Downsizing: Trends and Impacts

During the 1990s, almost all of Fortune 1000 firms have engaged in downsizing (Kets de Vries & Balazs, 1997, p. 11). Further, the trend appears to be continuing, and many analysts contend that "developments in management indicate that downsizing is here to stay. A major contributing factor has been the increasing popularity of global benchmarking. Finding one's overhead costs wanting compared to not only domestic but also international competitors has turned into a convincing argument to take large numbers of employees off the payroll" (Kets de Vries & Balazs, 1997, p. 11). Another reason for the continued introduction of downsizing practices is the administrative impact of the revolutionary transformation in information and communication technology. Changes in such technologies have

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please stockholders, downsizing almost always is perceived as creating adverse outcomes for employees (Schwind, 1997, p. 55). Employees either are downsized out of a job, or surviving employees are forced to assume greater organizational responsibilities. When downsizing does cause operations to become more productive, such productivity improvement is attained at the expense of an often extensive reorganization and employee discontent (Schwind, 1997, p. 55). Downsizing, as an example, failed to work for the Dutch transnational electronics giant Philips Gloeilampenfabrieken NV (Heller, 1997, p. 23). Although downsizing succeeded in reducing costs, other outcomes (personal misfortunes of downsized employees that became public, deteriorating product quality, and lower levels of customer service) tarnished the Philips corporate image, with the result that downsizing resulted in neither increased output nor needed management reforms (Heller, 1997, p. 23). Downsizing announcements themselves, however, can cause a decrease in productivity (Gilliam, 1997, p. 5). The mental toll on employee morale and performance while workers wait to see who is affected can have a devastating effect on organizational productivity. One of the proble
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