Following a downsizing strategy:
How it influences employees’
motivation.
ANR
Name
: 724169
: R.M.J.C. Hagen
: Organization & Strategy
Topic
Study Program : Premaster strategic management 2009/2010
Supervisor
Room
: Mrs. A.D. Timmers
: K1.106
Words
: 6698
Preface
This bachelor thesis is written as a part of the program for the MSc in Strategic Management at
the department Organization and Strategy.
Due to the development of this thesis it helped me to understand how scientific papers should be
written. This knowledge creates the basis for the development of future research at the Tilburg
University and during my career afterwards.
Within a period of 4 months ( from February 2010 til June 2010) I have been written this thesis.
Without the help of my supervisor Mrs. A.D. Timmers, Msc and my group members I could
never achieve this result. I would like to thank them for their guidance and suggestions.
Tilburg, June 10, 2010
R.M.J.C. Hagen
2
Management Summary
Employees have to be motivated in order to get them work harder and enjoy it. Motivation can
be converted into the common needs of people and categorised as described by Maslows’
hierarchy of needs (1943). According to Herzbergs’ two factor theory (1959) motivation can be
separated further in; intrinsic and extrinsic factors. Employees need the intrinsic factors for the
long term goals, the creation of positive attitudes, and job satisfaction. On contrary, the extrinsic
factors have a temporary characteristic. The “job characteristics” model of Hackman and
Oldham (1975) reflects the theory to practical facets. Due to the determination of motivational
preferences it is possible to influence motivation of different employees.
Downsizing is a business strategy to improve a organizations’ financial position by a reduction
and reorganization of the workforce. There are several organizational reasons to choose a
downsizing strategy, and there are different kinds of downsize strategies. To achieve a successful
downsizing strategy implementation, five different stages of Cummings & Worley (2001) could
be used.
In order to implement a downsizing strategy a strategic human resource management is essential.
The most important factor for organizations is an effective human resource management. A focus
has to be on the creation of high involved employees who are proud of their membership in the
organization. After downsizing, the remained employees shift to a lower layer of needs in the
hierarchy model of Maslow (1943). Employees experience downsizing as stressful and
unsecured. Organizations which use a downsizing strategy have to acknowledge the importance
of the communication with their remained employees.
During and after a downsizing strategy it is possible to create or improve the motivation of
employees. Especially at the fourth and fifth stage of the downsizing strategy (Cummings &
Worleyn 2001), an organizations’ management is able to influence the motivation of the
remained employees.
The results of this study will be useful for organizations which want to apply a downsizing
strategy. It provides information about different kinds of downsizing strategies and the possible
consequences to the motivation of the maintained employees.
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Table of contents
Preface
Management Summary
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
References
Introduction
1.1
Problem indication
1.2
Problem statement
1.3
Research questions
1.4
Methodology
1.5
Structure
5
5
6
6
6
Motivation factors
2.1.1 Maslows’ hierarchy of needs
2.1.2 The motivational system theory
2.1.3 Maslows’ hierarchy of Fords’ needs versus Fords’ MST
2.2
Different kinds of motivation factors
2.3
The ‘job characteristics’ model
2.4
Conclusion
8
9
10
10
12
13
Dissimilarity between employees
3.1
Motivational preferences
3.2
Dissimilarity between groups
3.3
Conclusion
14
14
16
Downsizing
4.1
Reasons for downsizing
4.2
Different stages of a downsizing strategy
4.3
Conclusion
17
18
19
Influence of downsizing on employee motivation
5.1
The effect on Maslows´ hierarchy of needs
5.2
The effect on Herzbergs´ two factor theory
5.3
The effect on the different categories of employees
5.4
Downsizing and the communication within the organization
5.5
Theories and downsizing stages
5.6
Conclusion
20
21
21
21
22
23
Conclusion, discussion and recommendation
6.1
Final conclusion
6.2
Managerial implication
6.3
Recommendations
24
25
25
26
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Chapter 1 Introduction
1.1
Problem indication
In order to survive in a rapidly changing business environment, organizations use different kinds
of strategies. One could argue whether organizational downsizing is a strategy or not.
Nevertheless, downsizing is a frequent used phenomenon. In 2009 different organizations were
forced, due to the economic crisis, to downsize their organizations. Some examples of large
downsizers in the Dutch labour market were ING (with 7000 discharges), Philips (6000
discharges) and Océ (1200 discharges) (Bizz, 2009). According to Cameron (1994),
organizational downsizing is a common understanding for different organizational activities. The
author stated that “organizational downsizing refers to 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, 1994, p. 192). In this thesis, the perception of
downsizing
is the declination of an organization through the reduction of the amount of
employees.
The result of a downsized organization is the need for reorganization. Questionable is whether
the remained employees, who are remained, are motivated enough to pass through such a
reorganization. Or as stated by Denton (2009), “How does one create trust that can weather the
storms of downsizing, outsourcing and the temporariness of today’s world? How does one keep
people coming in every morning and working hard?” (p. 11). Getting employees to do the work
and enjoy doing it can be related to the motivation of the employees (Stoffels, 1978). In addition,
motivation can be linked to the satisfaction and dissatisfaction of employees (Tietjen, & Myers,
1998).
The purpose of this thesis is to describe how downsizing influences the motivation of the
remaining employees.
1.2
Problem statement
The main problem statement of this thesis can be formulated as:
What is the influence of a
downsizing reorganization on the motivation of the remaining
employees?
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1.3
Research questions
In order to give an answer to the problem statement next research questions are formulated:
1. What are important motivation factors for employees?
2. Is there similarity of motivation factors between different employees?
3. What are different dimensions/forms of downsizing?
4. How are these motivation factors influenced by downsizing?
1.4
Methodology
This thesis represents a descriptive literature study in which published articles will be reviewed.
A literary view will be created by retrieving data out of different secondary sources such as
journals (Sekeran, 2003). As stated by Sekaran (2003), the purpose of a literature study is the
identification of the most important variables and to document the most important findings based
on prior research.
This literature study will give a description about the concepts “motivation of employees”,
“downsizing” and the influence of downsizing on the employees’ motivation. Some of the
important researchers who have written about motivation of employees are Maslow (1943),
Herzberg (1959), Koppula (2006), and Kovach (1995). Concerning ‘downsizing’, Cummings and
Worley (2001) and Cameron (1994) are considered as important researchers contributing the
literature.
1.5
Structure
This paper consists of several chapters in which the research questions are discussed. The second
chapter describes the most important motivation perceptions of employees. Maslows’ hierarchy
of needs (1959) and Herzbergs’ dual factor theory (1943) will be discussed. Further, this chapter
discusses how employees can be motivated with the ‘job characteristics’ model of Hackman and
Oldham (1975).
Because of different employee characteristics a distinction will be made by a description of
different categories like gender, age, and job types. These categories will be discussed in the
third chapter.
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Chapter four discusses different downsizing aspects. A description will be given when the
downsizing strategy can be adapted. There are different types of downsizing; workforce
reduction, organization design and systematic design (Cummings & Worley, 2001).
According to Cummings and Worley (2001), there are five stages which have to be followed in
order to realize a successful downsize process.
The influence of downsizing on motivation of the remaining employees will be described in the
fifth chapter. The main purpose of this chapter is to describe which theoretical aspects out of
chapter two, three and four are applicable to each other.
Finally, chapter six gives a final conclusion based on the theory as described, managerial
implications, and recommendations for further studies.
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Chapter 2 Motivation factors
Employees in organizations affect, at least partly, the overall performance. In order to get people
to work harder and enjoy it, they have to be motivated. Certain factors have an influence on the
motivation (Stoffels, 1978). As stated by Hammer (1978) most theories about employee
motivation and attitude are focussed on a two-way interaction. On the one hand there is the need
for individual structure. On the other hand the need for an employing organizations’ formal and
informal reward system. Therefore organizational performance, absenteeism and/or turnover can
be reflected in terms of behaviour by the employees through policy, supervision, technology and
hierarchical structure. As stated in chapter one, motivation in this article can be described as
getting things done by employees while they enjoy it (Hammer, 1978). In the following
paragraph a distinction will be made between different needs of employees.
2.1.1
Maslows’ hierarchy of needs
Employees’ motivation is an element to the common needs of people (Stoffels, 1978). The
theory of Maslow describes the hierarchy of these needs with five layers in the shape of a
pyramid starting with the base (Maslow,
1943):
Layer 1 Physiological needs; these are the
basic needs which are required to stay alive.
These needs include food, clothes, and
shelter;
Layer 2 Safety and security; this layer
represents the need for freedom without fear
of physical danger, the need for basic
psychological needs, and the need for selfpreservation;
Layer 3 Belonging; represents the need the
Fig.1: Maslow, 1943, pyramid of needs
social need for meaningful relationships and acceptance by different groups;
Layer 4 Self-esteem; the need for recognition as well as personally from others. The individual
feels useful and that they have affect on the environment;
Layer 5 Self actualisation; this top layer represents the need to maximize one’s potential and
become what one is capable of becoming.
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An organizations’ management is able to motivate its employees the most at the layer of ‘selfesteem’ (Stoffel, 1978). Organizations can achieve an importance feeling among the employees
by delegating authority, recognizing achievement and communicating important facts. In order to
create an organizational environment in which achievements are able to be recognized,
organizations should set up goals (Lazenby, 2008). These goals have to be specific and
measurable. In addition to the communication of important facts (e.g. objectives) the managerial
communication with employees can be separated into three categories (Sullivan, 1988):
1. Reduction of employee uncertainties and increase the knowledge level;
2. Reaffirmation of the employees’ sense of self-worth as a human being;
3. Guidance of the employee with cognitive scripts and schemas.
These three categories are a more practical explanation of the self esteem-layer as mentioned
above.
In essence, Maslows’ hierarchy of needs postulates that employees have to fulfil their different
kind of needs from layer to layer upwards through the pyramid. The fifth and highest layer is
therefore considered as the ultimate layer.
2.1.2
The motivational system theory
Another theory, besides Maslows’ hierarchical model (1943), is the Motivational System Theory
(MST) conducted by Ford (1992). This theory separates 24 needs/goals, divided into 6
categories, which are important for an individual. Category one describes the “affective goals”
which are; entertainment, tranquillity, happiness, bodily sensations, and physical well-being. The
needs/goals of second category are “cognitive goals” which are; exploration, understanding,
intellectual creativity, and positive self-evaluation. The third category of the MST consists out of
“subjective organization goals”. These needs/goals are unity and transcendence. In the fourth
category the “self-assertive social relationship goals” are described, which are; individuality, self
determination, superiority, and resource acquisition. Category five describes the “integrative
social relationship goals”, which are; belongingness, social responsibility, equity, and resource
provision. In the final sixth category the “task goals” are described, which are; mastery, task
creativity, management, material gain, and safety.
In essence, the MST consists out of an extensive description of peoples’ needs/goals. In contrary
to Maslows’ piramid, the MST does not divide the needs hierarchically. Furthermore, it is
possible to fulfil more needs/goals at the same time.
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2.1.3
Maslows’ hierarchy of Fords’ needs versus Fords’ MST
The MST describes substantially more needs/goals than the hierarchical model of Maslow.
Though, a management is able to influence their employees more specific. Questionable is
whether an organization has got the time and ability to identify the most important needs/goals
for each employee. The MST has, because of the detailed determination of needs/goals, also an
interface with the dual factor theory of Herzberg.
Based on the obtained information it can be concluded that Maslows’ hierarchical model still
remains popular as a theory of motivation at work. As stated by Mullins (2005):
Despite criticism and doubts about its limitations, the theory has had a significant
impact on management approaches to motivation and the design of organizations to meet
individual needs. It is a convenient framework for viewing the different needs and
expectations that people have, where they are in the hierarchy, and the different
‘motivators’ that might be applied to people at different levels. (p. 182)
Many researchers have used the hierarchical model of Maslow (Parkin, Tutesigensi & Büyükalp,
(2009); Tsai, Wu, Yen, Ho & Huang, (2005); Warsi, Fatima & Sahibzada, (2009); Hornstay,
(2000); Mullins, 2005). Therefore Maslows’ hierarchy of needs, in combination with Herzbergs’
dual factor theory which is discussed in the following paragraph, will be the essence of this
study.
2.2 Different kinds of motivation factors
Motivation can be divided into two categories: intrinsic and extrinsic factors (Fernández, Castro,
Otero, Foltz & Lorenzo, 2006). A prior study (Herzberg, Maunser & Snyderman, 1959)
describes the distinction between the so called ‘motivators’ (job factors) which are the intrinsic
motivation factors and the ‘hygiene factors’ (extra-job factors), which are the extrinsic
motivation factors. Motivators promote the attitudes and satisfaction on the long run. Therefore,
job satisfaction is a result of the job ‘motivation’ factors (Tietjen & Myers, 1998). This model is
called the ‘dual factor’ theory (Herzberg, Maunser & Snyderman, 1959).
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Intrinsic motivation or Herzbergs’ motivators
“Intrinsic motivation is the motivation or desire to do something based on the enjoyment of the
behaviour itself rather than relying on or requiring external reinforcement” (Fernández et. al.
2006, p. 269). The ‘motivators’ are (Herzberg, Maunser & Snyderman, 1959) are:
•
recognition;
•
achievement;
•
possibility of growth;
•
advancement;
•
responsibility;
•
the work itself.
Extrinsic motivation or Herzbergs’ ‘hygiene factors’
According to Fernández et al.: “Extrinsic motivation is defined as the desire or urge to perform a
certain behaviour based on the potential external rewards that may be received as a result (2006,
p. 269). The ‘hygiene factors’ are (Herzberg, Maunser & Snyderman, 1959):
•
salary;
•
interpersonal relations with supervisor/subordinates and or peers;
•
technical supervision;
•
the company policy and administration;
•
common working conditions;
•
factors in personal life;
•
status;
•
job security.
The most important difference between the two factors (‘motivators’ and ‘hygiene factors’) is the
level of satisfaction/dissatisfaction. Motivators are factors which are needed by the employee for
its goals on the long run, create positive job attitudes and satisfaction. On the other hand,
‘hygiene factors’ have a more temporarily characteristic. Although they can cause great
dissatisfaction, the absence of ‘hygiene factors’ will not lead to a high level of satisfaction. There
will be a lack of satisfaction instead of dissatisfaction as the opposite of job satisfaction
(Herzberg, Maunser & Snyderman, 1959).
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Considering the factor ‘work conditions’, for example. If the air conditioner gets broken down
during a hot day, the employees will be very dissatisfied. However, if the air conditioner just
works as expected during the day, the same employees will not take notice of it and will be extra
satisfied.
The essence of this model is the distinction between the intrinsic motivation factors
(‘motivators’) and the extrinsic motivation factors (‘hygiene factors’). Intrinsic motivation
factors can create positive attitudes and satisfaction. The absence of extrinsic motivation factors
can cause dissatisfaction.
2.3
The ‘job characteristics’ model
According to Koppula (2006), job satisfaction is an indicator of an organizational well being for
managers who need more than the traditional forms of motivation. Another theory for the
influence of job satisfaction is the “job characteristics” model of Hackman & Oldham (1975).
This model consists out of five different facets which have a direct influence on job satisfaction
and therefore indirectly measures the degree of motivation.
1. Task identity; how far an employee can relate to their part of the task being completed.
2. Task significance; the degree of importance of the employee’s job on the task being
completed.
3. Skill variety; In which degree the employee has a variety of responsibilities, or not.
Autonomy; the amount of control that the employee has over a task/job.
4. Feedback; the confidence of an employee whether the job is being done well.
Because of the influence of these facets on job satisfaction it is possible to relate this ‘job
characteristics’ model the intrinsic ‘job’ factors of Herzbergs’ dual factor theory (1959).
In essence, this model is a more specific description of the intrinsic motivation factors (Herzberg,
Maunser & Snyderman, 1959). It divides different facets which have an influence on the degree
of satisfaction and motivation. Therefore it can be stated that this model can help managers to
influence the motivation of their employees.
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2.4
Conclusion
Employees have to be motivated in order to stimulate them to work harder and let them enjoy it.
The motivation creation of people can be reduced to the common needs of people as discussed
with Maslows’ hierarchy of needs (1943). This model shows that there are five different layers of
needs. Each need has to be fulfilled before starting fulfilling the next need on a higher level.
Especially at the fourth layer, an organizations’ management is able to create motivation among
their employees.
To improve the motivation of employees it is important for managers to respects the three
aspects of Lazenby (2008): delegating authority, recognizing achievement and communicating
important facts. The theory of peoples’ needs also can be divided with the motivational system
theory (Ford, 1992). This theory describes 24 needs/goals which are separated in 6 categories. In
contrary to Maslows’ theory, the MST shows that there are not hierarchies between each
need/goal and it is possible to fulfil more needs/goals at the same time.
Motivation is a common expression which can be divided in two types; intrinsic (also called as
‘motivators’) and extrinsic (also called as the ‘hygiene factors’) (Herzberg, Maunser &
Snyderman, 1959). Employees need the intrinsic factors for the long term goals, the creation of
positive attitudes and job satisfaction. On the contrary, the ‘hygiene factors’ have a temporary
characteristic. ‘Hygiene factors’ will not lead to a high satisfaction level. However, the absence
of ‘hygiene factors’ can cause great dissatisfaction. As discussed finally within this chapter, the
‘job characteristics’ model (Hackman & Oldham, 1975). This model reflects the theory to
practical facets. Due to the influence of the facets on job satisfaction it is possible to relate this
‘job characteristics’ model to the intrinsic ‘job’ factors of Herzbergs’ dual factor theory (1959).
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Chapter 3 Dissimilarity between employees
Based on the theory so far, it can be stated that there is a possibility to create motivation through
affection of the employees. Motivation improvement can be achieved by setting up specific
measurable goals and also take care of an appropriate communication. Therefore it is important
to get to know which aspects are preferred by the employees.
3.1
Motivational preferences
Based on the article from Kovach (1995), it is clear that personal motivation preferences changes
over some time. According to a most recent list from 1995 the top 10 of important preferences
are:
1. interesting work;
2. full appreciation of work done;
3. feeling of being in on things;
Personal related
4. job security;
5. good wages;
Financial related
6. promotion and growth in the organization;
7. good working conditions;
8. personal loyalty to the employees;
Personal related
9. tactful discipline;
10. sympathetic help with personal problems.
Based on this list, it can be stated, that there are different types of preferences. Preferences
which are financial related and preferences which are more personal related. Furthermore, it is
clear that these personal related aspects are more important than the financial aspects. The first
financial aspect can be found at the fifth point. Also it is the only preference which is direct
related to the financial aspect.
3.2
Dissimilarity between groups
Referring to the theory discussed in the second chapter it seems that the employees can be seen
as equal. However, according to Kovach (1995), organizations have to recognize that employees
can be divided into several various sub groups. It is important to recognize these sub groups
because each sort of group can have its own characteristics concerning motivation factors.
14
•
Male versus female
As stated in the article of Kovach (1995) it seems that females possibly give interpersonal
relationships and communication a higher rank on their importance list than males do.
•
Age groups
In general, it can be stated that there is a shift of important preferences in accordance
with getting older. For employees of 30 years or younger especially the extrinsic
motivation factors of “job security”, “promotion” and good wages are very important.
This can be related to the fact that those employees have their all career in front and do
not have fulfilled their basic needs yet. Besides this, also the extrinsic motivation factor
of growth possibilities is ranked very high on their importance list. The importance of the
earlier mentioned basic needs decrease as the employees become older. With this
information it can be explained that employees with ages over 50 years rank all kinds of
rewards lower than their younger colleagues. Instead, the extrinsic factors “good working
conditions”, “personal loyalty to employees” and “sympathetic help with personal
problems” are much more important (Kovach, 1995).
•
Income Group
The first low-income group (income under USD 25.000) especially rank the factors
“good wages”, “job security” and “promotion and growth in the organization” high in
their importance list. The second income group (between USD 25.000 and USD 50.000)
differs only with the first group due to the moderation of those factors. More interesting
is the last group of high incomes (higher than USD 50.000) which rank the factor of job
security as more important than the second group. An explanation for this aspect is that
the employees within this group want to secure what they have (Kovach, 1995).
•
Job types
A final distinction can be made between white and blue-collar workers and whether these
employees are skilled or unskilled. There are some differences between unskilled bluecollar workers and unskilled white-collar workers. Unskilled blue-collar workers rank the
factors “full appreciation of work done”, “interesting work” and “good wages” as most
important. In contrast, the unskilled white-collar workers rank the factors “interesting
work”, “good working conditions” and “good wages” as important. Besides these
differences, it is quiet interesting that blue-collar workers have more interest for the factor
“job security” than white-collars. In contrary, white-collar workers appreciate “promotion
and growth in the organization” more than blue-collars.
15
The difference between skilled white-collar workers and skilled blue-collar workers is
less differentiated. Most noticeable is the fact that blue-collar workers do not rank the
factor of “full appreciation of work done” as important, in contrary to their unskilled
blue-collar colleagues. The most important factors of the skilled employees can be
compared with the unskilled ones, which are stated earlier (Kovach, 1995).
•
Organizational level
The organizational levels are differentiated by low, middle and high level categories. The
main difference is between the lowest category and the middle and high categories.
Whereas the lowest category ranks the factor of “good wages” as most important, the two
highest categories rank “full appreciation of work done” instead as most important
(Kovach, 1995).
3.3
Conclusion
In order to influence motivation, it is important to determine which aspects are preferred by the
employees. In this chapter a list of ten common preferences of employees has described. It can
be concluded that the most important preferences are not financial but personal related. The
weakness of this preference list is its commonness: not all employees can be considered as equal.
So the preference list can be different depending on several employee characteristics. Hence, a
separation of sub groups is made with use of several employee characteristics: gender, age group,
income group, job types, and organizational level (Kovach, 1995). It can be concluded that there
are different motivation factors for each kind of employee within each sub group.
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Chapter 4 Downsizing
Organizations implement different strategies in order to survive. One could argue whether an
organizational downsizing is a strategy or not. Nevertheless, downsizing is a frequent used
phenomenon. Downsizing is a business strategy to improve an organizations’ financial position
by a reduction and reorganization of the workforce (Appelbaum & Donia, 2001). Furthermore,
downsizing has become an intervention for organizations in order to demonstrate its flexibility,
bureaucratic structure reduction, increase of efficiency towards decision-making, communication
improvement, and cultivate entrepreneurship (Appelbaum, 2001; Bruton, Keels & Skook, 1996;
Mroczkowski & Hanaoka, 1997). According to Bruton, Keels & Shook (1996) also productivity
becomes better after downsizing.
4.1
Reasons for downsizing
Downsizing in general is a response to one or more of the following four conditions: mergers and
acquisitions, loss of revenues and market share through technological and industrial change,
implementation of a new organizational structure, and the belief that smaller is better (Cameron,
1994; Cummings & Worley, 2001). Several downsizing strategies can be differentiated
(Cameron, 1994; Cummings & Worley, 2001):
Workforce reduction; The focus of this downsize strategy is the reorganization of employees
(Cameron, 1994). Some examples of activities are early retirements, transfers/outplacements,
buy out packages, and golden parachutes. As stated by Bruton, Keels & Shook (1996) it is
questionable whether workforce reduction leads to the desired results. The bulk of the downsized
organizations do not achieve the expected profit increase. Furthermore, half of the organizations
do not have a reduction of the expenses as high as expected. It is also stated that many
organizations discover after downsizing that some dismissed employees fulfilled too important
functions. Finally, these organizations have to acknowledge the loss and rehire new employees.
Organization redesign; In order to reduce the number of employees another downsize strategy
is to reduce the work within an organization. Some of these redesign activities may involve
restructuring tasks and/or reorganization functions, hierarchical levels, groups, or products.
(Cameron, 1994).Organizational redesign can not be implemented quickly, which is the main
problem of this kind of downsizing strategy. However, due to a simplified organizational
structure a downsized organization is able to improve its efficiency. According to Bruton, Keels
& Shook (1996), efficiency can also be achieved if organizations not only reduce the number of
employees but also the absolute asset size as well.
17
Systemic redesign; In contrast with the other two strategies, systematic redesign strategy is the
main focus on the adjustment of the organizations’ culture, attitudes and values of the employees
(Cameron, 1994). This kind of downsizing strategy is a continue process of improvements in
stead of a certain program or target. Some of the systematic redesign activities are for example
reducing waiting time, incompatibilities in data systems, and rules/regulations. Like the
organization redesign, this strategy does not include the reduction of employees. However, in
contrast with the organization redesign, all the employees have the responsibility to achieve cost
reductions and finding improvements.
According to Cameron (1994) especially the strategy “workforce reduction” leads to a loss of
loyalty and commitment among the workforce. This phenomenon results in a deterioration of the
willingness to do some extra on behalf of the organization. Besides this, workforce reduction
leads to an sphere of “me first” among the employees.
In essence, this model makes a distinction between three different types of downsizing strategies.
Each downsizing strategy consists out of an unique focus. However, in order to implement either
of these downsizing strategies, different stages are determined. These stages will be discussed in
the next paragraph.
4.2
Different stages of a downsizing strategy
In order to apply a downsizing strategy as a strategic intervention, five different stages are
determined (Cummings & Worley, 2001):
Stage 1: Clarification of the organizational strategies: Goals and objectives
The main target of this stage is to clarify the organizations’ strategy. This strategy should be
communicated among the organizational leaders in order to create support for the determination
of the goals and objectives. Accordingly, this is the moment for members to express their
concerns and ask questions.
Stage 2: Assessment stage: Relevant choices and key decisions
In order to determine a downsizing method the main relevant choices and matching key
decisions have to be made in this stage. In general, an organization has to make a choice which
kind of downsizing strategy, as discussed earlier, will be applied.
Stage 3: Implementation stage: Reduction in workforce
This stage consists of the implementation of different methods in order to achieve a workforce
reduction. The kind of workforce reduction depends on the choice of downsize strategy.
18
Several decisions have to be made while there is also a ‘maintaining perspective’ with people
who try to preserve their own function. That is why the implementation of a downsizing strategy
should be carried out from a top-down perspective. Further, it is important to maintain the
organizations’ focus on the main target and remind the individuals that the restructuration is
necessary for the performance improvement.
Stage 4: Survivor Syndrome: Behavioural implications of remaining workforce
Within a restructured organization, employees have to accept an expansion of the responsibilities
and learn new activities/jobs. In contrary to this expansion, employees often do not notice an
increase of their compensation. This can result in an environment in which employees do not
strive for organizational success but are preoccupied whether there will be additional lay offs.
Also the feeling of guilt towards struggling co-workers while receiving payments and uncertainty
of career advancement are important aspects for the organization to deal with. Survivor
syndrome can be described as “emotional after effects” (Mirabal & Young, 2005). In the
workforce this exhibits
with anger, frustration, anxiety, and mistrust. The restructured
organization needs to deal with a workforce which is willing to take fewer risks at the expense of
the productivity.
Stage 5: Organizational renewal and growth: New or modified strategies
This is the final stage in which implementing the organizations’ renewal and growth process.
Despite all efforts, organizations often fail at this stage because a lack of communication with the
employees. Especially at this stage it is important to communicate the growth plans and renewal
strategies in order to prevent ineffectiveness. Important is, once a downsize strategy has been
chosen, that the whole organization has to anticipate and keep itself focussed.
4.3
Conclusion
Downsizing is a business strategy to improve a organizations’ financial position by a reduction
and reorganization of the workforce. As stated, there are several reasons for organizations to
choose a downsizing strategy. However, there are different kinds of downsize strategies;
workforce reduction (in which a number of employees will be eliminated), organizational
redesign (which starts with the reduction of work and afterwards with a limited employee
reduction), and systematic redesign (this strategy is focussed on the organizations’ culture,
attitude and values of the employees). In order to implement a downsizing strategy successfully,
five stages of Cummings & Worley (2001) are discussed. Stage four, the survivor syndrome, is
the most important stage for managers to influence the motivation of their employees.
19
Chapter 5 Influence of downsizing on employee motivation
Organizations have to treat their employees, who have been terminated, with dignity and
appreciation. Otherwise in a reaction, survivors of the employee reduction can become angry and
retaliate because of the improper attitude towards their exiting colleagues (Cangemi & Miller,
2004). Besides the reorganization of certain employees there is also the influence on the
employees who are remained. The survivors can lose trust and motivation which therefore, on
the long run, can seek for other ways out. A strategic human resource management, in order to
maintain and motivate, a viral human capital is essential (Tsai, Wu, Yen, Ho & Huang, 2005). In
addition to this, in order to achieve a successful downsize strategy there are some critical factors.
The human resource system has to be managed effectively. Downsizing organizations need to
involve their employees, stimulate teamwork, provide training, and rewarding. Human resource
professionals have the critical function to take care of the implementation of the downsizing
strategy (Cameron, 1994).
Highly committed employees are proud of their membership in the organization and expend
therefore extra effort at work. Due to a change of the organizational environment, such as
downsizing, this commitment can easily be disrupted. A common downsizing has been found to
have a negative influence on the loyalty of the maintained workers. Therefore it is important to
determine how to maintain a positive motivation of the employee under changing situations
(Chen & Chen, 2008) (Tsai, et al., 2005). The factors ‘job satisfaction’ and ‘continuance
commitment’ are critical for the creation of motivated human resources (Tsai, et. al. 2005).
In order to improve the employees’ willingness to remain, organizations should pay attention to
the most important aspects; salary/benefits, support for personal well-being and family life, the
nature of work, working environment, and management style of immediate supervisors. (Tsai,
P.C.F., et al., 2005).
5.1
The effect on Maslows´ hierarchy of needs
Referring to the perspective of Maslow’s hierarchy of needs it can be stated that employees make
a shift after experiencing a downsizing. People focus themselves more on their basic needs. The
social and ideal needs are getting of minor importance. The main reason for this shift can be
related to the lost of trust in their organization (Tsai, et al., 2005).
20
5.2
The effect on Herzbergs´ two factor theory.
Besides Maslows’ theory there is also a relation with Herzbergs’ two factor theory (1959). The
important aspects ‘salary/benefits’ and ‘personal well-being and family life’ are the so-called
‘hygiene’ factors. These aspects cause a feeling of dissatisfaction. Organizations have to reduce,
after downsizing, the aspects which create dissatisfaction (Tsai, et al. 2005). Employees
experience downsizing as very stressful at the workplace. Also a weak feeling of job security and
the disruption of family life causes a negative effect of downsizing on employees. After a
downsizing, employees will not have the expectation anymore to stay at one single organization
for a long time (Obilade, 2009).
5.3
The effect on the different categories of employees.
The common view of employees about downsizing is negative. This is not only the true for the
employees in general, also the survivors of a downsizing strategy share this view. Employees
also note that downsizing creates extra stress at the workplace (Obilade, 2009). As stated by
Luthans and Sommer (1999), especially female and married members have a high organizational
commitment. Also older aged and longer stationed employees, who are satisfied with their work,
have more commitment to their workplace. The status of employees has also an influence on the
motivational level. Employees who are involved with the decision making processes which can
result in lay offs, for example managers (white-collar workers), have a higher motivational level
than other employees with lower functions (e.g. blue-collar workers) (Obilade, 2009).
5.4
Downsizing and the communication within the organization
In the relation between downsizing and its communication to the stakeholders, there are several
important lessons to learn (Guiniven, 2001). In the first place, it is important for organizations to
recognize the need for grieving. Downsized organizations have to pay attention to employees
which are remained but have a feeling of guilt and/or grief. These feelings can result in counter
productivity of these employees. A solution is the symmetrical communication method. This
represents interpersonal communication and dialogue between the management and the workers.
During this kind of meetings the voice of the employees can be heard and feelings can be shared.
In the second place, another important lesson for organizations is to communicate the new period
of human resources management. The management has to make clear that the organization starts
with a new period. The message should be that the remained employees will be treated honestly
and that they will be entirely informed concerning decisions towards downsize. In the third, and
last lesson, an organization has to communicate the transition and not solely the change.
21
After downsizing, an organization needs to handle the wanted change with cautiously. The
change can not be achieved within a short term, this would cause even more uncertainty to the
workforce. Organizational restructuring of the organization has to start with a transition in which
it is allowed to release the past gradually instead of an abrupt change. Important for
organizations is to acknowledge that the employees’ needs will be different after a while (Tsai, et
al., 2005).
5.5
Theories and downsizing stages.
As stated below, within each stage of the downsizing strategy one or several theories of the
discussed theories can be applied.
Stages Theories/models
Clarification
Stage 1
Four downsizing conditions
An organization has to clarify what condition causes
(Cummings & Worley 2001).
the response to implement a downsizing strategy.
Also, in order to implement a suitable downsizing
strategy, an organization have to determine its goals
and objectives.
Stage 2
Different downsizing strategies
After stage 1, an organization needs to decide which
(Cummings & Worley, 2001).
kind of downsizing strategy is the most appropriate.
Is the purpose to reduce employees or is a systematic
redesign more suitable.
Stage 3
“Implementation stage”
The implementation stage should be carried out from
a top-down perspective. Important for an
organization is to focus on the main target of the
downsizing strategy.
Stage 4
‘The hierarchy of the needs’
After downsizing, an organization have to
(Maslow, 1943)
acknowledge that their employees focus themselves
on the basis needs of the employees which are
remained (for example; ‘safety and security’).
‘Dual factor theory’ (Herzberg,
Important for a downsized organization is the
1959)
reduction of dissatisfying (‘‘hygiene’’) factors, for
22
example a low level of job security.
‘Job characteristics model’
In order to increase satisfaction, several task related
(Hackman & Oldham, 1975)
facets can cause an increase of the satisfying feeling
within a downsized organization.
Dissimilarity between
In addition to the common theories it is important to
employees (Kovach, 1995)
acknowledge the differences between different kinds
of employees. A downsized organization is unable to
improve motivation thru common theories. Therefore
specific intrinsic and extrinsic preferences should be
acknowledged.
Stage 5
Communication lessons
In this final stage it is important for downsized
(Guiniven, 2001)
organizations to stay in communication with the
employees. With communication it is possible to
reduce the feeling of uncertainty and create
comprehension.
5.6
Conclusion
In order to implement a downsizing strategy with the maintenance of a vital human capital, a
strategic human resource management is essential. The most important factor for organizations is
an effective management of this human resource management. One of the main theories is to
create high involved employees who are proud of their membership in the organization. As
discussed there is a relation with the theory of Maslows’ hierarchy of needs (1943). After a
downsizing, employees shift to a lower layer of needs. Also downsizing theory can be related
with Herzbergs’ two factor theory (1959). Employees experience downsizing as stressful and
unsecured. In case of using a downsizing strategy, important for organizations is the
communication with their employees. According to Guiniven (2001) there are three lessons to
learn; the recognition for the need for grieving, the notion that the organization starts with a new
period and the importance to communicate the transition and not the change. In order to create
motivation during and after a downsizing strategy, each of the discussed theories can be
implemented in one of the five different stages. Especially at the fourth and fifth stage the
management of an organization is able to influence the motivation of the remained employees.
23
Chapter 6 Conclusion, discussion and recommendation
6.1
Final conclusion
Employees have to be motivated in order to get them work harder and enjoy it. The motivation
creation of people can be reduced to the common needs of people as discussed with Maslows’
hierarchy of needs (1943) in which there are five different layers of needs. Each need has to be
fulfilled before starting to fulfil the next need/layer. Especially at the fourth layer an organization
management is able to create motivation with their employees. However, it is important for
managers to acknowledge the three aspects of Lazenby (2008); delegating authority, recognizing
achievement and communicating important facts. The are two types of motivation according to
Herzbergs’ two factor theory (1959); intrinsic (also called as the ‘motivators’) and extrinsic (also
called as the ‘hygiene factors’). Employees need the intrinsic factors for the long term goals, the
creation of positive attitudes, and job satisfaction. On contrary of the ‘hygiene factors’ which
have a temporary characteristic. ‘Hygiene factors’ will not lead to a high satisfaction level.
However, the absence of these factors can create great dissatisfaction. The “job characteristics”
model reflects the theory to practical facets. In order to motivate employees it is important to
determine which aspects cause an improvement. It can be concluded that the most important
preferences are not financial but personal related. Not all employees can be considered as equal.
So the mentioned preferences can be different which depends on several employee
characteristics.
Downsizing is a business strategy to improve a organizations’ financial position by a reduction
and reorganization of the workforce. There are several reasons for organizations to choose a
downsizing strategy. Besides this, there are different kinds of downsize strategies; workforce
reduction (in which a number of employees will be eliminated), organizational redesign (which
starts with the reduction of work and afterwards with a limited employee reduction), and
systematic redesign (this strategy is focussed on the organizations’ culture, attitude and values of
the employees). To achieve a successful downsizing strategy implementation, five different
stages of Cummings and Worley (2001) could be used.
24
In order to implement a downsizing strategy with the maintenance of a vital human capital, a
strategic human resource management is essential. The most important factor for organizations is
an effective management of this human resource management. One of the purposes is to create
high involved employees who are proud of their membership in the organization. After a
downsizing, employees shift to a lower layer of needs in the hierarchy model of Maslow.
Furthermore, downsizing theory can be related with Herzbergs’ two factor theory (1959).
Employees experience downsizing as stressful and unsecure. In case of using a downsizing
strategy, important for organizations is the communication with their employees. Three lessons
to learn are important for organizations which use a downsizing strategy; the recognition for the
need for grieving, the notion that the organization starts with a new period, and the importance to
communicate the transition and not the change (Herzberg, Maunser & Snyderman, 1959).
During and after a downsizing strategy it is possible to create or improve the motivation of
employees. Especially at the fourth and fifth stage of the downsizing strategy, an organizations’
management is able to influence the motivation of the remained employees.
6.2
Managerial implication
Based on the theory as discussed, organizations need to recognize several characteristics of their
employees before choosing a certain downsize strategy. However, questionable is at what level a
organization should determine these characteristics. Organizations with a small number of
employees can base its determination at, for example, the individual level. On the contrary,
organizations with a larger number of employees, consist out of many different characteristics. In
that case, probably mediation and segmentation would be a better method.
6.3
Recommendations
The theory of Maslows’ hierarchy of needs is one of the used theories in this study. However, as
stated in chapter two, not only Maslow describes the influence of motivation. In future studies
more research can be done on the applicability of other similar ‘motivational’ theories. However,
this study describes the main preferences with the top ten list which is from 1995. As a
consequence of time and changing environment, it is thinkable that also the preferences of
employees are changed. Hence, in further studies more attention should be paid to the
actualization of the employees’ preferences.
25
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