How Are Employees at Different Levels Affected by Privatization? A Longitudinal Study of Two Swedish Hospitals

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45
The
British
Psychological
Journal of Occupational and Organizational Psychology (2009), 82, 45–65
q 2009 The British Psychological Society
Society
www.bpsjournals.co.uk
How are employees at different levels affected by

privatization? A longitudinal study of two Swedish
hospitals
Helena Falkenberg1*, Katharina Näswall1, Magnus Sverke1

and Anders Sjöberg2
1
Department of Psychology, Stockholm University, Stockholm, Sweden
2
Assessio, Stockholm, Sweden
Despite the amount of privatizations around the world in recent decades, only limited
research attention has been paid to how privatization affects the employees. The effects
are likely to vary depending on the individual’s position in the organization. The aim of
this study was to investigate how employees’ work-related attitudes and strain changed
after privatization of a Swedish acute care hospital, and to analyze whether the effects of
privatization differed between employees at various hierarchic levels. Questionnaire
data collected at a hospital 1 year before and 2 years after privatization, as well as at a
hospital which remained a public administration unit, suggest only limited effects of
privatization on a general level, but that employees at various hierarchic levels may be
affected differently. While employees at a high level (physicians) and low level (assistant
nurses) reported only marginal differences over time in work attitudes and strain, also
in comparison with their colleagues at the comparison hospital, work attitudes of
employees at the intermediate level (registered nurses) decreased after privatization.
These results emphasize the importance of taking hierarchic level into account when a
privatization is implemented and analyzed.
Privatizations have been carried out all across the world in recent decades, and the
increased influence of market forces has been described as one of the most profound
changes to have taken place in modern working life (Burke & Cooper, 2000). While a
bulk of research has focused on the economic consequences of privatization, by
examining aspects such as company performance and investor returns (see Megginson
& Netter, 2001), there has been a lack of research about the psychological and health-
related consequences of this kind of change on employees.
Theoretical papers (Burke & Cooper, 2000; Callan, 1993; Shaw, Fields, Thacker, &
Fisher, 1993) as well as empirical studies (Ashford, 1988; Ferrie, Shipley, Marmot,
* Correspondence should be addressed to Helena Falkenberg, Department of Psychology, Stockholm University, Stockholm
SE-106 91, Sweden (e-mail: hfg@psychology.su.se).
DOI:10.1348/096317908X289990
46 Helena Falkenberg et al.
Stansfeld, & Smith, 1995; Swanson & Power, 2001) point out that uncertainty tends to
increase for employees during organizational change, and that such uncertainty is
related to stress that can bring about a number of negative consequences, including
deteriorated health and decreased job satisfaction. It has been suggested that
privatization is no exception from other types of organizational change in this respect
(Nelson, Cooper, & Jackson, 1995). However, since employees at different levels have
different resources to handle uncertainty associated with change, it has been suggested
that organizational change can affect employees at different levels in various ways
(Martin, Jones, & Callan, 2006). For a better understanding of the consequences of
organizational change, earlier studies have recommended researchers to take
occupational groups into account (Armstrong-Stassen, 1998; Swanson & Power, 2001;
Väänänen, Pahkin, Kalimo, & Buunk, 2004).
There are only a few studies focusing on privatizations from the employees’
perspective (Egan, Petticrew, Ogilvie, Hamilton, & Drever, 2007), and the few that do
have so far produced ambiguous results. The variation in results may be due to most
studies on privatization failing to take group differences into account, even though there
are exceptions (e.g. Nelson et al., 1995). Moreover, studies of privatization have
typically not included a comparison organization (Struwig & van Scheers, 2004), not
followed the same individuals before and after privatization (Cunha, 2000; Cunha &
Cooper, 2002), or focused on the threat of job loss rather than the privatization (Ferrie,
Shipley, Marmot, Stansfeld, & Smith, 1995, 1998; Ferrie et al., 2001).
In order to contribute to the knowledge about potential consequences of
privatizations, the aim of this study was to investigate how hospital privatization may
affect the work-related attitudes and strain of employees, and to analyze whether the
effects of privatization differ amongst the occupational categories found at various
hierarchic levels. In order to study this, two Swedish acute care hospitals were
examined, both before and after one of the hospitals underwent privatization. With both
of the hospitals, occupational categories were investigated at three hierarchic levels,
namely, physicians, registered nurses, and assistant nurses.
In health care organizations the quality of care and the competitiveness of the
organization are dependent on the staff, which emphasizes the importance of studying
the potential effects of the major market changes that have occurred. These changes
have been described as the most dramatic yet to occur in this sector (Öhrming & Sverke,
2003; Quaye, 2001; Rosenberg & Weissman, 1995). Nevertheless, no other study has, as
far as we know, previously investigated the work-related consequences of hospital
privatization for employees at both the organizational and occupational levels utilizing a
quasi-experimental design with both pre- and post-measures and a reference
organization.
Consequences of privatization
Privatization involves a change in organizational ownership. The organization goes from
being owned by the public to being completely or partially owned by a private party
(Ramamurti, 2000). There are several aspects of organizational activity that could be
privatized, such as the financing, the production, or the regulation. In this study it is the
privatization of the production aspect that is investigated, while the financing is mostly
provided through public funding, as is usually the case in Swedish health care.
Privatization can, but need not, have characteristics in common with other types of
organizational change, such as mergers, acquisitions, or downsizing. As is the case with
How are employees affected by privatization? 47
mergers and acquisitions, privatization involves ownership change (Burke & Cooper,
2000), and it is likely that changes will follow within the culture and the structure of the
organization as well (Cunha & Cooper, 2002; Meginsson & Netter, 2001), although those
changes may not be obvious in the same way as they are with mergers or acquisitions.
Privatization may also involve downsizing in the form of reductions in the number of
employees (Ferrie et al., 2001), but downsizing is not necessitated by privatization.
It has been argued that a change process brings with it an uncertainty over what new
demands the changes will lead to, which makes it difficult for individuals to judge if they
will be capable of handling the demands (Ashford, 1988; Callan, 1993). Stress
experiences arise when it is unclear whether one’s own abilities are adequate enough to
handle the demands that can arise (Lazarus & Folkman, 1984). In line with this, it has been
suggested that organizational change tends to be associated with negative consequences
for employees (Burke & Cooper, 2000). Several research studies have shown that
organizational changes, such as downsizing and acquisitions, may be associated with
impaired job satisfaction, reduced organizational commitment, and elevated turnover
intention, as well as with increased levels of stress and ill-health (Ashford, Lee, & Bobko,
1989; Bordia, Hunt, Paulsen, Tourish, & DiFonzo, 2004; Parker, Chmiel, & Wall, 1997).
As with other kinds of organizational change, it is likely that the employees’ reactions
could vary during the course of the privatization process. It has been suggested that the
strongest reactions could come before the actual change and then decline due to
adaptation, while other reactions may be simultaneous with the change or develop
afterwards (cf. Zapf, Dormann, & Frese, 1996).
The results from the few studies investigating how privatization is associated with
employee attitudes and well-being are somewhat contradictory. For example, in a
longitudinal study of privatization at a regional water authority in Great Britain, it was
found that job satisfaction as well as mental and physical health deteriorated in
connection with privatization (Nelson et al., 1995). In contrast, two Portuguese studies
(Cunha, 2000; Cunha & Cooper, 2002) that analyzed privatization using both cross-
sectional and quasi-longitudinal data (the same data were used in both studies), showed
that privatization was associated with higher levels of job satisfaction. Privatization was,
however, found to be related to diminished mental and physical health. A cross-sectional
study investigating front-line service employees following the privatization of a South
African water supply organization suggests that several aspects, such as training,
communication, and empowerment, were experienced as more positive after
privatization (Struwig & van Scheers, 2004). Other aspects, such as motivation,
feedback, and the rewards system were, however, seen as more negative after
privatization. A longitudinal study where different phases of a privatization process that
included major downsizing were investigated – both longitudinally and with a
comparison group – shows that employees’ health status tends to deteriorate early on in
conjunction with the anticipation of privatization (Ferrie et al., 1995, 1998, 2001).
Those who were insecurely re-employed as well as those who became unemployed
experienced an increase in physical and psychological ill-health during, as well as after,
the privatization, compared with employees who did not undergo privatization.
In health care organizations, cross-sectional studies have found that the kind of
ownership an organization has may be related to employee work climate and attitudes.
Factors such as leadership, justice, and trust in management have been shown to be
rated more positively in hospitals run as stock companies (for-profit as well as non-
profit) as compared with a publicly administered hospital (Hellgren, Sverke, Falkenberg,
& Baraldi, 2005). Organizational commitment, on the other hand, has been found to be
higher in non-profit mental health institutions, in comparison to for-profit institutions

(Morris & Bloom, 2002).
Privatization is an organizational change whose significance has been compared to
that of a critical life-event, and it can be the root of a great deal of uncertainty (Nelson
et al., 1995). This kind of change, therefore, has the potential for being very stressful.
Privatization is also a relatively unusual event for individuals, which makes it likely that
few employees will have had any experience in handling such a situation (Nelson et al.,
1995). Although the empirical findings are not entirely unambiguous, most evidence
points to privatization being something negative for employees. Based on this line of
reasoning, the following hypothesis was developed:
Hypothesis 1: Privatization is associated with a decrease in work-related attitudes and an

increase in strain.
Hierarchic level
One of the reasons why research has suggested that privatization may have positive as
well as negative consequences for employees could relate to the fact that hierarchic
level has not been taken into account in most of the previous studies. Several theories
stress the importance of hierarchy and social status for handling negative life-events
(Adler et al., 1994; McLeod & Kessler, 1990). In accordance with this, Swanson and
Power (2001), who investigated a major organizational restructuring, concluded that a
consistent finding of their study was ‘the differential impact of change for employees at
different grades’ (p. 173).
Since change is readily characterized by uncertainty and turmoil, one’s resources for
handling the situation will most likely influence how the change itself is perceived and
what consequences it will have. As long as a situation is controllable it is less
threatening, and the negative consequences of uncertainty will probably, in-turn, be
lessened or avoided (Bordia et al., 2004; Karasek & Theorell, 1990; Lazarus & Folkman,
1984; Parker et al., 1997). It has been suggested (Demerouti, Bakker, Nachreiner, &
Schaufeli, 2001; Hackman & Oldham, 1976; Heller, Pusič, Strauss, & Wilpert, 1998;
Karasek & Theorell, 1990) as well as empirically shown (Marmot & Smith, 1991; Martin
et al., 2006; Parker et al., 1997; Spector, 1986) that factors such as access to information,
control over the work situation, influence over decision-making, and opportunities for
participating in different processes to some extent outweigh the negative effects of high
demands and uncertainty in the work situation.
It is likely that such resources, which facilitate the handling of uncertainty during
change, are not equally distributed throughout an organization. Although some studies
have suggested that employees at a high level have a greater responsibility for the
outcomes of organizational change and therefore could experience more stress than
other employees (Nelson et al., 1995; Väänänen et al., 2004), a good amount of research
indicates that employees in high positions are better able to handle uncertainty, due to
their having more access to resources that help alleviate the possible negative
consequences of change (Armstrong-Stassen, 1998; Henry, 2005; Ivancevich, Matteson,
& Preston, 1982; Marmot & Smith, 1991; Olson & Tetrick, 1988). It has also been found
that executives tend to report less distress than other employees during organizational
change (Armstrong-Stassen, 2005; Hunsaker & Coombs, 1988). For employees at lower
hierarchic levels, who have fewer resources for handling change turmoil, there is a
tendency for them to be more negatively affected by organizational change (Armstrong-
Stassen, 1998; Martin et al., 2006).
In one study that investigated three occupational categories during privatization

(Nelson et al., 1995), it was found that the levels of job satisfaction and mental health
symptoms differed amongst the three groups. Managers reported the highest levels of
job satisfaction after privatization, while a group consisting of staff and administrative
level employees exhibited the highest levels of mental health complaints after the
change. Manual workers reported the lowest levels of both job satisfaction and mental
health complaints after the organizations had been privatized. The reactions to the
change were similar for all three levels, but those in positions with less control and more
uncertainty (i.e. manual workers) experienced the most negative consequences in
connection with the change. Based on this, the following hypothesis is tested:
Hypothesis 2: Privatization is associated with consequences that affect the work-related

attitudes and strain-levels of employees in different ways depending on their hierarchic level, such
that the consequences are most negative for the employees at the lowest level (assistant nurses),
less negative for those at the intermediate level (registered nurses), and least negative for those
at the highest level (physicians).
Method
Setting
This study investigates two hospitals – one that underwent privatization and one that is
still a public administration unit. Only a few hospitals in Sweden have yet been
privatized, while the majority has remained public administration units, which made a
comparison between the two kinds of ownership possible.
In Sweden, health care has traditionally been run by the county councils, which are
the authorities responsible for public services in a given region. There are currently 21
county councils in Sweden. In the 1990s, the sway of the economic market began to gain
more political attention and a large number of changes were made in order to stimulate
competition and increase efficiency in the health care sector (Öhrming & Sverke, 2003).
Among other things, a division was made between the purchasers (the politicians) and
the producers (the hospitals and other health care providers) of health care.
The privatized hospital

Plans to privatize the hospital under study were made prior to 1994, but met strong
resistance from employees and unions. Instead of privatization, the hospital became a
public (non-profit) stock company in 1994, with the Stockholm County Council as the
sole shareholder. The transformation occasioned a more distinct division of
responsibilities between the County Council and the hospital, which made the hospital
more autonomous and facilitated the outlining of goals and strategies (Hellgren et al.,
2005). The political decision to privatize the hospital was made by the Stockholm
County Council on the 9th November, 1999. The hospital was then sold to a private
company on the 1st December, 1999.
The intention to privatize the hospital thus existed even before the hospital became
a public stock company in 1994, and thereafter its privatization only seemed like a
matter of time. With this long anticipation time, the hospital was able to prepare for the
change, which allowed hospital management to avert the downsizing and layoffs
that can accompany privatization. The privatization itself involved the County
Council selling its shares to a private company, which thereby rendered the hospital a
profit-driven enterprise whose surplus was to go to its shareholders. In the Swedish

health care system, it is mainly the production aspect of health care that is privatized,
while the financing is, by and large, provided through public funding and regulated by
means of a contract between the county council and the private party in question. In
association with the present privatization, some structural changes were made to the
organization: for example, two subsidiary companies were formed out of two clinics; a
new board of directors was appointed; and the cooperation with other hospitals and
with primary health care increased (St Göran’s Hospital, 1999, 2000).
The public hospital

The comparison hospital included in this study has not been transformed into a public
stock company nor privatized. It is still a public administration unit, with the County
Council being responsible for its operations. This hospital is located within the same
County Council region as the privatized hospital and has also been affected by the area’s
market-driven climate, which has resulted in a higher degree of cost consciousness.
There have also been some structural changes, such as a new surgery clinic (2000), an
increase in the geographic area of patient responsibility (2001), and a modest increase in
the number of beds (2001). Other changes include more flexible working hours and the
framing of a new vision statement for the hospital (Södertälje Hospital, 1999–2001).
Samples and procedure

Data were collected on two occasions; the first wave was approximately 1 year before
the privatization (Time 1: fall 1998) and the second wave was just over 2 years after its
occurrence (Time 2: winter/spring 2001/2002). Questionnaires were sent to the homes
of all physicians, registered nurses, and assistant nurses at both hospitals along with a
cover letter explaining the purpose of the study. The letter also made it clear that all
responses would be treated confidentially and that participation in the survey was
entirely voluntary. A second letter, in which the management of the respective hospitals
expressed their support for the survey, as well as a pre-addressed, postage-paid return
envelope were also included in the mailing.
Unfortunately, due to the amount of employee turnover at the hospitals and the
relatively long period of time between measurement occasions, there were many
employees who only participated in one of the two survey opportunities. The present
study only includes those individuals who responded to the survey on both occasions
and who also had complete data for all variables included in the study.
The privatized hospital

Altogether, 954 physicians, registered nurses, and assistant nurses at the subsequently
privatized hospital received questionnaires at Time 1, of whom 544 responded and
returned the questionnaire, yielding a response rate of 57%. At the second data
collection, 1,090 questionnaires were sent out and 620 returned, for a response rate of
57%. Of those who had participated in the first data collection, 269 still worked at the
hospital at the time of the second data collection, and of these, 214 (80%) also returned
the questionnaire at Time 2. After listwise deletion of missing data, the effective sample
for the privatized hospital totalled 179 employees (39 physicians, 84 registered nurses,
and 56 assistant nurses) who had complete data on all study variables. Their average age
was 43 (SD ¼ 10, range 24–63 years), the average tenure in the organization was 10
years (SD ¼ 8, range 0–34 years), and 76% were women.
The public hospital

At the public hospital, questionnaires were sent to a total of 842 physicians, registered
nurses, and assistant nurses at Time 1, of whom 583 (69%) returned their completed
questionnaires. At Time 2, there were 957 questionnaires sent out and 700 returned, for
a response rate of 73%. Of those who had participated in the first data collection, 325
still worked at the hospital at the time of the second data collection and, from them, 274
(84%) replies were received. After listwise deletion of missing data, the effective sample
for this hospital totalled 219 employees (20 physicians, 98 registered nurses, and 101
assistant nurses) who had complete data on all study variables. The average age in the
sample was 46 (SD ¼ 10, range 22–62 years), the average tenure in the organization was
15 years (SD ¼ 9, range 0–38 years), and 84% were women.
Non-response analysis
In order to investigate if our sample was biased due to self-selection and attrition over
the course of the study, a non-response analysis was conducted. Using Time 1 data, the
analysis compared (1) the longitudinal sample used, consisting of those who answered
the questionnaire on both occasions, with (2) those who still worked at the hospital at
the time of the second data collection but who chose not to participate a second time
(Time 2 non-respondents), and (3) those who no longer worked at the hospital at Time 2
(Time 2 leavers). For each hospital, the comparison involved Time 1 levels of
demographics and outcome variables. The results of the non-response analysis are
shown in Table 1.
Almost no differences were found, at either of the two hospitals, between the
effective sample and those who still worked at the hospital but who did not participate
in the second collection (organizational commitment at the privatized hospital was the
only exception). The general pattern at both hospitals was that the differences found
were between the effective sample and those who had left the hospitals at the time of
the second data collection. The comparisons, based on Time 1 data, indicate that those
who had left the hospitals at Time 2 were younger, had worked shorter time at the
hospital, were less satisfied with their job, had stronger intentions to leave the hospital,
and were more exhausted (and at the privatized hospital, also less committed to the
organization) than those in the longitudinal sample. There were, however, no
differences between the three groups at either of the two hospitals in regard to gender,
mental health complaints, or physical health complaints (and at the public hospital
there were no differences in commitment).
Measures
Table 2 presents the descriptive statistics, correlations, and reliabilities for all variables at
each measurement occasion. All the reliability coefficients (Cronbach’s a; Cronbach,
1951) were above .70 and therefore considered acceptable (Nunnally, 1978).
Work-related attitudes
The work-related attitudes investigated in this study are job satisfaction, organizational
commitment, and turnover intention. All items were scored on a five-point scale
(1 ¼ strongly disagree, 5 ¼ strongly agree). Job satisfaction was assessed with a
Swedish three-item scale (Hellgren, Sverke, & Isaksson, 1999) adopted from Brayfield and
Rothe (1951). The items (see Näswall, Baraldi, Richter, Hellgren, & Sverke, 2006) capture
Table 1. Test for mean differences at Time 1 between the longitudinal sample, Time 2 non-respondents and Time 2 leavers
Privatized hospital Public hospital

T2 non- T2 T2 non- T2
Longitudinal respondents leavers Bonferroni Longitudinal respondents leavers Bonferroni
sample (1) (2) (3) F/x2 post hoc sample (1) (2) (3) F/x2 post hoc
Age 43.33 39.91 39.38 6.53** 1.3 45.50 41.50 41.85 4.69** 1.3
Organizational 10.24 8.38 8.26 3.76* 1.3 15.45 14.45 11.88 4.85** 1.3
tenure
Gender (women) 0.76 0.76 0.80 0.99 – 0.84 0.88 0.84 0.28 –
Job satisfaction 4.11 4.10 3.73 9.28** 1 . 3; 2 . 3 3.89 3.83 3.64 3.83* 1.3
Organizational com- 3.09 2.74 2.74 12.10** 1 . 2; 1 . 3 2.63 2.62 2.53 1.12 –
mitment
Turnover intention 1.86 2.01 2.45 11.37** 1,3 2.24 2.51 2.77 9.95** 1,3
Mental health 2.21 2.20 2.22 0.07 – 2.21 2.21 2.23 0.37 –
complaints
Physical health com- 2.03 2.00 2.09 0.47 – 2.13 2.06 2.21 1.53 –
plaints
Emotional 2.32 2.35 2.58 5.44** 1,3 2.36 2.41 2.54 3.04* 1,3
exhaustion
*p , :05; **p , :01.

Table 2. Correlations, descriptive statistics, and reliability estimates (Chronbach’s a) for both hospitals at Time 1 and Time 2
Variable 1 2 3 4 5 6 7 8 9 10 11 12
Time 1
Work attitudes
1. Job satisfaction –
2. Organizational commitment .53 –
3. Turnover intention 2 .68 2 .49 –
Strain
4. Mental health complaints 2 .40 2 .24 .37 –
5. Physical health complaints 2 .33 2 .22 .33 .54 –
6. Emotional exhaustion 2 .48 2 .24 .51 .60 .58
Time 2
Work attitudes
7. Job satisfaction .40 .28 2 .37 2 .26 2.18 2.30 –
8. Organizational commitment .34 .53 2 .37 2 .15 2.15 2.20 .56 –
9. Turnover intention 2 .29 2 .24 .36 .23 .17 .23 2.73 2.44
Strain
10. Mental health complaints 2 .18 2 .11 .18 .52 .33 .38 2.49 2.31 .42 –
11. Physical health complaints 2 .21 2 .13 .20 .39 .61 .41 2.32 2.19 .35 .58 –
12. Emotional exhaustion 2 .23 2 .10 .21 .41 .42 .53 2.52 2.27 .46 .63 .63 –
M 3.99 2.84 2.07 2.21 2.08 2.35 3.89 3.00 2.08 2.16 2.06 2.17
SD 0.90 0.78 1.16 0.38 0.64 0.79 0.93 0.77 1.11 0.39 0.66 0.75
a .87 .73 .84 .82 .79 .85 .89 .76 .86 .84 .80 .86
Correlations of .11 or above are significant on a .05 level and correlations of .13 or above are significant on a .01 level, N ¼ 398.
How are employees affected by privatization?
53
the affective dimension of satisfaction, reflecting the general level of satisfaction with
work rather than the contentment experienced in connection with various specific
aspects of the job. Organizational commitment was measured with a four-item scale
(Sjöberg & Sverke, 2000) that was developed to capture Allen and Meyer’s (1990)
affective dimension of organizational commitment. The scale reflects the general level of
psychological identification with the organization. The turnover intention scale consists
of three items devised to measure the individual’s willingness to voluntarily leave the
organization (Sjöberg & Sverke, 2000, based on Cammann, Fishman, Jenkins, & Klesh,
1979; Lyons, 1971).
Strain
The strain variables investigated in this study are mental health complaints, physical
health complaints, and emotional exhaustion. Mental health complaints were measured
with the 12-item general health questionnaire (GHQ-12; Goldberg, 1972, 1978).
Employees reported how frequently they had experienced mental symptoms of stress,
such as concentration difficulties and dejection, during the previous weeks, on a scale
ranging from 0 (never) to 3 (always). The measure for physical health complaints was
developed by Andersson (1986) and modified by Isaksson and Johansson (1997).
It consists of 10 questions (see Sverke et al., 2004) aimed at determining whether an
employee has experienced any of a number of various health problems in the last 12
months, such as headaches, joint or muscle aches, or problems with the heart or chest
(1 ¼ never or almost never, 5 ¼ always or almost always). Emotional exhaustion, a
subdimension in the maslach burnout inventory (MBI; Maslach, Jackson, & Leiter, 1996),
was measured using nine items that assessed to what extent the respondent felt
emotionally drained and to what degree the interaction with patients was felt to be
strenuous. Responses were given on a five-point scale (1 ¼ strongly disagree,
5 ¼ strongly agree).
Analysis
In order to investigate the consequences of privatization for those employed at the
different hierarchic levels, a multivariate analysis of variance (MANOVA) was performed
with gain scores that is the differences between Time 2 and Time 1 for each work-related
attitude and strain variable, as dependent variables.1 The independent variables consisted
of hospital type (privatized vs. public) and hierarchic level (physicians, registered nurses,
assistant nurses). The finding of a significant main effect of hospital type would,
irrespective of the hierarchic level examined, indicate that the privatized hospital and the
public hospital had developed differently between Time 1 and Time 2. A significant main
effect of hierarchic level would indicate that the employees at the three hierarchic levels
had developed differently over time, regardless of hospital affiliation. To find a significant
interaction effect would indicate that employees at the three hierarchic levels had
developed differently at the privatized hospital in comparison to the public hospital. The
overall multivariate tests were supplemented with follow-up univariate F tests. To test the
interaction effects, t tests were performed in which the development of work-related
attitudes and strain among each occupational group at both hospitals were compared. In
addition, paired t tests were conducted to test whether the difference between Time 1
and Time 2 for each occupational group was significant.
1
The same analysis with the covariates of age, organizational tenure, and gender was conducted with similar results.
Results
Main effects
Table 3 shows the mean values in work attitudes and strain for employees at the three
hierarchic levels at the two hospitals, before and after privatization. This table also
includes an account of the univariate F test results. The result of the MANOVA shows
that there was a significant multivariate effect of hospital type (F½6; 387 ¼ 2:22,
p , :05). This indicates that there were overall differences in the development of work
attitudes and strain between the two hospitals. Significant univariate effects of hospital
type emerged for only two of the dependent variables – organizational commitment and
physical health complaints (see Table 3) – and the results were not in the expected
direction. Contrary to our first hypothesis, organizational commitment remained almost
stable at the privatized hospital, but increased somewhat at the public hospital. Also
contrary to the first hypothesis, physical health complaints decreased slightly at the
privatized hospital between Time 1 and Time 2, while the level remained practically
unchanged at the public hospital.
There was also a significant multivariate effect of hierarchic level (F½12; 776 ¼ 1:80,
p , :05). This indicates that employee attitudes and strain generally developed
differently, between the two measurement points, among the occupational groups at
the three different levels (physicians, assistant nurses, and registered nurses), when
hospital type was not taken into account. The only significant univariate effect of
hierarchic level emerged for turnover intention (see Table 3). As indicated by contrast
tests, turnover intention rose significantly for physicians, remained almost unchanged
for registered nurses, and decreased for assistant nurses.
Interaction effects
The multivariate interaction effect between hospital type and hierarchic level
approached significance (F½12; 776 ¼ 1:73, p ¼ :057). This indicates that the mean
levels for physicians, registered nurses, and assistant nurses developed differently at the
two hospitals. Significant univariate hospital-by-hierarchic level interaction effects
emerged for four of the six dependent variables (the exceptions were mental health
complaints and emotional exhaustion) (see Table 3). The t tests were conducted to
examine which of the six groups (three hierarchic levels at two hospitals) that had
developed differently from each other over time (T2–T1) (see Figure 1). The differences
between the various hierarchic levels, however, did not completely follow the pattern
expected in Hypothesis 2, where it was proposed that assistant nurses would be the
most negatively affected, registered nurses less affected, and physicians the least
negatively affected by privatization.
Figure 1a presents the results of the univariate interaction effects for job satisfaction.
The results indicate that job satisfaction decreased for the registered nurses at the
privatized hospital, while the opposite development was shown among the registered
nurses at the public hospital. Among physicians and assistant nurses at the privatized
hospital job satisfaction did not change significantly between Time 1 and Time 2.
It should be noted that job satisfaction decreased considerably between Time 1 and
Time 2 among physicians at the public hospital whereas among the assistant nurses at
the same hospital, satisfaction did not change significantly between the two
measurement points.
The results for organizational commitment are presented in Figure 1b. The level of
commitment was rather stable among all groups at the privatized hospital. At the public
Table 3. Mean values and univariate F tests for differences in gain scores
Time 1 Time 2
Variable Privatized Public Total Privatized Public Total Hospitala Levela Hospital £ Levela
Work attitudes
Job satisfaction 0.22 1.19 6.48**
Physicians 3.91 4.00 3.94 3.85 3.47 3.72

Registered nurses 4.16 3.86 4.00 3.82 4.08 3.96
Assistant nurses 4.16 3.89 3.99 3.99 3.79 3.86
Total 4.11 3.89 3.99 3.88 3.89 3.89
Organizational commitment 4.49* 1.31 3.73*
Physicians 3.19 2.99 3.12 3.27 2.98 3.17
Total 3.09 2.63 2.84 3.10 2.92 3.00
Turnover intention 0.00 5.56** 6.37**
Physicians 1.87 1.90 1.88 2.03 2.83 2.31
Total 1.86 2.24 2.07 2.04 2.12 2.08
Strain
Mental health complaints 1.59 0.05 1.96
Physicians 2.29 2.20 2.26 2.17 2.27 2.20
Total 2.21 2.21 2.21 2.15 2.16 2.16
Physical health complaints 6.33* 2.65 3.10*
Physicians 2.03 2.17 2.08 1.95 2.51 2.14

Total 2.03 2.13 2.08 1.97 2.14 2.06
Table 3. (Continued)
Time 1 Time 2
Variable Privatized Public Total Privatized Public Total Hospitala Levela Hospital £ Levela
Emotional exhaustion 0.99 0.44 2.88

Physicians 2.60 2.54 2.58 2.30 2.67 2.42
Total 2.32 2.36 2.35 2.15 2.18 2.17
*p , :05; **p , :01.

N privatized hospital ¼ 179; N public hospital ¼ 219. Scale range 1–5 for all variables except mental health complaints (0–3).
a
Univariate F test with gain scores that is the difference between Time 2 and Time 1. Degrees of freedom for univariate F tests: hospital (1,392); hierarchic level
(2,392); and hospital £ hierarchic level (2,392).
How are employees affected by privatization?

57
Figure 1. Tests for significant differences in hospital £ level interactions between physicians (PH),
registered nurses (RN), and assistant nurses (AN) at the privatized (priv) and public (publ) hospital
(paired t test of differences between Time 1 and Time 2; *p , :05; **p , :01; ***p , :001).
hospital, commitment increased significantly among the registered nurses, a

development that differed compared to all other groups. Commitment increased also
among assistant nurses at the public hospital but remained almost unchanged among
the physicians at the public hospital.
When the univariate interaction effect on turnover intention was analyzed
(Figure 1c), it showed that the intention to leave the hospital had not changed
significantly among the physicians and assistant nurses at the privatized hospital.
Registered nurses at the privatized hospital did, however, report an increased intention
to leave, while the opposite trend was found among registered nurses at the public
hospital. Physicians at the public hospital reported a marked increase in turnover
intention and this increase distinguished this group from the other groups. Turnover
intention did not change significantly among the assistant nurses at the public hospital
between the two measurement points.
Figure 1d presents the results of the univariate interaction effects for physical health
complaints. The results indicate that the level of physical health complaints remained
practically unchanged among the physicians and registered nurses at the privatized
hospital. Among the assistant nurses at the privatized hospital, physical health
complaints did, however, decrease. At the public hospital the level of physical health
complaints remained almost unchanged among registered and assistant nurses.
The increase of physical health complaints among the physicians did, however, differ
from all other groups at both hospitals.
The univariate interaction effects on mental health complaints and emotional
exhaustion did not reach significance.
Discussion
In spite of the fact that privatizations have been carried out all around the world during
recent decades, only a few studies have investigated their consequences for employees.
The present study examined how the staff was affected when a Swedish hospital was
privatized, using questionnaire data collected at two hospitals before and after the
privatization of one of the hospitals. Occupational groups at three hierarchic levels
(physicians, registered nurses, and assistant nurses) were studied at both hospitals.
Our first hypothesis was that privatization would be associated with a decrease in
work-related attitudes as well as an increase in strain. Privatization, as other kinds of
organizational change, was presumed to bring with it an uncertainty over the future
work situation and, hence, lead to deteriorated work attitudes and increased strain
(Nelson et al., 1995). The results showed, however, that the staff’s work attitudes and
strain – on an overall level – were only marginally affected by privatization.
Organizational commitment remained almost stable at the privatized hospital, while it
increased at the public hospital. Physical health complaints decreased at the privatized
hospital, and remained stable at the public hospital. In contrast to earlier findings (e.g.
Burke & Cooper, 2000; Cunha, 2000; Ferrie et al., 2001; Nelson et al., 1995), the present
study thus indicates that privatization, on an overall level (without taking hierarchic
differences into account), does not necessarily associate with any dramatic
consequences for the employees. Rather, the results imply that privatization may have
some positive effects for the employees.
The general lack of overall effects of privatization may, however, be due to
employees at various hierarchic levels being affected differently by organizational
change, as has been suggested in previous research (e.g. Armstrong-Stassen, 2005;
Martin et al., 2006; Nelson et al., 1995; Swanson & Power, 2001; Väänänen et al., 2004).
The second hypothesis of this study proposed that employees in higher positions would
experience the least negative consequences of privatization, while employees at a low
hierarchic level would suffer the most negative consequences, with the employees at an
intermediate level falling somewhere in-between.
The results showed that employees’ attitudes and strain indeed developed
differently depending on their hierarchic level, but not according to our expectations.
Employees in a high position at the privatized hospital (physicians) reported no
significant changes in their work attitudes or strain after the privatization, while their
colleagues at the public hospital, on the contrary, reported more negative attitudes
and an increase in physical health complaints. Unexpectedly, employees at a low
hierarchic level (assistant nurses) did not report any major decrease in attitudes or
well-being. This was the case at both the privatized and the public hospital (the only
changes were a decrease in physical health complaints at the privatized hospital,
while, at the public hospital, organizational commitment increased). Those who
reported the most negative changes in work attitudes after privatization were, rather,
the employees at an intermediate hierarchic level (registered nurses), while the trend
was the opposite for their colleagues at the public hospital. Well-being remained,
however, largely unaffected for the intermediate group.
Altogether, these findings indicate that, as hypothesized, employees who enjoy a
high position within an organization (in our case, physicians) do not seem to be
especially negatively affected by privatization. This could be due to the fact that
employees at a high hierarchic level tend to have better opportunities for controlling,
influencing, and participating in the change process, as well as better access to
information, than other employees (e.g. Armstrong-Stassen, 1998; Henry, 2005; Martin
et al., 2006). These factors are likely to facilitate the handling of uncertainty that is
typically associated with organizational change (e.g. Demerouti et al., 2001; Hackman &
Oldham, 1976; Heller et al., 1998; Spector, 1986).
While previous research has suggested that employees at low hierarchic levels are
more negatively affected by organizational change than employees at higher positions,
due to the former having more uncertainty and lack of control (Martin et al., 2006;
Nelson et al., 1995; Olson & Tetrick, 1988), the present study partially contradicts these
results. A possible explanation for this discrepancy could have to do with the notion that
the consequences of privatization are dependent on the extent to which the work
situation actually changes for a group of employees (cf. James & Sells, 1981). It has been
suggested that for employees at a low hierarchic level, the carrying out of daily work
tasks may remain largely unaltered even during a period of change (Swanson & Power,
2001). Thus, for the assistant nurses in the present study, everyday work may have been
perceived as ‘business as usual’ even during privatization.
In contrast to our expectations, the results indicate that the occupational groups at
an intermediate hierarchic level (registered nurses) are the most vulnerable in the event
of hospital privatization. This may be due to the fact that employees in middle positions
are affected considerably by such an organizational change, which, coupled with their
relative distance from the decision-making processes, would render them without the
adequate resources needed for counterbalancing the uncertainty that stems from the
changes in the work situation (cf. Demerouti et al., 2001; Heller et al., 1998). In line with
this, previous research (e.g. Armstrong-Stassen, 2005; Ivancevich et al., 1982; Swanson
& Power, 2001) has concluded that managers and employees in middle positions
experience pressure from both above and below – and therefore struggle with a very
demanding situation at work. For an already exhausting work situation to be
compounded by the higher burden that accompanies organizational change could lead
to more stress, a greater sense of powerlessness, and less satisfaction than might be
experienced at other job levels.
Despite finding a pattern other than that which was proposed in Hypothesis
2, the present study confirms the notion set forth in previous studies emphasizing
the importance of analysing organizational change on a level more in-depth than
the organizational level, which enables the consequences for employees at
various hierarchic levels to be taken into account (Swanson & Power, 2001;
Väänänen et al., 2004).
Methodological considerations
There are a number of factors in this study that may have influenced the results and
therefore need to be addressed. For one thing, a relatively long period of time passed
between the two measurement occasions. The fact that the baseline measurement was
obtained approximately 1 year prior to privatization and the post-test just over 2 years
after the change, opens up for the possibility that factors other than privatization may lie
behind the observed changes in work attitudes and strain (cf. Cook & Campbell, 1979).
It is conceivable that our results might have turned out differently if the second
measurement had been carried out after either a shorter or a longer lapse of time (cf.
Zapf et al., 1996). On the other hand, the disadvantage of having confounding factors
due to time lag must be weighed against the advantage of using longitudinal data, both
from the organization undergoing change and from a reference organization, that can
provide a baseline measurement and improve the chances of revealing how employee
work attitudes and strain may change after privatization.
Previous research has shown that the anticipation period could be the most stressful
phase of a change process (Ferrie et al., 1995; Paulsen et al., 2005). In regard to this
study, the plans for privatization started even prior to the hospital becoming a public
stock company in 1994, which was several years before the official decision about
privatization was made and then enacted in 1999. There are no indications that the
threat of privatization was especially urgent when the first data collection was
conducted in 1998. The first data collection is therefore considered to be a proper
baseline for our purposes. In order to avoid the possible confounding effect of change
turmoil, we also wanted to make sure that a considerable amount of time had passed
after the privatization. According to previous research, 2 years should be the optimal
measurement time for assessing the consequences of a merger from the employees’
perspective (e.g. Väänänen et al., 2004), and this guided our use of a similar time frame
for evaluating the consequences of privatization.
Also worth considering is the possibility that the negative effects of privatization may
have been underestimated due to attrition and self-selection. The non-response analysis
showed that those who no longer worked for the privatized hospital at Time 2 exhibited
more negative attitudes and strain at Time 1, compared to those in the longitudinal
sample. On the other hand, the same pattern emerged in the comparison organization,
which decreases the likelihood that a ‘healthy worker effect’ (Östlin, 1989) was
responsible for the consequences associated with privatization.
Another question could be raised concerning the difficulties involved in
comparing such complex organizations as hospitals. The other hospital under study
was selected because of its similarities to the privatized hospital. Both organizations
are acute care hospitals of similar size and with relatively similar specialties, and they
are both situated in the same geographical region (Öhrming & Sverke, 2003).
The changes at the comparison hospital were in some instances larger than expected.
By following another pattern of development, which to some extent is the opposite
to that of the privatized hospital, the results at the comparison organization by and
large gives emphasis to our conclusions regarding the importance of taking hierarchic
level into account when analysing organizations over time. It is, however, worth
noting that the privatized hospital was already a company at the time of the first
measurement, albeit public and non-profit. It was also the first hospital in the
Stockholm region, and the second in Sweden, to undergo privatization, and the
attention received because of this may have led to our results being more positive
than they would be in studies on privatizations that do not receive similar media
attention.
It is also possible that the perceptions of privatization within health care may differ
from how employees in other areas, as well as employees in other countries, perceive
this kind of change. In this case, it was the production aspect of health care at a Swedish
hospital that was privatized and the privatization was anticipated for several years
beforehand, which meant that the hospital could prepare for the change in a proactive
way and thus avoid major downsizing. It is likely that privatizations involving major
layoffs would be associated with other, more negative, consequences for employees
(Ferrie et al., 2001). The privatization we studied has its own unique characteristics and
it is therefore crucial that the results from the present study are replicated within several
organizations, in different sectors, during other circumstances and in different
countries.
Another issue is that the differences found between hierarchic levels could be due to
factors other than level. It is possible that hierarchic level is serving as a marker for
individual difference variables, for example, personality, educational level, gender, social
class, or standard of living as well as different occupational roles (cf. Sing-Manoux, Adler,
& Marmot, 2003). Moreover, the present study only included three occupational groups,
with relatively few respondents in each group. The understanding of how privatization
affects employee work attitudes and strain would be more nuanced if a greater variety of
different occupations, including a wider range of hierarchic levels and with more
participants in each group, were taken into account.
Conclusions
While previous research has found that there may be negative consequences of
organizational change in general (Ashford, 1988; Ashford et al., 1989; Burke & Cooper,
2000; Swanson & Power, 2001) as well as of privatizations in particular (Ferrie et al.,
2001; Nelson et al., 1995), this study indicates that privatizations, on an overall level,
might have only limited negative – or perhaps even some positive – effects for hospital
employees. This result masks, however, the fact that the consequences of privatization
differ depending on hierarchic level, which emphasizes the importance of analysing
organizational changes, such as privatizations, in more detail than only on an
organizational level. Supporting this is our finding that employees at high and low
hierarchic levels in the organization did not seem to be especially negatively affected by
privatization, while employees at an intermediate hierarchic position were found to be
the most vulnerable to this kind of change.
Health care, like many other areas in the service sector, relies heavily upon its
staff in its operations. The well-being of the staff is therefore a crucial component in
creating a good quality of service, which, in turn, is important for remaining
competitive. The knowledge that some occupational groups are affected more
negatively than others, and that special attention should be paid to intermediate
occupational groups, is important information for different actors in the privatization
process, such as the politicians who make decisions regarding privatizations and
the management executives who may carry them out. As privatization has no
doubt become a worldwide phenomenon, this study represents one step towards a
better understanding of how privatization can affect the people who experience it
most directly.
Acknowledgements
The research reported here was supported by grants from the Swedish Council for Working Life
and Social Research (grants 2000-0266 and 2003-0310) and the Stockholm County Council (grant
Ld 101/02).
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How are employees at different levels affected by

Helena Falkenberg1*, Katharina Näswall1, Magnus Sverke1

46 Helena Falkenberg et al.

How are employees affected by privatization? 47

48 Helena Falkenberg et al.

higher in non-profit mental health institutions, in comparison to for-profit institutions

Hypothesis 1: Privatization is associated with a decrease in work-related attitudes and an

How are employees affected by privatization? 49

In one study that investigated three occupational categories during privatization

Hypothesis 2: Privatization is associated with consequences that affect the work-related

The privatized hospital

50 Helena Falkenberg et al.

profit-driven enterprise whose surplus was to go to its shareholders. In the Swedish

The public hospital

Samples and procedure

The privatized hospital

How are employees affected by privatization? 51

The public hospital

Privatized hospital Public hospital

52 Helena Falkenberg et al.

*p , :05; **p , :01.

54 Helena Falkenberg et al.

How are employees affected by privatization? 55

56 Helena Falkenberg et al.

Assistant nurses 2.13 2.08 2.09 1.98 2.05 2.03

Emotional exhaustion 0.99 0.44 2.88

*p , :05; **p , :01.

How are employees affected by privatization?

58 Helena Falkenberg et al.

hospital, commitment increased significantly among the registered nurses, a

How are employees affected by privatization? 59

60 Helena Falkenberg et al.

How are employees affected by privatization? 61

62 Helena Falkenberg et al.

How are employees affected by privatization? 63

Andersson, K. (1986). Utveckling och prövning av ett frågeformulärsystem rörande arbetsmiljö

64 Helena Falkenberg et al.

How are employees affected by privatization? 65

Received 5 December 2005; revised version received 8 February 2008

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