Does Employee Downsizing Really Work?

Investor Response to Workforce Downsizing: The Influence of Industry Waves, Macroeconomic Outlook, and Firm Performance

“…Workforce downsizing is a managerial practice whose importance has been acknowledged by prior academic research and is widely evident in today's business environment (Datta & Basuil, 2015). Despite a substantial body of research on investor response to workforce downsizing announcements, the exact nature and facets of investors' information processing in connection with workforce downsizings have not yet been closely studied.…”

“…Despite compelling theoretical arguments and considerable empirical support for a negative investor response to workforce downsizing, research on workforce downsizing outcomes continues to be plagued by inconsistencies (see reviews by Datta & Basuil, 2015; Gandolfi & Hansson, 2011; and meta-analysis by Capelle-Blancard & Couderc, 2008). Prior reviews on the topic have concluded that the failure to resolve these inconsistencies largely stems from prior work being “primarily focused on examining only the direct effects of downsizing” and have pointed out that “it is quite likely that the wealth effects associated with downsizing are contingent on the context within which downsizing occurs” (Datta et al, 2012: 213).…”

“…Workforce downsizing, defined as the intentional reduction in workforce to improve firm performance, is a frequently used practice by managers (Datta, Guthrie, Basuil, & Pandey, 2010). In recent years, downsizing has spread massively across the United States as well as other developed economies in response to industry downturns and wider economic crises (Datta & Basuil, 2015; U.S. Bureau of Labor Statistics, 2014).…”

Downsizing and surviving employees' engagement and strain: The role of job resources and job demands

“…Workforce downsizing is one of the most significant topics in the area of human resource management. Organizations usually justify downsizing with expectations of higher organizational performance (Datta & Basuil, 2015); however, these expectations often are not met due to negative reactions of employees who remain in the organization (Datta, Guthrie, Basuil, & Pandey, 2010). Research on reactions of these employees, who are termed “downsizing survivors,” has shown that downsizing negatively affects their attitudes (Allen, Freeman, Russell, Reizenstein, & Rentz, 2001; Luthans & Sommer, 1999; Travaglione & Cross, 2006) and health (Grunberg, Moore, & Greenberg, 2001; Kivimäki et al, 2001; Snorradóttir, Vilhjálmsson, Rafnsdóttir, & Tómasson, 2013).…”

Employment practices, labour flexibility and the Great Recession: An automotive case study

“…Company level employment practices are heavily influenced by the macroeconomic environment (Boxall and Macky, 2009; Cook et al, 2016; Mitchell and Zaidi, 1990; Zagelmeyer and Gollan, 2012), and economic crisis may force firms to re-evaluate their business operations to remain competitive or simply to ensure survival. While businesses may respond by reducing employment levels through downsizing (Cooper et al, 2012; Datta and Basuil, 2015; Dencker, 2012; Goyer et al, 2016; Johnstone, 2018), they may also make changes to employment practices. Examples include freezing wages and bonuses, reducing overtime, diminishing opportunities of promotion, reallocating jobs and responsibilities, reducing expenditure on training and development, revising pension provision and adjusting working time (Ahlstrand, 2015; Cascio, 2014; Gunnigle et al, 2013; Lai et al, 2016; Larsen and Navrbjerg, 2015; Roche et al, 2013; Strandholm et al, 2013; Svalund, 2015; Svalund et al, 2013; van Wanrooy et al, 2013).…”