Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-cd9895bd7-fscjk Total loading time: 0 Render date: 2024-12-26T07:50:41.479Z Has data issue: false hasContentIssue false

2 - How does downsizing come about?

Published online by Cambridge University Press:  05 July 2014

By
Wayne F. Cascio
Edited by
Cary L. Cooper ,
Alankrita Pandey  and
James Campbell Quick
Wayne F. Cascio
Affiliation:
University of Colorado, Denver
Cary L. Cooper
Affiliation:
Lancaster University
Alankrita Pandey
Affiliation:
University of Texas, Arlington
James Campbell Quick
Affiliation:
University of Texas, Arlington
Get access

Summary

Employment downsizing, the planned elimination of positions or jobs, is a defining characteristic of modern life in organizations. It may be reactive (in response to a change in economic or organizational conditions) or proactive (executed in anticipation of such changes). In the most recent economic recession, downsizing was global in scope, with 8.5 million layoffs in the United States and more than 50 million worldwide. As Datta, Guthrie, Basuil, and Pandey (2010) have noted, in these turbulent economic times even countries that traditionally have avoided layoffs (e.g., South Korea, Japan, Taiwan, and Hong Kong) embraced the practice. Export-oriented and labor-intensive firms in China, and firms in both manufacturing and services industries in Britain, Canada, Australia, New Zealand, South Africa, South America, and Eastern Europe participated as well. Not surprisingly, therefore, employment downsizing has attained the (dubious) status as one of the most high-profile, significant, and pervasive management issues of our time. Over the past three decades, downsizing has occurred in virtually all industries and sectors of the economy, and it has affected business, governments, and individuals around the world (Cascio, 2010a; Gandolfi, 2008).

Although employment downsizing is a multifaceted phenomenon, characterized by antecedents, implementation, and consequences, this chapter addresses just three issues: what it is, what causes it, and some things we still do not know (i.e. directions for future research). The chapter does not consider other aspects of downsizing, such as its costs, consequences, or alternatives to it, that provide a more complete picture of the full scope of this phenomenon. For more on those issues, see other chapters in this volume or consult Cascio (2002, 2010), Datta et al. (2010), or De Meuse, Marks, and Dai (2011).

Type
Chapter
Information
Downsizing
Is Less Still More?
 , pp. 51 - 75
Publisher: Cambridge University Press
Print publication year: 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ahmadjian, C. L. and Robinson, P. 2001. “Safety in numbers: Downsizing and the deinstitutionalization of permanent employment in Japan.” Administrative Science Quarterly 46: 622–654.CrossRefGoogle Scholar
Attewell, P. and Rule, J. 1984. “Computing and organizations: What we know and what we don’t know.” Communications of the ACM 27: 1184–1192.CrossRefGoogle Scholar
Barney, J. B. 1995. “Looking inside for competitive advantage.” Academy of Management Executive 9(4): 49–61.Google Scholar
Baumol, W. J., Blinder, A., and Wolff, E. N. 2003. Downsizing in America: Reality, Causes, and Consequences. New York: Russell Sage Foundation.Google Scholar
Bethel, J. E. and Liebeskind, J. 1993. “The effects of ownership structure on corporate restructuring.” Strategic Management Journal 14: 15−31.CrossRefGoogle Scholar
Black, T. 2011. “S&P 500 cash hoards shrink for first time since 2009.” February 16. Downloaded from , February 17, 2011.
Blackstone, B. 2010. “Jobs data vindicate Germany’s work plan.” The Wall Street Journal, October 28, p. A13.
Bloomberg Business Week. 2010. “The gulf in auto wages.” September 12, p. 82.
Blow, C. M. 2011. “The seeds of change.” The New York Times, February 18, p. 2.
Bowen, D. E. and Ostroff, C. 2004. “Understanding HRM-firm performance linkages: The role of the ‘strength’ of the HRM system.” Academy of Management Review 29(2): 203–221.Google Scholar
Budros, A. 1997. “The new capitalism and organizational rationality: The adoption of downsizing programs, 1979–1994.” Social Forces 76: 229–250.CrossRefGoogle Scholar
Budros, A. 2000. “Organizational types and organizational innovation: Downsizing among industrial, financial and utility firms.” Sociological Forum 17: 307–342.CrossRefGoogle Scholar
Budros, A. 2002. “The mean and lean firm: Causes of involuntary and voluntary downsizing strategies.” Sociological Forum 17: 307–342.CrossRefGoogle Scholar
Budros, A. 2004. “Causes of early and later organizational adoption: The case of corporate downsizing.” Sociological Inquiry 74: 355–380.CrossRefGoogle Scholar
Cameron, K. S. 1994. “Investigating organizational downsizing: Fundamental issues.” Human Resource Management 33: 183–188.CrossRefGoogle Scholar
Cascio, W. F. 2002. Responsible Restructuring: Creative and Profitable Alternatives to Layoffs. San Francisco, CA: Berrett-Kohler.Google Scholar
Cascio, W. F. 2006. “Decency means more than ‘always low prices’: A comparison of Costco to Wal-Mart’s Sam’s Club.” Academy of Management Perspectives 20(3): 26–37.CrossRefGoogle Scholar
Cascio, W. F. 2010a. Employment Downsizing and Its Alternatives. Alexandria, VA: Society for Human Resource Management Foundation.Google Scholar
Cascio, W. F. 2010b. Managing Human Resources: Productivity, Quality of Work Life, Profits (8th edn.). New York: McGraw-Hill.Google Scholar
Cascio, W. F., Young, C. E., and Morris, J. R. 1997. “Financial consequences of employment-change decisions in major US corporations.” Academy of Management Journal 40: 1175–1189.Google Scholar
Conyon, M. J., Girma, S., Thompson, S., and Wright, P. W. 2002. “The impact of mergers and acquisitions on company employment in the United Kingdom.” European Economic Review 46: 31–49.CrossRefGoogle Scholar
Conyon, M. J., Girma, S., Thompson, S., and Wright, P. W. 2004. “Do wages rise or fall following merger?” Oxford Bulletin of Economics and Statistics 66: 847–862.CrossRefGoogle Scholar
Coucke, K., Pennings, E., and Sleuwaegen, L. 2007. “Employee layoffs under different modes of restructuring: Exit, downsizing or relocation.” Industrial and Corporate Change 16: 161–182.CrossRefGoogle Scholar
Coy, P. 2011a. “If demography is destiny, then India has the edge.” Bloomberg Businessweek, January 23, pp. 9, 10.
Coy, P. 2011b. “A message from the street.” Bloomberg Businessweek, February 13, pp. 58–65.
Damouni, N. and Kim, S. 2011. “Confident, cash-rich CEOs drive M&A to 4-year high.” Downloaded from , February 14, 2011.
Datta, D. K., Guthrie, J. P., Basuil, D., and Pandey, A. 2010. “Causes and effects of employee downsizing: A review and synthesis.” Journal of Management 36: 281–348.CrossRefGoogle Scholar
De Meuse, K. P., Marks, M. L., and Dai, G. 2011. “Organizational downsizing, mergers and acquisitions, and strategic alliances: Using theory and research to enhance practice,” in Zedeck, S. (ed.), Handbook of Industrial and Organizational Psychology, Vol. III. Washington, DC: APA Books, pp. 729–768.Google Scholar
DiMaggio, P. and Powell, W. 1983. “The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields.” American Sociological Review 48: 147–160.CrossRefGoogle Scholar
Dixon, S. 2003. “Implications of population ageing for the labour market.” Labour Market Trends 111(2): 67–76.Google Scholar
Economist. 2006. “Turning boomers into boomerangs.” February 16, pp. 65–67.
Eisenhardt, K. M. 1989. “Agency theory: An assessment and review.” Academy of Management Review 14: 57–74.CrossRefGoogle Scholar
Ellig, B. 2002. The Complete Guide to Executive Compensation. New York: McGraw-Hill.Google Scholar
Fama, E. F. and Jensen, M. C. 1983. “Agency problems and residual claims.” Journal of Law and Economics 26: 327–350.CrossRefGoogle Scholar
Feldman, D. C. 2007. “Late-career and retirement issues,” in Gunz, H. and Peiperl, M. (eds.), Handbook of Career Studies. Thousand Oaks, CA: Sage, pp. 153–168.CrossRefGoogle Scholar
Filatotchev, I., Buck, T., and Zhukov, V. 2000. “Downsizing in privatized firms in Russia, Ukraine, and Belarus.” Academy of Management Journal 43: 286–304.Google Scholar
Fortune’s 100 Best Companies to Work for. 2011. Downloaded from , March 7, 2011.
Gandolfi, F. 2008. “Reflecting on downsizing: What have managers learned?” SAM Advanced Management Journal 73(2): 46–56.Google Scholar
Gogoi, P. 2010. “Where are the jobs? For many companies, overseas.” December 28. on January 4, 2011.
Guthrie, J. P. and Datta, D. K. 2008. “Dumb and dumber: The impact of downsizing on firm performance as moderated by industry conditions.” Organization Science 19: 108–123.CrossRefGoogle Scholar
Hallock, K. F. 1998. “Layoffs, top executive pay, and firm performance.” American Economic Review 88: 711−723.Google Scholar
Hambrick, D. C. and Mason, P. A. 1984. “Upper echelons: The organization as a reflection of its top managers.” Academy of Management Review 9: 193−206.CrossRefGoogle Scholar
Hillier, D., Marshall, A. P., McColgan, P., and Werema, S. 2006. “Employee layoffs, shareholder wealth and firm performance: Evidence from the UK.” Journal of Business Finance and Accounting 34: 467–494.CrossRefGoogle Scholar
Kessler, A. 2011. “Is your job an endangered species?” The Wall Street Journal, February 17, p. A19.
Kets de Vries, M. F. R. and Balazs, K. 1997. “The downside of downsizing.” Human Relations 50(1): 11–50.CrossRefGoogle Scholar
Kirshnan, A. 2006. “Worker shuffles at SAS again.” Available at .
Krishnan, H. A., Hitt, M. A., and Park, D. 2007. “Acquisitions premiums, subsequent work force reductions, and post-acquisition performance.” Journal of Management Studies 44: 709–732.CrossRefGoogle Scholar
Lehto, E. and Böckerman, P. 2008. “Analyzing the employment effects of mergers and acquisitions.” Journal of Economic Behavior and Organization 68: 112–124.CrossRefGoogle Scholar
Lende, T. 2005. “Older workers: Opportunity or challenge?” Canadian Manager 30(1): 20–23.Google Scholar
Miller, D. J. 1995. “CEO salary increases may be rational after all: Referents and contracts in CEO pay.” Academy of Management Journal 38(5): 1361–1385.Google Scholar
Misra, S. 2007. “Socio-economic trends in India: Implications for HR Policies.” Presentation, Indian School of Business, January, Hyderabad, India.
Morris, B. 2001. “White-collar blues.” Fortune, July 23, pp. 98–110.
Morris, B. 2008. “America’s most admired companies: Steve Jobs speaks out.” Fortune, March 6. Downloaded from
O’Shaughnessy, K. C. and Flanagan, D. J. 1998. “Determinants of layoff announcements following M&As: An empirical investigation.” Strategic Management Journal 19: 989–999.3.0.CO;2-3>CrossRefGoogle Scholar
Perry, M. J. 2011. “The truth about US manufacturing.” The Wall Street Journal, February 25, p. A13.
Perry, T. and Shivdasani, A. 2005. “Do boards affect performance? Evidence from corporate restructuring.” Journal of Business, 78: 1403−1431.CrossRefGoogle Scholar
Pfeffer, J. 1998. The Human Equation: Building Profits by Putting People First. Boston, MA: Harvard Business School Press.Google Scholar
Pfeffer, J. 2010. “Lay off the layoffs.” Newsweek, February 15. Available at .
Power, C. 2010. “Machines don’t get paid overtime.” Bloomberg Businessweek, August 8, p. 13.
Redman, T. and Keithley, D. 1998. “Downsizing goes east? Employment restructuring in post-socialist Poland.” International Journal of Human Resource Management 9: 274–295.CrossRefGoogle Scholar
Society for Human Resource Management Foundation. 2010. “Once the deal is done: Managing a merger.” DVD produced by the Society for Human Resource Management Foundation, Alexandria, VA.
South China Morning Post. 2002. “China warns of 20 million urban jobless.” April 30, p. 1.
Stavrou, E., Kassinis, G., and Filotheou, A. 2007. “Downsizing and stakeholder orientation among the Fortune 500: Does family ownership matter?” Journal of Business Ethics 7: 149−162.CrossRefGoogle Scholar
Surowiecki, J. 2007. “It’s the workforce, stupid!” The New Yorker, April 30. Downloaded from , May 2, 2007
Triandis, H. C. 1998. “Vertical and horizontal individualism and collectivism: Theory and research implications for international comparative management,” in Cheng, J. L. and Peterson, R. B. (eds.), Advances in International and Comparative Management. Greenwich, CT: JAI Press, pp. 7–35.Google Scholar
Tsai, C., Wu, S., Wang, H., and Huang, I. 2006. “An empirical research on the institutional theory of downsizing: Evidence from MNC’s subsidiary companies in Taiwan.” Total Quality Management and Business Excellence 17: 633–654.CrossRefGoogle Scholar
Vits, C. and Randow, J. 2010. “The price of saving jobs in Germany.” Bloomberg Businessweek, August 8, pp. 12, 13.
Wagar, T. 1997. “Factors affecting permanent workforce reduction: Evidence from large Canadian organizations.” Canadian Journal of Administrative Sciences 14: 303–314.CrossRefGoogle Scholar
Yawson, A. 2006. “Evaluating the characteristics of corporate boards associated with layoff decisions.” Corporate Governance: An International Review 14: 75−84.CrossRefGoogle Scholar
Yoo, H. and Mody, B. 2000. “Predictors of downsizing in the US local telephone industry.” Information Society 16: 23–33.Google Scholar
Yu, G. and Park, J. 2006. “The effect of downsizing on the financial performance and employee productivity of Korean Firms.” International Journal of Manpower 27: 230–250.CrossRefGoogle Scholar
Zatzick, C. D. and Iverson, R. D. 2006. “High-involvement management and workforce reduction: Competitive advantage or disadvantage?” Academy of Management Journal 49: 999–1015.CrossRefGoogle Scholar
Zatzick, C. D., Marks, M. L., and Iverson, R. D. 2009. “Which way should you downsize in a crisis?” MIT Sloan Management Review 51(1): 78–86.Google Scholar

Save book to Kindle

To save this book to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×