Effects of downsizing policies on
IS survivors' attitude and career management
James J. Jiang
a,*, Gary Klein
b,1aDepartment of Business Analysis and Communication, College of Administration and Business, Louisiana Tech University, Ruston, LA 71272, USA
bCollege of Business and Administration, The University of Colorado at Colorado Springs, 1420 Austin Bluffs Parkway, P.O. Box 7150, Colorado Springs, CO 80933-7150, USA
Received 21 March 1998; received in revised form 24 March 1999; accepted 24 November 1999
Abstract
The effects of downsizing strategies on surviving system personnel have received scant attention in the IS literature. This paper reports a study of IS survivors, the employment practices of the organizations, the attitudes of the survivors toward downsizing, and the career management practices of the survivors. The results indicate that the downsizing practice has a strong relationship with survivor attitudes and the practices survivors use in managing their careers. Speci®cally, indirect downsizing methods tend to avoid negative attitudes and promote career management strategies more bene®cial to the organization.#2000 Elsevier Science B.V. All rights reserved.
Keywords:Information systems personnel; Career management; Downsizing survivors; Employee assistance
1. Introduction
Driven by top management interest in cost reduc-tion, information system (IS) downsizing the deliber-ate organizational decision to reduce workforce size is one of the most signi®cant phenomena in IS resources management in the 1990s. Firms downsizing their IS departments report signi®cant budget reduction and other bene®ts [6,39,66,71]. Despite growing top man-agement interest, little is known about the impact of the IS downsizing policies and its process implemen-tation on IS survivors. From a practical perspective, as
the downsizing process shifts from consideration of organizational level issues toward the individual affected by the process (survivors), efforts to manage the transition through intervention and to alleviate the impact on personnel come into focus.
Downsizing strategies refer to the methods employed to accomplish a workforce reduction. Means have included early retirement, attrition with-out replacement, with-outplacement, and layoffs. These approaches differ in their speed of achieving the goal of workforce reduction, the degree to which the organization retains control, and the negative effects on employees [46]. Once the downsizing strategy has been identi®ed, the process must be implemented and managed. Key issues concern the reduction of uncer-tainty through extensive communication and the implementation of interventions designed to aid and support both terminated personnel and survivors. The *Corresponding author. Tel.:1-318-257-3293;
fax:1-318-257-4253.
E-mail addresses: jiang@cab.latech.edu (J.J. Jiang), gklein@mail.uccs.edu (G. Klein).
1Tel.: 719-262-3157; fax: 719-262-3494.
goal is to help both terminated employees and survi-vors accept the process and prepare for new roles.
Although much literature on downsizing has been written over the last decade, technical professionals including IS personnel are generally overlooked. Existing studies are limited to determination of down-sizing success in the IS department [67] and factors in perceived success [68]. Apparently, none has investi-gated the impact on the attitudes and future career strategies of the survivors of an IS downsizing, though it has been done in other ®elds.
What are the IS survivors' attitudes toward down-sizing and how do they affect survivors' career man-agement strategies in the downsized workplace? Are these attitudes and strategies altered by the organiza-tional downsizing strategy and intervention processes? These are important questions, as a key element of success is that downsizing is perceived positively by the employees as a purposeful organizational response to achieve its objectives [13,38,45,51,64].
2. Downsizing background
Given the many negative effects of downsizing and their implications for organizations, a substantial lit-erature has developed. It addresses various aspects of the downsizing process. The literature is predomi-nately experience based. It is descriptive of the nor-mative mechanisms that organizations have used to downsize, and it is prescriptive as to how reductions should be accomplished [52,59]. From a conceptual perspective, the relevant components of the down-sizing process include target identi®cation, strategy selection, and management of transition through inter-vention. Targets refer to the segments of the organiza-tion that will absorb downsizing. Strategies represent the speci®c mechanisms used to operationalize the reduction. Intervention management involves imple-menting policies, such as psychological counseling and vocational training to assist individuals who are affected by the downsizing process. These items combine to form the organizational downsizing poli-cies.
Greenhalgh et al. [31] proposed that the various downsizing strategies could be arranged into two major categories that re¯ect the trade-offs between maintaining employee well-being and maximizing
short-term cost savings for the organization. Under indirect redeployment or layoffs, employees are encouraged to comply voluntarily; e.g., by transfers to different jobs or locations. Senior employees may be offered incentives to facilitate early retirement decisions. But, the most drastic method of downsizing is reduction without any assistance, termed direct redeployment or layoffs. Often, employees are offered assistance in adjusting to the termination [54] which may include outplacement or continuation of bene®ts. Observers have noted that a focus on short-term economic criteria often entails hidden costs for the organization; these are rarely considered within the context of downsizing strategy selection [35]; e.g., severe strategies may have unintended effects on survivors, including poor morale, lack of commitment, increased stress, and turnover [36]. Recent research indicates that the approach chosen may have an impact on the atmospheres within an organization [14].
Models that address intervention generally indicate two primary goals of the process [2,16]. The ®rst is to provide support for the personnel most directly affected by downsizing: displaced personnel. The second concerns survivors. The organization needs to regain the con®dence, trust, and commitment of its employees, and rebuild a positive image. Speci®c interventions include open communication between the organization and individuals, ®nancial support, career planning/counseling, resume development, on-going training, and interview training. It is believed that the provision of these interventions will help improve the transition [8,23,32,40].
studies. Furthermore, career management strategies are overlooked [38].
3. Research model
Downsizing decisions begin at the organizational level with a focus on the organizational environment (Fig. 1). The relevant environmental features, such as economic conditions, competitor actions, and market demand are objective in nature [69]. The detection of environmental change and its meaning are internal phenomena; variation in detection and interpretation across organizations is anticipated [25]. Some ®rms may anticipate the antecedents of change in advance of more normative detection, whereas others may lag well after others in the industry have attended to signi®cant change. Thus, detected environmental antecedents are regarded as perceived conditions that provoke re®nements of existing business strategy or its rede®nition, such as downsizing.
The framework (Fig. 1) shows that the degree of articulation of the downsizing decision is in¯uenced by characteristics of the organization. Characteristics such as strategic leadership, HRM sophistication, and cultural values enable or support the proactive
down-sizing decision processes. In their absence, decisions are more likely to be reactive in nature [43,60]. Target and strategy selection determine the ®rst impacts at the individual level, namely the terminated personnel, the survivors, and the programs designed to assist both groups. These form the organizational downsizing policies.
The framework further indicates that the relation-ship between downsizing strategies and effectiveness at the organizational level is mediated by complex psychological processes at individual levels of con-ceptualization. The con®guration of downsizing tar-gets and strategies, their sequence over time, and the nature of their implementation, not only serve to create categories of `survivors' and `terminated per-sonnel,' but also affect their perceptions, interpreta-tions, and reactions.
Positive attitudes toward downsizing view down-sizing as a long term process that incorporates a variety of strategies [37,42,58], is linked to long term strategic objectives [30,33,48], preserves distinctive and critical competencies and is carefully monitored through human resource management interventions [27,50]. In contrast, negative downsizing attitudes view downsizing decisions as poorly articulated with respect to these criteria. The time-frame is
compressed, criteria are simplistic, strategic compe-tencies are not considered, and the process is unma-naged [41].
However, from a purely instrumental perspective, the ways in which an organization supports downsized personnel and the effects of job loss on displaced employees are meaningful information to downsizing survivors. Survivor reactions of fear, rigidity, loss of commitment, loss of motivation, and failure to inno-vate may occur at the very time when the organization is most in need of employee support. Career manage-ment strategy is a reaction that can be either detri-mental or bene®cial. Survivor reactions in¯uence group and organizational effectiveness. Collective responses affect the ®rm's adaptation to (perceived) environmental contingencies. The effects of down-sizing unfold over time.
4. Hypotheses
The purpose of this study was to examine the relationship of downsizing policies to IS survivors' attitude toward downsizing and their career manage-ment strategies. The relationships in the framework would indicate that attitudes and career strategies could be managed by organizational practices. The following hypotheses were tested:
H1a: IS survivors' attitude toward downsizing is related to organizational downsizing strategy.
H2a: IS survivors' attitude toward downsizing is related to organizational intervention programs.
Other research indicates that strategies used to accomplish downsizing will in¯uence the behaviors and attitudes of those who survive [7,10,29]. Research also indicates that survivors can react positively or negatively to the layoffs depending on the perceived fairness of the organizational policies [9,11]. As an example, Atari's survivors showed decreased morale and strong intentions to leave the organization due to the callous manner in which employees were laid off [65].
Survivors of downsizing may need counseling to cope with feelings of guilt [28] and to adjust to additional job responsibilities [20]. They may need to be retrained to take on additional responsibilities or to ®ll new positions within the organization [62]. In
addition, Brockner and Greenberg argue that survivors examine whether the laid-off employees are treated fairly.
Another factor is the career management strategy taken by survivors. Those working to improve their chance of success within the organization are more likely to provide bene®t than those posturing to remain employable outside the organization. Thus, we need to explore the link of the model relating intervention and downsizing strategy to career man-agement strategy. We, therefore, propose the follow-ing hypothesis:
H3a: IS survivors' career management strategy is signi®cantly related to organizational downsizing strategy.
H4a: IS survivors' career management strategy is signi®cantly related to organizational intervention programs.
Some studies have shown that an organization taking severe immediate personnel cut-backs to reduce workforce often dramatically reduce employ-ees' trust and organizational commitment [17,21,26]. Researchers argue that intervention efforts indicate to survivors that the organization cares about its employ-ees and helps to maintain the morale and productivity of those remaining [56]. When an organization chooses to do nothing to help dismissed employees, a negative signal is sent to survivors. However, extra training and downsizing awareness associated with intervention should lead to increased external career management activities due to enhanced quali®cations and the desire to be prepared for future organizational downsizing actions. The psychological success cycle of careers [34] suggests that individuals who set and achieve goals in a supportive context will have higher satisfaction and higher career goals within an organi-zation.
5. Methodology
5.1. Sample
wide variety of managerial positions and organiza-tional settings and has been widely used in research situations. Self-addressed return envelopes for each questionnaire were enclosed. All the respondents were assured that their responses would be kept con®den-tial. A total of 85 questionnaires were returned for a response rate of 28%, which appears to be consistent with other mail surveys. Five questionnaires were eliminated due to missing data. As a results, 81 questionnaires were used in the data analysis. A summary of the demographic characteristics of the sample are presented in Table 1.
5.2. Questionnaire
The questionnaire was developed from a survey instrument by Byer [19]. The validation of the attitude measures toward downsizing can be found in that source. Intervention, downsizing methods, and employee career management strategies are quanti®ed and based on best recollection of the subjects. The questionnaires were critically reviewed by two man-agement researchers for further content validity. Ambiguities in the instructions were corrected. Instructions requested subjects to indicate how strongly they agree with the attitude statements and how often they use the career management strategies in a downsizing workplace.
The attitude instrument contained 10 items. The attitudes are survivor perception of downsizing as an organizational practice. As can be seen by the items in Table 2, viewpoints on downsizing (e.g. a strategy for continuous improvement) are sought rather than atti-tudes toward the organization. The intent is to examine attitudes toward downsizing and not job satisfaction measures.
Table 1
Demographic information
Gender
Male 61 (75%)
Female 20 (25%)
Age
<40 17 (21%)
40 and <50 36 (44%)
>50 28 (35%)
Marital status
Married 65 (80%)
Single/separated 16 (20%)
Having children living at home
Yes 42 (51%)
No 39 (48%)
Industry
Manufacturing 23 (28%)
Private service (e.g. finance, insurance) 30 (37%)
Wholesale/retail 6 ( 8%)
Public administration 5 (6%)
Others 17 (21%)
Company size
<100 employees 6 (7%)
100 and <500 employees 23 (28%) 500 and <1000 employees 12 (15%) 1000 and <2500 employees 13 (16%)
>2500 employees 27 (33%)
How long have been employed in this industry?
Less than 5 years 4 (5%)
5 and <10 years 7 (9%)
10 and <20 years 31 (38%)
20 years 39 (48%)
Education
High school/associate degree 11 (16%)
Bachelor 24 (34%)
Graduate (Master's or J.D.) 15 (21%) Ph.D. or equivalent 20 (29%)
Table 2
Attitude toward downsizing items. Please consider each of the following statements, representing viewpoints occasionally ex-pressed regarding downsizing, and indicate the degree to which you agree or disagree
a1. Downsizing is an unrealistic demand
a2. Downsizing is an opportunity for on-going improvement a3. Downsizing is an approach to maintain efficient organizations a4. Downsizing is a target or goal to be achieved
a5. Downsizing is a strategy for continuous progress
a6. Downsizing is a method to a achieve a more competitive position
a7. Downsizing is a constraint or obstacle to be overcome a8. Downsizing is a continuous activity to eliminate organizational fat
a9. Downsizing is every employee's responsibility a10. Downsizing is a reaction to economic pressure
The scale required further reduction and veri®cation before the research questions could be tested. First, principle components analysis was conducted. The analysis for attitude scale produced only one compo-nent. The ®rst nine items loaded into the factor after varimax rotation; item a10 was eliminated from further analysis. The homogeneity of the items within the identi®ed factor was established further by com-puting its internal consistency reliability coef®cient (a0.93) applying the formula recommended by Cliff [22]. Kaiser's measure of sampling adequacy [44] was conducted and the results (MSA0.82) indicated the adequacy of the sample size. A mean attitude score was created for each respondent. (Note: items 1 and 7 were reverse statements).
Table 3 shows the items used to measure career strategy. Statements are replicated from the survey. The scale was a 7 point scale with 1 Ð not used at all, 4 Ð used to a slight extent, and 7 Ð used almost exclusively. A principle components analysis for career strategy items produced two components with eigenvalues greater than chance [47]. The factor load-ings of a subsequent factor analysis using varimax rotation and the assignment of items to each of the two
scales are also shown. Kaiser's measures of sample adequacy for both approaches were 0.80. The alpha values for both were 0.68. Two mean scores were com-puted for each respondent, corresponding to the two factors: internal- and external-oriented career manage-ment. Item c7 did not load uniquely into either factor.
The ®rst factor can be considered an `internal-oriented' career approach including forming political alliances, developing critical skills tied to the organi-zation's new thrust, and avoiding long-term or group assignments where contributions cannot be clearly de®ned. This factor contains items generally favorable to the organization. Certainly, building skills that are advantageous to the organization is a major plus. Likewise, political contacts within the company are often important to the success of the systems group, and ultimately the success of systems important to the company. The third item is more of a route to avoid appearing unproductive by avoiding dangerous pro-jects. It is advantageous only if the organization has effective evaluation and reward structures in place to encourage participation in such activities.
The second factor can be considered an `external-oriented' approach including maintaining mobility,
Table 3
Factor analysis results of career management items. Please indicate the practices that you adopted for managing your career in a downsizing workplace
Factor 1 Factor 2
c1. Forming political alliances: do anything you find morally acceptable to be noticed in a positive way by key people
0.710 0.111
c2. Develop and market critical skills: develop skills that are closely tied to the organization's new thrust 0.680 0.246 c3. Maintain your mobility: see the company as a temporary arena in which to apply your skills and knowledge.
Be loyal primarily to yourself and to place your own interests above those of the organization
0.001 0.866
c4. Avoid long-term or group system project where your accomplishments cannot be clearly defined: strive for some individual problem-solving assignments and avoid attempting to solve the unsolvable
0.813 0.067
c5. Become an IS generalists rather than a specialist: over specialization can hinder movement from one corporation to another; however, that a delicate balance must be achieved
0.150 0.535
c6. Return calls from executive recruiters, thus maintaining your marketability: not returning calls is a tip-off that you are not willing to test the waters
0.324 0.724
c7. Cultivate networks that enhance your visibility outside your organization: participation in IS professional organizations and community activities makes you visible as a competent IS manager or professional
0.430 0.428
Response scale 1. Not used at all
becoming an IS generalist, and returning calls from executive recruiters. The harmful effects to the orga-nization are evident. These career strategies are aimed at ®nding a job in another organization. This strategy views the organization as a temporary arena, where skills are viewed as a path to a better place, and interactions with headhunters are sought.
Three scales remain. These include intervention methods, direct-layoff methods, and indirect-layoff approaches and the items are shown in Tables 4 and 5. Statements in the table are abbreviated and may be found in their complete form in Byer's article. The intervention scale items on the questionnaire were examined using principle components analysis and found to have only one identi®able component. Sub-sequent varimax rotation found all loaded into the single factor. The three scales of intervention methods, direct-layoff methods, and indirect-layoff approaches had Kaiser MSA values of 0.89, 0.75, and 0.71, respectively and alpha values of 93, 0.63, and 0.75.
While these scales could bene®t from further devel-opment, they are based extensively on the literature.
6. Results
Prior to start of testing the hypotheses, the demo-graphic data was examined for potential in¯uence. Each demographic measure was set up as an indepen-dent variable in separate MANOVAs with the six scales as the dependent variables. Not one of the demographic variables was found to have a signi®cant relationship to the scales. Thus, the sample's demo-graphic character does not confound the results of the analysis.
6.1. Attitude
In order to test the ®rst two hypotheses, a three-way ANOVA was conducted. Each of the independent variable scales was reduced to two dimensions (high and low) by dividing the sample at the median. Table 6 shows the results of the analysis. The top portion of the table shows the signi®cance levels of the factors in the ANOVA. Only the direct layoff approaches, the interventions, and the three-way interaction of the Table 4
Intervention items. Please consider each of the following alternatives, often utilized during downsizing programs, and indicate the extent to which each alternative has been used in your IS organization for the transition
Abbreviated statements
I1. Ensure equal amount of attention I2. Ensure job security
I3. Outplacement
I4. On-going training to survivors I5. Consulting to layoffs
I6. Develop and cross-training of employees I7. Redesigned compensation system I8. Severance packages to layoffs I9. Personal coaching to survivors I10. Career counseling to layoffs I11. Information sharing to survivors I12. Made the cuts all at once I13. Open communication I14. Task redesign for survivors
I15. Top management honest with employees
Response scale 1. Not used at all
2. Used to a very slight extent 3. Used to a slight extent 4. Used to a moderate extent 5. Used to a great extent 6. Used to a very great extent 7. Used almost exclusively
Table 5
Direct-layoff and indirect-layoff items. Please consider each of the following elements, frequently utilized in downsizing programs, and indicate the extent to which each element was used by your organization
Indirect-layoff a. Early retirements
b. Transferred employees to new jobs within the company c. Eliminated and/or reduced overtime
d. Retraining for different jobs within the same organization
Direct-layoff
a. Outplacements outside the company b. Involuntary layoffs
Response scale 1. Not used at all
independent variables are signi®cantly related to the attitude scale. This supports hypotheses H1a and H2a. The middle portion shows the attitude means for high and low categories of the two signi®cant factors. An examination reveals that subjects in organizations using the higher extent of direct-layoff methods expressed a signi®cantly more negative attitude toward downsizing than subjects in organizations using less extent of direct-layoff method for down-sizing (3.90 versus 4.10). Subjects in organizations implementing a higher extent of intervention pro-grams expressed a more positive attitude toward downsizing than subjects in organizations implement-ing a lower extent of assistance programs (4.39 versus 3.54). The means in the three-way analysis exhibit the same in¯uence.
In summary, the results show that survivors' attitude were strongly affected by the degree of use of the direct-layoff method to reduce workforce and the degree of assistance programs implemented by an organization.
6.2. Career strategy
In order to test hypotheses three and four, a three-way ANOVA was conducted. For the internal-oriented career management strategy (see Table 7), only two main effects, direct-layoff and indirect-layoff are
signi®cant. The subjects in the organizations using a high extent of direct-layoff expressed a higher extent use of internal-oriented career strategies than subjects in organizations with low extent use of direct-layoff (4.38 versus 3.33). Similarly, subjects in organizations using a high extent of indirect-layoff exhibited a signi®cantly higher use of internal-oriented strategies than subjects in organizations with a lower use (4.20 versus 3.29).
IS survivors' internal-oriented career management strategy in a downsized workplace is only highly dependent on the extent of downsizing. The higher extent the downsizing taken by an organization, the more active an individual will be to form political alliances and try to tie their skills to the organization's needs. Intervention programs, however, did not have the mitigating effect on the pursuit of career manage-ment strategies. The IS employees could as easily use the new skills to pad their resumes as to look for other opportunities within the organization.
Table 8 shows the results of a three-way ANOVA for external-oriented career strategies. There are two signi®cant main effects, direct-layoff and assistance programs, and a signi®cant three-way interaction. The results suggest that subjects in organizations using a higher extent of direct-layoff method expressed a higher extent use of external-oriented career manage-ment strategies than subjects in organization using a lower extent of direct-layoff. No signi®cant relation was found with the indirect layoff approaches indicat-ing that a better posture with the organization is obtained than with direct methods. In addition, IS Table 6
ANOVA for IS survivors' attitude
Independent variables F-value P-value
Indirect-layoff 1.32 0.25
Direct-layoff 3.96 0.05*
Intervention 5.70 0.02*
Indirectdirect 3.45 0.06 Indirectintervention 0.68 0.41 Directintervention 1.23 0.27 Indirectdirectintervention 3.85 0.05*
`Attitude' means analysis
Significant main effects Low High
Direct-layoff 4.10 3.90
Intervention 3.54 4.39
Three-way Direct low Direct high Intervention high Ð Indirect high 3.90 4.78 Intervention high Ð Indirect low 4.46 3.03 Intervention low Ð Indirect high 3.86 2.89 Intervention low Ð Indirect low 3.72 2.82
*Significant at 0.05.
Table 7
ANOVA for internal-oriented career approach
Independent variables F-value P-value
Indirect-layoff 3.79 0.05*
Direct-layoff 5.93 0.01*
Intervention 0.58 0.44
Indirectdirect 0.11 0.74
Indirectintervention 2.33 0.13 Directintervention 0.26 0.61 Indirectdirectintervention 0.03 0.87
`Internal career' means analysis
Significant main effects Low High
Direct-layoff 3.33 4.38
Indirect-layoff 3.29 4.20
survivors in organizations which implement a higher extent of assistance programs indicated a higher extent of use of external-oriented career strategies than sub-jects in organizations which implement a lower extent of assistance programs to their employees. Thus, the support exists for both H3a and H4a.
7. Conclusions
The explicit test in this paper is that the downsizing process that proceeds from organizational level con-siderations has individual level impacts. The results provide managers with insights into how to administer layoffs so as to elicit from survivors the most positive (or least negative) behavioral and attitudinal reactions. Downsizing efforts are often poorly planned and ineffective for organizations which are forced into crisis situations which necessitate immediate person-nel cut-backs to generate savings. On the other hand, organizations incorporating a variety of downsizing strategies linked to long-range strategic objectives preserve distinctive and critical competencies.
Fairness perception is also important to the survi-vors, as re¯ected in the indirect methods encouraging internal career strategies. Employees are more likely to judge a downsizing as justi®ed when: (1) workers received adequate advanced notice, (2) employees are
treated with dignity and respect during the downsiz-ing, (3) management must provide a clear, adequate explanation of the reasons for the layoffs, where taking the time to do so (`sweating the details') and the reasons themselves both count; and (4) employees are involved in layoff decisions. This latter has two bene®ts. The employees may create workable alter-natives to layoffs and they judge layoffs as more justi®ed when they are involved in decisions.
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Intervention 6.01 0.01*
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Dr. Gary Kleinis the Couger Professor of Information Systems at the University of Colorado in Colorado Springs. He obtained his Ph.D. in Management Science at Purdue University. Before that time, he served with Arthur Ander-sen & Company in Kansas City and was Director of the Information Systems Department for a regional financial institution. He was previously on the faculty at the University of Arizona, Southern Methodist University and Louisiana Tech University and served as Dean of the School of Business at the University of Texas of the Permian Basin. His interests include project management, knowledge management, system development and mathematical modeling with over 60 academic publications in these areas.
