R’ships after Downsizing

ORGANIZATIONAL VIRTUES AND ORGANIZATIONAL PERFORMANCE:
RELATIONSHIPS AFTER DOWNSIZING
Kim Cameron
University of Michigan
A Presentation for the Conference on Positive Organizational Scholarship
5-7 December 2001
Ann Arbor, Michigan
THE PREVALENCE OF DOWNSIZING
BEFORE 911
Almost all medium and large firms downsized in the last five years.


More than 90 percent of firms downsized in the last five years. A large majority downsized more than once in the last ten years.

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Downsizing is not a one-time action.


Approximately 62 percent of firms that downsized two years ago downsized again last year.


Downsizing is not motivated solely by bad economic news.


Only 37 percent of firms downsized last year because of economic difficulties compared to 71 percent at the beginning of the 1990s. Only five percent downsized because of decreased market demand.


In one third of all U.S. households, a family member lost a job.


Nearly three quarters of all U.S. households had a close encounter with layoffs in the last decade.


AFTER 911
The number of layoffs has equaled the total of all previously announced layoffs for the year. 416,000 lost jobs in September alone.

RESULTS OF DOWNSIZING IN AMERICA
Fewer than half the companies that downsized between 1990 and 2000 had short or long-term profit increases.


Fewer than a quarter reported increases in employee productivity, product and service quality, and shareholder value.


Three years after downsizing, the market share prices of downsized companies were an average of 26 percent below the share prices of their competitors.


Among companies that downsized, those that laid off the fewest workers exhibited the largest return on assets.


Almost all organizations that downsizedin the public sector and the private sectorexperienced an emergence of the dirty dozen as a result of downsizing.


THE DIRTY DOZEN
Universal Consequences of Downsizing, Trauma, Crisis
Centralization
The Threat-Rigidity Response
Loss of Innovativeness
Decreasing Morale
Politicized Environment
Loss of Trust
Increased Conflict
Restricted Communication
Lack of Teamwork
Loss of Loyalty
Scapegoating Leaders Leadership Anemia
Short-term Perspective Resistance to Change
THE ABUNDANCE HYPOTHESIS
A decade of downsizing research led to the supposition that organizations characterized by virtuous behavior would predict superior performance after downsizing. Impressionistic data led to the presumption that indicators of performance such as employee satisfaction, productivity, quality, organizational innovation, and shareholder value would increase over timeand the dirty dozen would decreasein organizations that fostered and facilitated the demonstration of organizational virtues.


In fact, a few firms were observed that displayed positive deviance, that is, an affirmative exception to usual organizational behavior. They possessed characteristics that seemed to foster extraordinary value, remarkable performance, and high levels of excellence. Especially on the human dimension, they engendered virtuousness in relationships and in treatment of people. When they downsized they did so with caring and compassion. When they recovered from crises they did so with maturity and wisdom. When they set strategy they tended to do good as well as do well. They were unusual in demonstrating a capability that led to long term success, even in the face of difficulty.


THE ROLE OF
VIRTUOUS ORGANIZATIONAL BEHAVIOR
Long-term
+Effectiveness
Organizational -Virtuous+Commitment,
Trauma (e.g.,OrganizationalLoyalty,
downsizing)BehaviorRetention
-Short-term
Effectiveness
WHAT DO WE MEAN BY VIRTUES?
The Relationships Between Virtues and Extraordinary Performance
PERSONAL
Physical HealthIllness HealthFitness
Mental HealthAbnormal NormalThriving
| | |
ORGANIZATIONAL VIRTUES
EffectivenessIneffectiveEffectiveExcellent
EfficiencyInefficient/FaultyEfficient/ReliableFlawless/Perfect
Crises ChaosCopingFlourishing
RelationshipsHarmfulHelpfulLoving
CommunicationSecretiveHonest and OpenHonoring
EthicsUnethicalEthicalGoodness
RecoveryPunishmentToleranceRenewal
Injury and Harm RetributionJusticeForgiveness
SOME FUNCTIONS OF ORGANIZATIONAL VIRTUES
Organizational virtues create meaning, vision, and human connection (e.g., they create clarity amidst uncertainty).


Organizational virtues build the foundation upon which alliances and productive relationships are formedboth individual and organizational (e.g., they foster well-developed social capital).


Organizational virtues foster attachments to the organization (e.g., they foster loyalty and trust).
Organizational virtues promote improved psychological and physical performance (e.g., they foster positive biological and mental responses).
Organizational virtues help organizations heal and move past trauma, such as downsizing (e.g., they foster improved organizational effectiveness over time).


SURVEY OF VIRTUES IN ORGANIZATIONS
Companies included in the preliminary analyses:
CH2MHill
Cooper Lighting
Dana Corporation
Dix and Eaton
General Electric Power Systems
Heidrick and Struggles
Invacare
Jo-Ann Stores
National City Bank
OfficeMax
Oglebay Norton
Thompson Hine
University of Michigan
YMCA
Roadway
Finistar
Data being gathered from addition firms:
Approximately 50 firms, mainly manufacturing organizations, studied 10 years ago in a study of organizational downsizing.


PRELIMINARY ANALYSES OF SURVEYS
DISCRIMINANT ANALYSES
Above Average Performance versus Below Average Performance
(Correlations with discriminant function)
12345678
Compassion and Caring781673668723909671835934
Overall Virtuousness6835686205637808107469441 = Overall Performance
2 = Productivity
Hope and Optimism7085295456037588736669203 = Quality
4 = Profitability
Integrity7225164547217325637158315 = Customer Retention
6 = Innovation
Forgiveness5052882745036785798375647 = Employee Turnover
8 = Employee Complaints
Humility436259300363551683771444
Centroid Below Average-382-417-421-451-417-217+517+481
Centroid Above Average417240308348329201-287-188
Classification100%100%100%100%100%100%100%100%
CONCLUSION: Organizations performing above the average demonstrate significantly more virtuousness than organizations that perform below the average.


PRELIMINARY ANALYSES OF SURVEYS
MULTIPLE REGRESSION ANALYSES
Major Predictors of Organizational Outcomes
(Significant regression weights)
12345678
Compassion and Caring.21*
Overall Virtuousness.18*.23*1 = Overall Performance
2 = Productivity
Hope and Optimism.35***.18*.20*.17*3 = Quality
4 = Profitability
Integrity.23**.21**.32***(-.18)(-.18)5 = Customer Retention
6 = Innovation
Forgiveness-.24**-.19*7 = Employee Turnover
8 = Employee Complaints
Humility.25***.27**
ANOVA F105.818.930.49.422.725.16.58.9
(all significant at .10
CONCLUSION: Different virtues tend to predict different outcomes. Hope and optimism predicts 4 outcomes. Integrity predicts 3 outcomes. Forgiveness, humility, and virtuousness predict 2 outcomes. Compassion and caring predicts 1 outcome.


(VERY) PRELIMINARY FINDINGS
Certain organizational virtues are predictive of high levels of organizational effectiveness, especially after the organization has encountered a trauma such as downsizing.


Organizational virtuousness and the dirty dozen are significantly and negatively related.
No virtues significantly predict employee turnover or employee grievances and complaints (although taken as a set of virtues, virtuousness is predictive of both factors).


Puzzle: General organizational forgiveness tends to be negatively associated with quality and with customer retention.
SOME KEY RESEARCH ISSUES
Virtues are considered to be intra-psychic and relevant only to individuals, not organizations or collectivities.


It is difficult to recognize virtues when they are demonstrated in organizations, consequently, it is difficult to measure them.
Virtues, by definition, represent inherent goodness. Consequently, to assess virtues empirically and endeavor to establish their relevance in organizations by associating them with an instrumental outcome is self-contradictory. That is, if no evidence emerges that instrumental outcomes are enhanced, the desirability of organizational virtues remains.
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