Research proposal

Impact of Downsizing on Employee

Phycology

Sheeraz Khan
BBA-AS17-ID-009
BBA V(Eve)-Management Sciences

Supervisor
Dr. Malik Muhammad Afzal

National University of Modern Languages, Islamabad; Pakistan.

Email: sherazkhan9091@gmail.com
 INTRODUCTION

Downsizing has become an ugly reality in the life of all kinds of workers and

organizations. Then, with advancing technology and offshore outsourcing, this

phenomenon has increased. Downsizing a company is never a pleasant task to carry out.

The companies do downsizing to reduce their cost. The companies that are in a

restructure state or their financial situation is not stable those companies do downsizing

but the after effects of this phenomena is on extreme. The effects of downsizing on the

survivor’s individual phycology is extreme. The employee satisfaction and employee

commitment is affected by this process. Employee Satisfaction, A measurement of an

employee’s “happiness” with current job and conditions; it does not measure how much

effort the employee is willing to expend.

Employee commitment, A measurement of an employee’s emotional commitment to an

organization; it takes into account the amount of effort, an employee expends on behalf of

the organization.
 Utilizing from the employees is important for the effectiveness of the firms. This

contributes to have competitive advantage; and mostly, human resource management

(HRM) deals with this subject in the organizations. There is the ‘employee concept’ in the

centre of HRM. These employees may be working for that firm or have the possibility of

working for that firm. HRM can be defined as the management of the decisions and

actions related with the employees in the organization to implement the strategies for

creating competitive advantage. Another definition about HRM is from Armstrong

(2000), that it is the strategically management of the members of an organization who

contribute to the achievement of that organization's objectives. These definitions make us

conclude that HRM is a strategic business and should be concerned strategically. Strategy

may be defined as the statement of; what an organization wants to become, the objectives

it wants to reach and, how to reach to these objectives (Armstrong, 2000). Strategic HRM

(SHRM) helps the organization in reaching its objectives, and the main players in SHRM

are the “employees”. Lawler (1986) argued that a firm’s HR strategy should be cantered

on developing skills and ensuring motivation and commitment (Wallace, Eagleson, &

Waldersee, 2000). In this statement, ‘ensuring the motivation’ is concerned with the

employee satisfaction. That is why; the satisfaction of the employees takes on added

importance.

Employees are more loyal and productive when they are satisfied (Hunter & Tietyen,

1997), and these satisfied employees affect the customer satisfaction and organizational

productivity (Potterfield, 1999). Employee satisfaction is defined as the combination of

affective reactions to the differential perceptions of what he/she wants to receive

compared with what he/she actually receives (Cranny, Smith, & Stone, 1992). Therefore,
the organizations should try to supply the employee expectations in order to approach the

employee satisfaction. In addition, emotional state of the employees may also affect their

satisfaction. This forces the managers to create and sustain the desired working

environments in the organizations. One the other hand, as stated by Organ and Ryan

(1995), the employee satisfaction is one of the basics of organizational citizenship

behaviour (Ozdevecioglu, 2003). That is, the well-satisfied employees will work more

willingly and this contributes to the effectiveness of their organizations.

There is no limit for the employees to reach the full satisfaction and it may vary from

employee to employee. Sometimes they need to change their behaviours in order to

execute their duties more effectively to gain greater job satisfaction (Miller, 2006).

Having good relationships with the colleagues, high salary, good working conditions,

training and education opportunities, career developments or any other benefits may be

related with the increasing of employee satisfaction. When investigating the employee

satisfaction, it should be known that; -an employee may be more satisfied by a satisfying

item, whereas the other employee may be less satisfied with the same item-. Because of

this, analysing the employee satisfaction from a large perspective will be better. That

means; the sum of all satisfying factors composes that employee’s satisfaction level. As a

general definition, the employee satisfaction may be described as how pleased an

employee is with his or her position of employment (Moyes, Shao, & Newsome, 2008).

To investigate what the employees are satisfied by and measuring the employee

satisfaction in the workplace is critical to the success and increases the profitability of the

organization for having competitive advantage (Kelley, 2005). Therefore, researching the

employee satisfaction is necessary.

Employee commitment is also an important factor as it is the extent to which an

employee is loyal, committed to the firm or company it is the extent how much an

employee is performing difficult tasks. It refers the attachment of employees to their

workplace. Employee commitment is the loyalty and support of workforce towards the

goal of organization. It also refers to the degree the employees are committed, and they

have positive feelings, attitudes and behaviour towards their firm (Veena, 2012).

Relationship of downsizing with employee commitment and employee satisfaction is

interrelated. The effect of downsizing is negative on these variables and downsizing

badly effect the employee satisfaction and employee commitment. It plays a negative role

while dealing with employee phycology.

III. i) Problem Statement

Downsizing and its effects on employee phycology is a major problem in the modern

business era. It has been studied previously in different aspects but these attributes

(employee commitment and employee satisfaction) has not been studied to depth.

Secondly there are many researches on downsizing but unexpected downsizing has not

been studied to depth so we are going to study it in depth according to the environment of

Pakistan.
Downsizing is a vast problem in the western business world but nowadays, it is also

common in Pakistan. So our study is based on the problem that is arising in Multinational

firms of Pakistan. LMKR is the Multinational firm of Pakistan that deals in software’s of

oil and gas development sector. It is a leading software house but recently it faced a crisis

that was unexpected downsizing that resulted in negative physiological effects on the

survivors.

III. ii) Research Questions

1. Does Downsizing affect the employee performance in an organization?

2. How can Downsizing affect job performance?

3. Is there any relation of Downsizing with the employee performance?

III iii) Research Objectives:

The main objective of this study is to define impact of Downsizing on the

employee’s performance and what are the effects of Downsizing on job of the

employees. This research is also conducted to know that what other step should b

taken except then downsizing

iv) Significance of Study

The reason of this research study is to know about the impact of downsizing of firms on

employees’ mind that everyone is well aware of the fact that technology is pushing the

organizations towards effortless environment, which is the major cause of workforce

terminations. So previously, in many journals the effect of downsizing of a firm is studied

but not in its true depth, that how it affects the thoughts, emotions and productivity of

employees’ therefore in this study we try to know that how an un expected move of

downsizing can affect the employee commitment and loyalty towards its work and

workplace and how it shakes the level of satisfaction of the workforce.

LITERATURE REVIEW

Where did the term downsizing come from? A considerable number of management

terms have originated with the automobile industry and, surprisingly perhaps, downsizing

finds its origin there as well. By 1970, Since Cascio’s (1993) article “Downsizing: What

do we know? What have we learned? .The research has burgeoned across several

countries. This paper examines what we have learned during the many years of scholarly

enquiry. As such, the article is based upon an analysis of the downsizing literature and
represents a summation of secondary sources. The research also provides an update on

the latest downsizing developments Review of International Comparative Management

Volume 10, Issue 3, July 2009 415 family car weighed 2 tons, was over 17 feet long, and

often sported a massive V-8 engine. Big was beautiful, and bigger was better. The oil

crisis of 1973 generated the need for smaller family cars with reasonable performance

and economy. Producing these vehicles became known as downsizing in the U.S. auto

industry (Littler & Gandolfi, 2008). Thus, the term downsizing was coined to define the

scaling down of car sizes by automobile manufacturers (Appelbaum, Simpson, &

Shapiro, 1987). In an organizational setting, the term was first applied to a process of

cutting back employees when business and government in the U.S. began making major

reductions to their employee bases in response to recessionary pressures in the 1980s.

Thus, the term downsizing became associated with workforce reduction (Littler &

Gandolfi, 2008). Accordingly, downsizing became a strategy to streamline, tighten, and

shrink the organizational structure with respect to the number of personnel employed by

the firm. As downsizing became more prevalent, the term was applied to a broader range

of managerial efforts to improve a firm’s performance (Gandolfi, 2008).

How can downsizing be defined? According to Cameron (1994), downsizing is: “… a set

of activities, undertaken on the part of the management of an organization and designed

to improve organizational efficiency, productivity, and/or competitiveness” .Cameron’s

definition embraces a holistic approach in an attempt to increase a firm’s overall

performance. On the other end of the continuum, Cascio (1993) asserts that downsizing is

“the planned eliminations of positions or jobs” (p 95). In other words, the primary

purpose of downsizing is not increased organizational performance per se, but the
reduction of the workforce. In its widest sense, downsizing may be seen as a complete

strategic transformation intended to change an organization’s design, its work processes,

corporate culture, values and attitudes, and mission (Kets De Vries & Balazs, 1997). In its

most narrow sense, downsizing can be viewed as a set of activities introduced to make a

firm more 416 Volume 10, Issue 3, July 2009 Review of International Comparative

Management cost-effective (Gandolfi, 2006). Downsizing in its most extreme form may

turn into an across-the-board cut in personnel (Kets De Vries & Balazs, 1997) or a re-

focus on core businesses and a disposal of peripheral ones (Crainer & Obleng, 1995). The

majority of downsizing research has been conducted in the U.S. (Chadwick, Hunter, &

Walston, 2004). Still, the contraction of workforces has not been confined to U.S. firms,

but has occurred throughout the world (Ryan & Macky, 1998). Empirical evidence shows

that downsizing and its many related concepts has been particularly pervasive in North

America (Freeman, 1994), Britain (Thornhill & Saunders, 1998), Canada (Dolan et al.,

2000), Europe (Lamsa & Takala, 2000; Gandolfi, 2007), Japan (Griggs & Hyland, 2003),

Australia, (Gandolfi, 2007), New Zealand (Macky, 2004), South Africa (Littler, 1998),

and Eastern Europe (Redman & Keithley, 1998). Downsizing is also prevalent in

countries that have been moving from a state-dominated to a market system, such as

countries in Latin America, Russia, and Eastern Europe, where privatization activities

often bring about the need to reduce firms’ headcounts (Appelbaum, Everard, & Hung,

1999). Downsizing has even become common in industrialized countries, such as Japan

and Sweden, which have historically shown to have very stable employment practices

(Mroczkowski & Hanaoka, 1997). Downsizing has also affected China, which has

become one of the world’s foremost manufacturing hubs. In 2003, over 25 million
Chinese lost their jobs from the transformation and privatization of state-owned-

enterprises (Cascio, 2003).

 Research Model and Conceptual Framework

EMPLOYEE
Downsizing COMMITMENT
EMPLOYEE
SATISFACTION
HYPOTHESIS

H0: Downsizing negatively effects the employee satisfaction towards its job.

H1: Downsizing reduces the employee commitment towards the firm.

Methodology

Mostly secondary data is used in conducting this research.

For in depth investigation we used questionnaire on which employees’ of different

organizations responded.

From this we develop a framework