Organizational Downsizing During an Economic Crisis: Survivors’ and Victims’ Perspectives

The recession that began in 2007 resulted in organizational retrenchment strategies focused on workforce reductions. In order to successfully emerge from this crisis and sustain long-term viability for their organizations, managers needed to reengage surviving employees and minimize the potential for retaliatory behavior by the victims of the downsizing activities. An understanding of the perceptions of both survivors and victims is critical when managers implement downsizing and recovery strategies. The psychological contract and attribution theory were used to examine employee perceptions post downsizing. The variables of interest in this study include employee perceptions related to organizational communication; understanding and agreement with organizational strategy; local management’s involvement in downsizing decisions; management responsiveness to employee needs; perceived fairness; optimism about the future of the company; and job security. A survey of 540 adults registered in an accelerated bachelor’s of business administration program during 2009 completed a downsizing survey designed for this study. This study found perceptual differences between the survivors and victims related to corporate management’s responsiveness to employee needs during downsizing; the fairness of the layoff decisions; managements’ favoritism in the layoff decisions; employee optimism about the future of the organization; and employee nervousness about job security