Academic journal article Revue Canadienne des Sciences de l'Administration

Factors Affecting Permanent Workforce Reduction: Evidence from Large Canadian Organizations

Academic journal article Revue Canadienne des Sciences de l'Administration

Factors Affecting Permanent Workforce Reduction: Evidence from Large Canadian Organizations

Article excerpt


Despite an extensive practitioner literature on workforce reduction, relatively few Canadian studies have empirically examined the determinants of workforce reduction policies. Using data from more than 1,000 organizations across the country, this study investigated factors associated with permanent workforce reduction strategies. Fifty-three percent of the respondents permanently reduced their workforce during the two-year period of the study (with an average reduction of almost 15% of the workforce). Multinomial logit was used to compare organizations that had and had not engaged in employee cutbacks. The results revealed that differences in workforce reduction strategies were associated with the economic environment, characteristics of the organization, and human resource management policies.

Rarely is it possible to browse through a major newspaper and not come across an article reporting the layoff of employees or the closure of a business. However, despite the near obsession of several organizations with reducing the workforce, relatively little research has focused specifically on permanent workforce reduction (Cameron, Sutton, & Whetten, 1988; Leana & Ivancevich, 1987). Rather, organizational scholars have, until recently, exhibited a strong preference for studying growing companies (Whetten, 1987). Moreover, while a review of the practitioner literature reveals a host of articles addressing downsizing and workforce reduction, the writings are largely prescriptive, typically unsupported by empirical research, and often in conflict.

Around the world, organizations are striving to become more competitive as they struggle to meet the challenges of the global marketplace. Traditional notions of job security and rewards for loyalty and long service to the organization have, in many instances, been replaced by continuous change, uncertainty, and considerable shedding of employees (Mathys & Burack, 1993). Associated with such developments is the considerable pain, stress, and hardship inflicted on employees (both workers who have lost jobs and "survivors," those who remain with an organization). In addition, there is mounting evidence that many downsizing efforts fail to meet corporate objectives (Cameron, 1994; Cascio, 1993).

Despite the extensive number of organizations engaging in workforce downsizing and restructuring, few Canadian studies have investigated the determinants of permanent workforce reduction strategies (in fact, popular press reports on employee cutbacks are often based on a small number of American reports). The present study has two major objectives. First, using data from 1,140 large Canadian organizations, it provides evidence concerning the frequency of workforce reduction. Second, it examines the relationship between an employer's workforce reduction strategy and a number of environmental and organizational variables by comparing organizations that have and have not engaged in permanent employee cutbacks.

Review of the Literature

Workforce reduction and organizational restructuring are beginning to attract research interest. In addition to an extensive and growing practitioner literature on workforce reduction (see, for instance, Adamson & Axmith, 1983; Byrne, 1994; Hansen, 1985; Nienstedt, 1989; Tomasko, 1990, 1991), there is an increasing focus on strategic responses to downsizing (for example, Koys, Armacost, & Charalambides, 1990; Lawrence & Mittman, 1991; Mathys & Burack, 1993). In 1993 that the Strategic Management Journal devoted its entire summer 1993 issue of the journal to the topic of corporate restructuring.

In recent years, a number of researchers have used case studies to study the workforce reduction process (Cornfield, 1983; Hardy, 1987, 1992; Teram & Hines, 1988). Furthermore, a growing area of research (and one of particular interest to organizational decision-makers) involves an examination of the consequences of workforce reduction and organizational decline (Cameron, Freeman, & Mishra, 1991; Cameron, Whetten, & Kim, 1987). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.