Academic journal article Journal of Applied Management and Entrepreneurship

The Pursuit of Survivor Commitment in the Context of Downsizing: An Exploration of Perceptions Related to Severance Packages

Academic journal article Journal of Applied Management and Entrepreneurship

The Pursuit of Survivor Commitment in the Context of Downsizing: An Exploration of Perceptions Related to Severance Packages

Article excerpt

Executive Summary

Organizations are increasing the use of downsizing as a tool to adjust to pressures manifested in an increasingly competitive environment. In conjunction with the use of downsizing, recent trends indicate that organizations are also reducing the size of severance pay and packages. Involuntary layoffs have numerous consequences for organizations, often triggering severe emotional and behavior reactions from employees. These reactions are not reserved to the victims of downsizing. In fact, those who remain with the organization (survivors) often experience a variety of emotional and behavior reactions. This paper offer some practical strategies that organizational leaders can pursue to increase surviving employees' perceived organizational support, and in turn their organizational commitment by considering some of the implications of survivor perceptions of severance packages.

Organizations face incredible challenges as they attempt to remain competitive in an economy characterized by expanding global markets, pressures to reduce costs, pressures to increase quality, and pressures to sustain or enhance stakeholder returns (Porter, 1998). In response to these pressures, leaders of these organizations have employed numerous strategies Intended to enhance viability and perpetuity of the organizations (Harder, Robertson, & Woodward, 2004). Downsizing/layoffs have been a particularly popular strategy for these organizations (Allan, 2002).

Conventional wisdom suggests that downsizing is a suitable approach for reducing expenses (De Meuse, Bergmann, & Vanderheiden, 1997; Nocera, 1996). Indeed, it appears that downsizing, as an organizational strategy, has widespread appeal. Over 10 million individuals have fallen victim to downsizing since 1980 (Mathews & Duran, 1999). Further, since 1979, over 43 million jobs have been lost, and the annual rate of job loss has averaged 3.4 million since 1992 (Uchitelle & Kleinfield, 1996). Considering the trends in downsizing, some researchers have concluded that downsizing has become a norm in U.S. organizations (Koretz, 1998; Robbins, 1999). It is not surprising, then, that a review of the business news and periodicals also indicates that downsizing has become routine, no longer worthy of the front page, except hi locales where the work force reduction occurs (e.g., Beckett, 1998; Blumenstein, 1998).The motives for downsizing are numerous and varied (McKinley, Sanchez, & Schick, 1995). This paring in the work force has not been without consequences, however. In fact, numerous downsizing organizations have failed to achieve the goals sought by the downsizing. Moreover, the psychological impact of downsizing on their surviving employees has, in many cases, deteriorated the internal strength of the organization, while seriously handicapping the organization's competitiveness, (cf. Amabile & Conti, 1999; Cascio, 1993; Morris, Cascio, & Young, 1999). With this in mind, the purpose of this study is to take a practical look at one aspect of downsizing, severance packages, exploring how the manipulation of the size and nature of severance packages may influence surviving employees' perceptions of and commitment to the organization.

Practical Considerations

As previously mentioned, it is interesting to note that the use of downsizing often fails to meet the anticipated economic and organizational objectives (Bruton, Keels, & Shook, 1996;Cascio, 1993). Cascio (1993) attributed the less-than-desirable outcomes to organizational leaders failing to evoke downsizing as part of an overall continuous improvement program. Despite the obvious benefits associated with having a well designed downsizing plan, evidence suggests that companies often begin the process without policies or programs to guide the process (Cascio, 1993). Bruton et al. (1996) further characterize this downsizing behavior as a knee-jerk reaction to competitive pressures. …

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