… omen on’ (p. 400) in which frogs boil to death while the water slowly changes from cold to boiling. Kearns and Nadler conclude (p.
280): ‘You also have to create dissatisfaction with the status quo. Otherwise, why are people going to work hard to disrupt it? And you can not wait around until everyone feels induced pain from the marketplace, because then it’s too late. So you need to have induced pain. You need to throw a few punches here and there’. There are some organizational level analyses which dissent from the litany of praise for downsizing. Handy (1990) argues that an organization does not exist only for profits; that is, profits should be viewed as a means to other desired ends rather than as the sole end.
His view is that shareholders have taken over too much of the power. They should, instead, be only one element of a hexagonal ring of stakeholders – which also includes employees, the environment, community, and suppliers. Petruno (1996) reflects the concern that institutional shareholder activists have gotten too greedy and imposed too large a price on the thousands upon thousands of employees who have lost their jobs; performance increases may be at the expense of hollowed out companies. Hamel and Prahalad (1994) do not question the legitimacy of downsizing, but argue that time spent on determining core competencies and relating those competencies to the external marketplace is time much better spent than restructuring and re engineering; the latter may shore up your current position, but does little to prepare you to compete in the future. Downs (1995) offers an even harsher critique. Downs decries the prevalence and public acceptance of a ‘culture of narcissism’, in which corporations have only one objective, profit.
He contrasts the view of Hewlett-Packard’s David Packard that the secret to successful management was to keep in balance the triangular interests of shareholders, management, and employees. Part of this narcissism is reflected in the increase of senior executive salaries by 1, 000 percent between 1980 and 1995, the same period of time in which record layoffs were amassed. In a Newsweek cover story, Sloan (1996: 44) argues that ‘Firing people has gotten to be trendy in corporate America, in the same way that building new plants and being considered a good corporate citizen gave you bragging rights 25 years ago. Now you fire workers – especially white-collar workers – to make your corporate ‘bones”. Organizational/ Individual Level Analysis The analysis at the organizational / individual interface is primarily focused on documenting and ameliorating the effects of downsizing on those who remain within the organization.
A stream of research, both laboratory and field, has provided documentation of the harmful effects downsizing can have on ‘survivors’; these effects have been described in terms of lower morale (e. g. , Armstrong-Stassen, 1993), high stress (e. g.
, Leana and Feldman, 1992), and a ‘syndrome’ marked by anger, envy, and guilt (e. g. , Noer, 1993). The perceived fairness of the downsizing is considered a key mediating variable (e. g. , Brockner, 1992), as is the effectiveness of the communication of information (e.
g. , Bridges, 1987). Key underlying assumptions include: 1) the pre-eminence of the organization over the individual, accompanied by a strong argument that the organization cannot reach its full potential without maximizing the effective use of human resources; 2) reliance upon the Lewin’s three step approach of unfreezing, moving to a new level, and freezing at a new level; as illustrated by the Xerox and GE cases described above, Lewin argued that to ‘break open the shell of complacency, it is sometimes necessary to bring about a deliberate emotional stir-up’ (Lewin, 1951: 229); 3) reliance upon psychological transition models, especially as put forward by Bridges (1991); Bridges theorizes three overlapping phases of transition – the ending of what was, a messy ‘neutral zone’, or limbo, and a new beginning; 4) the end of the old implicit ‘psychological contract’ assuring lifetime job security as long as the employee ‘keeps his or her nose clean’ and does an adequate job and formulation of a new contract in which employees are more autonomous and self-reliant (e. g. , Bridges, 1994).
Brockner and colleagues have studied the ‘fairness’ of layoffs from a procedural justice perspective and have shown a link between perceived fairness of the layoffs and survivor commitment to the organization (e. g. , Brockner et al, 1994). Among the fairness factors which Brockner examines is the connection with existing corporate culture.
Organizations such as IBM and Digital Equipment which have traditionally had a policy of averting layoffs are likely to be perceived by employees as violating the psychological contract and therefore as more unfair when they do resort to layoffs. Noer (1993) sees letting go of the old employment contract as tough but necessary. His view is that implicit lifetime employment guarantees are unhealthy both for individuals and organizations. They result in a sort of ‘organizational codependency’ in which individuals invest enormous energy in trying to control the system and at the same time have much of their self-worth tied up in trying to live up to the organization’s, not their own, values. In a similar vein, Hecksher (1995) concludes that management loyalty to the organization is no longer needed; what is needed is more professionalism, evidenced by creative contributions to the organization.
Bridges (1994) goes even further; he sees a secular trend away from the traditional job, with security, job description, etc. Like Noer, he sees greater possibility for individuals to achieve autonomy and satisfaction by taking responsibility for their own futures. Work relationships can become much more testy during periods of organizational decline. That can take the form of ‘backstabbing, placing of blame, and overt failure to cooperate’ (Mohrman and Mohrman, 1983: 459). Hickok (1995) analyzed interview responses at two downsizing military bases and found that mentions of increased conflict in the workplace were significantly greater than the more positive mentions of pulling together. Downsizing’s Impact on Culture For organizations, particularly the IBM’s and Digital Equipment’s of the world which long resisted layoffs, it is hard to image that the organizations or their cultures have remained anything close to intact.
Getting back to the questions posed earlier: 1) For whose benefit does the organization exist? It seems clear that organizations exist less today for the well-being of rank-and file employees than they once did. With the Dow shattering all records, it seems clear that the shareholders have the upper hand in making critical corporate decisions. They are partnered with CEO’s who received an average pay raise in 1995 of 23% (Washington Post, 3/5/96). Just look at who is prospering and who is not.
2) What are the basic assumptions among people about working relationships in the organization? The basic assumptions about working relationships have changed, in ways that can not yet be well assessed. It appears, at least, that relationships tend to be less ‘familial’ and more competitive than in the past. What is the worth of what have traditionally been termed commitment and loyalty? We just do not know? What is the impact of the feeling that the organization is a community – even a family – with relatively stable long-term working relationships? And how will that play out in terms of cooperation given to others as opposed to ‘backstabbing’ in the intense competition for scarce resources? We can only be sure that things have changed, not how. 3) What are the basic assumptions the organization and the employee make in relation to each other? The basic assumptions by employees and organizations about their employment relationship have changed from long-term and stable, with organizations expected to make accommodations to avoid laying people off to more short-term and contingent.
Researchers such as Bridges and Noer forecast a more happy future for those who adapt to the changing times in the new scenario, but that is a difficult forecast to test. Organizations usually have some degree of flexibility about how they reduce personnel expenses. Decisions to inflict pain upon employees as part of the process may very well reflect an effort to ‘bust’ the existing culture. Decisions to minimize pain may reflect an effort to reinforce the existing culture.
Table 1 sorts several downsizing practices by whether they tend to reinforce (or leave alone) existing culture or to intentionally destabilize the culture. For these purposes, methods which are less disruptive and / or give members more of a sense of control are labeled as reinforcing and those practices which are particularly likely to induce pain among members of the work force (particularly those who are asked to leave) are labeled as destabilizing: Table 1 Culture Reinforcing and Culture Destabilizing Practices Distinguished CULTURE REINFORCING CULTURE DESTABILIZING Voluntary reductions (e. g. , attrition, buyouts, job sharing) Involuntary reductions (layoffs) Advance notice Sudden termination Shared pain (e. g. , cuts across all levels) Winners / losers (e.
g. , executives get big bonuses while cutting others’ positions) Explicit criteria for ‘who stays, who goes’ Criteria are secret Transition assistance for those who depart involuntarily Little or no assistance Transition assistance for survivors Little or no assistance New ‘rules of engagement’ between organizations are made clear Reductions treated as exception or something which does not require explanation Participation in direction-setting from various levels in organization Goal setting done at top without input Quick analysis will reveal exceptions to any of the above propositions. For example, the columns would be reversed for an organization that historically had used the brute force of layoffs as a way to adjust work force. The reader is urged to look deeper at what is going on in the downsizing process. The reader needs to look beyond the stated rationale for reductions. How many organizations admit, for example, that one of the key layoff objectives is to ‘lose’ that part of the work force which is either under performing or does not fit in? There is more than meets the eye.
It is intuitively plain that an IBM or Digital Equipment today is not, in many fundamental respects, a different organization than existed 10 years ago. It will take more time to know if these new organizations are as habitable for human beings as they were in the past or, indeed, if they achieve greater effectiveness and prosperity over the long term. Toward a More Moral Approach to Culture Change and Downsizing How can an organizational leader know how to steer an appropriate course? This is not an easy task. In the case of the private sector, the market seems to well reward a ‘tough-nosed’ approach to downsizing, and in the case of the public sector, Republicans and Democrats vie for bragging rights over who can eliminate the jobs of the most bureaucrats.
In early 1996, a landmark journalistic account of the impact of downsizing’s impact on U. S. society-at-large (New York Times, 1996) and a Newsweek (1996) cover story lambasting corporate ‘greed heads’ for their excessive profits gained at the expense of many lost jobs reflected more critical coverage than had previously been enjoyed by the corporate community. AT&T’s Robert Allen also was criticized about his pay package of $16 million during 1995, the same year he set about to restructure 50, 000 people out of their jobs (Pearl stein, 1996).
Overall, however, the media have given quite friendly coverage to downsizing. A leader may have to look beyond external rewards and media coverage to determine how to approach downsizing and related issues. While ‘moral ism’ in the study of culture is best resisted, there are still many leaders who wish to acknowledge a certain responsibility for the ‘moral’ or ‘spiritual’ fabric of the life of their organizations. For those persons, the following partisan and unscientific comments are offered. A leader needs to examine just how well the course of downsizing action being proposed fits with the values and beliefs he / she would like to see carried forward. That may require a certain amount of introspection.
It may require putting to the side, at least temporarily, the brilliant technical rationale for reductions provided by his / her external management consultants. It may require him / her to reconsider the implementation strategy devised by legal team in conjunction with an outplacement service. One brief inventory of questions a leader can take – the ‘smell, tell, bell, sell, swell’ test – is shown in Table 2. This is intentionally short and simple, in the hope that it may be easy for the reader to recall at a later time. Table 2 The ‘Smell, Tell, Bell, Sell, Swell’ Downsizing TestS MELL Is the company being decent to it’s constituents? Or will, over time, the stench of fish left out too long become apparent? TELL Has the essential condition which may lead to some difficult decisions been communicated to the organization’s constituents. Have the constituents been able to provide input? BELL Have we carefully thought through the consequences for those ‘for them the bell tolls’? How will this affect those who may lose their jobs? How will this affect those who remain? SELL Are we prepared to announce and explain my decisions to multiple constituencies, including media, community activists, Congressmen? SWELL Does the plan for change, of which these decisions are a part, offer the organization to achieve better results in the future? Conclusion It is difficult to write with authority about the relationship of downsizing to , in part because these are both subject areas in need of clarification and empirical research.
It is intuitively evident, even definitional, that a leader’s cultural mind set will have a great deal to do with whether and how downsizing is implemented in an organization. It also seems, beyond question, that downsizing acts as an organizational de stabilizer and thus as a catalyst for culture change. Whether resultant cultural change is beneficial to the organization as a whole is open to speculation. Because downsizing is a relatively recent phenomenon at the white-collar level, time will have to differentiate between short-term effects and reactions and the longer-term consequences. Perhaps less bloated bureaucracies will free people to get more work done and to interact more positively.
Perhaps a whole generation of management thinkers overstated the value of loyalty and commitment that accrues over a long and stable employment tenure. That, again, will be for time to judge. This article has noted three observations in relation to the impact of downsizing on organizational culture. First, it clearly appears that power has shifted away from rank-and-file employees in the direction of top management / ownership .
Accompanying this change is a shift in emphasis away from the well-being of individuals in the direction of the pre-eminence and predominance of the organization as a whole. Second, it appears working relationships have changed away from being ‘familial’ in the direction of being more competitive. Third, the employer-employee relationship has moved away from long-term and stable in the direction of short-term and contingent. It was argued in this article that decisions associated with a downsizing action may tend either to be culturally ‘reinforcing’ (i.
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