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LITERATURE REVIEW

ABSTRACT

The economic recession that hit the world in 2007 resulted in global downsizing in many prestige organizations and its effects of workers productivity. This literature reviews focuses on affective organizational commitment among survivors of organizational restructuring and downsizing. It focused on middle level managers and employees in supervisory positions because survivors of this group are often called upon to assume expanded roles, functions and responsibilities in a post restructuring and downsizing environment. This paper also explores the impact of recession for those still in employment by looking at a key indicator of employee wellbeing, work pressure staff reductions and company reorganization both increase work pressure, as does current job insecurity. Other job changes, like large pay cuts, increases in responsibility, autonomy and monitoring also increase work pressure.

Keywords: Recession, downsizing, layoffs, economic downturns, organizational behavior, commitment, motivation, loss and grief, leaders, employees, stakeholders.

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INTRODUCTION The great recession of 2007 started on the month of December. National Bureau of Economic Research (NBER), the prestigious private research institute declared it officially. The government of US acknowledged the NBER's declaration, aware of the downfall since August 2007; the White House did not change its course on coping with the financial crisis. This was the third longest since The Great Depression. The Great recession in the US damaged greatly in 2007 since the 1930s.     At least 8 million jobs were lost $10 trillion dollars of wealth lost in US Closure of hundreds of banks According to RealityTrac. Inc., the Great Recession caused 2.5 million homes to be foreclosed on with millions more having foreclosure filings and by 2009, 1 in 45 homes were in default. (Montana, 2009) The sudden impact of economy downfall changed how organization behaved and impacted on people‟s lives, work and lead to grief in workplace. The change in economic prosperities in this topic grabs attention on issues such as the effects of unemployment in an organization‟s behavior and yet the implications of recession also extend to those who remain in employment and how does it affect them. The sociological literature suggests that insecurity can undermine working conditions, while organizational change, financial pressures, budget cuts and reductions in staff numbers all bring potential changes to the conditions of employment and the well-being of workers. In this paper we examine changes in organizational behavior and work pressure among workers based on resources from different articles and journals listed in the reference section below. The literature review will focus on effects of recession and its consequential effect of grievances, depression and loss on the organization. Employees and leader‟s behavior during and after recession and its impacts on different workplace. Motivational effects and health effects shall also be discussed.

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Literature Review

Recession has been defined in the marketing literature as a "process of decreasing demand for raw materials, products and services, including labor" (Shama 1978) or as a "state in which the demand for a product is less than its former level" (Kotler 1973). The global economic crisis has brought to the forefront of organizations the concepts of viability and survival which at these times can be desperate pursuit. There are three main reactions in organizations, namely the corporate reactions in organizations, namely the corporate reaction to remain viable, the employee reaction to survive the turbulence, and the human resources reaction (including recruiting and hiring talent, corporate organization, training and institutional learning)”. (Kathleen Patterson & Gray Oster, 2008). Several decades of research has considered the impact of job characteristics for people‟s experience of work and their well-being (Kalleberg, 1983; Crompton et al, 1996; Gallie, 2007). Research has focused on the impact of a range of job characteristics including skill and skill change (Capelli et al., 1997), job control, or the amount of decision-making an individual has about aspects of their job (Gallie et al, 1998), job insecurity (Burchell et al., 2002; Scherer, 2009) and flexible work arrangements (Russell et al., 2009a) . Literature on high performance workplace strategies has also looked at the impact on employee well-being (Appelbaum et al, 2000). Well-being is most commonly measured as job satisfaction, organizational commitment, work-family conflict or work pressure. Work pressure has important implications for employees‟ physical and mental well-being. It is associated with a wide range of psychological distress measures and physical health problems such as stomach problems and sleep difficulties (Wichert, 2002; Fairris and Brenner, 2001). Higher levels of work intensity have been found to lead to substantial reductions in employee well-being, as measured by job satisfaction and by indices of affective well-being (Warr, 1987). The effects of work pressure can also spill over to home life leading to negative outcomes for workers‟ families: previous research has found that work pressure is strongly linked to work to family conflict (Gallie and Russell, 2009; McGinnity and Calvert, 2009). Conversely, reduced pressure has potential benefits for employers through reduced absenteeism and increased organizational commitment (Burchell et al., 2002). Finally, as we are interested in recessionary effects, it might be argued that work pressure is more closely linked to current market conditions than other outcomes such as job
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satisfaction. Capturing the impact of the recession on work pressure can potentially highlight the wider implications of the economic downturn, for those who still have jobs. Work pressure is not simply a measure of the demands of work but also encompasses individuals‟ capacity to meet these demands, which will be influenced by their skills and capabilities (Gallie, 2005). Work pressure therefore measures people‟s experience of difficulty meeting work demands. This difficulty may arise because of physical, psychological or time demands i.e. the feeling that one does not have enough time to complete work tasks within contracted work hours. Work pressure is also closely related to job-stress which is “a cognitive or emotional experience that stems from an imbalance between job-related environmental challenges and the personal resources available.” (Rennesund & Saksvik, 2010: 632). A significant body of sociological research has examined the impact of changes in the nature of work on the work pressure experienced by employees. One important strand in the literature is how shifts in work pressure are associated changing skill requirements and technological change (Gallie, 2005; Green, 2004). It has also been argued that increases in work pressure are associated with changing management strategies and human resource practices that devolve responsibility and decision-making to the employee (McGovern et al, 2008) Other explanations for the increase in work pressure lay greater emphasis on market forces, for example rising job insecurity, organizational restructuring and reductions in staff numbers. On insecurity Green (2004) notes: “If workers perceive a finite risk of job loss, they might devote above-the-norm effort levels either to help support their employers‟ business or to move themselves toward the back of the redundancy queue. Workers with temporary job contracts, which by their nature are especially insecure, might devote extra effort if their wish is to be reemployed in subsequent periods.” (Green 2004: 720). For individual workers, redundancy not only effects current and future income but also challenges the person‟s general self-esteem, which is closely linked with job status and overall well-being (Burke & Cooper, 2000). As Latack et al. (1995) noted, “The impact of job loss is generally detrimental to individuals by virtually any criteria a researcher chooser to examine” (p.312). Negative outcomes of job loss and subsequent unemployment have been well documented in the article (Vickers, Margaret, 2010). Vickers and Margaret have investigated and surveyed the impact of redundancy (or the threat of redundancy) on three categories of people: experiences of „survivors‟ those employees who survived job loss, „executioners‟ the
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executives who are solely responsible for deciding who to fire in some cases due to conflict of interest and in some to cut cost and the experiences of a „victim‟ the ones who get terminated (Vickers, Margaret, 2010). Interestingly, the ultimate consequences of job layoffs for organizational productivity and effectiveness are far from clear-cut. Although managers and decision makers tend to subscribe to the view that making the organization “lean and mean” is essential to maintain competitiveness in today‟s economic climate, evidence suggests that downsizing can have both positive and negative influences on the bottom line (Sandler, 2009). For example, Cole (1993) noted that downsizing may result in a loss of organizational “memory” and sharing of knowledge across departments and organizational levels, disruption of routines that have built up over time and that ensure that the organizational functions smoothly, and even a decline in personal relationship between employees and customers. Article of Kodak workers (Patti, 2012) observed negative outcomes such as increased interpersonal conflict (perhaps due to conflict between coworkers to retain their jobs) and resistance to change among employees, along with reduced employee morale and organizational commitment, factors that may contribute (negatively) to job performance, health, grief and stress at work. Immense competition and continuous increase in cost of production is leading organizations toward downsizing, layoffs and restructuring as a result employees have to do a lot of work as compare to before as additional workload is added to their responsibilities. (Hellgren & Sverke, 2001). Also a shift towards service economy has increased work flexibility which caused in increased work pressure and workload (Burchell et al., 1999). So a transformation in work environment is observed. How employees perceive their work environment can affect employee's commitment, motivation, and performance and also helps organization to form a competitive edge over its rivals (Brown & Leigh, 1996). The view point of employee regarding the work environment and its importance is called as psychological work climate (James, Hater, Gent, & Bruni, 1978). The effect of individual's perception or work is for both, the organization and individual himself. Individual attitudes such as job satisfaction and organizational attitudes such as organizational commitment are dependent upon individual's psychological climate experience and perception of work. Research also support that psychological climate experiences have both long term and short term effects, in the long term it can cause stress and health problems while in the short term it can influence layoffs and work activities (Hellgren & Sverke, 2001). It is supported by
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research that a motivational and empowered work climate can influence employee's attitudes toward work positively and can improve work performance (Brown & Leigh, 1996). It was reported that specific work activities also creates boredom at work and can cause lack of motivation for the employees. (Dessler, 2005). Job enlargement is defined as "Assigning workers additional same level activities, thus increasing the number of activities they perform"(Dessler, 2005, p.138). An important determinant of employee's behavior at work is job enlargement, so there is a need of research regarding job enlargement and its relationship with motivation, organizational commitment and job satisfaction (Morrison, 1994). Today to accommodate a business need job enlargement is used to enhance employee's scope and workload. That need can be to increase skills of handling new customer or it can be an industry requirement, or to offset lack of resources due to lack of hiring or high turnover (Hellgren & Sverke, 2001). The employee may perceive this role enhancement as positive enforcement in start but if this added workload is not accompanied with any reward then the employee mere gain more responsibility and work and consider the work as fatigue and workload (Dessler, 2005). It was argued that that job enlargement is related to the fulfillment of lower order needs of Maslow's theory Therefore job enlargement leads to job satisfaction (Chung & Ross, 1977). Job enlargement lead to decrease in social interaction and increase in work load therefore decrease motivation, job satisfaction and commitment of the employees (Donaldson, 1975). Work environment plays a key role in developing employees‟ attitudes and behaviors. Motivation is also dependent upon work environment and other processes. Luthan (1998) defines motivation as, “a process that starts with a physiological deficiency or need that activates behavior or a drive that is aimed at a goal incentive”. So it is important to understand the relationship between needs, drives, and incentives to understand the process of motivation. Motivation is the result of psychological processes that lead to goal oriented and effective efforts of the individuals (Mitchell, 1982). Job satisfaction is a state of pleasure that could be gained by implementing one‟s values to a job (Locke, 1969). Job satisfaction “can be considered as a global feeling about the job or as a related constellation of attitudes about various aspects or facets of the job.” (Spector, 1997, p. 2). It is suggested that job satisfaction occurs when changing individual needs match unchanged and specific characteristics of the job (Salancik & Pfeffer, 1977). Dissatisfied employees have negative workplace behaviors such as low performance, high absenteeism, high turnover, and decreased productivity (Koys,
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2001). Organizational commitment can be simply defined as the attachment or bonding that individuals form to their employing organizations (Ketchand & Strawser, 2001). Job satisfaction is recognized as a part of organizational commitment (Kovach, 1977). Job satisfaction is a significant predictor of organizational commitment (LaLopa‟ 1997). Job satisfaction is an attitude toward work related situations, features, or aspects of the job. (Wiener, 1982). Consequently, commitment proposes more of an attachment to the employing firm as opposed to specific tasks, environmental factors, general atmosphere, and the location of the job to be performed (Mowday, et al., 1982). Current employees generally points to potentially negative impacts of downsizing on performance, while generally suggesting that providing high levels of assistance, participation, and communication can mitigate these effects (Margolis, 2009) Research on employees who remain after downsizing suggests a number of potential responses may occur beyond the loss of human and social capital. The evaluations of injustice, job insecurity, and distrust among remaining employees are hypothesized to relate to a number of outcomes, including changes in employee health; motivation and effort; aggression or sabotage; and decision making and innovation. In sum, these changes relate to the job performance of the remaining workforce. A large quantity of research suggests that job insecurity and reductions in force result in psychological difficulties including depression (Grunberg et al., 2001), burnout (Dekker & Schaufeli, 1995; Orpen, 1993), and poor quality of sleep (Mattiasson, Lindgarde, Nilsson & Theorell, 1990). Employees in more insecure workplaces are also more likely to report somatic health complaints (Ferrie et al., 2001), as well as increases in physical measures related to stress such as elevated blood pressure and serum cholesterol levels. Such psychological and somatic health problems can lead to increases in lost work. Indeed, employees in insecure employment take more medically certified sick leave. One paradox related to downsizing is the mixed effect on motivation and effort. Research suggests that motivation could be damaged by harsh layoffs due to perceptions of inequity and procedural injustice, while job insecurity may increase stress levels, reduce concentration, induce job search, and increase illness. However, if harsh layoffs lead employees to have some anxiety about maintaining employment, it is possible that employees will increase their effort to ensure that they are not laid off as well. In other words, employees may perceive an organization that downsizes harshly in a negative light, but fear of “being next out the door” may induce them to
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work harder (Grunberg et al., 2000). Another possibility is that downsizing and layoffs are sometimes encouraged by shareholders to discipline employees who are acting against the organization‟s interests. According to this theory, employees exert greater effort when the threat of downsizing exists because those who are laid off will have their reputation significantly damaged, and will have to go through a period of unemployment before finding suitable work (Stiglitz, 1984). 1
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Conclusion With a deep recession that swept across the globe, most of the organizations were feverishly executing cost cutting exercise, to maintain profitability and competitiveness. In spite of recession or boom, talent shortage will continue to haunt the corporate world. A long term strategy should be devised to maintain both internal and external reputation through intelligent strengthening of the value proposition being offered to current and potential employees. A balanced approach in improving the productivity level to counter the negative impact of downturn shall maintain the morale of existing employees, thereby reducing the outflow of valuable contributor which is an unavoidable element of any downsizing exercise. Retention and induction of right talent is a continuous process throughout the business cycle consisting of both boom and recession.

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