Downsizing and Organizational Culture Change: Effects and Research

Introduction: The Scope of Downsizing

A noted scholar recently assessed downsizing as "probably the most pervasive yet understudied phenomenon in the business world" (Cameron, 1994). While we have become numbed by the near-daily accounts of new layoffs, a New York Times national survey finding is perhaps more telling: since 1980, a family member in one-third of all U.S. households has been laid off (New York Times, 1996). By some measures, downsizing has failed abjectly as a tool to achieve its main raison d'être — reduced costs. According to a Wyatt Company survey covering the period between 1985 and 1990, 89% of organizations that engaged in downsizing reported expense reduction as their primary goal, while only 42% actually reduced expenses. Downsizing for the sake of cost reduction alone has been castigated intellectually as shortsighted and neglectful of what resources will be needed to increase the revenue stream of the future (Hamel and Prahalad, 1994).

A truer and fuller understanding of the forces shaping and driving downsizing forward today comes from an appreciation of increased global competition; changing technologies, which in turn are profoundly impacting the nature of work; the increasing availability of a contingent workforce (Fierman, 1994); and a shifting balance of power among organizational constituents — away from rank-and-file employees and toward shareholders and the chief executives who serve as their proxy. When we conceptualize downsizing within these broader frameworks, it becomes clear that we are speaking of downsizing both as a response to and as a catalyst of organizational culture change.

Background: Culture and Downsizing Connected

This paper will later provide a formal definition of "organizational culture." For the moment, it is suggested that culture is to an organization what personality is to an individual. As with personality, change takes time and may be hard to discern, especially for persons inside the organization. This paper argues that, ultimately, the most prominent effects of downsizing will be in relation to culture change — not in relation to saved costs or short-term productivity gains. Key drivers of organizational culture will tend to shape an organization's approach to downsizing. For whose benefit does the organization exist? What are the basic assumptions among people who work in the organization? What are the basic assumptions the organization and the employee make in relation to each other?

Establishing a direct link between downsizing and organizational culture is not an easy matter, however, as the following example demonstrates. The Chief Executive Officer of Apple Computer recently bought himself more time with disgruntled shareholders by promising to take forceful action on a number of fronts, including downsizing. The executive cited "five crises: lack of cash; declining quality; a failed operating system development project; Apple's chaotic culture; and a fragmented strategy" (Markoff, 1997). How does one connect downsizing — which is one of a number of actions being taken — with corporate culture, which is only one of a number of "crises" being addressed, in a manner that establishes a clear positive relationship?

Another reason it is difficult to draw a specific link between downsizing and organizational culture is that there are many different variations and approaches to downsizing. A distinction has been made between proactive downsizing, which is planned in advance and usually integrated with a larger set of objectives, and reactive downsizing, which is typified by cost-cutting as a last resort after a prolonged period of management inattention to looming problems (Kozlowski et al., 1991). Workforce reductions can range from forceful, involuntary reductions to milder approaches such as resignation incentives and job sharing (Sutton and D'Aunno, 1989). There are different ways of deciding "who stays, who goes" — from the outwardly arbitrary to criterion-based selection (Brockner, 1992). There are different modes of planning, ranging from secretive sessions to open discussions and solicitation of ideas from employees. There are different standards of termination notice, including relatively harsh same-day terminations as well as more generous 90-day or longer notices. There are even differences in intentionality: reductions can be planned to present employees with as little a break as possible from what they have known in the past, or they can be designed to be deliberately disruptive to the status quo (Noer, 1993).

Organizational Culture Defined

It has been observed with respect to the concept of "power" that its omnipresence makes it difficult to apply usefully in specific situations (Pfeffer, 1981). The same may be said of "culture." If it is everywhere and pervades every aspect of organizational existence, how can it be subjected to rigorous analysis? Schein (1992) offers at least a partial solution. He divides organizational culture into three levels: (1) at the surface are artifacts — those aspects (such as dress) that can be easily observed yet are hard to interpret; (2) beneath artifacts are espoused values, which are conscious strategies, goals, and philosophies; (3) the core, or essence, of culture is represented by the basic underlying assumptions and values, which are difficult to discern because they exist at a largely unconscious level, yet provide the key to understanding why things happen the way they do. These basic assumptions form around deeper dimensions of human existence such as the nature of humans, human relationships and activity, reality, and truth.

Schein (1992) himself acknowledges that, even with rigorous study, we can only make statements about elements of culture, not culture in its entirety. The approach he recommends for inquiring about culture is an iterative, clinical approach, similar to a therapeutic relationship between a psychologist and a patient. Schein's disciplined approach to culture stands in contrast to the almost flippant way in which culture is referred to in some of the popular management literature.

Conclusion

This chapter included a description of the sample, human protection procedures, and instruments. The data collection process was described in detail. The analysis methodology was also described.

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