size of a fi rm which,
frequently, implies job losses and retrenchments.
For the purpose of this literature review, downsiz-
ing will be referred to as an organizations planned
Franco Gandolfi and Magnus Hansson
were subsequently divided into three categories;
namely executioners, victims, and survivors. The
identifi ed and typical categories were derived
from the literature review outlined below.
Finally, this paper’s paradigmatic domicile is
primarily situated within the social action theory
within the functionalistic approach (Burrell &
Morgan, 1979). The social action theory is one
of the paradigmatic domains within the func-
tionalistic paradigm (Burrell & Morgan, 1979).
Within the social action theory realm explana-
tions of the social world must be adequate on the
level of meaning. Explanations to social affairs
must account for the way in which individuals
attach subjective meaning to situations and orient
their action in accordance with their perceptions
of those situations. The social action theory aims
to incorporate idealist and positivist approaches
to the study of society, bounded by the func-
tionalistic border to subjectivistic approaches.
Application of the social action theory consists of
a whole range of ontological, epistemological, and
methodological assumptions (Burrell & Morgan,
Why do fi rms resort to downsizing? From a review
of the downsizing literature it is evident that down-
sizing is a complicated and multifaceted phenom-
enon with a multitude of possible causes. While
scholars have asserted various downsizing causes,
drivers, and driving forces, no single cause can
explain and account for the emergence and perva-
siveness of the phenomenon. Still, there are some
archetypes of causes to a downsizing decision.
Taking Radcliffe et al. (2001) scheme as a starting
point, ‘classical’ causes of downsizing are various
types of cost reducing efforts in response to vari-
ous types of crises and external factors over which
management has little or no control. Frequently
cited examples include global competition
(Mirabal & DeYoung, 2005), pressures from rival
rms (Luthans & Sommer, 1999), poor industry
conditions (Espahbodi et al., 2000), deterioration
of micro niches (Cameron, Sutton, & Whetten,
to provide a coherent and integrated portrait of
the previous research.
In the downsizing literature a variety of terms
have been used including but not limited to:
building-down, compressing, consolidating,
contracting, declining, de-hiring, de-massing,
de-recruiting, dismantling, downshifting, func-
tionalizing, leaning-up, ratcheting-down, ratio-
nalizing, reallocating, reassigning, rebalancing,
rebuilding, redeploying, redesigning, reduction-
in-force, re-engineering, renewing, reorganizing,
reshaping, resizing, restructuring, retrenching,
revitalizing, rightsizing, slimming, slivering, and
streamlining (Cameron, 1994; Gandolfi , 2006b;
Littler et al., 1997). Given the multitude of terms,
this paper focuses on and applies some of the
most frequently used applied terms, such as, orga-
nizational restructuring, downsizing, delayering,
reengineering, and lean production (Cameron,
1994) as the search terms we have applied for
the data collection. Non-published items on the
internet were not included. All references were
abstracted or full copies obtained and subjected
to thematic analysis.
We followed the suggested principles of
Thorpe, Holt, Macpherson, and Pittaway (2005)
in order to adopt a systematic review involv-
ing transparency and a broad coverage. The
review was limited to published journal articles,
conference proceedings, and book chapters.
Comprehensiveness was achieved by cross check-
ing references through, among others for exam-
ple, the social science citation index (SSCI). To
qualify for the analysis, studies must have con-
tained and focused on causes and consequences
related to the strategic initiative of downsizing.
This paper asserts the ambition to outline
an integrative framework of typical causes and
consequences of downsizing activities. Extracted
from the literature review, we sorted explana-
tory factors into different categories. For the
causes of downsizing we distinguished between
external and fi rm-level factors and for the con-
sequences we divided between fi nancial, organi-
zational, and human factors. The human factors
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 503
predominantly white-collar workers, especially
among higher-level white-collar workers, pro-
fessionals, and middle managers, as seen in the
1980s (Littler, 1998; Dolan et al., 2000). Still and
as often argued by managers, fi rms downsize to
make best possible use of their human, capital,
and physical resources. They seek to gain effi -
ciency and productivity – measured in terms of
output per employee (Cascio, 1998; Chadwick
et al., 2004) – and to react to temporary changes
(Anthony, Perrewe, & Kacmaar, 1996). These
rms employ outsourcing (Beylerian & Kleiner,
2003) and the increased use of contingent labor
(Beylerian & Kleiner, 2003) as complementary
drivers to downsizing activities.
Downsizing can also be caused by fi nancial
pressures and fi nancial losses (Cameron et al.,
1988; Cascio, 1991, 1993). These are among the
dominant reasons to downsize and can include
reductions in workforce, investments, and pro-
duction equipment (Appelbaum, Lavigne-
Schmidt, Peytchev, & Shapiro, 1999b; Caulkin,
1995; Marks & De Meuse, 2003). Examples of
nancial and related pressures driving downsiz-
ing activities include decreased fi nancial resources
(Cameron, 1994), demands from shareholders
(Delorese, 1998), effects of mergers and acquisi-
tions (Kets de Vries & Balazs, 1997), privatization
(Allen, 1997), negative profi tability, higher opera-
tion costs, and lowered profi t margins, (Allen,
1997; Hambrick & D’Aveni, 1988), changes in
customer preferences, legislation, and regulatory
frameworks (Lee & Alexander, 1999; Marks &
De Meuse, 2003; Zammuto & Cameron, 1985),
higher administrative costs and the problems of
raising capital, as well as attracting, recruiting,
and retaining highly skilled workers (Aldrich
& Auster, 1986). Also, poor operating and
stock price performance, increased gearing, and
threats from external markets for corporate con-
trol precede employee layoffs (Hillier, Marshall,
McColgan, & Wereman, 2007). However, in
its extreme, long-term, severe forms of fi nancial
pressure, fi nancial losses, inabilities to handle
payments, and different forms of bankruptcy can
1988; Hannan & Freeman, 1988, 1989), shrink-
ing market (Harrigan, 1982), severe loss of mar-
ket shares (Hedberg, Nystrom, & Starbuck, 1978;
Starbuck, Greve, & Hedberg, 1978), change in
demographics (Mellahi & Wilkinson, 2004),
divestments (Montgomery & Thomas, 1988),
exit from international markets (Jackson, Mellahi,
& Sparks, 2005), failing strategic initiatives and
wrong investments (Ghemawat, 1991), and other
types of failures (Mellahi & Wilkinson, 2004).
Downsizing can be the consequence of a man-
agement practice or strategy. Ryan and Macky
(1998) distinguished between downsizing as a
reactive and downsizing as a proactive strategy.
The former strategy, implemented predominantly
prior to the late 1980s, was used to temporarily
adjust to a cyclical downturn or to avoid organiza-
tional demise and bankruptcy. The more versatile
proactive strategy seeks to address a multitude of
organizational situations, including but not lim-
ited to rectifying historical tendencies towards
overstaffi ng, managing cyclical business declines,
introducing new information technology, the use
of automation, shifting business strategies, merg-
ers and acquisitions (M&A), globalization, and
cost-reduction strategies aimed at achieving com-
petitive advantages (Farrell & Mavondo, 2004).
Downsizing is sometimes employed not only to
cut labor costs by shedding labor in the short run,
but also to apply downward pressure on wage
demands from the remaining workforce in the
longer term (Farrell & Mavondo, 2004; Ryan &
Macky, 1998).
Downsizing activities involve temporary
and permanent job cuts (Beaumont & Harris,
2003), plant closings (Allen, Freeman, Russell,
Reizenstein, & Rentz, 2001; Hansson & Wigblad,
2006a, 2006b), site closures (Gandolfi , 2006b),
and layoffs (Macky, 2004). Often, cutting initia-
tives have been aimed at the unskilled blue-col-
lar workers earning an hourly wage (Cameron,
1994), as well as some lower-level white-collar
workers (Freeman, 1994). In some aspects and
type of industries, however, there has been a shift
of job-cutting targets from blue-collar workers to
Franco Gandolfi and Magnus Hansson
for fi rms to engage in downsizing; in fact, tech-
nological improvements often resulted in hiring
additional workers. Similarly, Kets de Vries and
Balazs (1997) conclude that it was not the intro-
duction of technology per se, but the administra-
tive impact of the revolutionary transformation
in information and communication technology,
that resulted in downsizing. Still, a chief outcome
of the technological advances in the 1990s was
an increased redundancy of middle management
(Kets de Vries & Balazs, 1997) which resulted in
‘delayering’ (Gandolfi & Hansson, 2010; Littler,
From a neo-institutional perspective, a number
of empirical fi ndings of drivers and driving factors
that (partially) explain why organizations prac-
tice downsizing activities have been identifi ed:
Downsizing rates are higher among fi rms that
execute many consolidations than among those
that execute fewer ones, and fi rms that make large
investments in labor-saving technologies have
higher downsizing rates than those that make rel-
atively small investments in technologies (Budros,
1999, 2002, 2004). Further, downsizing rates are
higher among fi rms with higher employee com-
pensation levels than among those with lower lev-
els, and larger fi rms have higher downsizing rates
than smaller ones (Budros, 1997, 1999).
Moreover, fi rms with smaller shareholder
values have higher downsizing rates than those
with larger values (Budros, 2004). It is evident
that fi rms under attack from raiders have higher
downsizing rates than those not under attack,
rms in deregulated industries have higher
downsizing rates than those operating in regu-
lated ones (Budros, 1999, 2004), and downsiz-
ing rates increase during economic troughs and
decrease during peaks (Budros, 2004; Cascio,
1993; McKinley et al., 1995). Downsizing rates
are lower among employee-centered fi rms than
among those that are less employee-oriented,
and downsizing rates are higher among fi rms
with CEOs possessing fi nancial backgrounds
than among those where the CEOs came from
other educational and professional backgrounds
cause a complete workforce reduction and non-
continuity of business processes (Altman, 1971;
Aziz, Emanuel, & Lawson, 1988; Chopra, 2006;
Dimitras, Zanakis, & Zopounidis, 1996).
Firm behavior can be meaningfully interpreted
as ‘signals’ to capital markets and stakeholders.
Downsizing activities can serve as a key signal to
capital markets, where executives often think that
a stable or rising stock price constitutes an essen-
tial resource for the company (Littler & Gandolfi ,
2008). Downsizing has been applied as a strategy
in order to yield immediate increases in stock
prices (Appelbaum et al., 1999a, 1999b; Downs,
1995; Fisher & White, 2000). Executives are usu-
ally aware of the positive reaction immediately
following a decision to downsize, which, presum-
ably, could be used as means of achieving short-
term positive stock price movements. Investors
and fi nancial analysts could be expected to view
the announced downsizing programs favorably,
leading to an increase in stock prices (Appelbaum
et al., 1999a, 1999b; McKinley, Sanchez, &
Schick, 1995).
Harrington (1998) attributes downsizing to
surpluses of both employees and facilities, the
direct result of increased competition, increased
effi ciency, reduced need for middle managers
resulting from delayering and employee empow-
erment, and reductions in required maintenance
resulting from improved quality and reliability
of products. In a similar vein, Appelbaum et al.
(1999a, 1999b) view downsizing as one of many
cost-containment strategies, such as total quality
management (TQM), reengineering, transac-
tion processing, and information systems, imple-
mented in order to streamline activities and to
reduce waste and ineffi ciencies.
Downsizing can also be caused by a response to
technological change and advancement (Luthans
& Sommer, 1999). For example, Appelbaum
et al. (1999a, 1999b) asserted that technologi-
cal advancement and innovations resulted in
increased productivity and a decrease in required
workers. In contrast, Littler (1998) contends that
a change in technology was not the primary reason
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 505
effectiveness, productivity, and profi tability
(Cascio, 1993; Gandolfi , 2008; Gandolfi & Neck,
2008; Guthrie & Datta, 2008; Love & Nohria,
2005; Macky, 2004; Sahdev, 2003).
From the literature review, a set of common
denominators can be identifi ed. This is presented
in Table 1 as a chronological, non-exhaustive
account of some representative studies on the
nancial consequences of downsizing activities.
First, it is obvious that researchers have applied
diverse measures for their analyses. The results
vary among studies as some researchers indicate
positive fi nancial consequences, while others have
reported negative outcomes. For instance, there
are some contradictory outcomes on the return
on asset ratio (ROA) and return on equity ratio
(ROE). Indeed, a number of studies indicate
that both employee and asset downsizers as well
as employment ‘upsizers’ reduce ROA and ROE
levels, while other studies do not fi nd any signifi -
cant relationships (Cascio et al., 1997; Dawkins,
Littler, Valenzuela, & Jensen, 1999; De Meuse,
Bergmann, Vanderheiden, & Roraff, 2004; De
Meuse, Vanderheiden, & Bergmann, 1994).
Furthermore, asset downsizers have proved more
effective than employee downsizers when it comes
to the outcomes on the return on stock (ROS;
Cascio et al., 1997; Worrell et al., 1991).
Second, regarding the profi tability, profi t mar-
gin, and EBDIT margin of downsized fi rms, there
remains to be limited empirical data to support
the notion that downsizing produces improved
nancial outcomes (Dawkins et al., 1999; De
Meuse et al., 2004; Macky, 2004; Morris, Cascio,
& Young, 1999).
Third, following downsizing activities, operat-
ing performance seems to improve signifi cantly
in conjunction with reductions in cost of sales
and labor cost, as well as capital and research and
development (R&D) expenditures (Espahbodi
et al., 2000). Sales generally have a tendency to
increase following downsizing, while the costs of
sales and market-to-book ratio have no signifi cant
relationship with downsizing activities (Chalos
& Chen, 2002; De Meuse et al., 1994). It has
(Budros, 1999, 2004). Downsizing rates are
higher among fi rms with many interlocks with
past downsizing activities than among ones with
fewer interlocks with downsized fi rms (Budros,
1999, 2004). In addition, downsizing rates are
higher among fi rms that act in a network (e.g.,
industry) within which downsizing rates, among
participating fi rms or organizations, are high or
increasing. Finally, downsizing rates are higher
in industries that are highly competitive than
in industries that are less competition-oriented
(Budros, 1999).
In sum, a great multitude of downsizing causes
has appeared in the literature. To put a single
downsizing cause forward is problematic and
underrates the sheer complexity of the down-
sizing phenomenon. While some of the more
frequently cited driving forces include globaliza-
tion, increased foreign competition, M&A activi-
ties, deregulation, and the introduction of new
technologies, it must be understood that each
downsizing decision represents a combination
of various factors. Having established the causes,
the following section examines the outcomes and
consequences of downsizing.
Downsizing generates profound overall conse-
quences, as noted in the management literature as
well as in the business press. A close study of the
extensive body of literature on the consequences
of downsizing presents a complex yet rich picture.
Despite the large body of research, there is scant
evidence for the overall success, effectiveness,
and effi ciency of this strategy when assessed from
nancial, organizational, and human resource per-
spectives (Burke & Greenglass, 2000; Gandolfi ,
2009; Littler & Gandolfi , 2008).
Downsizing produces a range of nancial con-
sequences. A multitude of studies – cross-sectional
and longitudinal, North American and inter-
national – have demonstrated that while some
organizations have reported fi nancial improve-
ments, the majority of downsized fi rms have not
been able to reap improved levels of effi ciency,
Franco Gandolfi and Magnus Hansson
Author/s and title Methodology Dependent variable/s Result/s
Love, E. G., &
Nohria, N. (2005).
Reducing Slack:
The Performance
of Downsizing by
Large Industrial
Firms from
Method/s: Pooled time-series analysis
with the unit of analysis the fi rm-year.
Examination of fi nancial data. Analysis
of retrospective data.
Sample: Panel data of 100 large
industrial fi rms in USA
Period measured: 1977–1993
Industry: Multiple
Limitations: Only focus very large
industrial fi rms who were in a period
of relative decline. Results may not be
generalizable to other industries, high
growth sectors, or smaller fi rms
High/low absorbed
slack (HAS/LAS). Shows no evidence for the main effect of downsizing on
performance in post-downsizing fi rm-years. Distinguishing
high/low absorbed slack (HAS/LAS), scope and timing.
HAS fi rms were most likely to achieve performance
improvements. LAS fi rms that downsized reactively and
focused narrowly on employee reductions were least likely
to see performance improvements.
De Meuse, K. P.,
Bergmann, T. J.,
P. A., & Roraff,
C. E. (2004).
New evidence
downsizing and
a fi rm’s fi nancial
performance: a
long-term analysis.
Method/s: Longitudinal analysis.
Sample: Fortune Magazine’s Annual
Survey of largest 100 US corporations.
Period measured: 1987–1998
Industry: Multiple
Limitations: Small sample size; large
rms only.
Profi t margin; Return
on assets (ROA); return
on equity (ROE); asset
effi ciency; market-to-
book ratio.
It was found that downsized fi rms performed signifi cantly
poorer up to two years following the announcement.
Beginning with the third year, none of the differences
reached statistical signifi cance. When analyzing the
magnitude of downsizing, the data revealed that fi rms that
had downsized a small number of employees (i.e., up to
3%) performed signifi cantly better in the announcement
year, while fi rms that downsized more than 10% of the
workforce signifi cantly underperformed fi rms laying off less.
Chalos, P., &
Chen, C. J. P.
(2002). Employee
strategies: market
reaction and post
Method/s: Multiple regression analysis.
Sample: 250 fi rms from Fortune 500 list.
Period measured: 1993–1995
Industry: Multiple
Limitations: Primarily focusing large
US fi rms, covering a three year period.
Only considering aggregated fi nancial
Sales; Return on assets
(ROA); cost of sale
Over a three year period, 365 downsizing decision led
to employee layoffs of 915,546. Suggest that layoff
announcements that disclose strategic plans for refocusing
lines of business resulted in signifi cantly positive market
returns. Indicate positive IAFP for operating cash fl ow, sales
and (ROA). Cumulative abnormal returns, signifi cant. COS
did not improve signifi cantly. Sales and ROA did improve
for downsizing cost cutting fi rms.
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 507
Espahbodi, R.,
John, T. A., &
Vasudevan, G.
(2000). The effects
of downsizing
on operating
Method/s: Wilcoxon signed-rank tests
and parametric t-tests, regression
Sample: 118 downsizing fi rms
Period measured: 1989–1993
Industry: Multiple
Limitations: Reliance of secondary data
and a limited data set.
performance. Downsizing fi rms experienced decline in operating
performance, prior to the downsizing announcement.
Operating performance improved signifi cantly following the
Reduction of the cost of sales, labor cost, capital
expenditures and R&D expenditures.
Increase in assets following the downsizing.
et al. (1999).
Downsizing and
rm performance
(Chapter 6).
Method/s: Secondary data analysis from
the IBIS fi rm data base, Regression,
bivariate and Multivariate analyses.
Sample: 592 Australian fi rms (Classifying
organization dependent of level of
diversifi cation, size and change in
Period measured: 1990–1993
Industry: Multiple
Limitations: Broad set of industries
among investigated fi rms. Limited
data set, covering data for 1990 to
1993. Takes into account level of
diversifi cation, fi rm size, changes in
profi tability and employment.
Return on assets (ROA);
Return on equity (ROE);
EBDIT margin.
36% of fi rms were found to be highly focused, 43% were
somewhat diversifi ed and 22% were highly diversifi ed.
34% of non-benchmarking fi rms made substantial
improvements in labor productivity after they downsized,
while 48% of benchmarking fi rms did so.
Both upsizers and downsizers reduced their return on
equity (ROE), and similar patterns for return on assets
(ROA) and EBDIT margin (EBDITM). Effects were stronger
for fi rms that upsized or downsized the most. Small to
medium size fi rms had an 80% chance of having reduced
profi t ability a year or two down the track if they did not
change their employment size. Over 80% considered
that they achieved some increase in labor productivity as
a result, about half of which said that they had achieved
it to a great extent. Failed to fi nd any clear evidence of
downsizing leading to improved rates of profi t. Inferred as
a general rule, reduced employment per se did not provide
the key to higher profi tability
S. H., Everard,
A., & Hung, L.
(1999a). Strategic
Critical success
Sample: 16 American fi rms
Period measured: 1982–1988
Industry: Multiple
Limitations: Does not differentiate
between fi rms with single and/or
multiple-rounds of downsizing.
Stock market price. Appelbaum et al. (1999a) cited a Mitchell & Co. study of
16 North American fi rms that had cut more than 10% of
their respective workforces between 1982 and 1988. It was
shown that two years after the initial stock price increase,
ten of the 16 stocks were quoting below market by 17–48%
and 12 were below the comparable companies in their
industries by 5–45%. Concluded that such results depicted
the ‘true’ fi nancial impact of downsizing on fi rms.
Franco Gandolfi and Magnus Hansson
Morris, J. R.,
Cascio, W.
F., & Young,
C. E. (1999).
Downsizing after
all these years:
Questions and
answers about
who did it, how
many did it, and
who benefi ted
from it.
Method/s: Secondary data analysis
from the Standard & Poor’s 500
list, descriptive statistics, regression
Sample: 5,479 observations.
Period measured: 1981–1992
Industry: Multiple
Limitations: Primarily North American
rms, no international comparison, focus
on descriptive statistics.
Profi tability; Stock
market price. Studied the fi nancial performance of the Standard and
Poor’s 500 index subsequent to changes in employment.
The tabulation showed that fi rms with stable employment
consistently outperformed companies with employment
downsizing. Also, fi rms that ‘upsized’ (i.e., employment
increases exceeded 5%) generated stock returns that were
50% higher than those of stable and downsized fi rms in
the year that they upsized, and cumulative stock returns
that were 20% higher over a period of three years. A
consistently positive correlation between downsizing and
improved fi nancial performance could not be established.
Rather, empirical evidence suggested that downsizing
was unlikely to lead to improvements in a fi rm’s fi nancial
Cascio, W. F.,
Young, C. E.,
& Morris, J. R.
(1997). Financial
of employment
change decisions
in major U.S.
Method/s: Multiple regression analysis
between profi tability and change in
Sample: All companies included in the
Standard & Poor’s (S&P) 500 list, equal
to 5,479 occurrences of changes.
Period measured: 1981–1992
Industry: Multiple
Limitations: Data set covering fi ve years,
studying annual changes in employment
rather than announcements of changes.
Does not take in to account the long-
term consequences/effects.
Change in employment
(Relationship between
profi tability and change
in employment); return
on assets (ROA; return
on stock, ROS).
The largest changes in employment (both up and down),
occurred in conjunction with major asset restructuring. The
downsizers were, on the average, less profi table compared
to stable employers or upsizers. Apparent decline in return
on assets (ROA) for the employment downsizers, and
increase in ROA for asset downsizers. Stable employers
remain stable in the Return on stock (ROS). Employment
downsizers show a slight increase in ROS. Asset downsizers
show a signifi cant increase in ROS.
De Meuse, K. P.,
Vanderheiden, P.
A., & Bergmann,
T. J. (1994).
layoffs: Their
effect on
corporate fi nancial
Method/s: Secondary data analysis,
regression analyses
Sample: Top 100 fi rms in Fortune’s 1989
Period measured: 1987–1991
Industry: Multiple
Limitations: Does not differentiate
between fi rms with single and/or
multiple-rounds of downsizing.
Five fi nancial indices:
Profi t margin; return
on assets (ROA); return
on equity (ROE); asset
turnover; market-to-
book ratio.
No signifi cant positive relationships for any of the fi nancial
variables. The empirical evidence did not support the
contention that downsizing leads to improved fi nancial
Author/s and title Methodology Dependent variable/s Result/s
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 509
Worrell, D. L.,
Davidson, W. N.,
& Sharma, V. M.
(1991). Layoff
and stockholder
Method/s: Secondary data analysis
based on the DIALOG System of
National Newspaper Index.
Sample: 194 fi rms
Period measured: 1979–1987
Industry: Multiple
Limitations: Study did not test the
reaction of the stock market to actual
layoffs, but to their announcement in the
nancial press.
Return on stock (ROS) Stock returns of companies for the period from 90 days
prior to the announcement of the downsizing to 90 days
after the announcement. There was a signifi cantly negative
market reaction to the announcements with the cumulative
loss in stock value being about 2% of the value of the
equity of the fi rms. For fi rms that provided restructuring
and consolidation as the reason for the layoffs, there was a
3.6% increase in stock value over the 180-day test period,
while among fi rms citing fi nancial distress as the reason for
downsizing, stock values declined an average of 5.6% over
the same period.
Source: Developed for this paper.
also been reported that, in the long run, fi rms
embracing asset and employee downsizing have a
less positive stock market price development than
rms adopting upsizing activities (Hillier et al.,
2007; Morris et al., 1999).
Admittedly, some companies have reaped
nancial benefi ts following downsizing. In fact,
there can be a healthy side to the restructuring
and downsizing of organizations. For instance,
some fi rms become bloated and, thus, require
‘rightsizing’ in order to bring workforce levels
into alignment with the entire organizational sys-
tem (Hitt, Keats, Harback, & Nixon, 1994). This
can be achieved by eliminating unnecessary and/
or redundant work. For instance, in a Canadian
study of 1,034 downsized fi rms, Axmith (1995)
found that the majority of surveyed compa-
nies reported improved levels of earnings,
employee productivity, and customer service,
as well as decreased overall costs. However, the
vast majority of evidence suggests that downsiz-
ing activities fall short of meeting fi nancial and
organizational objectives (Cameron, Whetten,
& Kim, 1987; Cascio, 1998; Gandolfi & Neck,
2008). Nonetheless and perhaps surprisingly,
despite its dismal track record to date, downsizing
has remained a most popular strategy of choice
(Farrell & Mavondo, 2004; Gandolfi & Hansson,
2010; Littler & Gandolfi , 2008).
Downsizing generates a range of organiza-
tional consequences. Downsizing consolidates
decision-making at higher levels of organiza-
tional hierarchy, and often produces a crisis
mentality focused on immediate needs at the
expense of long-term planning (Cameron,
1994). Further, downsizing generates a loss of
innovation with less tolerance for risk and fail-
ure associated with creative activity (Richtnér
& Ahlström, 2006). Ironically, although overall
communication becomes restricted, the orga-
nizational climate becomes more politicized as
special interest groups organize and become
more vocal (Burke & Cooper, 2000; Littler
& Hansson, 2007). Other negative conse-
quences following downsizing activities include
Franco Gandolfi and Magnus Hansson
victims’ careers (Cameron et al., 1991; Dolan
et al., 2000). Victims have also reported a loss of
earning power upon reemployment (Konovsky
& Brockner, 1993). Studies further suggest that
victims have encountered feelings of cynicism,
uncertainty, and decreased levels of commitment
and loyalty that carry over to the next job (Macky,
Scholars have studied extensively the emotions,
behaviors, and attitudes displayed by survivors
during and after downsizing activities. These
symptoms have come to be known as survivor
‘sicknesses’ (Appelbaum & Donia, 2001). One
dominant stream of the downsizing research has
focused on the survivor syndrome as a cluster of
negative workforce outcomes (Appelbaum et al.,
1997; Brockner, 1988; Brockner, Grover, Reed,
& DeWitt, 1992; Brockner, Grover, Reed,
DeWitt, & O’Malley, 1987). These psychologi-
cal outcomes generate, for example, ‘new’ psy-
chological contracts (Barker & Duhaime, 1997;
Barker & Mone, 1994; Guest, 1998; Robbins &
Pearce, 1992; Rousseau & McLean-Parks, 1993;
Sparrow, 1998), reduced career conscious-
ness (Freeman, 1994; Freeman & Cameron,
1993), decreased organizational involvement
(Brockner et al., 1988a,b), decreased levels of
work quality (Makawatsakul & Kleiner, 2003),
and reduced organizational commitment
(Brockner et al., 1987; Freeman, 1994; Freeman
& Cameron, 1993; Littler, 1998; Littler et al.,
2003; Rousseau & McLean-Parks, 1993).
Other negative outcomes of downsizing include
guilt (Allen, 1997; Devine, Reay, Stainton,
& Collins-Nakai, 2003), positive inequity
(Brockner et al., 1986a, 1988a, 1988b), anger
and arousal (Cutcher-Gershenfeld, 1991), stress
(Sverke & Hellgren, 2001), anxiety (Staw,
Sandelands, & Dutton, 1981; Shaw & Barrett-
Power, 1997), relief (Allen, 1997; Schweiger,
Ivancevich, & Power, 1987), and increased job
insecurity (Brockner et al., 1985, 1986b, 1987,
1988a, 1988b; Hansson, 2008a).
decreased morale (Wagar, 1998), decreased pro-
ductivity (Budros, 1997; Yoo & Mody, 2000),
and an increased number of confl icts, slower
confl ict resolution, and a loss of trust (Cameron,
1994; Cutcher-Gershenfeld, 1991; Hansson,
2008a,b; Littler & Hansson, 2007). Increased
levels of individualism and disconnectedness
have shown to hinder teamwork, while poor or
lack of leadership and an increased level of resis-
tance to change generate conservatism and a
threat-rigidity response, leading to a protection-
istic stance (Cameron, 1994; Hansson, 2008a;
Shaw & Barrett-Power, 1997).
On the other hand, some studies have unveiled
positive organizational outcomes, including lower
overhead costs, less bureaucracy, faster decision-
making, smoother communication, greater entre-
preneurship, and increased levels of employee
productivity (Burke & Cooper, 2000).
Downsizing generates a range of human con-
sequences. It has been reported that the human
costs of downsizing are immense and far-reaching
(Brockner, 1988, 1992; Brockner et al., 1988a,
1988b; Burke & Greenglass, 2000). From the
extant literature, it is possible to distinguish
between three categories of people directly
impacted by downsizing; victims, survivors, and
executioners (Allen, 1997; Downs, 1995; Kettley,
1995; Littler, 1998). The following sections pres-
ent a non-exhaustive account of some representa-
tive studies on the identifi ed human consequences
of downsizing activities:
Research depicts strong evidence of adverse
psychological effects resulting from job loss,
including psychological stress, ill health, family
problems, marital problems, reduced self-esteem,
depression, psychiatric morbidity, helplessness,
anxiety, and feelings of social isolation (Dolan
et al., 2000; Gandolfi , 2007; Greenglass &
Burke, 2001; Havlovic, Bouthillette, & Van der
Wal, 1998). There is some evidence suggesting
that job loss caused by downsizing has the pro-
pensity to generate permanent damage to the
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 511
anger (Allen, 1997; Cameron et al., 1991; Noer,
1993). Survivor guilt tends to arise when survi-
vors perceive that their own performance merited
no better treatment than that accorded down-
sized victims (Littler et al., 1997). Scholars have
learned it is not the terminations per se that cre-
ate hostility, anger, bitterness, and survivor guilt
but the manner in which the terminations are
handled (Schweiger et al., 1987). Moreover, bit-
terness, anger, and disgust regarding the layoffs of
co-workers may potentially result in survivor guilt
(Appelbaum et al., 1999a, 1999b).
In addition, survivor envy refl ects a survivor’s
feelings of envy towards the victims (Campbell-
Janison et al., 2001; Kinnie et al., 1998; Littler,
1998). Research suggests that the focus in most
downsized fi rms is on the downsizing victims,
who are deemed most in need of counseling,
support, help, and re-training (Amundson et al.,
2004). Victims frequently receive generous ben-
efi ts (Gandolfi , 2006a), including personal assis-
tance like outplacement support, personal and
family counseling, and retraining, plus fi nancial
compensation, such as severance pay, relocation
assistance, and various benefi ts packages (Allen,
1997). Survivors presume victims will obtain
either generous retirement incentives or new
jobs with more attractive compensation. It is not
surprising that Littler (1998, p. 14) found that,
at times, ‘survivors start to feel that they are the
unlucky ones, the poor idiots left behind to clean
up the corporate mess with reduced resources’.
A downsizing executioner or executor is an
employee, manager, or consultant entrusted with
the planning, execution, and evaluation of a
downsizing activity (Downs, 1995). To date, little
research has explored the emotional responses and
reactions of the subjects implementing downsiz-
ing (Gandolfi & Neck, 2008). Nonetheless, there
is some empirical evidence suggesting that the
implementers of downsizing suffer from similar
psychological and emotional effects as the victims
and survivors (Gandolfi , 2007) in that bearing
Survivors tend to display dysfunctional work
behaviors and attitudes, such as decreased moti-
vation (Kinnie, Hutchinson, & Purcell, 1998),
decreasing morale (Cameron, 1994; Smeltzer
& Zener, 1994), increased propensity to leave
(Appelbaum et al., 1997; Littler et al., 2003),
lowered commitment (Beylerian & Kleiner,
2003), decreased satisfaction (Redman &
Keithley, 1998), increased resistance to change
(Macky, 2004), increased level of confl icts, and
lowered speed of confl ict resolution (Cutcher-
Gershenfeld, 1991; Hansson, 2008b).
Further survivor sickness pathologies include
increased levels of absenteeism (Campbell-
Janison, Worrall, & Cooper, 2001; Gandolfi ,
2005), increased employee turnover (Brockner,
1988), decreased employee involvement
(Beylerian & Kleiner, 2003), reduced risk tak-
ing (Allen, 1997), decreased levels of innova-
tion (Cascio, 1993; Gandolfi & Oster, 2009),
decreased employee commitment (Mirvis &
Marks, 1992), decreasing morale (Lecky, 1998),
and distrust towards management (Cascio, 1993;
Greenhalgh & Rosenblatt, 1984). Along the
same lines, researchers have documented low-
ered productivity (Estok, 1996; Kinnie et al.,
1998), decreased work performance (Beylerian
& Kleiner, 2003), reduced effi ciency (Lee, 1992),
reduced job performance (Cameron et al., 1993;
Littler, Bramble, & MacDonald, 1994; Littler &
Innes, 2003), decreased levels of product and ser-
vice quality (Fisher & White, 2000), decreased
level of learning (Sahdev, 2003), and deteriorated
levels of competence in the organization (Gettler,
Gettler (1998) observed similar symptoms
among survivors in New Zealand, Australia,
and South Africa suggesting the fi ndings were
in line with data from the U.S. and Europe
(Amundson et al., 2004; Beylerian & Kleiner,
2003; Makawatsakul & Kleiner, 2003).
Compounding the survivor syndrome is the
survivor guilt represented by the victim’s sense of
responsibility or remorse for some offence, and is
often expressed in terms of depression, fear, and
Franco Gandolfi and Magnus Hansson
chosen as a reactive measure to economic crises.
Since the mid-1980s, however, downsizing or
rightsizing has manifested itself as a proactive
human resource strategy (Chadwick et al., 2004;
Hitt et al., 1994) and a strategy of choice (Burke
& Greenglass, 2000). Thus, downsizing has
become decoupled from the business cycle (Littler
& Gandolfi , 2008), and the decision to embrace
downsizing is no longer determined by fi nan-
cial success and failure (Mellahi & Wilkinson,
2004). This fundamental change connotes that
downsizing has attained the status of a restruc-
turing strategy (Cameron, 1994) with the intent
of achieving a new organizational structure and a
new level of competitiveness (Littler et al., 1997).
Consequently, the 1990s saw the elevation of the
downsizing strategy as a way of life (Filipowski,
1993) and a corporate panacea (Nelson, 1997).
Paradoxically, this development took place despite
the absence of downsizing successes.
The active adoption of downsizing has enjoyed
continued popularity in the fi rst few years of this
new millennium despite the many lackluster
results reported in the 1980s and the 1990s. From
a change management perspective, the 1990s did
not end in 1999, but culminated in the technol-
ogy-induced fi nancial markets downturn in 2001
(Littler & Gandolfi , 2008), as well as frequently
reported multiple layoffs following the current
global fi nancial crisis (Sowjanya & Vasanthi,
2009). There is strong empirical evidence demon-
strating that downsizing practices have remained
fashionable in this new decade (Gandolfi & Neck,
2008; Macky, 2004; Mirabal & DeYoung, 2005).
As in the previous two decades, downsizing-
related synonyms and euphemistic terms have
appeared in abundance in both the business press
and academic literature (Story & Dash, 2008;
Weiss, 2008).
Large fi rms, in particular, have continued
to downsize and embark upon extensive non-
selective (i.e., across-the-board) job cutting since
2001 (Littler & Gandolfi , 2008). This is evident
in the downsizing announcements and plant clo-
sures in the U.S. and elsewhere over the past three
downsizing responsibilities is emotionally taxing
and professionally challenging (Clair & Dufresne,
In sum, a multitude of fi nancial, organiza-
tional, and human consequences of downsizing
has appeared in the literature. To put a single
downsizing consequence forward is problematic
and underrates the complexity of the phenom-
enon. Some frequently reported consequences of
downsizing include decreased levels of organiza-
tional effi ciency, effectiveness, productivity, and
profi tability. Furthermore, downsizing has also
shown to produce decreased morale and job sat-
isfaction, increased number of confl icts, slower
confl ict resolution, and a loss of trust as well as
increased levels of individualism and percep-
tions of disconnectedness generating a range of
psychological outcomes for downsizing victims,
survivors, and executioners.
As described in the previous section, it is possible
to state that downsizing has largely failed to pro-
duce the widely anticipated fi nancial and organiza-
tional gains, while profound human consequences
have emerged among all constituencies within the
downsized fi rm. There is some acknowledgment
within the business community that downsizing
has been destructive (Zyglidopoulos, 2003), yet
there is considerable empirical and anecdotal evi-
dence suggesting that the execution of downsiz-
ing has continued well into the new millennium
(Gandolfi , 2009; Hansson, 2008a,b; Macky, 2004;
Mirabal & DeYoung, 2005). In addition, there are
widespread expectations that fi rms will continue
to resort to downsizing activities (Gandolfi &
Hansson, 2010; Littler & Gandolfi , 2008).
Prior to the mid-1980s, downsizing was
adopted in situations where employee reductions
were undertaken in response to external events
and short-term needs (Kozlowski, Chao, Smith,
& Hedlung, 1993). This strategy, which was con-
sidered reactive downsizing, is intrinsically cor-
related with the business cycle and purposefully
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 513
employees were typically dismissed en masse
(Story & Dash, 2008).
This research paper has shown that downsizing
remains a complex, multifaceted business phe-
nomenon (Datta et al., 2010). While the down-
sizing literature is extensive and many valuable
insights have been gained over the past three
decades, the reactive and strategic adoption and
practice of downsizing has continued unabated
despite its dubious track record (Gandolfi &
Hansson, 2010).
In order to develop a more in-depth under-
standing of downsizing, the authors believe that
it is necessary to determine and understand the
driving factors causing downsizing activities
and the ensuing consequences of such endeav-
ors (Datta et al., 2010). As a result, an integra-
tive framework has emerged depicting the causes
and consequences that are typical and most fre-
quently cited in the literature. This integrative
framework is shown in Figure 1 and purports to
lay out the foundations for a more comprehensive
understanding of the most typical causes and con-
sequences of downsizing than any single explana-
tion by itself.
Accordingly, downsizing activities can be
driven by either external factors, such as fi nancial
crises, competition, and other types of change
that infl uence an organizations realm of action,
or internal fi rm-level factors, namely fi nancial
and managerial actions. Interactions between the
external and fi rm-level factors are in most cases
driven from changes in the external environment
generating various implications and management
action on the fi rm level, often including downsiz-
ing (see dotted arrow in causes as per Figure 1).
A downsizing activity per se is a deliberate action
within the organization and initiated by man-
agement. How and to what extent external fac-
tors generate management actions resulting in
downsizing activities is an empirical question.
In line with Mellahi and Wilkinson (2004), we
argue that future studies should compare and
years. In 2007, for example, large pharmaceuti-
cal fi rms, such as AstraZeneca, Bayer, Johnson &
Johnson, and Amgen announced plant closures
and closings of research centers, thereby practic-
ing employee layoffs on a large scale (Martino,
2007). During the same time period, high-tech-
nology companies cut their employee levels; for
example, Dell shed 8,800 jobs (Ogg, 2007) and
Motorola released 10,000 employees (Deffree,
2007). Most recently, the global fi nance industry
has been severely impacted by the global credit
squeeze (Elstein, 2008). In the wake of the on-
going U.S. subprime mortgage crisis and its after-
math, many fi nancial rms have been forced to
make deep personnel cuts (Story & Dash, 2008).
At present, signifi cant employee cutbacks are
occurring in the global fi nance industry and pro-
jections of hundreds of thousands of job losses in
the U.S. fi nance industry in the wake of the cur-
rent economic fallout have surfaced (Read, 2008).
Downsizing can appear in different shapes and
forms. For instance, stealth downsizing, seen by
some as a current management fad (Weiss, 2008),
has emerged as a current layoff practice. Under
the stealth approach, managers are not permitted
to discuss downsizing and downsizing-related lay-
offs openly in meetings, memos, or e-mails out of
fear that negative publicity may ensue (Richtmyer,
2002). Firms engaging in such practices attempt
to avoid negative press coverage at all costs, yet
they are likely to create an atmosphere of distrust
and unease among employees leading to lower
levels of workforce morale and motivation as
well as defections of talented people (McGregor,
2008). As a result, fi rms reduce employee levels in
a surreptitious manner (Demerjian, 2005; Krane,
2002; Weiss, 2008).
The current downsizing-related layoffs in the
nance industry can be characterized as stealth
downsizing (Story & Dash, 2008). In the past,
non-selective, across-the-board (mass) layoffs in
the fi nance industry were typically conducted
with sudden, deep employee cuts. This was exem-
plifi ed in both the 1987 U.S. stock market crash
and the global fi nancial upheaval in 1998, where
Franco Gandolfi and Magnus Hansson
provide a mapping of downsizing with guidelines
for theory-consistent empirical research (Luft &
Shields, 2003). Rather, this framework merely
provides an overview and depicts the majority of
factors reported in previous research on downsiz-
ing. Such a task is challenging and can be a useful
source for future research. Second, the frame-
work is also limited to the extent that it does not
take into account the type of downsizing activ-
ity employed. However, the majority of studies
focuses on workforce reduction as a downsizing
strategy even if there are some studies that take
into account divestments as strategic transforma-
tions intended to change a fi rms design, work
processes, corporate culture, values and attitudes,
and mission (Kets de Vries & Balazs, 1997).
Finally, this paper has reviewed contributions
from the downsizing literature. It has been the
authors’ intention to make a widely scattered,
multifaceted, and notably diverse fi eld of research
much more readily available to scholars and busi-
ness professionals. As previously noted, the vast
majority of the downsizing literature is paradig-
matically situated within the social action theory
within the functionalistic approach consisting of
a whole range of ontological, epistemological, and
methodological assumptions (Burrell & Morgan,
1979). Still, within the social action theory
realm, explanations of the social world must be
adequate at the level of meaning. Explanations of
social affairs must account for the way in which
individuals attach subjective meaning to situa-
tions and orient their action in accordance with
their perceptions of those situations. This has not
been clear within the previous research. Thus, the
authors argue that future research should take
into account such aspects in order to combine
theoretical richness and methodological rigor.
Aldrich, H. E., & Auster, E. R. (1986). Even dwarfs
start small: Liabilities of age and size and their
strategic implications. In B. M. Staw & L. L.
Cummings (Eds.), Research in organization behav-
ior (pp. 165–198). Greenwich, CT: JAI Press.
contrast the impact of organizational dynamics,
management actions, and various types of change
during growth and decline stages, stable and
unstable environment, and periods of technologi-
cal stability and change.
As established in this current paper, downsiz-
ing activities generate a wide range of fi nancial,
organizational, and human consequences. The lit-
erature on downsizing consequences has shown to
be diverse and a number of contradictory fi ndings
to the mainstream research have been presented.
On an aggregated level, and as previously noted,
the overall consequences of downsizing activities
have presented themselves to be largely negative,
particularly at the organizational and human
levels. Nonetheless, some positive downsizing
outcomes have been reported, primarily at the
nancial level.
In the integrative framework (see Figure 1), the
authors have outlined the most frequently reported
consequences under each level of analysis. Each
reported consequence has been associated with an
indication of its typical outcome, as reported from
the scholarly literature. The indication is depicted
with an arrow (or arrows) as increase (), decrease
(), or no signifi cantly reported effect (–). This
framework indicates a somewhat complex picture
of a multitude of causes and consequences. The
value of presenting this framework is to gain a
better understanding of the problems and issues
organization face in ever-changing internal and
external environments. The integrative role of
this framework remains its delineation of various
causes and consequences of downsizing activi-
ties, and its consideration of whether the stated
activities are congruent with or disparate from
the extant literature. It is evident from the review
of the downsizing literature that a multitude of
dependent variables has been the primary focal
point and that the majority of research has been
conducted using survey or panel data.
The outlined integrative framework holds
certain limitations: First, it has not been our
intent to outline causal relationships that have
been addressed in the previous research, nor to
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 515
empirical evidence. Strategic Management
Journal, 18, 13–27.
Barker, V. L., & Mone, M. A. (1994).
Retrenchment: Cause of turnaround or conse-
quence of decline. Strategic Management Journal,
15, 395–405.
Beaumont, P. B., & Harris, R. I. D. (2003). Internal
wage structures and organizational performance.
British Journal of Industrial Relations, 41, 53–70.
Beylerian, M., & Kleiner, B. H. (2003). The down-
sized workplace. Management Research News, 26,
Brockner, J. (1988). The effects of layoffs on survi-
vors: Research theory and practice. Research in
Organizational Behavior, 10, 213–255.
Brockner, J. (1992). Managing the effects of
lay-offs on survivors. California Management
Review, 34(2), 9–28.
Brockner, J., Davy, J., & Carter, C. (1985). Layoffs,
self-esteem and survivor guilt: Motivational,
affective, and attitudinal consequences.
Organizational Behavior and Human Decision
Processes, 16, 229–244.
Brockner, J., Greenberg, J., Brockner, A., Bortz, J,
Davy, J., & Carter, C. (1986a). Layoffs, equity
theory, and work performance: Further evidence
of the impact of survivor guilt. Academy of
Management Journal, 26(2), 373–384.
Brockner, J., Greenberg, J., Brockner, A., Bortz, J.,
Davy, J., & Carter, C. (1986b). Layoffs, equity
theory and work motivation: Further evidence
for the impact of survivor guilt. Academy of
Management Journal, 29, 373–384.
Brockner, J., Greenberg, J., & Grover, S. (1988).
The impact of layoffs on survivors: Insights
from interpersonal and organizational justice
theory. In J. Carrol (Ed.), Advances in applied
social psychology: Business settings (pp. 4575).
Hillsdale, NJ: Erlbaum.
Brockner, J., Grover, S., & Blonder, M. (1988).
Predictors of survivors’ job involvement fol-
lowing layoffs: A fi eld study. Journal of Applied
Psychology, 73(3), 436–442.
Brockner, J., Grover, S., Reed, T, F., & DeWitt, R.
E. (1992). Layoffs, job insecurity, and survivors’
work effort: Evidence of an inverted-U relation-
ship. Academy of Management Journal, 35(2),
Allen, R. K. (1997). Lean and mean: Workforce
2000 in America. Journal of Workplace Learning,
9(1), 34–42.
Allen, T. D., Freeman, D. M, Russell, J. E. A.,
Reizenstein, R. C., & Rentz, J. O. (2001).
Survivor reactions to organizational downsizing:
Does time ease the pain? Journal of Occupational
and Organizational Psychology, 74(2), 145–164.
Altman, E. I. (1971). Corporate bankruptcy in
America. Lexington, MA: Heath.
Amundson, N., Borgen, W., Jordan, S., &
Erlebach, A. (2004). Survivors of downsizing:
Helpful and hindering experiences. The Career
Development Quarterly, 52, 256–271.
Anthony, W. P., Perrewe, P. L., & Kacmaar, K. M.
(1996). Strategic human resource management
(2nd ed.). Fort Worth, TX: Dryden.
Appelbaum, S. H., Delage, C., Labibb, N., &
Gualt, G. (1997). The survivor syndrome:
Aftermath of downsizing. Career Development
International, 2(6), 137–146.
Appelbaum, S. H., & Donia, M. (2001). The real-
istic downsizing preview: A management inter-
vention in the prevention of survivor syndrome
(Part I). Career Development International, 6(1),
Appelbaum, S. H., Everard, A., & Hung, L.
(1999a). Strategic downsizing: Critical success
factors. Management Decision, 37(7), 535–559.
Appelbaum, S. H., Lavigne-Schmidt, S., Peytchev,
M., & Shapiro, B. (1999b). Downsizing:
Measuring the cost of failure. The Journal of
Management Development, 18(5), 436–455.
Appelbaum, S. H., Simpson, R., & Shapiro,
B. (1987). The tough test of downsizing.
Organizational Dynamics, 16(2), 68–79.
Atwood, J., Coke, E., Cooper, C., & Loria,
K. (1995). Has downsizing gone too far?
Jacksonville, FL: University of North Florida,
MBA Research Project 6065.
Axmith, M. (1995). 1995 dismissal practices survey.
Toronto: Murray Axmith.
Aziz, A., Emanuel, D. C., & Lawson, G. H.
(1988). Bankruptcy prediction – an investi-
gation of cash fl ow based models. Journal of
Management Studies, 25, 419–437.
Barker, V. L., & Duhaime, I. M. (1997). Strategic
change in turnaround process: Theory and
Franco Gandolfi and Magnus Hansson
decline: Frameworks, research and prescriptions.
Cambridge, MA: Ballinger.
Cameron, K. S., Whetten, D. A., & Kim, M. U.
(1987). Organizational dysfunctions of decline.
Academy of Management Journal, 30, 126–137.
Campbell-Janison, F., Worrall, L., & Cooper, C.
(2001). Downsizing in Britain and its effects on
survivors and their organizations. Anxiety, Stress
and Coping, 14(1), 35–58.
Cascio, W. F. (1991). Costing human resources.
Cascio, W. F. (1993). Downsizing: What do we
know? What have we learned? Academy of
Management Executive, 7(1), 95–104.
Cascio, W. F. (1998). Applied psychology in human
resource management (5th ed.). Upper Saddle
River, NJ: Prentice Hall.
Cascio, W. F. (2003). Responsible restructur-
ing: Seeing employees as assets, not costs. Ivey
Business Journal Online, November 2003, 1–5.
Cascio, W. F., Young, C., & Morris, J. (1997).
Financial consequences of employment change
decisions in major U.S. corporations. Academy
of Management Journal, 40(5), 1175–1189.
Caulkin, S. (1995). The new avengers – years of
corporate lip services to the importance of people
is fi nally catching up: Payment is now due in full.
Management Today, November 1995, 48–52.
Chadwick, C., Hunter, L., & Walston, S. (2004).
Effects of downsizing practices on the per-
formance of hospitals. Strategic Management
Journal, 25(5), 405–420.
Chalos, P., & Chen, C. J. P. (2002). Employee
downsizing strategies: Market reaction and post
announcement fi nancial performance. Journal of
Business Finance & Accounting, 29(5), 847–870.
Chopra, A. (2006). Survival. Academy of
Management Conference, Atlanta, August 2006.
Clair, J. A., & Dufresne, R. L. (2004). Playing the
grim reaper: How employees experience carrying
out a downsizing. Human Relations, 57(12),
Crainer, S., & Obleng, E. (1995). Re-engineering:
Overview. In F. T. Stuart Crainger (Ed.),
The fi nancial times handbook of management
(pp. 231–241). Marstons Mills, MA: Pitman.
Cutcher-Gershenfeld, J. (1991). The impact on
economic performance of a transformation
Brockner, J., Grover, S., Reed, T., DeWitt, R., &
O’Malley, M. (1987). Survivors’ reactions to lay-
offs: We get by with a little help for our friends.
Administrative Science Quarterly, 32, 526–541.
Budros, A. (1997). The new capitalism and organi-
zational rationality: The adoption of downsizing
programs. Social Forces, 76(1), 229–250.
Budros, A. (1999). A conceptual framework
for analyzing why organizations downsize.
Organization Science, 10(1), 69–83.
Budros, A. (2002). The mean and lean fi rm of
downsizing: Causes of involuntary and volun-
tary downsizing strategies. Sociological Forum,
17(2), 307–342.
Budros, A. (2004). Causes of early and later organi-
zational adoption: The case of corporate down-
sizing. Sociological Inquiry, 74(3), 355–380.
Burke, R. J., & Cooper, C. L. (2000). The new
organizational reality: Transition and renewal.
In R. J. Burke & C. L. Cooper (Eds.), The
organization in crisis (pp. 3–19). Malden, MA:
Burke, R. J., & Greenglass, E. R. (2000).
Organizational restructuring: Identifying effec-
tive hospital downsizing processes. In R. J.
Burke & C. L. Cooper (Eds.), The organization
in crisis (pp. 284–303). Malden, MA: Blackwell.
Burrell, G., & Morgan, G. (1979). Social paradigms
and organisational analysis – Elements of the soci-
ology of corporate life. Lancaster, UK: Ashgate.
Cameron, K. S. (1994). Strategies for successful
organizational downsizing. Human Resource
Management, 33(2), 189–211.
Cameron, K. S. (1998). Strategic organizational down-
sizing: An extreme case. In C. L. Cooper & D.
Rousseau (Eds.), Trends in organizational behavior
(Vol. 5, pp. 185–229). New York: John Wiley.
Cameron, K. S., Freeman, S. J., & Mishra, A. K.
(1991). Best practices in white-collar down-
sizing: Managing contradictions. Academy of
Management Executive, 5(3), 57–73.
Cameron, K. S., Freeman, S. J., & Mishra, A. K.
(1993). Downsizing and redesigning orga-
nizations. In G. Huber and W. Glick (Eds.),
Organizational change and redesign (pp. 19–63).
New York: Oxford University Press.
Cameron, K. S., Sutton, R, I., & Whetten, D.
A. (Eds.). (1988). Readings in organizational
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 517
Elstein, A. (2008). Research: 22,000 jobs cut on
Wall Street, with more to come. Crain’s New
York Business, Workforce Management. Accessed
2 June 2008, from
Espahbodi, R., John, T. A., & Vasudevan, G.
(2000). The effects of downsizing on operating
performance. Review of Quantitative Finance
and Accounting, 15, 107–126.
Estok, D. (1996). The high cost of ‘dumbsizing’.
Macleans’s, 109(23), 28–29.
Farrell, M., & Mavondo, F. (2004). The effect of
downsizing strategy and reorientation strategy
on a learning orientation. Personnel Review,
33(4), 383–402.
Filipowski, D. (1993). Dont rush downsizing: Plan,
plan, plan, Personnel Journal, 72(11), 64–76.
Fisher, S. R., & White, M. A. (2000). Downsizing in
a learning organization: Are there hidden costs?
Academy of Management Review, 25(1), 244–251.
Freeman, S., & Cameron, K. S. (1993).
Organizational downsizing: A convergence and
reorientation framework. Organizational Science,
4(1), 10–29.
Freeman, S. J. (1994). Organizational downsizing
as convergence or reorientation: Implications for
human resource management. Human Resource
Management, 33(2), 213–238.
Gandolfi , F. (2005). How do organizations imple-
ment downsizing? – An Australian and New
Zealand study. Contemporary Management
Research, 1(1), 57–68.
Gandolfi , F. (2006a). Personal development and
growth in a downsized banking organization:
Summary of methodology and fi ndings. Journal
of Human Resource Development International,
9(2), 207–226.
Gandolfi , F. (2006b). Corporate downsizing demysti-
ed: A scholarly analysis of a business phenomenon.
Hyderabad, India: The ICFAI University Press.
Gandolfi , F. (2007). How do large Australian and
Swiss banks implement downsizing? Journal of
Management & Organization, 13(2), 145–159.
Gandolfi , F. (2008). Refl ecting on downsizing –
what have managers learned? SAM Advanced
Management Journal, 73(2), 46–56.
Gandolfi , F. (2009). Where did downsizing go?
A review of 30 years of a strategic business
in workplace relations. Industrial and Labor
Relations Review, 44(2), 241–260.
Datta, D. K., Guthrie, J. P., Basuil, D., & Pandey,
A. (2010). Causes and effects of employee
downsizing: A review and synthesis. Journal of
Management, 36(1), 281–348.
Dawkins, P., Littler, C. R., Valenzuela, M. R., &
Jensen, B. (1999). The contours of restructuring
& downsizing in Australia. Melbourne Institute
of Applied Economic and Social Research,
Melbourne University.
De Meuse, K. P., Bergmann, T. J., Vanderheiden,
P. A., & Roraff, C. E. (2004). New evidence
regarding organizational downsizing and a fi rm’s
nancial performance: A long-term analysis.
Journal of Managerial Issues, 16, 155–177.
De Meuse, K. P., & Marks, M. L. (2003). Resizing
the organization. Managing layoffs, divestitures,
and closings. San Francisco, CA: Jossey-Bass.
De Meuse, K. P., Vanderheiden, P. A., &
Bergmann, T. J. (1994). Announced layoffs:
Their effect on corporate fi nancial performance.
Human Resource Management, 33(4), 509–530.
Deffree, S. (2007). Motorola layoffs reach 10,000,
EDN Electronic News. Accessed 4, April 2007,
Delorese, A. (1998). Healing the downsized organi-
sation. New York: Three Rivers Press.
Demerjian, C. (2005). HP continues stealth lay-
offs. The Inquirer. Accessed 09, February 2005,
Devine, K., Reay, T., Stainton, L., & Collins-
Nakai, R. (2003). The stress of downsizing:
Comparing survivors and victims. Human
Resource Management, 42, 109–124.
Dimitras, A. I., Zanakis, S. H., & Zopounidis, C.
(1996). A survey of business failures with an
emphasis on prediction methods and industrial
applications. European Journal of Operational
Research, 90, 487–513.
Dolan, S., Belout, A., & Balkin, D. B. (2000).
Downsizing without downgrading: Learning
how fi rms manage their survivors. International
Journal of Manpower, 21(1), 34–46.
Downs, A. (1995). Corporate executions. New York:
Franco Gandolfi and Magnus Hansson
Hannan, M. T., & Freeman, J. H. (1988). The
ecology of organizational mortality: American
labor unions 1863–1985. American Journal of
Sociology, 94, 25–52.
Hannan, M. T., & Freeman, J. H. (1989).
Organizational ecology. Cambridge, MA:
Harvard University Press.
Hannan, M. T., & Freeman, J. H. (1989).
Organizational ecology. Cambridge, MA:
Harvard University Press.
Hansson, M. (2008a). On closedowns: Towards a
pattern of explanations to the closedown effect.
Doctoral dissertation, Örebro Studies in Business
Dissertations, No. 1. Örebro University, Sweden.
Hansson, M. (2008b). When the lights go out,
conference proceedings. The Academy of
Management Annual Conference, Anaheim.
Hansson, M., & Wigblad, R. (2006a).
Recontextualizing the Hawthorne effect.
Scandinavian Journal of Management, 22,
Hansson, M., & Wigblad, R. (2006b). Pyrrhic
victories – Anticipating the closedown effect.
International Journal of Human Resource
Management, 17(5), 938–958.
Harrigan, K. R. (1982). Exit decisions in mature
industries. Academy of Management Journal, 25,
Harrington, H. J. (1998). Performance improve-
ment: The downside to quality improvement
(the surplus people problem). The TQM
Magazine, 10(3). http://www.emerald-library.
Havlovic, S. J., Bouthillette, F., & Van der Wal, R.
(1998). Coping with downsizing and job loss.
Canadian Journal of Administrative Sciences,
15, 322–332.
Hedberg, B. L. T., Nystrom, P. C., & Starbuck, W.
(1978). Camping on the seesaws: Prescriptions
of a self-designing organization. Administrative
Science Quarterly, 21(1), 41–65.
Hillier, D., Marshall, A., McColgan, P., &
Wereman, S. (2007). Employee layoffs, share-
holder wealth and fi rm performance: Evidence
from the UK. Journal of Business Finance &
Accounting, 34(3–4), 467–494.
Hitt, M. A., Keats, B. W., Harback, H. F., &
Nixon, R. D. (1994). Rightsizing – building and
phenomenon. The Australasian Journal of
Business and Social Inquiry, 7(1), 40–65.
Gandolfi , F., & Hansson, M. (2010). Reduction-
in-force (RIF) – New developments and a
brief historical analysis of a business strategy.
Journal of Management & Organization, 16(5),
Gandolfi , F., & Neck, P. (2003). Organizational
downsizing: A review of the background, its
development, and current status. The Australasian
Journal of Business and Social Inquiry, 1, 1.
Gandolfi , F., & Neck, P. (2008). Consequences,
payoffs, and fallout of downsizing (A literature
review of corporate downsizing: Part 3). Review
of International Comparative Management, 9(1),
Gandolfi , F., & Oster, G. (2009). Sustaining
innovation during corporate downsizing. SAM
Advanced Management Journal, 74(2), 42–53.
Gettler, L. (1998). Survey: Downsizing doesn’t cut
costs. Sydney Morning Herald. Accessed June 16,
1998, p. 27.
Ghemawat, P. (1991). Commitment: The dynamic of
strategy. New York: Free Press.
Greenglass, E. R., & Burke, R. J. (2001). Downsizing
and restructuring, implications for stress and anxi-
ety. Anxiety, Stress, and Coping, 14, 1–13.
Greenhalgh, L., & Rosenblatt, Z. (1984). Job
Insecurity: Toward conceptual clarity. Academy
of Management Review, 9(3), 438–448.
Griggs, H. E., & Hyland, P. (2003). Strategic
downsizing and learning organizations. Journal of
European Industrial Training, 24(2–4), 177–187.
Guest, D. (1998). Beyond HRM: Commitment
and the contract culture. In P. Sparrow & M.
Marchington (Eds.), Human resource manage-
ment: The new agenda (pp. 37–51). London:
FT/Pitman Publishing.
Guthrie, J. P., & Datta, D. K. (2008). Dumb and
dumber. The impact of downsizing on fi rm per-
formance as moderated by industry conditions.
Organizational Science, 19, 108–123.
Halley, A. A. (1995). Downsizing. Washington
DC Offi ce: The Meridian International
Hambrick, D. C., & D’Aveni, R. A. (1988).
Large corporate failures as downward spirals.
Administrative Science Quarterly, 33, 1–33.
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 519
maintaining strategic leadership: A long-term
competitiveness. Organizational Dynamics, 23,
Jackson, P., Mellahi, K., & Sparks, L. (2005).
Shutting up shop: Understanding the interna-
tional exit process in retailing. Service Industries
Journal, 25, 252–273.
Kets de Vries, M., & Balazs, K. (1997). The downsiz-
ing of downsizing. Human Relations, 50, 11–50.
Kettley, P. (1995). Employee morale during down-
sizing. Report 291. London: Institute of
Employment Studies.
Kinnie, N., Hutchinson, S., & Purcell, J. (1998).
Downsizing: Is it always lean and mean?
Personnel Review, 27(4), 296–311.
Konovsky, M. A., & Brockner, J. (1993).
Managing victim and survivor layoff reactions:
A procedural justice perspective. In R.
Cropanzano (Ed.), Justice in the workplace:
Approaching fairness in human resource manage-
ment (pp. 133–153). Mahwah, NJ: Lawrence
Kozlowski, S. W. J., Chao, G. T., Smith, E., &
Hedlung, J. (1993). Organizational downsizing:
Strategies, interventions, and research implica-
tions. In C. L. Cooper & I. T. Robertson (Eds.),
International review of industrial and organiza-
tional psychology (pp. 264–332). London: Wiley.
Krane, J. (2002). IBM’s unannounced layoffs near
5,000 mark. CRN, May 31. Accessed http://
Lamsa, A. M., & Takala, T. (2000). Downsizing
and ethics of personnel dismissals – The case of
Finnish managers. Journal of Business Ethics, 23,
Lecky, S. (1998). The failure of slash & earn.
Sydney Morning Herald, 83–87.
Lee, C. (1992). After the cuts. Training, 17–23.
Lee, S., & Alexander, J. (1999). Managing hospitals
in turbulent times: Do organizational changes
improve hospital survival? Health Service
Research, 34(4), 923–946.
Littler, C. R. (1998). Downsizing organisations:
The dilemmas of change. Human Resources
Management Bulletin. Sydney: CCH Australia.
Littler, C. R. (2000). Comparing the downsizing
experiences of three countries: A restructuring
cycle? In R. J. Burke & C. L. Cooper (Eds.),
The organization in crisis (pp. 58–77). Malden,
MA: Blackwell.
Littler, C. R., Bramble, T., & MacDonald, J. (1994).
Organizational restructuring: Downsizing, delayering
and managing change at work. Canberra: AGPS.
Littler, C. R., Dunford, R., Bramble, T., & Hede,
A. (1997). The dynamics of downsizing in
Australia and New Zealand. Asia Pacifi c Journal
of Human Resources, 35(1), 65–79.
Littler, C. R., & Gandolfi , F. (2008). What hap-
pened to downsizing? Organizational continuity,
managerial fashion, & signaling. Academy of
Management Conference. Anaheim, CA.
Littler, C. R., & Hansson, M. (2007). Closure and
downsizing: Integrating overlapping literatures.
Academy of Management Annual Conference.
Philadelphia, PA.
Littler, C. R., & Innes, P. (2003). Downsizing and
deknowledging the fi rm. Work, Employment and
Society, 17(1), 73–100.
Littler, C. R., Wiesner, R., & Dunford, R. (2003).
The dynamics of delayering: Changing manage-
ment structures in three countries. Journal of
Management Studies, 40(2), 225–256.
Love, G. E., & Nohria, N. (2005). Reducing slack:
The performance consequences of downsiz-
ing by large industrial fi rms, 1977-93. Strategic
Management Journal, 26, 1087-1108.
Luft, J., & Shields, M. D. (2003). Mapping man-
agement accounting: Graphics and guidelines for
theory-consistent empirical research. Accounting,
Organizations and Society, 28, 169–249.
Luthans, B. C., & Sommer, S. M. (1999). The
impact of downsizing on workplace attitudes.
Group and Organization Management, 24(1),
Macky, K. (2004). Organisational downsizing
and redundancies: The New Zealand workers’
experience. New Zealand Journal of Employment
Relations, 29(1), 63–87.
Makawatsakul, N., & Kleiner, B. H. (2003). The
effect of downsizing on morale and attrition.
Management Research News, 26, 2–4.
Marks, M. L., & De Meuse, K. P. (2003). The
realities of resizing. In K. P. De Meuse &
M. L. Marks (Eds.), Resizing the organiza-
tion. Managing layoffs, divestitures, and closings
(pp. 1–39). San Francisco, CA: Jossey-Bass.
Franco Gandolfi and Magnus Hansson
Martino, M. (2007). Pfi zer: Top 5 layoffs in 2007.
FierceBiotech, October 15, 2007.
McGregor, J. (2008). The stealth layoff.
BusinessWeek, May 16, 2008.
McKinley, W., Sanchez, C. M., & Schick, A.
G. (1995). Organizational downsizing:
Constraining, cloning, and learning. Academy of
Management Executive, 9, 32–42.
Mellahi, K., & Wilkinson, A. (2004). Organizational
failure: A critique of recent research and a
proposed integrative framework. International
Journal of Management Review, 5/6(1), 21–41.
Mirabal, N., & DeYoung, R. (2005). Downsizing
as a strategic intervention. Journal of American
Academy of Business, 6(1), 39–45.
Mirvis, P. H., & Marks, M. L. (1992). Managing
the merger: Making it work. Englewood Cliffs,
NJ: Prentice Hall Direct.
Montgomery, C. A., & Thomas, A. R. (1988).
Divestments: Motives and gains. Strategic
Management Journal, 9(1), 93–97.
Morris, J. R., Cascio, W. F., & Young, C. E.
(1999). Downsizing after all these years:
Questions and answers about who did it,
how many did it, and who benefi ted from it.
Organizational Dynamics, 27(3), 78–87.
Mroczkowski, T., & Hanaoka, M. (1997). Effective
rightsizing strategies in Japan and America: Is
there a convergence of employment practices?
The Academy of Management Executive, 11(2),
Nelson, B. (1997). The care of the un-downsized.
Training & Development, 51(4), 40–43.
Noer, D. (1993). Healing the wounds: Overcoming
the trauma of layoffs and revitalizing downsized
organizations. San Francisco, CA: Jossey-Bass.
Ogg, E. (2007). Dell to lay off 10 percent of work-
force. CNET, May 31. http://news.
Radcliffe, V. S., Campbell, D. R., & Fogarty, T. J.
(2001). Exploring downsizing: A case study on
the use of accounting information. Journal of
Management Accounting Research, 1, 131–157.
Read, M. (2008). Celent: 200,000 US banking
jobs at risk. USA Today. Accessed January 4,
2008 from
Redman, T., & Keithley, D. (1998). Downsizing
goes east? Employment re-structuring in
post-socialist Poland. The International Journal
of Human Resource Management, 9(2), 274–295.
Richtnér, A., & Ahlström, P. (2006). Organizational
downsizing and innovation. SSE/EFI Working
Paper Series in Business Administration, 1.
Richtmyer, R. (2002). IBM workers fear the axe.
CNNMoney, May 10, 2002. Accessed from
Robbins, K. D., & Pearce, II, J. A. (1992).
Turnaround: Retrenchment and recovery.
Strategic Management Journal, 13, 287–309.
Rousseau, D. M., & McLean-Parks, J. (1993). The
contracts of individuals in organizations. In L.
L. Cummings & B. M. Staw (Eds.), Research on
organizational behavior (pp. 1–43). Greenwich,
CT: JAI Press.
Ryan, L., & Macky K. A. (1998). Downsizing orga-
nizations: Uses, outcomes and strategies. Asia
Pacifi c Journal of Human Resources, 36(2), 29–45.
Sahdev, K. (2003). Survivors’ reactions to downsiz-
ing: The importance of contextual factors. Human
Resource Management Journal, 13(4), 56–74.
Schweiger, D. M., Ivancevich, J. M., & Power, F. R.
(1987). Executive actions for managing human
resources before and after acquisition. Academy
of Management Executive, 1(2), 127–138.
Shaw, J. B., & Barrett-Power, E. (1997). A concep-
tual framework for assessing organization, work
group and individual effectiveness during and after
downsizing. Human Relations, 50(2), 109–127.
Smeltzer, L. R., & Zener, M. F. (1994). Minimizing
the negative effect of employee layoffs through
effective announcements. Employee Counselling
Today, 6(4), 3–9.
Sowjanya, M., & Vasanthi, V. (2009). Managing down-
turn without downsizing (A): US fi nancial crisis and
layoffs. Hyderabad, India: IBS Case Development
Sparrow, P. (1998). New organizational forms,
processes, jobs and psychological contracts:
Resolving the HRM issues. In P. Sparrow & M.
Marchington (Eds.), Human resource manage-
ment: The new agenda (pp. 117–141). London:
Financial Times/Pitman Publishing.
Starbuck, W. H., Greve, A., & Hedberg, B. L. T.
(1978). Responding to crisis. Journal of Business
Administration, 9, 111–137.
Causes and consequences of downsizing
Volume 17, Issue 4, July 2011 JOURNAL OF MANAGEMENT & ORGANIZATION 521
Staw, B. M., Sandelands, L. E., & Dutton, J. E.
(1981). Threat-rigidity effects in organizational
behavior: A multilevel analysis. Administrative
Science Quarterly, 26, 501–524.
Story, L., & Dash, E. (2008). For Wall Street work-
ers, ax falls quietly. The New York Times, May
16, 2008.
Sverke, M., & Hellgren, J. (2001). Unionized
employees’ perceptions of role stress and
fairness during organizational downsizing:
Consequences for job satisfaction, union satis-
faction and well-being. Economic and Industrial
Democracy, 22, 543–567.
Thornhill, A., & Saunders, M. N. K. (1998). The
meanings, consequences and implications of the
management of downsizing and redundancy: A
review. MCB Personnel Review, 27(4), 271–295.
Thorpe, R., Holt, R., Macpherson, A., & Pittaway,
L. (2005). Using knowledge within small and
medium-sized fi rms: A systematic review of the
evidence. International Journal of Management
Reviews, 7(4), 257–281.
Wagar, T. (1998). Exploring the consequences
of workforce reduction. Canadian Journal of
Administrative Sciences, 15, 300–309.
Weiss, D. C. (2008). Humor columnist takes aim at
stealth layoffs. ABA Journal, May 23, 2008.
Whetten, D. A. (1980). Organizational decline:
A neglected topic in organizational science.
Academy of Management Review, 5(4), 577–588.
Worrell, D. L., Davidson, W. N., & Sharma, V. M.
(1991). “Layoff announcements and stock-
holder wealth”. Academy of Management Journal,
34, 662-678.
Yoo, H., & Mody, B (2000). Predictors of down-
sizing in the US local telephone industry.
Information Society, 13, 23–33.
Zammuto, R. F., & Cameron, K. S. (1985).
Environmental decline and organizational
response. In B. M. Staw & L. L. Cummings
(Eds.), Research in organizational behavior
(pp. 171–222). Greenwich, CT: JAI Press.
Zatzick, C. D., & Iverson, R. D. (2006). High-
involvement management and workforce reduc-
tion: Competitive advantage or disadvantage.
The Academy of Management Journal, 49(5),
Zemke, R. (1990). The ups and downs of downsiz-
ing. Training, November 1990, 27–34.
Zyglidopoulos, S. C. (2003). The impact of down-
sizing on the corporate reputation for social per-
formance. Journal of Public Affairs, 4(1), 11–25.
Received 28 April 2010 Accepted 19 February 2011
The Future of Technical and Vocational Education and Training:
Global challenges and possibilities
Special Issue of International Journal of Training Research – Volume 9 Issue 1–2
ii+178 pages – ISBN 978-1-921729-10-2 – April 2011
Editor: Rupert Maclean (International Education and Director of the Centre for Lifelong Learning Research and Development,
Hong Kong Institute of Education and UNESCO International Centre for Technical and Vocational
Education and Training, Bonn, Germany)
eContent Management Pty Ltd, PO Box 1027, Maleny QLD 4552, Australia
Tel.: +61-7-5435-2900; Fax. +61-7-5435-2911; Content
Editorial: The future of technical and vocational education and
training: Global challenges and possibilities – Rupert Maclean
and Ada Lai
Skills and education for all from Jomtien (1990) to the GMR of
2012: A policy history – Kenneth King
Where to now for vocational education and training in Africa?
Simon McGrath
Teacher education in TVET: Developing a new paradigm
Shyamal Majumdar
TVET and the poor: Challenges and possibilities – Stephen Lamb
The implications of skills deepening for vocational education and
training in Australia – Tom Karmel
Is skill training a good investment for the poor? The evidence
from Pakistan – Shehryar Janjua
Informal training for skilled workers: Issues arising from a
qualitative study in four sites in Rajasthan and Madhya Pradesh
Claire Noronha and Tanuka Endow
TVET initiatives in Southeast Asian countries in response to
increasing labour mobility within the region and beyond
Paryono Paryono
Global skills and mobility challenges and possibilities for VET:
A cross-border cross-sectoral case study – Roslyn Cameron and
Terry O’Hanlon-Rose
Building future sustainability and democratic practices: The role
of adult education in post-confl ict communities – Georgia Lysaght
and Peter Kell
Offshore teaching practice in the Australia-Pacifi c Technical
College: A case study in the South Pacifi c – Anthony Bailey
... A common assertion is that downsizing leads to negative socioemotional outcomes among employees because it induces a perception of violation of the psychological contract which makes employees withhold contributions (Lester et al., 2003). However, the normalisation of downsizing as an organisational strategy (Gandolfi and Hansson, 2011) has changed employee expectations of the job relationship (Zatzick et al., 2015). Job security and long-term employment have become less relevant; the 'new employee' is more concerned with keeping their skills marketable and their employability high (Kanter, 1989). ...
... However, it is often demographic characteristics, such as ethnicity, age and organisational tenure (Brand et al. 2008;Dwyer and Arbelo, 2012), and not performance that inform layoff decisions. Nevertheless, previous research has indicated that layoffs often generate negative performance outcomes, such as lowered productivity (Gandolfi and Hansson, 2011;Gandolfi, 2013). ...
... The unique features of each workforce reduction method generate different emotional reactions, because they are perceived as distinct work events, some with positive connotations and some with negative ones. This research provides evidence of the positive effect of some downsizing methods on commitment which contradicts the dominant views in both the downsizing (Gandolfi and Hansson, 2011) as well as the closedown bodies of literature (Hansson, 2017). Furthermore, the effect of downsizing on employees' commitment varies depending on their contextual proximity to the downsizing event as shown in Figure 2. Contextual proximity refers to the degree of similarity between features of the environment of employees and the environment of units targeted for reductions. ...
Full-text available
Arzuaga, S., Gandolfi, F., Hansson, M. and Johnston, T. (2021) Downsizing and affective organizational commitment: A contextual proximity perspective, Journal of Empirical Economics Letters, Vol. 20, No. 9, pp. X.
... This thesis will focus on specific consequences of downsizing and the options for leaders to do something about it. It has been widely acknowledged that the situation of downsizing puts additional demands on employees (Gandolfi & Hansson, 2011), which may cause adverse changes in work attitudes and health (Kivimäki et al., 2001). For ailing organizations high additional costs resulting from sickness absence and occupational disability could be the knock-out blow. ...
... Downsizing can be defined as the planned elimination of jobs in an organization (Cascio, 1993). As already mentioned, downsizing usually puts additional demands on employees (Gandolfi & Hansson, 2011) and it tends to cause adverse changes in the work environment, work attitudes and health (Kivimäki et al., 2001). ...
... The widespread use of downsizing in the organizational sense emerged in the late 1970s and early 1980s. With the economic recession experienced during this period and the effect of privatization that started in the United Kingdom that affected almost all economic systems, businesses resorted to reducing the number of employees under their control (Gandolfi and Hansson, 2011). This period can be defined as the early years of downsizing. ...
The Pandemic leads to different changes in the daily life such as eating, smoking behavior. The study mainly focused to comparatively analyze the change of eating and smoking behavior during lockdown among the people of Gujranwala, Mumbai and New York and also highlight what significant changes come in life due to pandemic. The study is cross national study and quantitative in nature. The survey method was used for data collection. The data was collected through Google survey from. The population of this study was people who belong to Gujranwala, Mumbai and New York and sample sized of 450 people were selected by using convenience sampling technique. The study results showed that participants of these three cities recorded changes in their eating and smoking behavior during pandemic. Most of the respondent’s weight were observed increased. They started eating extra food against their normal routine. The study results also noted that people have also changed their smoking behavior. They increased the frequency of smoking per day in confinement. The study also found that people spent more time with their family after the pandemic, because government of these three countries imposed a lockdown. The study concluded that Covid-19 effect on smoking and eating behavior negatively.
... Downsizing refers to layoffs that may or may not be accompanied by systematic restructuring programs such as staff reductions, departmental consolidations, office closings, or other forms of reducing payroll expenses [3]. Institutional downsizing is the conscious use of personnel reductions when faced with difficult economic conditions [4], and these changes were described by Lawson and Angle [5] as "trigger events", which initiated knowledge shifts and stir up feelings and emotions that elicited different reactions because the effort of many educational tertiary institutions goes into separation packages and support for lay off employees as a result of downsizing with little attention given to the retained employees who are remaining in educational institutions [6]. ...
... Furthermore, as the reliance on temporary and part-time contracts may provide flexibility during demand fluctuations in terms of employment adjustment, we control for Temporary workers ratio (ratio of temporary workers over total workforce) and Part-time workers ratio (ratio of part-time workers over total workforce) (Muñoz-Bullón & Sánchez-Bueno, 2014). Since downsizing may result from the competitive pressure of rival firms (Gandolfi & Hansson, 2011), we control for the number of competitors in the main market of the company (Competitors). Rural areas are regarded as localities particularly rich in terms of social capital where family and community networks result in localization advantages for family firms (Backman & Palmberg, 2015). ...
Full-text available
This study explores the downsizing propensity of family and non-family firms by considering their territorial embeddedness during both periods of economic stability and financial crisis. By drawing on a panel dataset of Spanish manufacturing firms for the period 2002–2015, we show that, all things being equal, family firms have a lower propensity to downsizing than non-family firms. When considering the effect of territorial embeddedness, we found that territorially embedded family firms have an even lower propensity to downsizing than their non-family counterparts. Furthermore, the concern of territorially embedded family firms for their employees’ welfare was particularly pronounced during the years of the global financial crisis. This result is explained by the existence of socially proximate relationships with the firms’ immediate surroundings, based on similarity and a sense of belonging, which push deeply rooted family firms to treat their employees as salient stakeholders during hard times. Overall, our study stresses the importance of local roots in moderating the relationship between family firms and downsizing.
... These actions have downstream effects to stakeholders, and their decision-making abilities are judged in part by real-life consequences to these stakeholders. Downsizing generates profound consequences in financial, organizational, and human resource realms (Gandolfi & Hansson, 2011). The collective ability of the management team to participate in open information exchange and produce collaboratively based solutions and decisions predicts, in part, the process and perceptions of organizational decline (Carmeli & Schaubroeck, 2006). ...
Full-text available
Decline and downsizing often create organizational conditions that are tension-filled, problematic, disruptive, and prone to unethical behaviour. It is common for educational organizations to face discontinuity of services and reduction of personnel; therefore, it is important to understand the relationship between declining organizations and the ethical behaviour of educational leaders under these circumstances. In this article, we provide a general description of organizational decline, typical responses to such decline, and highlight the phenomenon of personnel downsizing, with particular attention to the Canadian education context. We offer descriptions of various in situ strategies from several Canadian educational superintendents to illustrate implications for how we might better understand personnel reductions in relation to ethics. We conclude with suggestions concerning ways we might upgrade downsizing with wise judgment and ethical decision-making.
... These actions have downstream effects to stakeholders, and their decision-making abilities are judged in part by real-life consequences to these stakeholders. Downsizing generates profound consequences in financial, organizational, and human resource realms (Gandolfi & Hansson, 2011). The collective ability of the management team to participate in open information exchange and produce collaboratively based solutions and decisions predicts, in part, the process and perceptions of organizational decline (Carmeli & Schaubroeck, 2006). ...
This study investigates whether and how organizations change their use of management accounting during crisis. The study is important because organizations regularly face significant challenges such as crisis during which the role of management accounting is not well understood. Based on interviews and observation in five private sector organizations and one in the public sector, I find that executives in organizations facing crisis due to a discontinuous and unpredictable environmental change leverage management accounting during the crisis. In contrast, executives in organizations facing crisis due to a continuous and predictable environmental change question the truth and value of their management accounting practices and, as a result, do not change their use of management accounting to manage the crisis. For those organizations that do leverage management accounting, I rely on conceptual and empirical insights from the literature examining the decision‐facilitating role of informal management accounting to examine how they adapt or develop new management accounting tools and practices to manage crisis. I find that executives first engage in a comprehensive review of their management accounting systems and reports to convince themselves that they can be relied on. Following this process, they leverage accounting to understand the past, develop metrics intended to reach all employees, and institute various forms of accountability to support the management of crisis. The use of these informal management accounting tools and practices enables organizations to develop a new language for understanding and managing crisis. The primary contribution of my study is that it conceptualizes and theorizes informal management accounting tools and practices as a mechanism that facilitates response to crisis. These tools and practices are low‐cost and easy to implement, which are favorable given the challenges associated with crisis. This article is protected by copyright. All rights reserved.
Full-text available
Despite redundancies having far reaching consequences for organisations, relatively limited attention has been paid to the conflicting experiences of those implementing the redundancy process; the redundancy envoys. By drawing on theories of cognitive dissonance and ‘dirty work’ we explain how individuals implementing redundancies can experience a disconnect between their outward and inner emotions. We reconceptualise redundancy envoys as quasi-dirty workers as they intermittently perform ‘dirty work’ tasks that may be perceived as morally tainted, whilst recognising their conventional role incorporates tasks perceived as contrary to that of ‘dirty work’. Our study draws on insider research access to redundancy envoys over a five-year period during the implementation of four consecutive redundancy programmes, providing the opportunity to observe decisions and actions in ‘real time.’ We offer a contemporary reconceptualisation of the redundancy envoywhich permits a deeper understanding of the negative impact on redundancy envoys and offers opportunities to examine how this can be reduced. In addition, it is anticipated that the results of this study will offer support to HR functions in reducing the stigma of ‘dirty work’ for redundancy envoys with the intention of enhancing the management of redundancy implementation.
When firms face pressures to reduce costs, evidence from the field suggests that they often reduce labor costs (i.e., wages, benefits, payroll taxes). Because of the prevalence of labor cost reduction in the field, academic research has begun to investigate the consequences of management's decisions to reduce labor costs. I provide a structured literature review on the employee-level consequences of three labor cost reduction practices: employee downsizing, furloughs, and pay cuts. My literature review synthesizes the labor cost reduction research through a lens of a discretionary management accounting decision to reduce costs and highlights opportunities for management accounting researchers to explore the consequences of labor cost reductions on employees’ attitudes and behaviors. To synthesize the literature on labor cost reduction, I develop a model that proposes that management's labor cost reduction decisions, which include features of the implementation and contextual factors, influence employees’ perceptions of management's and employees’ attitudes and behaviors. Consistent with my model, my synthesis of the literature shows that labor cost reduction generally has negative employee-level consequences. However, features of management's implementation of the labor cost reduction practice and contextual factors can alter employees’ perceptions and mitigate these negative consequences. This article is protected by copyright. All rights reserved.
Full-text available
While downsizing has become an increasingly popular organizational tool in the achievement and/or maintenance of competitiveness and increased productivity, the negative side effect known as survivor syndrome continues to plague many post-downsizing organizations. This two-part article examines the full spectrum of research, with the goal of producing a model. The model is based upon the problems survivors experienced and modeled after the John Wanous realistic job preview (RJP). The realistic downsizing preview (RDP), which can be effectively used before the downsizing, is implemented to prevent survivor syndrome in the aftermath of the downsizing. The foundation of the RDP model is that by addressing issues that have been observed as survivor syndromes prior to a downsizing, the negative outcomes can be minimized. Part I considers downsizing, its effects on survivors and their needs, and the importance of good communication and perceived fairness within the process.
Full-text available
Large Australian and Swiss banks have been trimming their workforces since the mid-1990s. With further rounds of downsizing activities predicted, this study sought to identify, examine, and compare the adopted organizational downsizing implementation strategies. The primary purpose of this cross-cultural study was to determine how large Australian and Swiss banks implemented downsizing in their most recent endeavors. The research has revealed three key findings. First, Australian banks primarily adopted workforce reduction strategies, whereas Swiss banks employed a mixture of organization redesign, workforce reduction, and systemic strategies. Second, Australian banks had considerable depth in their downsizing, whereas Swiss banks had more breadth in their overall strategies. Third, Australian banks favored reorientation approaches, whereas Swiss banks embraced reinforcement approaches. It remains unclear as to why large Australian and Swiss banks differed in the selection of implementation strategies and why they diverged in their overall approaches to downsizing. Further research is required to explore aspects that are likely to influence the adoption of downsizing strategies in both Australia and Switzerland.
The costs of human resources vary across industries, but in knowledge organizations, they typically comprise more than half of total operating costs. The costs of benefits and overhead easily can add another 75 percent to base pay. Although organizations incur HR costs in a number of key areas, one of the most common ones is employee absenteeism. The total cost absenteeism is comprised of three broad categories of costs: those associated with absentees themselves, the costs of managing absenteeism problems, and all other relevant costs. Free, Web – based software is available to do these calculations.