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The information system downsizing trend has been on the increase during the last five years because of extreme pressures brought about by the slow economy and intense global competition. The major benefit of downsizing is cost saving or cost avoidance, though reports of downsizing show that not all companies have achieved projected cost savings; while some have gained the savings predicted, others have cut short their efforts to downsize, the project ending in total disenchantment. Reports on a survey which uses companies, ranked as the top 100 information users. These “best users” were selected as the basis for determining: the motivation for downsizing; how cost effective downsizing is; and the degree of satisfaction after downsizing was attempted. Results indicate that cost saving and effective information technology utilization are the principal motives for downsizing. Less than 50 per cent of respondents indicated cost‐reduction due to downsizing, while the rest indicated otherwise or were not sure. Discusses downsizing strategies and identifies research challenges.

A 1995 survey of 119 academic and public library directors in North Carolina, USA, examined the degree to which their libraries had experienced downsizing and the expectations of these librarians regarding downsizing. While 27 per cent of the respondents had downsized in the past two to three years, only 7 per cent expected to do so in the near future. Likewise, fewer respondents expected to reduce personnel as a response to downsizing than had done so when downsizing did take place and, by contrast, more respondents expected to reduce or eliminate specific services than had actually done so when downsizing did take place. The survey also found that few libraries were prepared for downsizing; only 28 per cent of the respondents reported feeling at least well prepared, and only 2 per cent of the respondents felt very well prepared.

Purpose – The purpose of this chapter is to recast downsizing as an act of corporate social irresponsibility by showing it to be contrary to ethical principles available to defend any course of action against the alternatives.

Methodology – Ethics theory is used to analyse the prevalent business practice of downsizing, drawing upon literature that examines downsizing and/or explains and demonstrates the application of ethical principles.

Findings – Downsizing, as defined in this chapter, is an unethical and irresponsible business practice because it reduces utility, ignores rights, creates injustice, breaks social contracts, creates agency relationships where none exist and fails to respond to the legitimate claims that employees, as a stakeholder, make upon corporations.

Practical implications – Change becomes necessary to the business practice of downsizing when it is carried out by profitable companies without proper appeal to ethics principles for justification. Ethical principles may, instead, suggest alternative courses of action or techniques.

Social implications – Downsizing (and other forms of mass layoffs) is not a morally neutral activity, as it engenders significant social implications (i.e. harm) that necessitate ethical consideration. Moreover, when business actions have social consequences, the interests of other stakeholders may become legitimate.

Value of the chapter – This chapter illustrates the formulation and application of principles that help guide business people to take morally right courses of action. It also serves as a template for analysing other aspects of the employment relationship for a more critical approach to corporate responsibility. As shown in this chapter, ethics can have more than a peripheral role in business decision making.

In this study, I explore the link between workforce downsizing and the predominance of a corporate governance model that espouses a shareholder value maximization principle. Specifically, I examine how top managers’ shareholder value orientation affects the adoption of a downsizing strategy among large, publicly traded corporations in the United States. An analysis of CEOs’ letters to shareholders indicates that firms with CEOs who use language that espouses the shareholder value principle tend to have a higher rate of layoffs, after controlling for various indicators of the firm’s adherence to the shareholder value principle. The finding suggests that corporate governance models, particularly those advocated by powerful organizational elites, have a significant impact on workers by shaping corporate strategies toward the workforce. The key actors in this process were top managers who embraced the new management ideology and implemented corporate strategy to pursue shareholder value maximization.

Using data from a retail chain of 193 bakery shops that underwent downsizing, we study the effects of two types of downsizing announcements – closure or sale to another operator – on sales in the affected shops, and how these effects are moderated by job security perceptions. On average, sales in the affected shops go down by 26% after a closure announcement and by 7% after a sale announcement. Sales decline more sharply in shops where employees had higher job security perceptions before the announcement. Our findings are consistent with psychological contract theory: a breach of an implicit contract promising job security in exchange for work effort results in a reciprocal effort withdrawal. We rule out several alternative explanations to our findings.

Our study examines CEO compensation for firms that announce layoffs during the 1993–2001 period. We find that overall there is a large increase in CEO equity-based compensation in the year prior to and the year of the downsizing. Our sample of downsizing firms has small improvements in operating performance following the announcement. However, these performance improvements manifest themselves in the low but not the high equity-based compensation firms. We find that the announcement period returns are higher for downsizing firms that are larger, hire a new CEO in the year prior to the downsizing, have higher leverage, and better operating performance.

Based on the theory of basic human values, this study aims to examine the impact of CEO conservation (i.e. security, conformity and tradition) and openness to change (i.e. self-direction, stimulation and hedonism) values on one of the most conflictual decisions inside a firm: workforce downsizing.

The hypothesis testing was done in the context of all workforce downsizing decisions made by German companies (and their CEOs) listed on the German Prime-Index between 2005 and 2019. A software-based psycholinguistic assessment of various sources of CEO communications was conducted to tap into their underlying values.

Tobit regression analysis confirms that CEO conservation and openness-to-change values impact the severity of workforce downsizing. Namely, the higher the CEO conservation values, the lower the downsizing severity (i.e. employees dismissed in relation to overall workforce). In contrast, the higher the CEO openness to change values, the higher the downsizing severity.

Against prior research that has centered around political ideology as a proxy to understand the mechanisms through which values impact strategic decisions, the present study employs advanced measurement approaches to assess the general impact of CEO values on critical firm decisions. As such, the study contributes to upper echelons research by offering a new perspective on how CEO values impact critical firms' decisions.

This study aims to examine configurations of person-centered psychological change during organizational restructuring and downsizing in a public sector setting. Drawing on a social cognitive framework of organizational change the authors explore and identify the existence of different groups of employees who demonstrate varied responses (on commitment, engagement and anxiety) to restructuring and downsizing.

Surveys were collected from employees in three longitudinal waves (Time 1 N = 253; Time 2 N = 107; Time 3 N = 93, twelve months apart) at a UK public sector organization shortly before, during and after restructuring and downsizing.

Three classes of response emerged based on levels of and change in anxiety, organizational commitment and work engagement: a positive “Flourishers” profile was identified along with two relatively negative response profiles, labeled as “Recoverers” and “Ambivalents”. Higher levels of job control accounted for membership of the more positive response profile; higher structural uncertainty predicted membership of the most negative response group.

Using a person-centered approach, the authors form an understanding of different types of employee responses to downsizing; along with potential factors that help explain why groups of employees may exhibit certain psychological response patterns and may need to be managed differently during change. Thus, this approach provides greater understanding to researchers and managers of the varied impact that restructuring/downsizing has on the workforce.

To date there has been little research exploring employee responses to organizational restructuring and downsizing that has attempted to take a person-centered approach, which assumes population heterogeneity. Unlike variable centered approaches, this unique approach helps identify different patterns of employee responses to restructuring and downsizing.

The purpose of this research is to focus on organizational support factors that facilitate organizational commitment among downsizing survivors. High attrition by employees who “survive” layoffs is common and costly.

Using a sample of 2,751 employees, a secondary analysis of employee survey data examined the effects of perceived organizational support (POS), perceived supervisor support (PSS), and gender on downsizing survivors' organizational commitment.

Findings indicate that organizational commitment is positively related to both POS and PSS, with POS accounting for a greater increment of variance. When predicting organizational commitment subsequent to a downsizing, POS and PSS compensate for each other in that: POS moderates the association between PSS and organizational commitment, such that the relationship becomes stronger as the level of POS decreases; and PSS moderates the association between POS and organizational commitment, such that the relationship becomes weaker as the level of PSS increases. Gender moderates the two‐way interaction between POS and PSS when predicting organizational commitment such that the interaction is stronger among men than for women.

The effect sizes associated with the interactions are small and because this was a secondary analysis, we could not use established scales for some constructs. Also, the sample was drawn from one USA organization and may not generalize to other organizational settings.

The items contained in our scales suggest multiple ways that organizations can make their employees feel more supported in terms of both POS and PSS.

This study found a previously unknown interaction among POS and PSS that was moderated by gender.

The primary purpose of this article is to examine two alternative approaches for the use of performance appraisals in selecting individuals out of the organization (i.e. to be laid off). A rank‐order approach and a banding approach are compared to provide insight regarding issues associated with each approach.

Literature examining the status of downsizing as an organizational strategy, as well as some of the legal and practical considerations associated with the use of performance appraisals in downsizing decisions is reviewed as a precursor to an illustrated comparison of a rank‐order approach and banding approach to select individuals to be downsized. Actual performance appraisal scores for 106 individuals working in an organization were analyzed for the purposed of the comparative illustration.

The illustrative comparison highlights specific issues associated with using two different approaches for selecting individuals for an organizational downsizing.

To provide a more comprehensive examination of rank‐order and banding approaches for selecting individuals for an organizational downsizing, larger samples from a variety of organizations in different industries would be insightful. Further, organizations considering either approach for the purpose of making downsizing decisions should more closely examine existing case law and legal precedents to insure compliance with appropriate laws.

The article highlights the potential dilemmas faced by organizations using a banding or rank‐order approach in making downsizing decisions.

The paper contributes to a growing body of literature emphasizing the importance of performance appraisals in organizations.