The Psychological Effects of Downsizing and Privatisation

...Early research in this area concentrated on individuals having to cope with unexpected job loss and the effects of long term unemployment. Studies began by looking at the effects of involuntary job losses and the effects on the unemployed (see, for example, the work conducted by DeFrank and Ivancevich, 1986; Leana and Ivancevich, 1987; Leana and Feldman, 1994). These studies indicated that there were emotional, physical, social and psychological effects on the individual. Further research looked at the effects of employee turnover on the individual and the effects of turnover on those remaining employed after redundancy programs had been implemented (see Mowday, 1981; Brockner & Kim, 1993). This literature provided some insight into survivor reactions to redundancy, whereby survivors may evaluate the effects on those made redundant and how that influences their own reactions...

Empirical evidence (e.g. Greenhalgh, 1983; Armstrongstassen, 1993a) suggests that the post layoff environment can be stressful for a number of reasons: survivors are worried about their own job security, there may be anger associated with the process by which the redundancy program has been implemented and there may be concerns about the creation of heavier workloads due to the reduction of manpower. Brockner (1988) suggests that the onset of stress typically leads to changes in survivors’ work attitudes and behaviors such as reduced organizational commitment, job satisfaction and increased turnover intention. Several articles identified emotional responses in survivors such as guilt, betrayal and isolation (e.g. Machlowitz, 1983). These employee reactions were compared to survivors of other distressing events, such as natural and man made disasters. Brockner et al. (1985) undertook a study directly related to layoffs, or rather designed to simulate a ‘layoff’ situation in a laboratory study using students who were required to complete a proof reading task. The students were then subjected to a ‘layoff’ and were subsequently asked to complete a questionnaire to investigate how they had felt and whether or not they felt the process had been fair. The results found, in support of equity theory, that following layoffs ‘survivors’ experienced increased feelings of remorse and negative attitudes towards co-workers (in order to redress the balance of inequity). Secondly, the study revealed that those who perceived there to be an injustice produced less in their second proof reading task simultaneously suggesting that layoffs have the potential (negatively) to influence productivity...

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