Date of Award

5-1-2013

Degree Name

Doctor of Philosophy

Department

Business Administration

First Advisor

Mykytyn, Peter

Abstract

Organizational downsizing, defined as a reduction in workforce, is a common strategy implemented by firms for the purpose of improving an organization's efficiency, work processes, or cost structure. However, previous research has shown that downsizing seldom generates positive results at a macro or micro level. It has been demonstrated that downsizing has a negative impact on financial performance, such as Return on Assets, Return on Investments, and profits in the long-term. Downsizing also has a negative impact on the remaining workers left employed, referred to as the "survivors". Survivors typically respond to downsizing by exhibiting negative attitudes and behaviors such as: decreasing employee morale, commitment, motivation, loyalty, work effort, and trust. Trust, in particular, has been shown to be critical component in survivors' responses to downsizing and is decreased through perceived violations of psychological contracts of employment and perceptions of organizational injustice. However, there is little understanding about how downsizing impacts survivors' collective trust in the long-term. The purpose of this dissertation was to examine how downsizing affects collective trust over time using a Latent Growth Curve Analysis (LCA). LCA allowed us to determine the trajectory of collective trust when downsizing occurs which we found to be nonlinear with diminishing returns. We found collective trust initially decreases in time period two but shows a slight rebound in the subsequent time. This suggests that the levels of collective trust decrease as a result of downsizing. We also found that organizational variables such as the severity of downsizing, voluntary turnover, and CEO pay moderate the relationship between downsizing and collective trust by magnifying the negative relationship between downsizing and collective trust. We also found that CEO tenure moderates the relationship between downsizing and collective trust by suppressing the negative relationship between downsizing and collective trust. Together, the theory and empirical results provide insight into the impact of downsizing on the survivors, ways to mitigate the negative consequences of downsizing, and uncover opportunities for extending management theory.

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