A Global Perspective on the Non-Financial Consequences of Downsizing

Franco Gandolfi () and Magnus Hansson
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Franco Gandolfi: The University of the South Pacific, Fiji Islands
Magnus Hansson: Örebro University School of Business Centre for Empirical Research on Organizational Control (CEROC), Sweden

REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, 2015, vol. 16, issue 2, 185-204

Abstract: Firms engage in workforce downsizing for a multitude of reasons, generating a myriad of consequences and implications at organizational, sub-group, and individual levels of analysis. The downsizing literature is extensive, reflecting the prevalence of this management practice in North America and around the globe. Despite the large body of research, there is scarce evidence regarding the success of the downsizing strategy when assessed from financial, organizational, and human resource perspectives. This paper demonstrates that there are patterns in downsizing practices irrespective of country of origin. Internationally-oriented firms adopt similar strategies and practices to handle external threats or internal inefficiencies and experience similar outcomes. Also, there is substantial empirical evidence from multiple countries suggesting that executives have adopted downsizing activities as a strategy, driven by a deep-seated belief that these strategies will improve organizational efficiency, effectiveness, and overall financial performance. The paper shows that managers often experience a crisis mentality following the planning and implementation of downsizing and fail to make effective long-term plans for the firm and its constituencies. Furthermore, executives have a tendency to inadequately prepare for the aftermath of downsizing, and fail to understand how downsizing survivors will be affected by workforce reduction activities. Finally, the authors argue that firms mitigate some of the negative effects by providing training for survivors and introducing human resource policies and plans to mediate the after-effects of downsizing.

Keywords: downsizing; consequences; implications; global. (search for similar items in EconPapers)
JEL-codes: M10 M14 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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