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Journal of Industrial Technology • Volume 15, Number 1 • November 1998 to Januray 1999

Volume 15, Number 1 - November 1998 to January 1999

Downsizing Effects on
Organizational Development
Capabilities at an Electric Utility
By
Jerry Wagner

KEYWORD SEARCH

Human Relations
Management
Sociology
Research

Reviewed Article

The Official Electronic Publication of the National Association of Industrial Technology


© 1998

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Journal of Industrial Technology • Volume 15, Number 1 • November 1998 to Januray 1999

Downsizing Effects on
Organizational Develop-
ment Capabilities at an
Electric Utility
Mr. Jerry Wagner is currently seeking Mr. Jerry Wagner
his Master’s Degree in Industrial Tech-
nology from Northern Illinois University observations it was believed that this job insecurity is associated with declines
and is also a full time employee of the would be true for electric utility employ- in commitment, trust in organization,
Braidwood Nuclear Power Plant in and job satisfaction. They also reported
Braceville, Illinois.
ees. However, deregulation of the
electric market is bringing the long era positive relationships between job
of guaranteed prosperity of electric insecurity and both organizational
Introduction utilities to a close. The electric utility change and role ambiguity, and that a
This study was submitted as a thesis where this study was completed envi- significant negative relationship exists
for partial fulfillment of a Master of sions transforming to a competitive between job insecurity and power to
Science in Industrial Technology to the learning organization. Currently its control outcome.
Department of Technology at Northern culture is primarily static in nature. And, McCarthy (1993) used Ashford et
Illinois University. In addition to being a the entitlement mentality is deeply al.’s Job Insecurity Scale as a measure-
graduate student, the author is also a full ingrained in its employees. Downsizing ment tool for his study of job insecurity
time employee of the Braidwood is taking place. This descriptive study in a merger environment. He reported
Nuclear Power Plant in Braceville, examined the relationship of job that the measure of job insecurity did
Illinois and is involved with refuel insecurity to organizational culture show a significant difference between
outage planning as well as other areas of change in one business unit of the the three locations as hypothesized. In
project management. The purpose of electric utility. However, it did not addition, his results indicated that both
this study was to determine if a relation- attempt to establish a causal relationship powerlessness and organizational trust
ship exists between job insecurity and between job insecurity and resistance to were significantly related to job insecu-
resistance or receptiveness to an organizational culture shift. rity, further validating Ashford et al.’s
organizational culture shift in an study. The McCarthy study is relevant
organization where cultural-shift Literature Review to the study being reported here. It
activities were being performed concur- Four areas of literature were suggests a relationship between the
rently with downsizing efforts. The reviewed: employee job insecurity, degree of organizational change and the
study focused on three hypotheses: organizational downsizing, learning measure of job insecurity. It also
“There is no significant correlation organizations, and entitlement mentality. substantiates several of Ashford et al.’s
between the measure of learning results with a high return rate that
organization attributes and the measure Job Insecurity supports the inferential validity of the
of job insecurity,” “There is no signifi- Ashford, Lee, and Bobko (1989) Job Insecurity Scale. Koesterer (1994)
cant correlation between the measure of argue that the lack of empirical attention further validated Ashford et al.’s Job
learning- organization attributes and the to job insecurity is an overlooked aspect Insecurity Scale. In her study, three
measure of entitlement mentality,” and of downsizing, restructuring, and variables emerged as significant predic-
“There is no significant correlation mergers. The only previous attempt at tors of job insecurity: management
between the measure of job insecurity developing a multidimensional job level, job changes, and relocation. Other
and the measure of entitlement mental- insecurity model seems to be the 1984 studies are available in the literature.
ity” (Wagner, 1996, p. 6). Greenhalgh and Rosenblatt study Based on the review of literature in this
Entitlement mentality is often referenced by Ashford et al. (1989). area, it appears that there is a relation-
generated by a work history of regular That study divides job insecurity into ship between the measure of job
raises, scheduled promotions, and a five components: importance of job insecurity and organizational change. It
secure job; it seems that over time, feature, likelihood of losing job feature, also validates the use of the Ashford et
organizational members simply seem to importance of job loss, likelihood of job al. Job Insecurity Scale and methods.
become “entitled” or to expect this to loss, and perceived powerlessness.
continue for their career or job life. Using this model, Ashford et al. devel- Organizational Downsizing
Based on the structure of the regulated oped a Job Insecurity Scale for this The literature on downsizing was
monopolies and the researcher’s 1989 study. The authors reported that important to this study. Lee (1992)

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Journal of Industrial Technology • Volume 15, Number 1 • November 1998 to Januray 1999

reported that 50% of the companies There does not seem to be any empirical business and organization opportunities
studied were not prepared for evidence that would indicate a relation- that create potential new sources of
downsizing and a ripple effect reverber- ship between downsizing and cultural- growth” (p. 7). Finally, Senge writes
ated throughout the various companies shift capabilities. that the primary institutions of our
for months. There were neither policies society are oriented toward controlling
nor programs in place to minimize the Learning Organizations not learning, and toward rewarding for
negative effects of cutting back. He Senge (1990a) and Denton and performing for others instead of reward-
argues that most downsizings fail to Wisdom (1991) referenced Dumaine ing for cultivating the individuals’
achieve their goals. He cited a study (1989) who said, “The most successful natural curiosity. He further argues that
conducted by Wyatt Co. (1991) where organizations in the 1990s will be focusing on obtaining someone else’s
46% of 1,005 companies met their something called a learning organiza- approval creates the conditions that
expense-reduction goals, less than 33% tion, a consummately adaptive enter- predestine corporations to mediocre
met their profit goals, and only 21% prise, with workers who think for performance. This focus on “worth
increased their shareholders’ return on themselves, identify problems and proving” appears to be a detriment to
investment. Eighty-six percent of these opportunities, and go after them” (p. systems thinking and, as such, a
companies had downsized three to five 54). Senge (1990a) further clarified measure of the degree of this trail would
years before this study. Lee’s study that the focus must be on generative appear to be appropriate for a systems-
shows several tendencies detrimental to learning that is about creating as well thinking measure construct.
a cultural shift, especially the lack of as on adaptive learning that is about Denton and Wisdom (1991) also
policies. Also, multiple downsizings coping. Senge cited the evolvement of argue that an understanding of the
may tend to keep an organization in a the total quality movement in Japan as whole business is imperative in the
perpetual state of anticipation. a transition from adaptive to generative learning organization. They cite the
Pedersen (1991) studied the effects learning. Springfield Remanufacturing Corpora-
of layoffs on work performance of Denton and Wisdom (1991) tion where employees are told that 85%
engineers. He reported that a merit- referenced Hayes of the Harvard of their pay is for doing their job and the
based work-force reduction policy Business Schools who stated, “Manag- remaining 15% is for learning the
combined with timely communications ers have to encourage workers’ experi- business. They believe that it is the
about the layoff process may tend to mentation with finding better ways to do company’s responsibility to teach their
improve the work performance of the things” (p. 69). Senge (1990a) argued employees a basic understanding of the
survivors, enabling the organization to that business as well as other human whole management area to develop a
get back on track. endeavors are systems bound by fabrics good understanding of how interdepen-
In 1994, Johns studied the effects of of interrelated actions that may take dent the world is. The literature further
downsizing on middle managers. Those years for the effects to be fully realized. supports Senge’s philosophies and
perceiving a significant role change or Since the individual is part of it, it is constructs with studies. The systems-
ambiguity reported a decline in work difficult to see the whole pattern, and thinking traits (those mentioned above
performance. This addresses the need many individuals tend to focus on and others not mentioned for the sake of
for reduction by design, not number snapshots of isolated parts, wondering brevity), while not all-encompassing
quotas and that restructuring requires why problems never get solved. “Gen- measures, seem to be suitable traits for
new roles to be clearly defined. erative learning requires seeing the inclusion into a systemic construct.
Duron (1994) reported that downsizing systems that control events. When we
correlated negatively with both morale fail to grasp the systemic source of Entitlement Mentality
and productivity variables. She also problems, we are left to push on Bardwick (1991) describes entitle-
reported that the management practices symptoms rather than eliminate underly- ment mentality as an attitude. She
of clarity of expectations, communica- ing causes, and the best we can ever do identifies those who possess this attitude
tion, and recognition correlated posi- is adaptive learning” (Senge, 1990a, p. as individuals who believe that they do
tively with morale and had a greater 8). Denton and Wisdom referenced a not have to earn what they get; they are
impact on employees than the negative Hewlett-Packard study of 170 managers owed it. In the work place, entitlement
consequences of the downsizing event. and argued that the most effective exists when people have so much
Based upon the literature review on managers “had a willingness to chal- security that they are not required to
downsizing, it appears that there is lenge the same old way and had a belief produce. They keep their jobs and get
adequate evidence to conclude that a that things could be done better...these regular raises whether they do well or
relationship exists between organiza- leaders believed in continuous improve- nothing. Promotions are based on length
tional downsizing and morale. It would ment” (p. 71). Senge (1990b) also of time in the current position instead of
also appear that management methods referenced a study by Shell Oil Com- competence or ability to perform in the
in implementing downsizings may tend pany and argued that the key to long- new position. Some of the characteris-
to positively or negatively affect the term organizational survival is the tics of an entitlement-mentality organi-
impact of downsizing on productivity, ability to “run experiments in the zation described by Bardwick include
morale, and organizational perception. margin, to continually explore new high levels of risk avoidance, depen-

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Journal of Industrial Technology • Volume 15, Number 1 • November 1998 to Januray 1999

dence, informal tenure, complacency, were also four demographic variables. The JIM was an abbreviated version
apathy, rules and rule checkers. She There were seven STM questions. The of Ashford et al.’s Job Insecurity Scale.
cites a study performed at a utility possible range of STM scores was a Several studies, after the initial study
where employees were asked to charac- maximum of 35, which would indicate attested to its validity, thus its validity
terize their company both before and strong resistance to systems thinking, was accepted for the study being
after deregulation. Words such as and a minimum of 7, which would presented here. The STM and EM
“family oriented, “ caring,” and “loyal” indicate a high degree of acceptance of constructs were developed for the
were used to describe the “old” com- systems thinking. There were four EM present study. Several steps were taken
pany. “Insecure,” “chaotic,” “fear,” and questions. The possible range of scores to establish construct validity for both.
“short-sightedness” were used to was a maximum of 20, which would The traits of the constructs were
characterize the company after deregu- indicate a high degree of entitlement selected by a review of the works of
lation. Based on researcher observations mentality, and a minimum of four, noted authors. Careful consideration
it was determined that these characteris- which would indicate a low degree of was given to ensure the adequacy of
tics also fit the utility under study and entitlement mentality. Two questions on traits without overloading on one
that they were appropriate for an the questionnaire were used to obtain particular characteristic. After the
entitlement mentality measure construct. importance factors in determining the constructs were completed, they were
For the purpose of this study, the JIM. These questions required respon- forwarded to three subject-matter
following terms were defined: dents to assign an importance factor to experts for review: Barry Wisdom,
Job Insecurity Measure. A construct them and then supply “a likelihood of Professor, Department of Management,
used to determine the degree to which future occurrence” value. For each of Southwest Missouri State University;
an individual is apprehensive about the ten items, the importance value (IV) Joseph Yaney, Professor, Department of
losing his/her present position in the was multiplied by the likelihood value Management, Northern Illinois Univer-
organization, combining importance, (LV) to obtain a measure of an indi- sity; and William Reckmeyer, Professor,
perceived likelihood of occurrence, and vidual JIM component. The ten indi- Department of Leadership and Systems,
perceived degree of powerlessness into vidual JIM components were then San Jose State University. The results of
a single-interval data number. summed to produce a preliminary JIM. the review were positive. A small pilot
Systems Thinking Measure. A One question on the questionnaire was study was recommended which em-
construct used to assess receptiveness to used to obtain an assessment of power- ployed purposive sampling techniques
organizational culture shift, from static lessness. The JIM was obtained by in participant selection. Refinements
role to learning organization, consisting multiplying the powerlessness assess- were made accordingly.
of seven traits: cross-department ment (PA) by the preliminary JIM. The Although reliability measures are
teamwork, innovation, worth proving, possible range of scores for the JIM was not generally designed for a one-time,
focus on whole, shared vision, trust, and a maximum of 1,250, which would self-report attitudinal survey, and no
move beyond blame. indicate a high measure of job insecu- specific statistical measures for
Entitlement Mentality. A construct rity, and a minimum of 10, which would reliability were used, several measures
used to determine the degree to which a indicate a low measure of job insecurity. were taken to maximize reliability.
person perceives that the organization The remaining four questions repre- Correlation of the pilot study, size of
owes the individual security. sented demographic variables and were the sample population, and specifying
assigned ordinal values. These variables a 75% response rate, were all intended
Methodology and Procedures were used for stratification of the to enhance reliability of the measure-
A questionnaire was mailed with an respondents to determine if they were ment instrument. The usable return
introductory letter to all management factors in the correlation between the rate was 78%.
employees at an electric-generating three constructs.
station. A response rate of 50% was The results were plotted on Results
determined adequate. A response rate scattergrams to determine if a curvilin- The correlation between the JIM
of 75% was required to preclude the ear relationship existed. A curvilinear and the STM and the correlation
need for implementation of nonresponse relationship was not suggested so the between the STM and the EM were
measures. The survey contained 19 Pearson r correlation method was both found to be significant at the .001
questions, four of which were com- deemed appropriate. The following level when computed for the entire
pound questions that resulted in a total elements were correlated: survey. The correlation between the JIM
of 35 answers. A one-time response (a) JIM with STM, (b) JIM with EM, and the EM was found to be significant
required participants to answer the and (c) STM with EM. These correla- at the .01 level for the same group.
questions based upon their present tions, as well as the scatter plots, were When the data were stratified by a
personal experiences and attitudes. made using both the total response single demographic variable, signifi-
There were three construct vari- population and with stratification using cance at the .001 and .01 levels were
ables: Systems Thinking Measure the four demographic variables of age, found for various groups and are
(STM), Job Insecurity Measure (JIM), gender, years with company, and time in summarized in Tables 1, 2, and 3.
and Entitlement Mentality (EM). There current position. Several single demographic variable

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Journal of Industrial Technology • Volume 15, Number 1 • November 1998 to Januray 1999

groups showed significance. To further variables stratifications yielded several using the data for the entire sample
explore the sample population, stratifi- repeating patterns. Specifically the population as well as stratifying by a
cation was performed using two exclusion of the “years in company 11- single-level demographic group and
different demographic variables with 20” demographic, in combination with excluding by a single- level demo-
“and” logic to determine if groups any other demographic group or groups, graphic group. Table 9 contains the
possessing several characteristics would always resulted in a correlation between equations by which STM can be
show significance. The results are JIM and STM that failed to achieve predicted from the JIM or EM. It also
summarized in Tables 4 and 5. All significance at the .01 level. The only shows the calculated standard error of
correlations between the JIM and EM other demographic group shows estimate.
using two demographic variables exclusion affected significance for the
stratification failed to achieve signifi- correlation between JIM and STM as Summary and Conclusions
cance at the .01 level. A three- variable “age group 40-49.” When used in two This study was designed to test for
demographic stratification using “and” demographic-groups’ exclusion correla- the presence of a relationship between
logic was performed. While overall tions, four of nine correlations failed to job insecurity and resistance to an
correlation increased for the JIM to achieve significance at .01. When used organizational culture shift at an
STM correlation, the reduction of N to in three demographic groups’ exclusion, organization where cultural-shift
32 using this stratification lowered the t 28-40 failed to achieve significance at activities were being performed
value to below that which was required .01. Correlations between JIM and STM concurrently with downsizing efforts.
for the .01 level of significance. A t that did not exclude either of these The organization was an electricity-
value of 2.750 was required for the .01 demographics almost always achieved production industry which was experi-
level of significance with 30 degrees of significance at .01 or above. Correla- encing a period of rapid transition as
freedom; the computed t value results tions between STM and EM using two market forces were working to deregu-
were 2.667. However, significance, at and three demographic groups’ exclu- late the electric markets, bringing the
the .01 level was identified for three sion also possessed patterns. The long era of the regulated monopoly to a
correlations of the JIM and STM at the exclusion of either the “age group 40- close. It was felt that members of the
three demographic variables stratifica- 49” or “males” in combination with any organization possessed a certain degree
tion level, and two correlations of STM other demographic group or groups, of entitlement mentality because of the
and EM at the three demographic always resulted in a correlation between nature of the regulated monopoly. The
variables stratification level. The results STM and EM that failed to achieve desired direction of the organizational
are in summarized in Table 6. significance at the .01 level. cultural shift was toward that of a
For most of the single demo- Finally, to develop prediction learning organization; the undesirable
graphic variable stratification correla- equations based on the survey data, a starting point was that of a static-role
tions that failed to achieve significance linear regression analysis was per- culture.
at the .01 level, the groups showed formed. The results were compiled
moderately low correlations that could
have been significant had the group Table 1
been of adequate size. The demo-
graphic groups that exhibited virtually JIM to STM Correlations at .01 or Above
no correlation are included in Table 7.
These groups had correlation coeffi- Group Name Group Size (N) Level
cients of less than .110, positive or
negative, for the specified correlations. Years with Company 11-20 165 .001
As an additional measure of data
Years in Position 4-5 81 .01
analysis, correlations between the three
constructs were performed with Age Group 40-49 134 .01
exclusions made by demographic
Males 297 .01
group. The exclusions were made at
both the single demographic variable Females 22 .001
level as well as at the two- and three-
demographic variables levels using
Table 2
“and” logic. Table 8 displays the results
of those groups failing to achieve JIM to EM Correlations at .01 or Above
significance at the .01 level when a
single demographic group was ex- Group Name Group Size (N) Level
cluded from the sample population.
An analysis of the correlation Years in Position 1-3 132 .01
results when excluding by two demo-
Males 297 .01
graphic variables and three demographic

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Journal of Industrial Technology • Volume 15, Number 1 • November 1998 to Januray 1999

Significance at the .001 level was sponse population. The relationship by that group) were found significant
found for the relationship between job between job insecurity and entitlement were also identified. Years with
insecurity and systems thinking, and was found significant at the .01 level company, 11-20; years in current
also for the relationship between for the same group. Demographic position, 4-6; and age range of 40-49
systems thinking and entitlement when groups of the sample population where were found significant for the relation-
correlated for the entire survey re- results of correlation (when stratified ship between job insecurity and
systems thinking. Years in current
Table 3 position, 1-3, and gender of male were
found significant for the relationship
STM to EM Correlations at .01 or Above
between job insecurity and entitlement.
Years with company, 11-20; years in
Group Name Group Size (N) Level current position, 1-3; age range of 40-
Years with Company 11-20 165 .001 49; and gender of male were found
significant for the relationship between
Years in Position 1-3 132 .01 systems thinking and entitlement.
Age Group 40-49 134 .001 The study provided evidence that
the possession of either a high degree of
Males 297 .001 job insecurity or a high degree of
entitlement mentality will tend to
Table 4 present an obstacle to an organizational
culture shift in that organization’s
Two-Group JIM to STM Correlations at .01 or Above members. While the contribution of job
insecurity and entitlement mentality,
Group Name Group Size (N) Level when used as a predictor for resistance
to an organizational shift, account for
Years with Company 11-20 and only a fraction of the variance, the
Age Group 40-49 66 .001
results clearly indicate that the three
Years with Company 11-20 and variables, as defined for the study, are
Age Group 30-39 92 .01 related.
The information obtained in the
Years with Company 11-20 and
Years in Position 1-3 75 .001 present study may be useful for the
prediction of organizational acceptance
Years with Com Ed 11-20 and Male 155 .001 to cultural shift when either the levels of
Years with Com Ed < 5 and
job insecurity or entitlement have been
Years in Position 1-3 11 .01 assessed. The equations in Table 9 can
serve as the basis for prediction if a
Years in Position 1-3 and Female 8 .01 quantitative assessment of the character-
Years in Position 4-6 and Male 78 .01 istics has been performed. If only a
qualitative assessment has been per-
Age Group 30-39 and Female 8 .01 formed, the conclusions of this study—
that is, job insecurity and entitlement
Table 5 mentality affect receptiveness to
learning organizational attributes— may
Two-Group STM to EM Correlations at .01 or Above serve as a basis for postulating the
effectiveness that cultural-shift initia-
Group Name Group Size (N) Level tives will have when either of the traits
are present.
Years with Company 11-20 and
Age Group 40-49 66 .01
References
Years with Company > 20 and Ashford, S., Lee, C., & Bobko, P.
Age Group 40-49 36 .01 (1989). Content, causes, and conse-
quences of job insecurity: A theory
Years with Company 11-20 and Male 155 .001
based measure and substantive test.”
Years with Position 1-3 and Academy of Management Journal, 32,
Age Group 40-49 55 .01 827-829.
Years in Position 1-3 and Male 123 .01
Bardwick, J. M. (1991). Danger in
the comfort zone. New York:
Age Group 40-49 and Male 123 .001 AMACOM.

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Journal of Industrial Technology • Volume 15, Number 1 • November 1998 to Januray 1999

Denton, D. K., & Wisdom, B. L. Table 6


(1991, December). The learning
organization involves the entire work Correlations Significant at .01 for Groups Stratified at the Three
Demographic Variable Levels
force. Quality Progress, pp. 69-72.
Dumaine, B. (1989, July 3). What
the leaders or tomorrow see. Fortune, Group Name Group Size (N) Constructs
p. 54. Years with Company < 5 and
Duron, S. A. (1994). The reality of Years in Position 1-3 and Male 10 JIM and STM
downsizing: What are the productivity
outcomes? (Doctoral dissertation, Years with Company 11-20 and
Years in Position 1-3 and Male 71 JIM and STM
Golden State University, 1994). Disser-
tation Abstracts International, 54(09), Years with Company 11-20 and
4953. Age Group 40-49 and Male 61 JIM and STM
Johns, M. (1994). Middle manag-
Years with Company 11-20 and
ers’ perceived role changes and conse- Age Group 40-49 and Male 61 STM and EM
quences in downsized organizations
(Doctoral dissertation, Temple Univer- Years in Position 1-3 and
sity, 1994). Dissertation Abstracts Age Group 40-49 and Male 52 STM and EM
International, 54(08), 4429.
Koesterer, S. J. (1994). The reliabil- Table 7
ity between demographic variables and
job security in the survivors of a Stratified Groups that Exhibited Virtually No Correlation
corporate downsizing (Webster Univer-
sity, 1994). Dissertation Abstracts Group Name Group Size (N) Constructs
International, 55(12), 3915.
Lee, C. (1992, July). After the cuts. Years with Company 5-10 70 JIM and STM
Training, pp. 17-23.
Years with Company > 20 49 JIM and STM
McCarthy, N. I. (1993). Validation
of the job insecurity scale in a merger Years in Position < 1 56 JIM and EM
environment (Doctoral dissertation,
Age Group < 30 16 JIM and STM
University of LaVerne, 1993). Disserta-
tion Abstracts International, 53(11), Age Group > 30 16 STM and EM
3989.
Age Group 50 or More 25 STM and EM
Pedersen, L. B. (1991). The effects
of organization downsizing on the
survivor work force: An investigation of
Table 8
the effects of layoff process on work
performance of those who remain Correlations That Did Not Achieve Significance at the .01 Level
within the organizational system (Nova
University, 1991). Dissertation Abstracts When a Single Demographic Group Was Excluded
International, 52(08), 1986.
Senge, P. M. (1990a). The fifth Excluded Group Name
discipline: The art and practice of the (all except the group) Group Size (N) Constructs
learning organization. New York:
Doubleday. Years with Company 11-20 156 JIM and STM
Senge, P. M. (1990b, Fall). The Age Group 40-49 187 STM and EM
leaders’ new work: Building learning
organizations. Sloan Management Males 24 STM and EM
Review, pp. 7-23. Years with Company 5-10 249 JIM and EM
Wagner, J. D. (1996). Effects of
downsizing on organizational develop- Years with Company 11-20 156 JIM and EM
ment capabilities at an electric utility. Years in Position 1-3 189 JIM and EM
Unpublished master’s thesis, Northern
Illinois University, DeKalb. Years in Position > 6 270 JIM and EM

Age Group 40-49 187 JIM and EM

Age Group 50 or more 187 JIM and EM

Males 24 JIM and EM