Impact of Employee Downsizing on Organizational Performance

CHAPTER ONE

1.0 Background

Organizations of virtually every type face an

environment of continuous and accelerating change. A

pervasive response to this experience is some form of

downsizing. It has affected hundreds of organizations

and millions of workers since the 1980s. Downsizing

refers to activities undertaken by management to improve

the efficiency, productivity, and competitiveness of the

organization by reducing the workforce size.

Over the past couple of decades, employee downsizing has

become an integral part of organizational life. Global

competitive pressures coupled with ever-changing demand

conditions have caused firms to critically examine their

cost structures, including those associated with human

resources.

Due to the globalization of business, organizations are

able to develop a number of approaches by which to

employ human resources, technology, and capital to

implement innovative projects in different parts of the

world. They are able to derive maximum advantage due to

these possibilities. While the larger goals appear

justifiable and in the interest of most stakeholders,

they often lead to frequent changes at the

organizational, functional, and individual levels.

1

At the organizational level, such changes can lead to

closure of businesses, offshoring, merging with another

organization, outsourcing, restructuring, etc. At the

functional level, it can imply changes in the

availability of resources, changes in the scope of

activities, etc. As a sequel to these developments,

employees can be redeployed, transferred, rendered

redundant, or let go within a very short span, without

adequate preparation for these changes. Such changes

take their toll in terms of organizational productivity,

nature of employer-employee relationships and the

associated social costs (Noer 2004). People who

contribute to the organizational goals are the

organization's assets. The challenge is to manage

employee exit without disrupting the organization's

functioning. Those individuals who lose jobs are the

hardest hit. For the affected employee, the emotional

trauma of losing a job is very difficult to cope with.

Aside from the financial implications of a job loss,

they have to reconcile with the loss of self-esteem,

self-confidence, and a breach of trust between the

employer and the employee. Along with the individual,

his/her family also gets deeply affected with the

involuntary job loss of a family member. The pain is not

limited to the individual alone but affects a number of

others. The effect is also felt by other employees who2

remain in the organization as they suffer from the guilt

and are also faced with the fear of job insecurity.

The fundamental reason to resize the organization is to

improve organizational performance and to reduce costs

of operation. While these changes are expected to fetch

significant gains for the companies in the long run, an

analysis of corporate experiences of downsizing shows

that such measures are not always implemented with

careful consideration of all the implications.

Downsizing also brings, in its wake, a number of

associated hidden costs, which companies tend to

overlook in pursuit of short-term gains. The flip side

of downsizing is that the organizations lose expertise,

skills, knowledge, experience and valuable

relationships, which walk out of the door every time

somebody leaves. A number of alternative approaches can

be implemented to achieve the over-riding goal of

enhancing business performance. At the same time, it is

true that downsizing in many cases is an inevitable

option. However, downsizing should be considered not as

the first but the last option. If the axe has to fall,

it should be preceded by a careful consideration of the

consequences of such a drastic action. This study

investigates the circumstances which compel

organizations to downsize and its impact on

organizational performance.3

While some researchers likeWorrel et al., (2001),

Fernando Munoz-Bullon and Maria Jose Sanchez-Bueno,

(2008) have provided evidence of the stock market

reaction to downsizing, others likeDeMeuse et al.(2004)

have focused on the effect of downsizing on

profitability. In theory, downsizing is presumed to have

positive outcome for the organization. In many

situations, downsizing did accomplish what management

had intended, and in others, unintended and negative

consequences resulted. Although organizations are

continuing to use the downsizing tactic as a cost

cutting strategy, they are beginning to weigh the

relative costs and a benefit against the negative impact

downsizing has on employees.

1.1 Statement of the Problem

Researchhas showneconomic and technical factors as

causes of organizations abandoning deeply

institutionalized practices. The change in consumer

demand causes organizations to adopt practices opposed

to long-held principles. Poor performance leads firms to

abandon long-maintained practices. Environmental

stimuli, including product demand, technology, and the

competitive environment, transform organizational

strategy and structure.

4

As a result of these changes, many companies have

resorted into the downsizing their human resources in

order to cope with economic pressures. But what most of

these companies do not realize is that downsizing does

not always lead to savings in reality or increase in the

market worth of the company. On the contrary, the

downsizing companies may be branded anti-people. It

usually leads to repetitive downsizing and results in

the loss of employee morale and loyalty and thereby

affects overall productivity levels.

1.2 Purpose of the Study

The aim of this study is to see the impact of employee

downsizing (including layoffs, retrenchments, severance

and rightsizing) and subsequent organizational

performance. Other objectives include:

a.To investigate downsizing approaches/strategies and

their employment implications.

b.To study the association between organizational

downsizing and subsequent problems in employees.

c.To examine the relationship between organizational

downsizing and organizational performance.

d.To examine the reasons why organizations downsize.

e.To study if downsizing reduces organizations spending.

1.3 Research Questions

5

In achieving above objectives the following research

questions are raised:

a.Is there a relationship between organizational

downsizing and organizational performance?

b.What are the downsizing approaches and their

employment implications?

c.Is there significant difference between organizational

downsizing and subsequent problems in the

organization?

d.To what extent has downsizing reduced organizations

spending?

e.Does downsizing make organization achieve optimum

results?

1.4 Research Hypotheses

To provide answers to the research questions the

following hypotheses will be tested:

H0: That downsizing does not lead to cost cutting for

organizations.

6

Hi: That downsizing leads to cost cutting for

organizations.

H0: There is no significant relationship between

organizational downsizing and organizations

profitability.

Hi: There is significant relationship between


profitability.

H0: There is no significant difference between

organizational downsizing and productivity.

Hi: There is significant difference between


1.5 Scope and Limitation of the Study

Most hiring managers have every intention of complying

with employment laws but find that the time needed to

keep abreast of the nuances of employee retention in

areas such as gender, religion, national origin, age,

marital status, physical disability or criminal record

is hard to find. This problem coupled with economic

recession and fall in demand or price. The research is

limited by the availability of comparable research data

across studies. The scope of this study therefore, is

to see the effect of this on general organizational

performance.

7

1.6 Definition of Terms

Organization: It’s a social unit explicitly

established for the achievement

ofspecific goals.

Employee Downsizing:Employee downsizing is a planned set of

organizational policies and

practices aimed at workforce reduction

with the goal of improving firms’

performance. Thus, we view downsizing

as an intentional event involving a

range of organizational policies and

actions undertaken to improve firm

performance through a reduction in

employees (Datta et al, 2010).

Rightsizing: This is the process of a corporation

re-organising/restructuring their

business by cost cutting, reduction of

workforce or re-organising upper-level

management. The goal is to get the

company molded properly to achieve the

8

maximum profit without ruthlessly

downsizings.(thefreedictionary.com)

Layoff: (in British and American English), also

called redundancy in the UK, is the

temporary suspension or permanent

termination of employment of an

employee or (more commonly) a group of

employees for business reasons, such as

when certain positions are no longer

necessary or when a business slow-down

occurs. Originally the term layoff

referred exclusively to a temporary

interruption in work, as when factory

work cyclically falls off. The term

however nowadays usually means the

permanent elimination of a position,

requiring the addition of "temporary"

to specify the original meaning.

Outsourcing: This is the contracting out of a

business process, which an organization

may have previously performed

internally or has a new need for, to an

independent organization from which the

process is purchased back as a service.

Though the practice of purchasing a

business function—instead of providing9

http://en.wikipedia.org/wiki/Business_process

http://en.wikipedia.org/wiki/Contract

http://en.wikipedia.org/wiki/Employee

http://en.wikipedia.org/wiki/Termination_of_employment

it internally—is a common feature of

any modern economy, the term

outsourcing became popular in America

near the turn of the 21st century. An

outsourcing deal may also involve

transfer of the employees and assets

involved to the outsourcing business

partner.

Severance: It means to break up relationship

between employee and employer.

Redundancy: Dismissal of an employee for lack of

available work.

Organizational

Performance: Comprises the actual output or results

of an organization as measured against

its intended outputs (or goals and

objectives).According to Richard et al.

(2009) organizational performance

encompasses three specific areas of

firm outcomes:

a.Financial performance (profits,

return on assets, return on

investment, etc.)

b.Product market performance (sales,

market share, etc.); and

10

http://en.wikipedia.org/wiki/Objective_(goal)

http://en.wikipedia.org/wiki/Organization

c.Shareholder return (totalshareholderreturn, economic valueadded, etc.).

11

CHAPTER TWO

2.0 Literature Review

It is understood that downsizing requires the reduction

of the labour force and the elimination of many

positions for the purposes of cost reduction, the

stimulation of capital turnover, and the increase in

profits through increases in productivity. In addition,

great numbers of once full-time employees have been

relegated to contract or otherwise irregular employment.

It is evident that downsizing has led to negative social

consequences as well as positive ones. The aim of

downsizing is to cut cost, improve profitability,

increase productivity, and enhance competitiveness. Daft

(1995) argues that the purpose of reengineering is to do

things right the first time; improve quality,

eliminating repeated work, spending less time on

bureaucratic rules and procedures, by doing away with

them, tearing down barriers between departments,

empowering employees and teams, substituting information

technologies for paper handling , etc

There have been downsizing in Nigeria both in the public

and private sector, but the manner and ways in which it

is done, undermine the good reasons for downsizing,

hence unintended consequences. Many authorities have

written about the negative impact of downsizing on the

12

attitude of the layoff survivors. According to Cook and

Hunsaker (2001), scope and depth are the most basic

descriptors of any job.

After a layoff, it is expected that the survivors would

be happy that they survived the downsizing exercise and

expect reward for being better performers, and enjoy job

satisfaction, but the reverse is the case. They see

downsizing as a wicked exercise, hence work with mixed

feelings as if their confidence in the organization has

been undermined by the downsizing exercise.

Proponents of liberal economics argue that downsizing is

one of the "hard choices" that has to be made to

rationalize the economy and to create more efficient and

transparent companies, and observers are quick to note

that the negative effects are aggravated in the case of

Nigeria because of its underdeveloped social welfare and

re-employment programmes.

2.1 The History of Airtel Nigeria

BhartiAirtel Limited, commonly known as Airtel, is an

Indian telecommunicationsservice company headquartered

at New Delhi, India. It operates in 20 countries across

South Asia, Africa and the Channel Islands. Airtel has

GSM network in all countries in which it operates,

providing 2G, 3G and 4G services depending upon the

country of operation. Airtel is the world's fourth

13

http://en.wikipedia.org/wiki/List_of_mobile_network_operators

http://en.wikipedia.org/wiki/4G



http://en.wikipedia.org/wiki/GSM_network

http://en.wikipedia.org/wiki/Channel_Islands

http://en.wikipedia.org/wiki/New_Delhi,_India

http://en.wikipedia.org/wiki/Telecommunications

largest mobile telecommunications company with over 261

million subscribers across 20 countries as of August

2012.

The company started as Econet Wireless Nigeria (2001);

Vodacom Nigeria (2004); and the same year to V-Mobile

Nigeria; Celtel Nigeria (2006); to Zain Nigeria (2008)

and now BhartiAirtel Nigeria.

Airtel is credited with pioneering the business strategy

of outsourcing all of its business operations except

marketing, sales and finance and building the 'minutes

factory' model of low cost and high volumes. The

strategy has since been copied by several operators. Its

network—base stations, microwave links, etc.—is

maintained by Ericsson, Nokia Siemens Network and

Huawei, and business support is provided by IBM, and

transmission towers are maintained by another company

(BhartiInfratel Ltd. in India)

Airtel Nigeria (Airtel Networks Limited), a leading

mobile telecommunication services provider in Nigeria

and a member of Airtel Africa Group, is committed to

providing innovative, exciting, affordable and quality

mobile services to Nigerians, giving them the freedom to

communicate, rise above their daily challenges and drive

economic and social development. The company made

history on August 5, 2001 by becoming the first telecoms

operator to launch commercial GSM services in Nigeria14

http://en.wikipedia.org/wiki/IBM

http://en.wikipedia.org/wiki/Huawei

http://en.wikipedia.org/wiki/Nokia_Siemens_Network

http://en.wikipedia.org/wiki/Ericsson

http://en.wikipedia.org/wiki/Outsourcing

http://en.wikipedia.org/wiki/List_of_mobile_network_operators

and has scored a series of many "firsts" in the highly

competitive Nigerian telecommunications market including

the first to introduce toll-free 24-hour customer care;

first to launch service in all the six geo-political

zones in the country; first to introduce affordable

recharge denominations; first to introduce monthly free

SMS and first to introduce monthly airtime bonus.

In Nigeria, Airtel is working tirelessly to live up to

an ambitious vision of being the most loved brand in the

daily lives of Nigerians as it offers a superior brand

experience and a portfolio of innovative products &

services ranging from exciting voice solutions to

inventive data packages and mobile broadband. Also, the

company is continuously making a positive impact in the

communities in which it operates through the expansion

of its networks to rural areas and through an extremely

robust CSR programme to uplift underprivileged children

in poor, rural communities.

2.2 Conceptual Definition of Downsizing

Downsizing is the 'conscious use of permanent personnel

reductions in an attemptto improve efficiency and/or

effectiveness' (Budros, 1999, p.70).Thus, we view

downsizing as an intentional event involving a range of

organizational policies and actions undertaken to

15

improve firm performance through a reduction in

employees.

Regardless of the label applied, however, downsizing

essentially refers to layoffs that may or may not be

accompanied by systematic restructuring programs, such

as staff reductions, departmental consolidations, plant

or office closings, or other forms of reducing payroll

expenses. Corporate downsizing results from both poor

economic conditions and company decisions to eliminate

jobs in order to cut costs and maintain or achieve

specific levels of profitability.

Companies may lay off a percentage of their employees in

response to these changes: a slowed economy, merging

with or acquiring other companies, the cutting of

product or service lines, competitors grabbing a higher

proportion of market share, distributors forcing price

concessions from suppliers, or a multitude of other

events that have a negative impact on specific

organizations or entire industries. In addition,

downsizing may stem from restructuring efforts to

maximize efficiency, to cut corporate bureaucracy and

hierarchy and thereby reduce costs, to focus on core

business functions and outsource non-core functions, and

to use part-time and temporary workers to complete tasks

previously performed by full-time workers in order to

trim payroll costs.16

According to Gladys B. West, (2000), downsizing has

four(4) major attributes that help defineand separate it

from related, but non-synonymous concepts such as

decline and layoffs. These four(4)attributes, intent,

personnel, efficiency, and work processes are described

as follows:

a.Downsizing may occur intentionally as a strategic,

proactive response designed to improveorganizational

effectiveness. This response may involve mergers,

acquisitions, sell-offs, orrestructuring to better

enable the organization to meet its mission or fill an

environmental niche.

b.The personnel attribute of downsizing usually involves

reductions in personnel. However,downsizing is not

limited entirely to personnel reductions. In some

downsizing situations newproducts are added, new

sources of revenue opened up, and/or additional work

acquired. Eventhough some people may be added, the

overall process results in fewer numbers of workers

employedper unit of output as compared to some

previous level of employment.

c.Downsizing occurs either reactively or proactively to

contain costs, enhances revenue,enhance efficiency,

and/or bolster competitiveness.

d.Downsizing activities may bring about changes in the

work processes through restructuringand eliminating17

work or some redesign. After a reduction in the

workforce, fewer employees remainto do the same amount

of work, and this affects what work gets done and how

it gets done.

2.3 THEORETICAL FRAMEWORK

2.3.1 Organizational Performance

Rosabeth Moss Kanter's model of organizational

empowerment offers a framework for creating meaningful

work environments for professionals. Kanter(2003) argues

that situational aspects of the workplace influence

employee attitudes and behaviours to a greater extent

than personal predispositions. She describes various

"power tools" that enable employees to accomplish their

work in meaningful ways: access to information, support,

resources, and the opportunity to learn and grow. Lines

of power come from formal and informal systems within

the organizations. Jobs that are central to the overall

purpose of the organization are highly visible within

the organization, constructed in such a way that there

is a lot of discretion or flexibility in how work is

accomplished, and contain high degrees of formal power.

Informal power results from positive relationships with

superiors, peers, and subordinates within the work

setting that lead to effective alliances. According to

the model, employees with access to these power tools 18

are more motivated at work than those without access.

They also experience greater job satisfaction and

commitment to the organization. Managers can play an

important role in providing access to these empowering

conditions in the work setting.

Several studies have linked structural empowerment to

factors identified as important for retaining workers,

including job satisfaction, participation in

organizational decision making, job autonomy or control

over practice and organizational commitment. Work

settings that are structurally empowering are more

likely to have management practices that increase

employees' feelings of organizational justice, respect,

and trust in management.

Bernard, et al (2006) refers to organizational justice

as employees' perceptions of fairness in organizational

processes and activities. Interactional justice refers

to perceptions of the quality of interactions among

individuals involved in or affected by decisions.

According to Greenberg (1993), interactional justice

consists of two components: interpersonal justice and

informational justice. Interpersonal justice refers to

the extent to which individuals are treated with respect

and dignity; informational justice is the extent to

which individuals are provided with information or

rationale for how decisions that affect them are made.19

Employee perceptions of justice are significantly

related to important organizational outcomes such as job

satisfaction, commitment, withdrawal behaviour, and

intention to quit.

Interpersonal justice was associated with a two-fold

risk of poor self-rated health and minor psychiatric

disorders, particularly among women. Thus, perceptions

of interactional justice appear to have pervasive

effects on employee attitudes and behaviors. It seems

logical to expect that if high levels of interactional

justice were present in the organization, employees

would be more likely to feel that they are respected

both as individuals and as important contributors to

achieving organizational goals.

Respect has been defined as paying attention to and

taking seriously another person (Bernard et al 2006).

People experience disrespect when they are ignored,

neglected, disregarded, or dismissed lightly or

thoughtlessly. Although respect is identified as a core

value within organizational theory, research on respect

in the workplace is limited. Mishra and Spreitzer(2006)

argue that respect is fundamental to employees' trust of

others in the organization. It is reasonable to expect

that when employees are empowered to carry out their

work in a meaningful way, and are treated fairly and

20

with respect, they are more likely to trust management

to represent their best interest.

Gilbert and Tang (2003) define organizational trust as

the belief that an employer will be straightforward and

follow through on commitments, open communication,

sharing of critical information, and greater worker

decisional involvement foster trust in organizations and

increase employee productivity. Thus organizational

trust is linked to job satisfaction, organizational

commitment, role clarity, and in-role performance.

In organizations that are downsizing, low levels of

trust are associated with poor communication and

increased conflict. Structural empowerment seems to

offer a buffer to the negative effects of downsizing. In

a study by Laschinger, et al (2001), structural

empowerment resulted in higher levels of psychological

empowerment, which, in turn, strongly influenced the

employees trust in management. This enhanced trust

subsequently had a positive effect on their commitment

to the organization. When the work environment is

empowering and employees perceive a climate of justice,

respect, and trust, it is reasonable to expect that they

would experience greater job satisfaction and commitment

to the organization.

The two most important predictors of job satisfaction

were stress and organizational commitment. Communication21

with peers and supervisors, autonomy, and recognition

were also important. McNeese-Smith (2005) found that

leadership behaviors such as "enabling others to act"

had a significant impact on job satisfaction.

Organizational commitment consists of employees'

attachments to their organization. Employees with high

commitment are more likely to rise to the challenges

imposed by restructuring.

2.4 Organizational Downsizing

Organizational downsizing as suggested by Budros (1999)

defines the concept of downsizing as “an organization’s

conscious use of permanentpersonnel reductions in an

attempt to improve its efficiency and/or effectiveness”.

The implication of the definition of downsizing is that

it places the conscious use of permanent personnel

reductions at the heart of downsizing. The reason is

that most scholars not only associate the process of

downsizing with the process of reducing the size of the

organization, they also agree that downsizing is

something intentionally undertaken by the organization.

However, it is important to note that we do not equate

downsizing with layoffs. The difference between layoffs

and downsizing is that layoffs are solely concerned with

the individual level of analysis, while downsizing is a

broader concept applicable to other levels of analysis

22

than solely the individual level. Additionally,

downsizing is a strategic decision while layoffs are an

operational mechanism used to implement a downsizing

strategy. The emphasis on being a strategic intent

instead of being an involuntary loss of resources is

what distinguishes organizational downsizing from the

literature on organizational decline (Bernard, et al

2003). Freeman and Cameron (2004) identified four

factors that distinguish downsizing from decline, and

distinguish downsizing from other related concepts.

First, downsizing is an intentional endeavor. Second,

downsizing is not limited to reductions inpersonnel,

although it is usually involved. Third, the focus of

downsizing is to improve either the efficiency or the

effectiveness of the organization. Finally, work

processes are likely to be affected, wittingly or

unwittingly. An additional difference between the

literature on downsizing and decline respectively is

that downsizing activities can be implemented

independent of if the organization is growing or

declining and there is also a need to elaborate on the

last part of the employed definition of organizational

downsizing: “improvement of organizational efficiency

and/or effectiveness”. Most organizations that downsize

are concerned with improving the efficiency of the

organization.23

2.4.1 Why Organizations Downsize

Employee downsizing is a nightmare feared by most of the

employees working in the corporate world. In management

parlance, the term “downsizing” refers to pruning

(including layoffs, retrenchments, severance and

rightsizing) of the size of workforce for a variety of

reasons: these reasons range from obsolescence of skills

consequent upon upgrade of technology, shift in the

organizational requirements; outsourcing; modernizing,

restructuring or even reducing the activities of

industrial units; and redesigning the job in an

organization.

Some other reasons include the following;

2.4.2 Cost Reduction

One the primary reasons for employee downsizing is to

reduce costs. Employee payroll counts as a liability on

the company balance sheet and, therefore, reduces the

owners' equity. The retained earnings of a company are

affected by the amount it pays out in payroll, and

removing this obligation is one way to cut costs. Aside

from payroll, employee benefits are also costly to

companies, as are the operating costs associated with

overproduction.

2.4.3 Productivity24

Companies sometimes downsize their employee base to

increase productivity. This may seem counterintuitive on

the surface, but some instances exist where this would

be advantageous. For instance, if a company knows that

it can increase the output of individual workers while

remaining constant with its productivity, this can be

advantageous for cost reduction. However, a company may

also decide to downsize to increase productivity by

replacing workers with sophisticated equipment that can

do the same job.

2.4.4 Value

Downsizing the number of employees in a company

generally signals that some restructuring and changes

are underway. These changes generally take place for

increasing profitability of the company. If shareholders

and other investors perceive that the company will be

making changes that increase its profitability, it will

increase the value of company stock. This can result in

more investors coming on board or current investors

increasing their shareholdings in the organization. In

either case, downsizing can increase the company's

perceived value.

2.4.5 Outsourcing

Companies may overextend themselves in terms of the

number and types of services they offer from time to

time. It may behoove company ownership to sharpen the25

focus of the company by eliminating some of the products

or services that it offers. In doing so, a decrease in

the number of employees may be necessary. Company

officials may decide that outsourcing certain activities

will result in increased productivity and reduced costs

as well.

2.5 Downsizing Implementation Strategies

There is much to begained from a humane and strategic

approach to downsizing. According to Adrian Wilkinson

(2004), the way downsizing is implemented is more

important than the fact thatit is implemented. He

reports on three approaches to downsizing. They include:

2.5.1 Workforce Reduction Strategies: This approach focuses

primarily on reducing headcount and is usually

implemented in a top-down, speedy way. However, the

downside ofsuch an approach is that it is seen as the

“equivalent to throwing a grenade into acrowded room,

closing the door and expecting the explosion to

eliminate a certainpercentage of the workforce. It is

difficult to predict exactly who will be eliminatedand

who will remain”, but it grabs the immediate attention

ofthe workforce to the condition that exists. Because of

26

the quick implementationassociated with the workforce

reduction strategy, management does not have timeto

think strategy through and communicate it properly to

employees. This may resultin a low "perceived

distributive fairness" As a result,employees may be

negatively affected by the stress and uncertainty

created by thistype of downsizing and may react with

reduced organizational commitment, less job involvement,

and reduced work efforts.

2.5.2 Work Redesign Strategies: This approach is aimed at

reducing work(in addition to or instead of reducing the

number of workers) through redesigningtasks, reducing

work hours, merging units, etc. However, these are

difficult toimplement swiftly and hence are seen as a

medium-term strategy. (Adrian Wilkinson, 2004)

2.5.3 Systematic Strategies: This approachfocuses more broadly

on changing culture, attitude and valuesnot just

changing workforce size. This involves “redefining

downsizing process as a basis for continuous

improvement; rather than as a programmeor a target”.

Downsizing is also equated with simplification of all

aspects of theorganization - the entire system including

supplies, inventories, design process,production

methods, customer relations, marketing and sales

support, and so on”. Again, this strategy requires

27

longer-term perspectives andis more consistent with the

ideas of TQM.

2.6 DownsizingandOrganization’sPerformance

As noted, firms often reduce personnel as a form of

restructuring in pursuit of improved performance. The

stated objective of employee downsizing is often the

enhancement of competitiveness via productivity and

profitability improvements brought about by eliminating

people and/or jobs deemed redundant or unnecessary

(DeWitt 1998, Freeman and Cameron 1993),The most

substantial difference between those who predict

positive or negative performance-related impacts from

downsizing is the perspective from which they view this

phenomenon. On the one hand, theorists concentrating on

employee reactions have proposed that the threat of

downsizing generates anxiety and job insecurity among

those who remain, potentially increasing stress,

dissatisfaction, and turnover. Termination of co-workers

may lead to perceptions of organizational injustice and

distrust of top management. These negative attitudes may

potentially reduce individual motivation and job

performance. Workgroup membership changes also may be

associated with the loss of important organizational

knowledge (Fisher & White, 2000) and reductions in

familiarity and cohesion.28

On the other hand, some note that concentrating on core

operational competencies can reduce unnecessary

management layers and increase the speed of decision-

making. Some even suggest fear of termination may

increase individual effort among employees who wish to

retain their jobs (Kraft, 1991). Although recognized

less often, downsizings also affect the society, in

which an organization is situated, potentially changing

the opinions of applicants, consumers, and regulatory

bodies regarding the downsizing organization.

2.6.1 Relationship between Downsizing and Work

Performance

The studies here primarily focus on the effects of

downsizing on the quantity and quality of survivors’

work. Studies indicate that downsizing results in

reduced creativity and also has a negative impact on

different aspects of quality improvement. Amabile and

Conti (1999) attributed the reduced creativity to the

deterioration in the work environment following

downsizing. In addition, there is some evidence that

downsizing results in a significant decline in other

dimensions of work performance.

However, studies indicate that the relationship is

influenced by several factors. Armstrong- Stassen

(2008), for example, found that although supervisor

29

support was positively associated with post downsizing

job performance, threat of job loss has an adverse

effect on such performance. Likewise, Brockner et al.

(2004) observed that the job performance of survivors

following employee reductions was negatively affected by

threats to their well-being. Moreover, unlike escape

coping, control coping on the part of survivors had a

positive impact on their job performance. Finally,

relationships with other survivors and their reactions

played a key role in determining survivors’ job

performance, with greater attraction among survivors

being associated with superior job performance. In

addition, Datta, Brockner et al. (2010) found that

communications coupled with positive reactions from

fellow survivors resulted in better job performance

among downsizing survivors.

2.6.2 Relationships between Employee Downsizing and

Firm Profitability

A number of studies have sought to examine whether

downsizing leads to improved firm profitability.

Findings, however, have been mixed. Some studies suggest

that employee reductions lead to performance

30

improvements. Interestingly, Espahbodi et al. (2000);

Perry and Shivdasani (2005) observed that such

improvements occurred 2 to 3 years after downsizing,

reinforcing the view that benefits from employee

reductions, if any, are experienced only in the long

term. While others have found that that employee

downsizing has a deleterious effect on organizational

profitability.

The equivocal findings on the relationship between

downsizing and profitability have motivated researchers

to search for moderators in an effort to explain

performance differences. Yu and Park (2006) observed

that although downsizing resulted in improved return on

assets (ROA) among firms that did not experience losses

in the 3 years prior to downsizing, no such improvements

occurred among loss making firms. In another study,

Guthrie and Datta (2008) examined the moderating role of

industry conditions on the downsizing-performance

relationship and concluded that the negative effects of

downsizing on organizational performance were more

pronounced in industries characterized by high research

and development (R&D) intensity, growth, and low capital

intensity.

2.6.3 Links between Rightsizing and Downsizing

31

When an organization must have a reduction in work force

that is prompted by external forces, the phrase

“downsizing” accurately applies. Some of the external

forces that can cause downsizing include major economic

recessions, natural disaster, major health problems or

the death of a significant person in the organization,

and/or the end of the cold war.

Downsizing is a reactive process. Most of the time, it

is a depressing, destructive process. Being put in the

position of having to lay people off is not pleasant for

any manager. When you are coping with downsizing, it can

feel that your time and effort is nonproductive.

Downsizing can be disruptive to ongoing operations

because people need to spend time undoing and redoing

things that used to work.

Although the phrase “rightsizing” has been used in some

organizations as a euphemism for “downsizing” to make it

seem more pleasant than it is, they are not the same

thing.

Rightsizing is proactive and needs to be a constant part

of the process of managing an organization. To do

rightsizing of an organization, the leaders first look

at market needs and trends, technologies, alternative

approaches, and new ideas. They focus their attention on

the future and where the organization should be headed.

Newly clarified or refined strategic direction often32

gives managers new insights about what skills will be

needed within the organization to head in that

direction. Knowing where things are probably headed

helps rightsizing managers make more effective hiring

decisions and provides direction for training/retraining

current employees who want to learn new skills to

prepare for the future. Armed with clarified strategic

direction, a team of managers has a sense of being

centered, of knowing what the priorities are, and a

better chance to create an organizational structure that

is conductive to success.

In rightsizing, organizations are designed to implement

strategic direction. Some departments are enlarged while

others may be eliminated. Sometimes the proactive,

strategic design elements of rightsizing introduce a new

layer of management. However, more and more

organizations are using rightsizing processes to

intentionally eliminate layers of middle management as

they establish the most effective shape and size of

their organizations. To sustain the right shape and size

of an organization, proactive managers realize that they

are dealing with a dynamic process. What is right for

the organization today will probably not be right

tomorrow.

Rightsizing is a creative, constantly exciting process

of adjusting one’s organization to be the most33

efficient, effective, competitive, and profitable it can

possibly be. The process of rightsizing is not immune to

outside forces, but unlike downsizing it does not wait

for things to happen to the organization that force

reactive changes. Managers who understand rightsizing

drive strategic change in a positive direction.

The term downsizing is often confused with rightsizing

for the following reasons;

a.One of the reasons rightsizing and downsizing become

confused in people’s minds is that some passive

managers abdicate their responsibilities and wait

for a wave of downsizing to force them to act.

Managers who do not want to face tough rightsizing

decisions like this, may wait until a downsizing

Congressional mandate comes along to give them an

excuse (a scapegoat) to do what they “should have”

been doing all along.

b.Another source of confusion is the conflicting

messages being sent to organizations today. In this

complex world of ever-changing external forces, even

the most practiced reactive managers would not know

if they were being prompted to do up sizing or

downsizing. In some industries, it is difficult to

tell if you are “coming or going.”

c.Another source of confusion between rightsizing and

downsizing is the fact that many larger34

organizations are facing the need to do both

downsizing and rightsizing at the same time.

An excellent example of an industry facing both

rightsizing and downsizing is the telecommunications

industry. The recession and seemingly endless series of

legislative changes have forced some companies to

downsize. Service that was once protected for them is

now open for competition. At the same time, exciting

technological advances and increased customer demand for

services and choice cue the leaders within organizations

to take the more proactive rightsizing approach.

Organizations in the telecommunications industry cannot

help but see the need to invest in fiber optic cable

instead of copper wire, telecomputers for business

customers and individual consumers, improved cellular

service, research to find ways to expand band width,

upgraded equipment and routing software (ISDN (Integrated

Services Digital Network) vs. PBX(Private Branch Exchange)), training

in new approaches to total quality management, and the

list goes on and on.

It is very frustrating for the managers, trainers, and

staff employees alike to live through this roller

coaster ride not knowing what tomorrow will bring. It is

also a very expensive ride. It is also very tempting for

employees within these companies to become cynical.

Afraid that they will be the next to be laid off, they35

may distrust their managers’ intentions when their job

functions change or training begins. When employees

resist change, a positive rightsizing action of training

employees for the future can soon feel just like a

depressing downsizing situation.

If the manager involved is not energized about the

strategic rightsizing reasons behind the investment in

retraining or the manager feels that his/her own

position is at risk too, the manager may inadvertently

contribute to the confusion. When managers act as though

something is being done to them rather than they are an

integral part of driving strategic change, rightsizing

quickly changes to downsizing. It is a tremendous

challenge for leaders of today’s organizations to

evaluate complex market trends, technological options,

economic changes, work force demographics, and

competitive threats to select their major strategies. It

is an even greater challenge for those strategies to be

communicated in such a way that managers truly embrace

them, feel that they play a part in driving strategic

change, and are designing their organizations to be the

right size and shape for optimum effectiveness,

efficiency, and profitability.

It is a challenge worth facing because if the

executives, managers and staff employees of today’s

36

organizations do not intentionally choose rightsizing on

a daily basis, they are only left with downsizing.

2.7 Organizational Outcomes of Employee Downsizing

Most research on downsizing is geared toward addressing

the basic question, “Does employee downsizing result in

improved organizational performance?” Proponents of

employee downsizing have long argued that downsizing

represents a rational tool that managers can use to

improve organizational productivity and efficiency.

Improved firm performance can come from reduction of

labor costs (which, in many organizations, is the

largest component of the cost structure), provided

reductions result in the remaining employees working at

higher productivity levels. Critics of downsizing on the

other hand, have vehemently argued that such benefits

are, at best, minimal and often nonexistent. They argue

that although downsizing may result in short-term

reductionsin labor costs, it also undermines long-term

competitive advantage by eroding skill bases, disrupting

organizational relationship networks, and, as already

discussed, eliciting negative responses on the part of

survivors.

Downsizing also has a negative effect on "corporate

memory",employee morale, distracts social

networks,causes a loss of knowledge, and disrupts

37

learning networks. As a result, downsizing could

"seriously handicap and damage thelearning capacity of

organizations" (Fisher and White, 2000: 249). Further,

giventhat downsizing is often associated with cutting

cost, downsizing firms may provideless training for

their employees, recruit less externally, and reduce the

research anddevelopment (R&D) budget.

Although most literature are often dominated by research

on how downsizing affects financial performance (market

returns and firm profitability), a few studies have

examined other organizational outcomes, namely, sales

growth, labor productivity, changes in R&D intensity,

and reputation. (Datta et al, 2010)

2.8 Criticisms of Downsizing

While companies frequently implement downsizing plans to

increase profitability and productivity, downsizing does

not always yield these results. Although critics of

downsizing do not rule out the benefits in all cases,

they contend that downsizing is over-applied and often

used as a quick fix without sufficient planning to bring

about long-term benefits. Moreover, downsizing can lead

to additional problems, such as poor customer service,

low employee morale, and bad employee attitudes. Laying

workers off to improve competitiveness often fails to

38

produce the intended results because downsizing can lead

to the following unforeseen problems and difficulties:

The loss of highly-skilled and reliable workers and

the added expense of finding new workers.

An increase in overtime wages.

A decline in customer service because workers feel

they lack job security after layoffs.

Employee attitudes that may change for the worse,

possibly leading to tardiness, absenteeism, and

reduced productivity.

An increase in the number of lawsuits and disability

claims, which tends to occur after downsizing

episodes.

Restructuring programs sometimes take years to bear

fruit because of ensuing employee confusion and the

amount of time it takes for employees to adjust to

their new roles and responsibilities.

Some studies have indicated that the economic advantages

of downsizing have failed to come about in many cases,

and that downsizing may have had a negative impact on

company competitiveness and profitability in some cases.

Downsizing has repercussions that extend beyond the

companies and their employees. For example, governments

must sometimes enact programs to help displaced workers

obtain training and receive job placement assistance.

39

Labor groups have reacted to the frequency and magnitude

of downsizing, and unions have taken tougher stances in

negotiations because of it.

Instead of laying employees off, critics recommend that

companies eliminate jobs only as a last resort; not as a

quick fix when profits fail to meet quarterly

projections. Suggested alternatives to downsizing

include early retirement packages and voluntary

severance programs. Furthermore, some analysts suggest

that companies can improve their efficiency,

productivity, and competitiveness through quality

initiatives by empowering employees through progressive

human resource strategies that encourage employee

loyalty and stability, and other such techniques.

CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This is the heart of the study this chapter covers

research design, study population, sampling and sample

40

size, research instrument and administration, method of

data analysis.

3.1 Restatement of Research Questions

Is there a relationship between organizational

downsizing and organizational performance?

What are the downsizing approaches and their

employment implications?

Is there significant difference between organizational

downsizing and subsequent problems in the

organization?

To what extent has downsizing reduced organizations

spending?

Does downsizing make organizations achieve optimum

results?

3.2 Restatement of Research Hypothesis


organizations.


organizations.



profitability.

41



profitability.



Hi: There is significant difference between


3.3 Research Design

Research design is the programme that guides the

researcher in the process of collecting, analyzing and

interpreting data, information and observation (Asika,

2004). Research design is viewed as the plan, structure

and strategy for investigation conceived so as to obtain

answers to research questions and control variance. It

specifies the direction the research is going and how to

go about getting relevant data.

Therefore, in this study the research makes use of

survey research design. Survey design is the method of

collecting information by asking a set of preformulated

questions in a predetermined sequence in a structured

questionnaire to a sample of individuals drawn so as to

be representative of a defined population.

This is because the research is interested in some

characteristics of the population. It is also called

descriptive research it is pre-planned and structured.

42

3.4 Population of the Study

A population is the set of all objects (units) or

observation about which conclusions are to be drawn. A

population is also an aggregation of all elements that

share common characteristics (Osuagwu, 2002).

However, the study was carried among 100 employees of

Airtel Nigeria. The employee of this organization was

sampled and no special consideration was given to age,

sex and nationality in collecting information from the

respondent.

3.5 Sample Size and Sampling Technique

A sample is a part of the population or representative

of the population. The procedure for drawing the sample

from a population is called “sampling”. There are

varieties of sampling techniques that can be employed in

a research study. However, in this study, the research

employs convenience sampling technique (non-probability

sampling technique).

This is so because in convenience sampling, the research

attempts to obtain a sample of convenient element by

selecting convenient sample. The respondents are

selected because they happen to be in the best position

to do so.

3.6 Description of Data Collection Instrument

The research instrument that would be used for this

study would be a questionnaire which will be in two43

sections; A & B.

Section A contains the personal data of the respondents.

This is necessary since it will assist the researcher in

understanding the level of maturity of the respondents

as regards their responses to be gathered through the

administration of the questionnaires.

Section B contains questions that are required to answer

the research questions and to test the formulated

hypotheses. The options available to the respondents

include; Strongly Agree (SA), Agree (A), Strongly

Disagree (SD) and Disagree.

3.7 Validity of Research Instrument

Validity of research instrument is achieved by

presenting the statements in the questionnaire to the

project supervisor, for constructive critics,

corrections and subsequent approval before it was

administered on the selected respondents.

3.8 Reliability of Research Instrument

The reliability of a research instrument concerns the

extent to which the instrument yields the same results

on repeated trials. Although unreliability is always

present to a certain extent, there will generally be a

good deal of consistency in the results of a quality

instrument gathered at different times. The tendency

44

toward consistency found in repeated measurements is

referred to as reliability. The reliability of the test

can be estimated by examining the consistency of the

responses between the respondents.

3.9 Methods of Data Collection

The method of data collection for this study includes

both primary and secondary sources.

Primary data is the collection of data from subjects

or respondents compared to using data already

collected by someone else. The primary data will be

collected through questionnaires.

Secondary data are data that had been collected by

someone else (ready-made data). The secondary data

will be collected from organizations news and

website, journals and other publications.

3.10 Method of Data Analysis

This describes the procedure for which obtained data can

be analyzed in an understandable manner. The method of

data analysis shows the quantitative and qualitative

presentation of the collected data in which the data can

be easily understood.

To analyze the data that will be collected, SPSS

regression model will be employed. This model will help

in hypotheses testing and the impact of downsizing on

45

organizations performance.

3.11 Limitations of the Study

As in the case of all human endeavors, there are some

limitations that rob this study of perfection. The major

ones being constraints imposed by limited funds and

time. The sample and sampling technique constitute one

of the limitations. The exact population of the universe

is unknown, thus, it has effect on the sample taken.

However, it should be pointed out that this set back is

not peculiar to this study alone but to all other

studies that use sample for analysis.

The conduct of the research was quite interesting and

worth doing although there were few constraints such as

time and finance, as already mention above for instance,

delay in the collection of responses from respondents

because of their commitments.

46

CHAPTER FOUR

DATA ANALYSIS, PRESENTATION AND INTERPRETATION

4.0Introduction

This chapter supplies analysis of data collected through

the questionnaires distributed and retrieved in order to

ascertain if relationship exist between employee

downsizing and organization performance using a case

study of Airtel Nigeria. The responses were collected

and regression analysis method was used in analyzing the

responses and testing the hypothesis.

4.1Respondents’ Characteristics and Classifications

The bio-data analyses of the 83 questionnaires retrieved

from the 100distributed is shown below:

Table I: Analysis of Respondents by Sex

Frequency PercentValidPercent

CumulativePercent

Valid Male 42 50.6 50.6 50.6

Female 41 49.4 49.4 100.0

Total 83 100.0 100.0

Source: Field Study (January, 2014).

The table above shows that 50.6% of the respondents were

male while 49.4% were female. Therefore, majority of the

respondents were males.

48

Table 2: Analysis of Respondents by Marital Status


CumulativePercent

Valid Single 63 75.9 75.9 75.9

Married 16 19.3 19.3 95.2

Divorced 4 4.8 4.8 100.0

Total 83 100.0 100.0



single, 19.3% was married while 4.8% was divorced.

Therefore, majority of the respondents were single.

Table 3: Analysis of Respondents by Age


CumulativePercent

Valid 21-30yrs 50 60.2 60.2 60.2

31-40yrs 29 34.9 34.9 95.2

41 above 4 4.8 4.8 100.0

Total 83 100.0 100.0


From the table above, the age distribution of the

respondents’ shows that 60.0% of the respondents

constitute the age bracket of 21-30 years, 34.9% falls

within the age bracket of 31- 40years, while 4.8% were

above 41.

49

Table 4: Analysis of Respondents by Educational Qualification

Frequency Percent

ValidPercent

CumulativePercent

Valid O level 4 4.8 4.8 4.8

Nd/Nce 15 18.1 18.1 22.9

Hnd/B.Sc/B.A 37 44.6 44.6 67.5

Mba/M.Sc/M.A 27 32.5 32.5 100.0

Total 83 100.0 100.0Source: Field Study (January, 2014).

From the distribution above, 4.8% of the respondents

were O/Level holders, 18.1% were ND/NCE holders, and

44.6% were HND/B.SC/B.A holders while 32.5% of the

respondents had master degree.

Table 5: Analysis of Respondents by Working Experience


CumulativePercent

Valid Below 5yrs

40 48.2 48.2 48.2

5-10yrs 37 44.6 44.6 92.8

11-15yrs 6 7.2 7.2 100.0

Total 83 100.0 100.0


The table above shows that 48.2% of the respondents had

less than 5 years of working experience, 44.6% had 5-

10years working experience while 7.2% had more than

10years of working experience with the company.

50

Table 6: Analysis of Respondents by Employment Status


CumulativePercent

Valid Top Level Management 6 7.2 7.2 7.2

Middle Level Management

31 37.3 37.3 44.6

Junior Staff 46 55.4 55.4 100.0

Total 83 100.0 100.0



junior staff, 37.3% was middle level management while

7.2% of the respondents represent the management staff.

STATEMENT I: Downsizing is Essential in The Achievement of Organizational Goals

TABLE 7


CumulativePercent

Valid Strongly Agree 6 7.2 7.2 7.2

Agree 16 19.3 19.3 26.5

Disagree 55 66.3 66.3 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0

51

The table above shows that 7.2% of the respondents

strongly agreed, 19.3% agreed while 66.3% of the

respondents disagreed with the statement, while 7.2%

strongly disagreed with the statement that downsizing

is essential in the achievement of organizational

goals. Thus, majority of the respondents disagrees with

the statement.

STATEMENT II: Downsizing Is Changing The Way Business Organizations Operate

TABLE 8


CumulativePercent


Agree 19 22.9 22.9 71.1

Disagree 18 21.7 21.7 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0


strongly agreed, 22.9% agreed 21.7% of the respondents

disagreed with the statement, while 7.2% strongly

disagreed with the statement that downsizing is changing

the way business organizations operate. Thus, majority

of the respondents strongly agrees with the statement.

52

STATEMENT III: Downsizing Has Impacts On The Performance Of Organizations

TABLE 9


CumulativePercent


Agree 55 66.3 66.3 85.5

Disagree 8 9.6 9.6 95.2

Strongly Disagree

4 4.8 4.8 100.0

Total 83 100.0 100.0




disagreed with the statement downsizing has impacts on

the performance of organizations. Thus, majority of the

respondents agrees with the statement.

STATEMENT IV: Service Quality Plays A Significant Role In The Acceptability Of Services

TABLE 10


CumulativePercent


Agree 22 26.5 26.5 92.8

Disagree 4 4.8 4.8 97.6

Strongly Disagree

2 2.4 2.4 100.0

Total 83 100.0 100.0

53




disagreed with the statement service quality plays a

significant role in the acceptability of services. Thus,

majority of the respondents strongly agrees with the

statement

STATEMENT V: Downsizing Improves Organizations' Efficiency And Effectiveness

TABLE 11


CumulativePercent


Agree 42 50.6 50.6 57.8

Disagree 29 34.9 34.9 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0




disagreed with the statement service quality plays a

significant role in the acceptability of services.

Thus, majority of the respondents agrees with the

statement.

54

STATEMENT VI: Downsizing Approaches Have Employment Implications

TABLE 12


CumulativePercent


Agree 10 12.0 12.0 89.2

Disagree 5 6.0 6.0 95.2

Strongly Disagree

4 4.8 4.8 100.0

Total 83 100.0 100.0



disagreed with the statement, and while 4.8% strongly

disagreed with the statement downsizing approaches have

employment implications. Thus, majority of the

respondents strongly agrees with the statement.

STATEMENT VII: Promotions Are Based Primarily OnPerformance

TABLE 13


CumulativePercent


Agree 16 19.3 19.3 28.9

Disagree 55 66.3 66.3 95.2

Strongly Disagree

4 4.8 4.8 100.0

Total 83 100.0 100.0



disagreed with the statement, and while 4.8% strongly55

disagreed with the statement promotions are based

primarily on performanceThus, majority of the

respondents disagrees with the statement.

STATEMENT VIII: There Is Significant Difference Between Downsizing And Subsequent Problems In The Organization

TABLE 14


CumulativePercent


Agree 46 55.4 55.4 59.0

Disagree 28 33.7 33.7 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0



disagree with the statement, and while 7.2% strongly

disagreed with the statement that there is significant

difference between downsizing and subsequent problems in

the organization.Thus, majority of the respondents

agrees with the statement.

56

STATEMENT IX: Downsizing Leads To Reductions In Quality And Defective Customer Services

TABLE 15


CumulativePercent


Agree 19 22.9 22.9 77.1

Disagree 10 12.0 12.0 89.2

Strongly Disagree

9 10.8 10.8 100.0

Total 83 100.0 100.0




disagreed with the statement that there is downsizing

leads to reductions in quality and defective customer

services.Thus, majority of the respondents strongly


STATEMENT X: Downsizing Reduces Organizations Spending

TABLE 16


CumulativePercent


Agree 8 9.6 9.6 32.5

Disagree 4 4.8 4.8 37.3

Strongly Disagree

52 62.7 62.7 100.0

Total 83 100.0 100.0

57




disagreed with the statement that there is downsizing

reduces organizations spending.Thus, majority of the

respondents strongly disagrees with the statement.

STATEMENT XI: Both Negative And Positive Social Consequences Results From Downsizing

TABLE 17


CumulativePercent


Agree 6 7.2 7.2 89.2

Disagree 5 6.0 6.0 95.2

Strongly Disagree

4 4.8 4.8 100.0

Total 83 100.0 100.0




disagreed with the statement that both negative and

positive social consequences results from

downsizing.Thus, majority of the respondents strongly

agrees with the statement

58

STATEMENT XII: Downsizing Affects The Profitability Of An Organization

TABLE 18


CumulativePercent

Valid Stronlgy Agree 55 66.3 66.3 66.3

Agree 9 10.8 10.8 77.1

Disagree 13 15.7 15.7 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0




disagreed with the statement thatdownsizing affects the

profitability of an organization.Thus, majority of the

respondents strongly agrees with the statement.

STATEMENT XIII: Level Of Organizational Competitiveness Increases After Downsizing

TABLE 19


CumulativePercent


Agree 31 37.3 37.3 44.6

Disagree 10 12.0 12.0 56.6

Strongly Disagree

36 43.4 43.4 100.0

Total 83 100.0 100.0

59


strongly agreed, 37.3% agreed, 12.0% of the respondents


disagreed with the statement that the level of

organizational competitiveness increases after

downsizing.Thus, majority of the respondents strongly

disagrees with the statement.

STATEMENT XIV: Technological Developments Have Effect On Increase Use Of Downsizing Exercises By Organizations

TABLE 20


CumulativePercent


Agree 46 55.4 55.4 62.7

Disagree 25 30.1 30.1 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0




disagreed with the statement that technological

development have effect on increase use of downsizing

exercises by organizations.Thus, majority of the

respondents agrees with the statement.

60

STATEMENT XV: Good Communication Coupled With Positive Reactions From Fellow Survivors’ Results In Better Job Performance Among Downsizing Survivors

TABLE 21


CumulativePercent


Agree 18 21.7 21.7 77.1

Disagree 13 15.7 15.7 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0




disagreed with the statement that good communication

coupled with positive reactions from fellow survivors’

results in better job performance among downsizing

survivors.Thus, majority of the respondents strongly


61

STATEMENT XVI: Downsizing Exercise Is Necessary If There Is Duplication Of Function In An Organization

TABLE 22


CumulativePercent


Agree 55 66.3 66.3 68.7

Disagree 22 26.5 26.5 95.2

Strongly Disagree

4 4.8 4.8 100.0

Total 83 100.0 100.0




disagreed with the statement that downsizing exercise is

necessary if there is duplication of function in an

organization.Thus, majority of the respondents agrees

with the statement.

STATEMENT XVII: The Survivors Perform Better After The Downsizing Exercise

TABLE 23


CumulativePercent


Agree 40 48.2 48.2 55.4

Disagree 27 32.5 32.5 88.0

Strongly Disagree

10 12.0 12.0 100.0

Total 83 100.0 100.0

62




disagreed with the statement that the survivors perform

better after the downsizing exercise.Thus, majority of

the respondents agrees with the statement.

STATEMENT XVII: Appraisal Improves The Performance Of Survivors Of Downsizing

TABLE 24


CumulativePercent


Agree 16 19.3 19.3 85.5

Disagree 10 12.0 12.0 97.6

Strongly Disagree

2 2.4 2.4 100.0

Total 83 100.0 100.0




disagreed with the statement that appraisal improves the

performance of survivors of downsizing.Thus, majority of

the respondents strongly agrees with the statement.

63

STATEMENT XIX: Organizations Resort To Downsizing In Order To Cope With Economic Pressures

TABLE 25


CumulativePercent


Agree 37 44.6 44.6 77.1

Disagree 13 15.7 15.7 92.8

Strongly Disagree

6 7.2 7.2 100.0

Total 83 100.0 100.0




disagreed with the statement thatorganizations resort to

downsizing in order to cope with economic

pressures.Thus, majority of the respondents agrees with

the statement.

STATEMENT XX: Merging Of Various Departments In An Organization Improves An Organizations Performance

TABLE 26


CumulativePercent


Agree 31 37.3 37.3 44.6

Disagree 27 32.5 32.5 77.1

Strongly Disagree

19 22.9 22.9 100.0

Total 83 100.0 100.0

64




disagreed with the statement that merging of various

departments in an organization improves an organizations

performance.Thus, majority of the respondents agrees

with the statement.

4.2 Test of Research Hypotheses

Having given a careful analysis of the responses

obtained from the respondents through questionnaires

administered, the hypotheses earlier formulated in the

first chapter of this project were tested and the

results are fully discussed below. In doing so, SPSS

version 17.0 specifically regression analysis is

employed, with a value of 0.05 (level of significance)

that corresponds to a 95% confidence level. Therefore,

all tables presented are SPSS analysis outputs.

Hypothesis I


organizations.


organizations.

65

Model Summary

Model R R SquareAdjusted RSquare

Std. Error ofthe Estimate

1 .292a .085 .076 .61511

a. Predictors: (Constant), Downsizingb. Dependent variable: Cost Cutting

The table displays R, R squared, adjusted R squared, and

the standard error R, the multiple correlation

coefficient, is the correlation between the observed and

predicted values of the dependent variables. The table

shows a positive relationship having R value of 0.292,

which means the independent variable, is related to cost

cutting. Downsizing has a significant effect on

profitability. The R squared has a value of 0.085 which

indicates that the model truly fit the data well as it

measures the proportion of variation in the dependent

variable as explained by the regression model.

Anovab

ModelSum ofSquares Df Mean Square F Sig.

1 Regression 3.448 1 3.448 9.114 .003a

Residual 37.079 98 .378

Total 40.528 99

a. Predictors: (Constant), Downsizingb. Dependent Variable: Cost Cutting

The table summarizes the result of the analysis of

variable. The sum of the squares, degree of freedom, and

the mean square are displayed for two sources of

66

variation, regression and residual. The output for

regression displays information about the variation

accounted for by the model. The independent variable did

a good job explaining the variation in the dependent

variable with a smaller value less than 0.05 (0.003).

Therefore, downsizing has a significant effect on cost

cutting for organizations.

Coefficientsa

Model

UnstandardizedCoefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) 1.677 .221 7.595 .000

Downsizing .303 .100 .292 3.019 .003

a. Dependent Variable: Cost Cutting

From the table above, the constant gave a value of 7.595

which is the intercept. Hence, establishing a positive

relationship since the intercept has positive value

while the row contains the name of the Independent

Variable which is slopes. That is, the variable is of

more importance in establishing a relationship between

the dependent variable. The t-value of this test is

found in the column labeled Sig. The value for the

Independent Variable is significant, this also explain

the establishment of a relationship between the

Independent Variable and the Dependent Variable. The67

independent variables had significant values of 0.003

which is lesser than the decision rule value of 0.05.

Therefore, there is significant relationship between

downsizing and cost cutting of an organization.

Hypothesis II



profitability.



profitability.

Model Summary



1 .023a .001 -.010 .39257

a. Predictors: (Constant), Downsizingb. Dependent variable: Organizations’

profitability





shows a negative relationship having R value of 0.023,

which means the independent variable, is related to

organizations’ profitability. Downsizing affects

organizations’ profitability. The R squared has a value

68

of 0.001 which doesindicates that the model truly fit

the data well as it measures the proportion of variation

in the dependent variable as explained by the regression

model.

Anovab


1 Regression .008 1 .008 .054 .817a

Residual 15.103 98 .154

Total 15.111 99

a. Predictors: (Constant), Downsizingb. Dependent Variable: Organizations' Profitability

The table summarizes the result of the analysis of







variable with a smaller value higher than 0.05 (0.817).

Therefore, downsizing does not have a significant effect

on organizations’ productivity.

69

Coefficientsa

Model


Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) 2.431 .141 17.259 .000

Downsizing -.015 .064 -.023 -.233 .817

a. Dependent Variable: Organizations' Profitability

From the table above, the constantgave a value of 17.259



while the row contains the name of the Independent

Variable. That is the variable is of more importance in

establishing a relationship between the dependent

variable. The t-value of this test is found in the

column labeled Sig. The value for the Independent

Variable is significant, this also explain the

establishment of a relationship between the Independent

Variable and the Dependent Variable. The independent

variable had significant values of 0.000 which is lesser

than the decision rule value of 0.05. Therefore, there

is significant relationship between downsizing and

organizations’ profitability.

Hypothesis III



70

HI: There is significant difference between


Model Summary



1 .361a .131 .122 .89295

a. Predictors: (Constant), Downsizingb. Dependent Variable: organizations

productivity.





shows a positive relationship having R value of 0.361,

which means the independent variable, is related to

organizations’ productivity. Downsizing affects

organizations’ profitability. The R squared has a value

of 0.131 which indicates that the model truly fit the

data well as it measures the proportion of variation in

the dependent variable as explained by the regression

model.

71

Anovab


1 Regression 11.738 1 11.738 14.721 .000a

Residual 78.141 98 .797

Total 89.879 99

a. Predictors: (Constant), Downsizingb. Dependent Variable: Organizations' ProductivityThe table summarizes the result of the analysis of







variable with a smaller value less than 0.05 (0.000).

Therefore, downsizing has a significant effect on

organizations’ productivity.

Coefficientsa

Model


StandardizedCoefficients

T Sig.B Std. Error Beta

1 (Constant) .642 .320 2.005 .048

Downsizing .559 .146 .361 3.837 .000

a. Dependent Variable: Organizations' Productivity

From the table above, the constantgave a value of 2.005



while the row contains the name of the Independent72

Variable which it slopes. That is the variable is of

more importance in establishing a relationship between

the dependent variable. The t-value of this test is

found in the column labeled Sig. The value for the

Independent Variable is significant; this also explains

the establishment of a relationship between the

Independent Variable and the Dependent Variable. The

independent variable had significant values of 0.000 and

0.048 which is lesser than the decision rule value of

0.05. Therefore, there is significant relationship

between downsizing and organizations’ productivity.

4.3 Discussion of Findings

Based on the analysis stated above, it can be

generalized that downsizing could lead to cost cutting

for organizations, it can be said that downsizing has

significant effects on organizational performance and

increase organizational productivity. It could be

deduced here that downsizing can advantageous to the

organization if properly managed.

73

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This study investigates the influence of employee

downsizing on job performance, using Airtel Nigeria as

case study. The data collected in the course of this

research tends to see the effects of employee downsizing

74

on an organizations’ performance. Downsizing refers to

the process through which organizations focus their

actions in order to achieve a more efficient and

effective use of their resources.

By way of testing, a set of hypotheses were developed,

and data were collected principally from the

questionnaires distributed and these have been tested

for significance in respect of our proposition.

5.1 Summary of Findings

Restructuring activities may be brought about either

internally or externally, depending on management’s

preferences and organizational characteristics. This

study investigated the influence of organization

downsizing on job performance.The evidence suggests,

however, that downsizing does not typically result in

subsequent improvements in organizational performance.

In general, the evidence suggests that downsizing

decisions, whether triggered by changing environmental

circumstances or by internal reorganization, reflect

strategic choices made by managers. Some firms downsize

even as their markets expand; others respond to market

declines without undertaking job cuts. However, the

general consensus among researchers over the past two

decades is that organizational performance is likely to

suffer as it is to improve after downsizing, even in the

75

short term, and that the long-term prospects associated

with downsizing are oftennegative when compared to

alternatives such as targeting growth (Cascio, 2000).

A number of studies find that downsizing announcements

have a negative effect on subsequent stock price(Abowd,

et al 2001). It has been shown that, on average,

downsizing does not yield financial payoffs in the long

term.Some observers suggest that the continued

popularity of downsizing despite its ineffectiveness is

evidence of its institutionalization as a strategic

approach (McKinley, Zhao, and Rust, 2000).Reports of

average performance effects, however, mask variation in

success in carrying out downsizing across organizations,

for example, reported results from a survey suggesting

that while one-third of downsizing organizations

experienced subsequent productivity improvements,

another one-third reported that their post-downsizing

productivity actually worsened. AsT. D Jick, (2003)

argued, the factors that distinguish successful from

unsuccessful downsizing require further investigation.

5.2 Conclusion

This study argues that convergent downsizing will have a

negative effect on organization performance. Conversely,

reorientation downsizing, it s argued, will have a

positive effect on a market orientation. The study also

76

argues that the variables of trust and commitment are

central to understanding the dynamics of the downsizing

strategies. Given that downsizing is expected to

continue, and that organizations face the challenges of

increasing their market orientation, this study

encourages empirical research that will test the above

propositions. Furthermore, the study enhances

organization understanding on downsizing activities, the

advantages and disadvantages on downsizing activities in

the macro economy. Finally, the study gives corporate

strategy on downsizing method.

5.3 Recommendation

Consequently upon these findings, the following

recommendations are put forward:

1.Downsizing should be done in a normal and appropriate

way in order not to affect the organizational

performance

2.Retrenchment of workers should be adequately looked at

in order not to spoil the image of the organization.

3.Downsizing should be considered not as the first but

the last option.

77

4.Downsizing organization should be informed with

adequate information about the economic situation and

consequence of downsizing.

5.4 Suggestions for Further Research

Further research on the Impacts of Employee Downsizing

on Organization Performance will serve to further refine

the relationships as presented, or add data sufficient

to assess those variables not usable in this meta

analysis.

In addition, further studies may identify new variables

not currently identified as potentially relevant to

downsizing. This research found minimal data that

address impact of downsizing over time; additional

longitudinal research studies would help to enlighten

this area of interest. Research that standardizes

downsizing definitions and terminology will help to make

more studies adaptable for use in the meta-analysis

method. Further research that includes the

implementation of independent studies of the effects of

downsizing on survivors in the public sector would aid

in a more definitive comparison between public and non-

public sector studies.

78

Lagos State University, Ojo,

Faculty of Management Science,

Department of Business

Administration

and Management Technology,

Business Administration Unit.

Dear Respondent,

QUESTIONNAIRE

I am a final year student of the above named university. I

am carrying out a research on the Impact of Employee

Downsizing on Organizational Performance(A case study of

AirtelNigeria) your response will be of great help.

I will be very grateful if you participate in this

research by completing this questionnaire. I promise to

keep all information supplied to me with strict

confidentiality.

Thanks for sparing me some of your valuable time.

Yours faithfully,

YESU MAUSI ENOCH

090821233

79

SECTION A

PERSONAL BIO DATAInstructions: - Please tick your responses in the

appropriate space provided.

1.Sex: (a) Male ( ) (b) Female ( ).

2.Marital status: Single ( ) Married ( ) Divorces

( ).

3.Age: Under 20 yrs ( ) 21 – 30yrs ( ) 31 – 40yrs

( ) 41 – above ( ).

4.Educational Qualification:

a)O level ( )

b)ND/NCE ( )

c)HND/B.sc/B.A ( )

d)MBA/M.sc/M.A ( )

5.Working Experience:

a)Below 5yrs ( )

b)5 – 10yrs ( )

c)11 – 15ys ( )

80

6.Employment Status:

a)Top level Management ( )

b)Middle Level Management ( )

c)Junior Staff ( )

SECTION BPlease tick where appropriate in the table belowSA – Strongly AgreeA – AgreeD – DisagreeSD – Strongly Disagree

S/N STATEMENT SA A D SD1. Downsizing is essential in the

achievement of organizational goals.2. Downsizing is changing the way business

organizations operate.3. Downsizing has impacts on the

performance of organizations.4. Service quality plays a significant

role in the acceptability of services.5. Downsizing improves organization’s

efficiency and effectiveness.6. Downsizing approaches have employment

implications. 7. Promotions are based primarily on

81

performance.8. There is significant difference between

downsizing and subsequent problems in the organization.

9. Downsizing leads to reduction in quality and defective customer service.

10. Downsizing reduces organizations spending.

11. Both negative and positive social consequences results from downsizing.

12. Downsizing affects the profitability ofan organization.

13. Level of organizational competitivenessincreases after downsizing.

14. Technological developments have effect on increase use of downsizing exercisesby organizations.

15.

16.

Good communication coupled with positive reactions from fellow survivors’ results in better job performance among downsizing survivors.Downsizing exercise is necessary if there is duplication of function in an organization.

17. The survivors perform better after the downsizing exercise.

18. Appraisal improves the performance of survivors of downsizing.

19. Organizations resort to downsizing in order to cope with economic pressures.

20. Merging of various departments in an organization improves an organizations performance.

82

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