Hostname: page-component-848d4c4894-nr4z6 Total loading time: 0 Render date: 2024-05-16T08:19:10.127Z Has data issue: false hasContentIssue false
  • English
  • Français

Downsizing is dead; long live the downsizing phenomenon: Conceptualizing the phases of cost-cutting

Published online by Cambridge University Press:  02 February 2015

Franco Gandolfi  and
Craig R Littler
Franco Gandolfi
Affiliation:
School of Business, California Baptist University, Riverside, CA, USA
Get access Rights & Permissions [Opens in a new window]

Abstract

Downsizing as a systematic reduction of employees is frequently utilized in order to increase productivity, efficiency, profitability, and competitiveness of organizations. As a strategy of choice for many firms around the world, downsizing produces far-reaching financial, organizational, and social consequences. Despite the large body of literature, there is inconclusive evidence as to whether downsizing is effective and whether it generates the widely anticipated benefits. Employee downsizing as a change management strategy has been actively adopted for more than three decades. This downsizing article presents a phase typology of job cutting including three distinct phases and three levels of argument. As a conceptual paper, it aims to examine, update, and extend Littler and Gandolfi's (2008) seminal work. The research paper culminates with a discussion of current downsizing practices, and posits that the downsizing phenomenon has remained a popular restructuring.

Keywords

downsizingphenomenoncost cuttingphaserestructuringstrategy
Type
Research Article
Information
Journal of Management & Organization , Volume 18 , Issue 3 , May 2012 , pp. 334 - 345
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

+

Tribute: Craig R. Littler was Head of School of Business at James Cook University after having returned to Australia from appointments at the Universities of London and St Andrews. Professor Littler was an exceptional academic with a strong international reputation. As a distinguished management scholar and business thinker, Dr Littler was an influential and leading contributor to ANZAM and the management academies in Australia and overseas. As my mentor and role model, Craig was a remarkable man who provided a learningrich research environment, always striving for excellence, promoting innovative thinking, and pursuing out-of-the-box solutions.

References

All, A. (2009, 03 6). IBM's ‘stealth’ layoffs show need for more transparency. IT Business Edge. Retrieved from http://www.itbusinessedge.com/cm/blogs/all/ibms-stealth-layoffs-show-need-for-more-transparency/?cs=30949Google Scholar
Allen, R. K. (1997). Lean and mean: Workforce 2000 in America. Journal of Workplace Learning, 9(1), 34–42.Google Scholar
Allen, T., Freeman, D., Russell, J., Reizenstein, R., & Rentz, J. (2001). Survivor reactions to organizational downsizing: Does time ease the pain? Journal of Occupational and Organizational Psychology, 74, 145–164.Google Scholar
Anthony, W. P., Perrewe, P. L., & Kacmaar, K. M. (1996). Strategic human resource management (2nd ed.). Fort Worth, TX: The Dryden Press.Google Scholar
Appelbaum, S. H., Everard, A., & Hung, L. (1999). Strategic downsizing: Critical success factors. Management Decision, 37(7), 535–559.Google Scholar
Beaumont, P., & Harris, R. (2002). Examining white-collar downsizing as a cause of change in the psychological contract. Employee Relations, 24(4), 378–388.Google Scholar
Beylerian, M., & Kleiner, B. H. (2003). The downsized workplace. Management Research News, 26, 2–4.Google Scholar
Brown, B. (2011, 11 3). Bloodiest tech industry layoffs in 2011. Network World. Retrieved from http://www.networkworld.com/news/2011/110311-tech-layoffs-cisco-rim-252733.htmlGoogle Scholar
Bruton, G. D., Keels, J. K., & Shook, C. L. (1996). Downsizing the firm: Answering the strategic questions. Academy of Management Executive, 10(2), 38–45.Google Scholar
Budros, A. (1999). A conceptual framework for analyzing why organizations downsize. Organization Science, 10(1), 69–82.Google Scholar
Budros, A. (2002). The mean and lean firm and downsizing: Causes of involuntary and voluntary downsizing strategies. Sociological Forum, 17(2), 307–342.Google Scholar
Bureau of Labor Statistics. (2009). Economic news release – Employment situation summary. Retrieved from http://www.bls.gov/news.release/empsit.nr0.htmGoogle Scholar
Cameron, K. S. (1994). Strategies for successful organizational downsizing. Human Resource Management, 33(2), 189–211.Google Scholar
Cameron, K. S., Freeman, S. J., & Mishra, A. K. (1993). Downsizing and redesigning organizations. In Huber, G., & Glick, W. (Eds.), Organizational change and redesign (pp. 19–63). New York, NY: Oxford University Press.Google Scholar
Cappelli, P. (1992). Examining managerial displacement. Academy of Management Journal, 35, 203–217.Google Scholar
Cascio, F. W. (2002). Strategies for responsible restructuring. Academy of Management Executive, 16(3), 80–91.Google Scholar
Cascio, W. F. (1993). Downsizing: What do we know? What have we learned? Academy of Management Executive, 7(1), 95–104.Google Scholar
Cascio, W. F. (2003). Responsible restructuring: Seeing employees as assets, not costs. Ivey Business Journal Online, 68(2), 1–5.Google Scholar
Cascio, W. F., & Young, C. E. (2003). Financial consequences of employment-change decisions in major US corporations, 1982-2000. In Meuse, K. P. De, & Marks, M. L. (Eds.), Resizing the organization: Managing layoffs, divestitures, and closings. San Francisco, CA: Jossey-Bass.Google Scholar
Caulfield, B. (2008, 11 26). Google's stealth layoffs. Forbes.com. Retrieved from http://www.forbes.com/2008/11/26/google-layoffs-contractors-tech-enter-cx_bc_1126google.htmlGoogle Scholar
Chadwick, C., Hunter, L., & Walston, S. (2004). Effects of downsizing practices on the performance of hospitals. Strategic Management Journal, 25(5), 405–420.Google Scholar
Chan, S. P. (2009, 05 6). Latest round of Microsoft layoffs may not be last. The Seattle Times. Retrieved from http://seattletimes.nwsource.com/html/micro-soft/2009180671_microsoft06.htmlGoogle Scholar
Crosman, P. (2006, 11 10). Stealth layoffs and reputation monitoring. Intelligent Enterprise. Retrieved from http://www.intelligententerprise.com/blog/archives/2006/11/stealth_layoffs.htmlGoogle Scholar
Datta, D. K., Guthrie, J. P., Basuil, D., & Pandey, A. (2010). Causes and effects of employee downsizing: A review and synthesis. Journal of Management, 36(1), 281–348.Google Scholar
Davis, J. (2003). Organizational downsizing: A review of literature for planning and research. Journal of Healthcare Management, 48(3), 181–201.Google Scholar
Deffree, S. (2007, 04 4). Motorola layoffs reach 10,000. EDNElectronic News. Retrieved from http://www.edn.com/article/CA6547845.htmlGoogle Scholar
Demerjian, C. (2005, 02 09). HP continues stealth layoffs. The Inquirer. Retrieved from http://www.theinquirer.net/en/inquirer/news/2005/02/09/hp-continues-stealth-layoffsGoogle Scholar
De Meuse, K. P., Bergmann, T. J., Vanderheiden, P. A., & Roraff, C. E. (2004). New evidence regarding organizational downsizing and a firm's financial performance: A long-term analysis. Journal of Managerial Issues, 16, 155–177.Google Scholar
De Meuse, K. P., & Marks, M. L. (2003). Resizing the organization. Managing layoffs, divestitures, and closings. San Francisco, CA: Jossey-Bass.Google Scholar
Dolan, S., Belout, A., & Balkin, D. B. (2000). Downsizing without downgrading: Learning how firms manage their survivors. International Journal of Manpower, 21(1), 34–46.Google Scholar
Downs, A. (1995). Corporate executions. New York, NY: Amacom.Google Scholar
Elstein, A. (2008, 06 2). Research: 22,000 jobs cut on Wall Street, with more to come. Crains New York Business, Workforce Management. Retrieved from http://www.workforce.com/section/00/article/25/56/87.htmlGoogle Scholar
Farfan, B. (2009, 08 31). U.S. retail industry numbers: 364 stealth store closings. Barbara's Retail Industry Blog. Retrieved from http://retailindustry.about.com/b/2009/08/31/u-s-retail-industry-num-bers-364-stealth-store-closings-900-grand-openings-69000-clunker-trade-ins-65-ceos-surveyed-and-a-comeback-story-straight-from-hollywood.htmGoogle Scholar
Farrell, M., & Mavondo, F. (2004). The effect of downsizing strategy and reorientation strategy on a learning orientation. Personnel Review, 33(4), 383–402.Google Scholar
Fisher, S. R., & White, M. A. (2000). Downsizing in a learning organization: Are there hidden costs? Academy of Management Review, 25(1), 244–251.Google Scholar
Freeman, S. J. (1994). Organizational downsizing as convergence or reorientation: Implications for human resource management. Human Resource Management, 33(2), 213–238.Google Scholar
Gandolfi, F. (2006). Corporate downsizing demystified: A scholarly analysis of a business phenomenon. Hyderabad, India: The ICFAI University Press.Google Scholar
Gandolfi, F. (2007). How do large Australian and Swiss banks implement downsizing? Journal of Management & Organization, 13(2), 145–159.Google Scholar
Gandolfi, F. (2008). Cost-reductions, downsizing-related layoffs, and HR practices. SAM Advanced Management Journal, 73(3), 52–58.Google Scholar
Gandolfi, F. (2009). Where did downsizing go? A review of 30 years of a strategic business phenomenon. The Australasian Journal of Business and Social Inquiry, 7(1), 40–65.Google Scholar
Gandolfi, F. (2010). Organizational downsizing: A review of two decades of a strategic phenomenon. Sasin Journal of Management, 16(1), 85–108.Google Scholar
Gandolfi, F., & Hansson, M. (2010). Reduction-in-force (RIF) – New developments and a brief historical analysis of a business strategy. Journal of Management & Organization, 16(5), 727–743.Google Scholar
Gandolfi, F., & Hansson, M. (2011). Causes and consequences of downsizing: Towards an integrative framework. Journal of Management & Organization, 17(4), 498–521.Google Scholar
Gandolfi, F., & Neck, P. (2008). Consequences, payoffs, and fallout of downsizing (A literature review of corporate downsizing: Part 3). Review of International Comparative Management, 9(1), 55–78.Google Scholar
Greenglass, E. R., & Burke, R. J. (2001). Downsizing and restructuring, implications for stress and anxiety. Anxiety, Stress, and Coping, 14, 1–13.Google Scholar
Griggs, H. E., & Hyland, P. (2003). Strategic downsizing and learning organizations. Journal of European Industrial Training, 24(2–4), 177–187.Google Scholar
Heckscher, C. (1995). White-collar blues: Management loyalties in an age of corporate restructuring. New York, NY: Basic Books.Google Scholar
James, D. (1999, 03 22). Middle managers or those with ‘power’ often went first. Business Review Weekly, 52.Google Scholar
Jones, V. D. (1998). Downsizing the federal government: The management of public sector workforce reductions. Armonk, NY: M.E. Sharpe Inc.Google Scholar
Kennedy, J. (2009, 01 28). Stealth layoffs at IBM already at 4,000 – reports. SiliconRepublic.com. Retrieved from http://www.siliconrepublic.com/news/article/12173/business/reports-of-stealth-layoffs-at-ibmGoogle Scholar
Kirby, J. (1999, 03 22). Downsizing gets the push. Business Review Weekly, pp. 50–54.Google Scholar
Krane, J. (2002, 05 31). IBM's unannounced layoffs near 5,000 mark. CRN. Retrieved from http://www.crn.com/it-channel/18820762Google Scholar
Lat, D. (2010, 03 10). Rolling stealth layoffs continue at McDermott Will & Emery. Above the Law. Retrieved from http://abovethelaw.com/2010/03/rolling-stealth-layoffs-continue-at-mcdermott-will-emery/#Google Scholar
Lat, D. (2012, 02 28). Staff layoff watch: Bingham McCutchen makes cut. Above the Law. Retrieved from http://abovethelaw.com/2012/02/staff-layoff-watch-bingham-mccutchen-makes-cuts/Google Scholar
Lee, C. (1992, 07 1992). After the cuts. Training, pp. 17–23.Google Scholar
Littler, C. R. (1998). Downsizing organisations: The dilemmas of change. In Human resources management bulletin. Sydney, NSW: CCH Australia Limited.Google Scholar
Littler, C. R., Dunford, R., Bramble, T., & Hede, A. (1997). The dynamics of downsizing in Australia and New Zealand. Asia Pacific Journal of Human Resources, 35(1), 65–79.Google Scholar
Littler, C. R., & Gandolfi, F. (2008, 08 8–13). What happened to downsizing? Organizational continuity, managerial fashion, & signaling. Paper presented at Academy of Management Conference, Conference Proceedings (One Nomination for Best Conference Paper), Anaheim, CA.Google Scholar
Luthans, B. C., & Sommer, S. M. (1999). The impact of downsizing on workplace attitudes. Group and Organization Management, 24(1), 46–70.Google Scholar
Macky, K. (2004). Organisational downsizing and redundancies: The New Zealand workers' experience. New Zealand Journal of Employment Relations, 29(1), 63–87.Google Scholar
Martino, M. (2007, 10 15). Pfizer: Top 5 layoffs in 2007. Fierce Biotech. Retrieved from http://www.fiercebiotech.com/special-reports/1-pfizerGoogle Scholar
Mathieson, C. (2009, 04 14). Qantas to axe 1750 jobs and ground 10 planes. The Australian. Retrieved from http://www.theaustralian.com.au/business/news/downturn-plunges-qantas-into-the-red/story-e6frg906-1225697062545Google Scholar
Maurer, H. (2005, 12 5). Downsizing in Detroit. The Business Week. Retrieved from http://www.businessweek.com/magazine/content/05_49/c3962050.htmGoogle Scholar
McCullough, J. (2009, 03 2). Anglo coal cuts 650 jobs. Courier Mail. Retrieved from http://www.news.com.au/couriermail/story/0,23739,25125953953,00.htmlGoogle Scholar
McGregor, J. (2008, 05 16). The stealth layoff. Business Week, 2008. Retrieved from http://www.businessweek.com/careers/managementiq/archives/2008/05/the_stealth_lay.htmlGoogle Scholar
McKinley, W., Sanchez, C. M., & Schick, A. G. (1995). Organizational downsizing: Constraining, cloning, and learning. Academy of Management Executive, 9, 32–42.Google Scholar
McKinley, W., Zhao, J., & Rust, K. G. (2000). A socio-cognitive interpretation of organizational downsizing. Academy of Management Review, 25, 227–243.Google Scholar
Minnick, D. J., & Ireland, R. D. (2005). Inside the new organization: a blueprint for surviving restructuring, downsizing, acquisitions and outsourcing. The Journal of Business Strategy, 26(1), 18–25.Google Scholar
Mishra, A. K., Mishra, K. E., & Spreitzer, G. M. (2009). Downsizing the company without downsizing morale. MIT Sloan Management Review, 50(3), 39–44.Google Scholar
Morath, E. (2007, 01 23). Research center closing is ‘black day’ for employees. The Detroit News. Retrieved from http://www.detroitnews.com/article/20070123/BIZ/701230358/1148Google Scholar
Morris, J. R., Cascio, W. F., & Young, C. E. (1999). Downsizing after all these years: Questions and answers about who did it, how many did it, and who benefited from it. Organizational Dynamics, 27(3), 78–87.Google Scholar
Mroczkowski, T., & Hanaoka, M. (1997). Effective rightsizing strategies in Japan and America: Is there a convergence of employment practices? The Academy of Management Executive, 11(2), 57–67.Google Scholar
Mũnoz-Bullon, F., & Sanchez-Bueno, M. J. (2010). Downsizing implementation and financial performance. Management Decision, 48(8), 1181–1197.Google Scholar
Ogg, E. (2007, 05 31). Dell to lay off 10 percent of workforce. CNET News.com. Retrieved from http://news.cnet.com/8301-10784_3-9724562-7.htmlGoogle Scholar
Olson, P. (2007, 12 13). Novartis scales back in tough times. Forbes.com. Retrieved from http://www.forbes.com/2007/12/13/novartis-restructuring-generics-markets-equity-cx_po_1213markets05.htmlGoogle Scholar
Orlando, J. (1999). The fourth wave: The ethics of corporate downsizing. Business Ethics Quarterly, 9(2), 295–414.Google Scholar
Polivka, A. (1996). Contingent and alternative work arrangements, defined. Monthly Labor Review, 119(10), 3–9.Google Scholar
Prior, J. (2010, 07 8). Wells Fargo to lay off 3,800 employees, leave non-prime space. Housing Wire. Retrieved from http://www.housingwire.com/2010/07/08/wells-fargo-to-lay-off-3800-employ-ees-leave-non-prime-spaceGoogle Scholar
Quinn, J. (2009, 02 6). US unemployment expected to rocket. The Daily Telegraph. Retrieved from http://www.telegraph.co.uk/finance/financetop-ics/recession/4535002/US-unemployment-expected-to-rocket.htmlGoogle Scholar
Rampell, C. (2009, 01 29). Layoffs spread to more sectors of the economy. The New York Times. Retrieved from http://www.nytimes.com/2009/01/27/business/economy/27layoffs.html?_r=1&scp=1&sq=layoffs%20spread&st=cseGoogle Scholar
Reed, D. (2008, 06 24). 950 pilots at United Airlines to lose their jobs in layoffs. USA Today. Retrieved from http://www.usatoday.com/money/industries/travel/2008-06-23-pilot-cuts_N.htmGoogle Scholar
Robertson, J. (2010, 01 27). Oracle CEO: About 1,000 layoffs planned for Sun. The Associated Press. Retrieved from http://www.newsday.com/business/oracle-ceo-about-1-000-lay-offs-planned-for-sun-1.1726914Google Scholar
Rochfort, S. (2008, 12 11). Mining giant cuts 14,000 jobs. Sydney Morning Herald. Retrieved from http://www.smh.com.au/business/mining-giant-cuts-14000-jobs-20081210-6vu1.htmlGoogle Scholar
Rooney, B. (2011, 07 18). Borders liquidates: 10,700 jobs lost. CNN Money. Retrieved from http://money.cnn.com/2011/07/18/news/companies/borders_liquidation/?hpt=hp_t2Google Scholar
Root, K. (1984). Deindustrialization: Restructuring the economy. Annals of the American Academy of Political and Social Science, 475, 52–65.Google Scholar
Rothacker, R. (2011, 09 2). Bank of America layoffs could reach 30,000. Charlotte Observer. Retrieved from http://www.charlotteobserver.com/2011/09/02/2574344/bank-of-america-layoffs-could.htmlGoogle Scholar
Rouse, M. (2008, 10 22). Overheard: Stealth layoffs at Yahoo. IT Knowledge Exchange. Retrieved from http://itknowledgeexchange.techtarget.com/overheard/overheard-stealth-layoffs-at-yahoo/Google Scholar
Ryan, L., & Macky K. A. (1998). Downsizing organizations: Uses, outcomes and strategies. Asia Pacific Journal of Human Resources, 36(2), 29–45.Google Scholar
Sharone, O. (2007). The disposable American: Layoffs and their consequences. Sociological Inquiry, 77(3), 514–517.Google Scholar
Sharp, D. (2011, 01 7). BIW to lay off design workers on stealth destroyer. The Associated Press. Retrieved from http://www.kjonline.com/news/bath-iron-works-layoff-workers-design-ddg-1000-stealth-destroyer.html#Google Scholar
Shook, L., & Roth, G. (2011). Downsizings, mergers, and acquisitions. Journal of European Industrial Training, 35(2), 135–153.Google Scholar
Simons, J. (2007, 12 13). Big Pharma's tough medicine. CNNMoney.com. Retrieved form http://money.cnn.com/2007/12/10/news/companies/pharma_layoffs.fortune/index.htmGoogle Scholar
Story, L., & Dash, E. (2008, 05 16). For Wall Street workers, ax falls quietly. The New York Times. Retrieved from www.nytimes.com/2008/05/16/business/16layoff.html?_r=1&ref=business&pagewanted=print&oref=sloginGoogle Scholar
Tasker, S. J. (2009, 01 21). Mining job losses escalate as BHP Billiton cuts 6000. The Australian. Retrieved from http://www.theaustralian.com.au/news/half-of-6000-bhp-job-cuts-in-australia/story-0-1111118625594Google Scholar
Teichert, E. (2010, 12 7). Roche – Top layoffs of 2010. FiercePharma. Retrieved from http://www.fiercepharma.com/special-reports/top-10-layoffs-2010/roche-top-10-layoffs-2010Google Scholar
Thomas, G. (2010, 09 1). JAL files aggressive restructuring plan; 16,000 workers, 103 aircraft to be cut by March 2011. ATW Air Transport World. Retrieved from http://atwonline.com/airline-finance-data/news/jal-files-aggressive-restructuring-plan-16000-workers-103-aircraft-be-cut-Google Scholar
Thomson, J. (2009, 02 26). Iconic manufacturer Pacific Brands slashes 1850 jobs. Smart Company. Retrieved from http://www.smartcompany.com.au/manufacturing/iconic-manufacturer-pacific-brands-slashes-1850-jobs.htmlGoogle Scholar
Touby, L. (1993). The business of America is jobs. The Journal of Business Strategy, 14(6), 20–28.Google Scholar
Tucci, J., & Sweo, R. (1996). Strategic groups: Firm structure, industry diversification, and performance determinants. American Business Review, 14, 73–79.Google Scholar
Vlasic, B., & Hoffman, B. (2006, 01 24). Painful. The Detroit News. Retrieved from http://commonsensepoliticalthought.com/?p=1200Google Scholar
Weiss, D. C. (2008, 05 23). Humor columnist takes aim at stealth layoffs. ABA Journal. Retrieved from http://abajournal.com/news/humor_columnist_takes_aim_at_stealth_layoffs/Google Scholar
Wilkinson, A. (2005). Downsizing, rightsizing or dumbsizing? Quality, human resources and the management of sustainability. Total Quality Management, 16(809), 1979–1088.Google Scholar