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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

1

devel.’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. It activities were being performed concur. job changes. likelihood of losing job feature. Lee. and variables emerged as significant predic- “There is no significant correlation mergers. The McCarthy study is relevant organization where cultural-shift Literature Review to the study being reported here. substantiates several of Ashford et al. also validates the use of the Ashford et organizational members simply seem to importance of job loss.’s Job learning. The reviewed: employee job insecurity. p. And. and a five components: importance of job insecurity and organizational change. Ashford. learning measure of job insecurity. ees. continue for their career or job life. and relocation. Ashford et al. the author is also a full ingrained in its employees. likelihood of job al. However.organization attributes and the to job insecurity is an overlooked aspect Insecurity Scale. In her study. and that a This study was submitted as a thesis where this study was completed envi. Number 1 • November 1998 to Januray 1999 Downsizing Effects on Organizational Develop- ment Capabilities at an Electric Utility Mr. Department of Technology at Northern culture is primarily static in nature. his results indicated that both this study was to determine if a relation. three measure of entitlement mentality. It also “There is no significant correlation organizations. 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. 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. and entitlement mentality. rity. and perceived powerlessness. trust in organization. scheduled promotions. The only previous attempt at tors of job insecurity: management between the measure of job insecurity developing a multidimensional job level. The electric utility change and role ambiguity. 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. This descriptive study in a merger environment. Job Insecurity Scale and methods. feature. 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. Using this model. McCarthy (1993) used Ashford et Illinois University.’s organizational culture shift in an study. Jerry Wagner is currently seeking Mr. it did not addition. The authors reported that important to this study. insecurity model seems to be the 1984 studies are available in the literature. Braidwood Nuclear Power Plant in and job satisfaction. 6). Greenhalgh and Rosenblatt study Based on the review of literature in this Entitlement mentality is often referenced by Ashford et al.” and of downsizing. Other and the measure of entitlement mental. 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. in commitment. degree of organizational change and the study focused on three hypotheses: organizational downsizing. Journal of Industrial Technology • Volume 15. it seems that over time. 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.’s Job Insecurity Scale as a measure- graduate student. restructuring. 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. Four areas of literature were suggests a relationship between the rently with downsizing efforts. The purpose of electric utility. Lee (1992) 2 . ity” (Wagner. However. become “entitled” or to expect this to loss. 1996. He reported Nuclear Power Plant in Braceville. They also reported Braceville. further validating Ashford et al. In addition to being a the entitlement mentality is deeply al. Downsizing ment tool for his study of job insecurity time employee of the Braidwood is taking place. Currently its control outcome.” “There is no signifi. area. Illinois. It secure job. 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. In project management. (1989).

approval creates the conditions that expense-reduction goals. The systems- ambiguity reported a decline in work difficult to see the whole pattern. a consummately adaptive enter. new position. Senge writes ated throughout the various companies shift capabilities. nothing. “Manag. 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. a companies had downsized three to five 54). It would ment” (p. systems thinking and. competence or ability to perform in the in implementing downsizings may tend pany and argued that the key to long. Duron (1994) reported that downsizing systems that control events. leaders believed in continuous improve. remaining 15% is for learning the combined with timely communications ers have to encourage workers’ experi. p. Senge (1990b) also of time in the current position instead of also appear that management methods referenced a study by Shell Oil Com. He further argues that conducted by Wyatt Co. Senge (1990a) argued employees a basic understanding of the survivors. There were neither policies society are oriented toward controlling nor programs in place to minimize the Learning Organizations not learning. that create potential new sources of downsizing and a ripple effect reverber.005 companies met their something called a learning organiza. Also. erative learning requires seeing the inclusion into a systemic construct. “The most successful natural curiosity. Springfield Remanufacturing Corpora- of layoffs on work performance of Denton and Wisdom (1991) tion where employees are told that 85% engineers.. predestine corporations to mediocre met their profit goals. entitlement consequences of the downsizing event. it appears that there is lenge the same old way and had a belief produce. (1991) where organizations in the 1990s will be focusing on obtaining someone else’s 46% of 1. with workers who think for performance. they are impact on employees than the negative Hewlett-Packard study of 170 managers owed it. multiple downsizings coping. depen- 3 . 1990a. ment mentality as an attitude. and the best we can ever do identifies those who possess this attitude tion. identify problems and proving” appears to be a detriment to investment. When we correlated negatively with both morale fail to grasp the systemic source of Entitlement Mentality and productivity variables. a cultural shift. This focus on “worth increased their shareholders’ return on themselves. is adaptive learning” (Senge. less than 33% tion. Those years for the effects to be fully realized. 69). and only 21% prise. Denton and Wisdom referenced a not have to earn what they get. ing causes. referenced Hayes of the Harvard of their pay is for doing their job and the based work-force reduction policy Business Schools who stated. while not all-encompassing quotas and that restructuring requires why problems never get solved. endeavors are systems bound by fabrics good understanding of how interdepen- In 1994. as such. enabling the organization to that business as well as other human whole management area to develop a get back on track. security that they are not required to downsizing. They keep their jobs and get adequate evidence to conclude that a that things could be done better. a transition from adaptive to generative learning organization. Senge (1990a) further clarified measure of the degree of this trail would years before this study. ability to “run experiments in the zation described by Bardwick include morale. communica. She of clarity of expectations. it is constructs with studies. They cite the Pedersen (1991) studied the effects learning. business. The literature further downsizing on middle managers. ship between downsizing and cultural. He reported that a merit. not number snapshots of isolated parts. measures. seem to be suitable traits for new roles to be clearly defined. 71).these regular raises whether they do well or relationship exists between organiza. She also problems. we are left to push on Bardwick (1991) describes entitle- reported that the management practices symptoms rather than eliminate underly. and go after them” (p. Journal of Industrial Technology • Volume 15. and organizational perception. “Gen. 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. especially the lack of as on adaptive learning that is about Denton and Wisdom (1991) also policies. margin. and recognition correlated posi. 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. and toward rewarding for negative effects of cutting back. 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. supports Senge’s philosophies and perceiving a significant role change or Since the individual is part of it. and argued that the most effective exists when people have so much Based upon the literature review on managers “had a willingness to chal. Eighty-six percent of these opportunities. that the primary institutions of our for months. 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. and thinking traits (those mentioned above performance. In the work place. He cited a study (1989) who said. Promotions are based on length tional downsizing and morale.. growth” (p. to continually explore new high levels of risk avoidance. as individuals who believe that they do tively with morale and had a greater 8). This addresses the need many individuals tend to focus on and others not mentioned for the sake of for reduction by design. wondering brevity). 7). Finally. Johns studied the effects of of interrelated actions that may take dent the world is. 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.

The JIM was an abbreviated version apathy. Two questions on traits without overloading on one that they were appropriate for an the questionnaire were used to obtain particular characteristic.” “chaotic. was accepted for the study being after deregulation. consisting multiplying the powerlessness assess. worth proving. For each of Southwest Missouri State University. person perceives that the organization The remaining four questions repre. Professor. These correla. trust. were taken to maximize reliability. The of Ashford et al. “short-sightedness” were used to was a maximum of 20. gender. The results of a single-interval data number. The usable return introductory letter to all management factors in the correlation between the rate was 78%. population and with stratification using cance at the . after the initial study where employees were asked to charac. and vidual JIM component. “Insecure. found for various groups and are (STM). noted authors. importance factors in determining the constructs were completed. signifi- There were three construct vari. and a maximum of 1. (b) JIM with EM. were made accordingly. indicate a high measure of job insecu. at the . and a minimum of four. the review were positive. an individual is apprehensive about the ten items. Department of Leadership and Systems. sity. size of owes the individual security. and the EM was found to be significant required participants to answer the and (c) STM with EM. and no move beyond blame.” and questions. Department of Management.01 level for the same group. A response rate scattergrams to determine if a curvilin. The following level when computed for the entire pound questions that resulted in a total elements were correlated: survey. as well as the scatter plots. Refinements role to learning organization. maximum of 35. There current position. ployed purposive sampling techniques organizational culture shift. A small pilot Systems Thinking Measure. A response rate of 50% was The results were plotted on Results determined adequate. station. The ten indi. the JIM. made using both the total response single demographic variable. employees at an electric-generating three constructs. The survey contained 19 Pearson r correlation method was both found to be significant at the . and 3. “ caring. and Entitlement Mentality (EM). used to determine the degree to which future occurrence” value. Several single demographic variable 4 . Based on researcher observations mentality. The JIM was obtained by in participant selection. informal tenure. which would indicate a low degree of was given to ensure the adequacy of tics also fit the utility under study and entitlement mentality. Job Insecurity Measure. Careful consideration it was determined that these characteris. (LV) to obtain a measure of an indi. 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. A construct them and then supply “a likelihood of Professor.001 and . from static lessness. were also four demographic variables. Northern Illinois Univer- organization. A one-time response (a) JIM with STM. Several steps were taken pany. 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. Correlation of the pilot study. The correlation between the JIM of 75% was required to preclude the ear relationship existed. thus its validity terize their company both before and strong resistance to systems thinking. the importance value (IV) Joseph Yaney. cites a study performed at a utility possible range of STM scores was a Several studies. These questions required respon. perceived likelihood of occurrence. they were For the purpose of this study. perceived degree of powerlessness into vidual JIM components were then San Jose State University. 2. shared vision. combining importance. Department of losing his/her present position in the was multiplied by the likelihood value Management. which would indicate attested to its validity. A construct rity. and William Reckmeyer. Job Insecurity Measure (JIM). The Although reliability measures are teamwork. 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. were When the data were stratified by a personal experiences and attitudes. which would The traits of the constructs were characterize the company after deregu. four of which were com. indicate a high degree of entitlement selected by a review of the works of lation. rules and rule checkers. innovation. and a minimum of 10. which would reliability were used.’s Job Insecurity Scale. complacency. years with company. and time in summarized in Tables 1. There were four EM present study. The correlation between the JIM of 35 answers. and specifying assigned ordinal values. Journal of Industrial Technology • Volume 15. specific statistical measures for Entitlement Mentality. which would presented here. The possible range of scores to establish construct validity for both. These variables a 75% response rate. She There were seven STM questions. forwarded to three subject-matter following terms were defined: dents to assign an importance factor to experts for review: Barry Wisdom. possible range of scores for the JIM was not generally designed for a one-time. which would self-report attitudinal survey. Number 1 • November 1998 to Januray 1999 dence. summed to produce a preliminary JIM.001 questions. deemed appropriate. focus on whole. sented demographic variables and were the sample population.” and “loyal” indicate a high degree of acceptance of constructs were developed for the were used to describe the “old” com.01 levels were ables: Systems Thinking Measure the four demographic variables of age.” “fear. Words such as and a minimum of 7. After the entitlement mentality measure construct.250. systems thinking. questions based upon their present tions. of seven traits: cross-department ment (PA) by the preliminary JIM. Professor. several measures used to determine the degree to which a indicate a low measure of job insecurity. The STM and EM “family oriented.

01 demographics almost always achieved production industry which was experi- level of significance with 30 degrees of significance at . for the . The exclusions were made at both the single demographic variable Females 22 .001 As an additional measure of data Years in Position 4-5 81 . These groups had correlation coeffi. significance at the .01 level. Number 1 • November 1998 to Januray 1999 groups showed significance. Table 8 displays the results of those groups failing to achieve JIM to EM Correlations at . A t that did not exclude either of these The organization was an electricity- value of 2. of entitlement mentality because of the and EM at the three demographic always resulted in a correlation between nature of the regulated monopoly.01.01 level when a single demographic group was ex. However. 49” or “males” in combination with any organization possessed a certain degree tion level. Years with Company 11-20 165 . to develop prediction learning organization.01 level. Table 9 contains the possessing several characteristics would always resulted in a correlation between equations by which STM can be show significance.667. Journal of Industrial Technology • Volume 15. single-level demographic group and different demographic variables with 20” demographic. at the . using two demographic variables exclusion affected significance for the stratification failed to achieve signifi. late the electric markets. All significance at the . The long era of the regulated monopoly to a correlations of the JIM and STM at the exclusion of either the “age group 40.01 graphic variables and three demographic 5 . correlation between JIM and STM as Summary and Conclusions cance at the . culture.01 or Above no correlation are included in Table 7.01 exclusions made by demographic Males 297 .01 analysis. Specifically the population as well as stratifying by a cation was performed using two exclusion of the “years in company 11. in combination with excluding by a single.01 group. When used organizational culture shift at an STM correlation.01.” When used in two This study was designed to test for demographic stratification using “and” demographic-groups’ exclusion correla. It also summarized in Tables 4 and 5. significance.750 was required for the .01 level.01 level of significance. 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 . Group Name Group Size (N) Level cluded from the sample population.level demo- “and” logic to determine if groups any other demographic group or groups.01 or above. encing a period of rapid transition as freedom. It was felt that members of the three demographic variables stratifica. Finally. Correlations between JIM and STM concurrently with downsizing efforts.01 level was identified for three sion also possessed patterns. graphic group. the groups showed formed. a starting point was that of a static-role tions that failed to achieve significance linear regression analysis was per.110. Correla. The results were compiled moderately low correlations that could have been significant had the group Table 1 been of adequate size. close. A three. To further variables stratifications yielded several using the data for the entire sample explore the sample population. the undesirable graphic variable stratification correla.and three- demographic variables levels using Table 2 “and” logic.001 level as well as at the two. at and three demographic groups’ exclu. An analysis of the correlation Years in Position 1-3 132 . The results are JIM and STM that failed to achieve predicted from the JIM or EM. correlations between the three constructs were performed with Age Group 40-49 134 . The demo- graphic groups that exhibited virtually JIM to STM Correlations at .01 or Above significance at the . While overall tions. the presence of a relationship between logic was performed. cultural shift was toward that of a For most of the single demo. the computed t value results tions between STM and EM using two market forces were working to deregu- were 2. for the specified correlations. stratifi. The variables stratification level. and two correlations of STM other demographic group or groups. positive or negative.01 level. bringing the the .variable “age group 40-49. the reduction of N to in three demographic groups’ exclusion. The results STM and EM that failed to achieve desired direction of the organizational are in summarized in Table 6. repeating patterns. The only shows the calculated standard error of correlations between the JIM and EM other demographic group shows estimate.01 results when excluding by two demo- Males 297 . four of nine correlations failed to job insecurity and resistance to an correlation increased for the JIM to achieve significance at . equations based on the survey data. Group Name Group Size (N) Level cients of less than .

results of correlation (when stratified ship between job insecurity and systems thinking.01 827-829. Age Group 40-49 55 . Journal of Industrial Technology • Volume 15.001 results clearly indicate that the three Years with Company 11-20 and variables. 1-3. years in Group Name Group Size (N) Level current position. Number 1 • November 1998 to Januray 1999 Significance at the . 4-6.01 quantitative assessment of the character- Years in Position 4-6 and Male 78 . 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. New York: Age Group 40-49 and Male 123 .01 or Above members. P. 6 ..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 . 11-20. Years in current Table 3 position.001 present study may be useful for the prediction of organizational acceptance Years with Com Ed 11-20 and Male 155 . 11-20.01 systems thinking and entitlement. are Age Group 30-39 92 . M.01 assessed.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. Lee..01 References Years with Company > 20 and Ashford. (1991). & Bobko. and gender of male were found significant for the relationship STM to EM Correlations at . the Age Group 40-49 66 . Age Group 40-49 36 . 1-3. C. the conclusions of this study— that is.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 . and was found significant at the . Years in Position 1-3 and Male 123 . Content. The relationship by that group) were found significant found for the relationship between job between job insecurity and entitlement were also identified. J. Demographic position. 32.01 formed.001 AMACOM. and gender of male were found significant for the relationship between Years in Position 1-3 132 . While the contribution of job insecurity and entitlement mentality.01 Bardwick. job insecurity and entitlement Table 5 mentality affect receptiveness to learning organizational attributes— may Two-Group STM to EM Correlations at . The equations in Table 9 can serve as the basis for prediction if a Years in Position 1-3 and Female 8 . Group Name Group Size (N) Level when used as a predictor for resistance to an organizational shift. Age Group 40-49 134 . S. Years with company.01 level company. Years with Company 11-20 and Age Group 40-49 66 . Years with insecurity and systems thinking. account for Years with Company 11-20 and only a fraction of the variance. If only a qualitative assessment has been per- Age Group 30-39 and Female 8 .001 based measure and substantive test.001 The study provided evidence that the possession of either a high degree of Males 297 . Danger in the comfort zone.01 (1989). as defined for the study.01 related. years in current also for the relationship between for the same group.” Years with Position 1-3 and Academy of Management Journal. The information obtained in the Years with Company 11-20 and Years in Position 1-3 75 .01 istics has been performed. causes.001 49. age range of 40- Years with Company 11-20 165 . and conse- quences of job insecurity: A theory Years with Company 11-20 and Male 155 .001 level was sponse population.01 or Above between job insecurity and entitlement.

(1993). The learning organization involves the entire work Correlations Significant at . 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 7 . Dissertation Abstracts Age Group 40-49 and Male 52 STM and EM International. Age Group 50 or More 25 STM and EM Pedersen. 1994). December). Quality Progress. Dissertation Abstracts When a Single Demographic Group Was Excluded International. Disserta- tion Abstracts International. 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 . The Age Group 40-49 187 STM and EM leaders’ new work: Building learning organizations. After the cuts. Years with Company 11-20 and 4953. July 3). Number 1 • November 1998 to Januray 1999 Denton. Fall). (1989. Validation of the job insecurity scale in a merger Years in Position < 1 56 JIM and EM environment (Doctoral dissertation. Journal of Industrial Technology • Volume 15. New York: Doubleday. Northern Illinois University. N. Years with Company 5-10 249 JIM and EM Wagner. 1994). L. 54(09). (1992. J. The reliabil. 69-72. 1986. Senge. 54(08). DeKalb. 3915. M. Lee. Years with Company 5-10 70 JIM and STM Training. 53(11). B. (1994). Age Group > 30 16 STM and EM 3989. L. (1990a). 4429. Sloan Management Males 24 STM and EM Review. Table 6 (1991. B. (1994). Years with Company > 20 49 JIM and STM McCarthy. Years in Position 1-3 and sity. Temple Univer. S. (1996). (1990b. M. S. Fortune. 52(08).01 for Groups Stratified at the Three Demographic Variable Levels force. Group Name Group Size (N) Constructs p. Age Group 40-49 and Male 61 STM and EM quences in downsized organizations (Doctoral dissertation. 55(12). 1991). C. Years with Company 11-20 156 JIM and STM Senge. July). Years with Company 11-20 and Years in Position 1-3 and Male 71 JIM and STM Golden State University. Age Group < 30 16 JIM and STM University of LaVerne. Age Group 40-49 and Male 61 JIM and STM Johns. 17-23.. P. K. 1994). Years with Company 11-20 156 JIM and EM ment capabilities at an electric utility. Middle manag- Years with Company 11-20 and ers’ perceived role changes and conse. Dissertation Abstracts Group Name Group Size (N) Constructs International. M. D. Years with Company < 5 and Duron. 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. 7-23. J. pp. Disser- tation Abstracts International. (1994). Effects of downsizing on organizational develop. pp. What the leaders or tomorrow see. Dumaine. I. P. (1991). A. pp. 54. 1993). D. B. Koesterer. The reality of Years in Position 1-3 and Male 10 JIM and STM downsizing: What are the productivity outcomes? (Doctoral dissertation. Years in Position 1-3 189 JIM and EM Unpublished master’s thesis. The fifth Excluded Group Name discipline: The art and practice of the (all except the group) Group Size (N) Constructs learning organization. & Wisdom.01 Level within the organizational system (Nova University.