Skip to main content Accessibility help

When responsible downsizing strategy meets employee-oriented leadership: Implications for downsizing performance

  • Philip Cheng-Fei Tsai (a1) and Chih-Ting Shih (a2)


This study examines whether a responsible downsizing strategy and employee-oriented leadership are complementary in strengthening firm performance after downsizing. This study investigated 154 firms that have used an organizational downsizing strategy with surveys and follow-up focus groups. Results of both the empirical evidence and qualitative data demonstrates that for firms adopting an employee-oriented leadership style, the level of responsible downsizing strategy is high and firm performance is significantly increased. Specifically, the results of the focus groups indicate that a responsible downsizing strategy deepens the loyalty and faith of employees to their employer. These theoretical and practical implications are also discussed.


Corresponding author


Hide All
Aiken, L. S., West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park, CA: Sage.
Appelbaum, S. H., Everard, A., Hung, T. S. (1999). Strategic downsizing: Critical success factors. Management Decision, 37(7), 535552.
Arthur, J. B. (1992). The link between business strategy and industrial relations system in American steel mini-mills. Industrial & Labor Relations Review, 45(3), 488506.
Bass, B. M. (1985). Leadership and performance beyond expectations. New York, NY: Free Press.
Battilana, J., Gilmartin, M., Sengul, M., Pache, A.-C., Alexander, J. A. (2010). Leadership competencies for implementing planned organizational change. Leadership Quarterly, 21(3), 422438.
Beam, H. H. (1997). Survivors: How to keep your best people on board after downsizing. Academy of Management Executive, 11(2), 9294.
Bennis, W., Nanus, B. (1985). Leaders: The strategies for taking charge. New York, NY: Harper and Row.
Blake, R. R., Mouton, J. S. (1965). The managerial grid. Houston, TX: Gulf Publishing Company.
Brockner, J. (1988). The effects of work layoffs on survivors: Research, theory and practice. Research in Organizational Behavior, 10, 213255.
Brockner, J., Spreitzer, G., Mishra, A., Hochwarter, W., Pepper, L., Weinberg, J. (2004). Perceived control as an antidote to the negative effects of layoffs on survivors’ organizational commitment and job performance. Administrative Science Quarterly, 49(1), 76100.
Brockner, J., Wiesenfeld, B. M., Reed, T., Grover, S., Martin, C. (1993). Interactive effect of job content and context on the reactions of layoff survivors. Journal of Personality and Social Psychology, 64(2), 187197.
Budros, A. (1999). A conceptual framework for analyzing why organizations downsize. Organization Sciences, 10(1), 6982.
Cameron, K. S. (1994). Strategies for successful organizational downsizing. Human Resource Management, 33(2), 189211.
Cameron, K. S., Freeman, S. J., Mishra, A. K. (1993). Downsizing and redesigning organizations. New York, NY: Oxford.
Carmeli, A., Sheaffer, Z. (2009). How leadership characteristics affect organizational decline and downsizing. Journal of Business Ethics, 86(3), 363378.
Cascio, W. F. (1993). Downsizing: What do we know? What have we learned? Academy of Management Executive, 7(1), 95106.
Cascio, W. F. (2002). Strategies for responsible restructuring. Academy of Management Executive, 16(3), 8091.
Cascio, W. F., Wynn, P. (2004). Managing a downsizing process. Human Resource Management, 43(4), 425436.
Chadwick, C., Hunter, L. W., Walston, S. L. (2004). Effects of downsizing practice on the performance of hospitals. Strategic Management Journal, 25(5), 405427.
Chien, Y.-F. (1994). Reconsideration on Integrating Qualitative and Quantitative Research Methods. National Cheng-Chi University Review, 68, 116.
Cho, J., Dansereau, F. (2010). Are transformational leaders fair? A multi-level study of transformational leadership, justice perceptions, and organizational citizenship behaviors. Leadership Quarterly, 21(3), 409421.
Datta, D. K., Guthrie, J., Basuil, D., Pandey, A. (2010). Causes and effects of employee downsizing: A review and synthesis. Journal of Management, 36, 281348.
Delery, J. E., Shaw, J. D. (2001). The strategic management of people in work: review, synthesis and extension. Research in Personnel and Human Resources Management, 20, 165197.
De Meuse, K. P., Marks, M. L., Dai, G. (2011). Organizational downsizing, mergers and acquisitions, and strategic alliances: Using theory and research to enhance practice. Vol. 3: Maintaining, expanding, and contracting the organization. In Zedeck, S. (Ed.), APA handbook of industrial and organizational psychology (pp. 729768), Washington, DC: American Psychological Association.
Dimaggio, P. J., Powell, W. W. (1983). The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48, 147160.
Filatotchev, I., Buck, T., Zhukov, V. (2000). Downsizing in privatized firms in Russia, Ukraine, and Belarus. Academy of Management Journal, 43(3), 286304.
Fisher, S. R., White, M. A. (2000). Downsizing in a learning organization: Are there hidden cost? Academy of Management Review, 25(1), 224251.
Freeman, S. J. (1999). The gestalt of organizational downsizing: Downsizing strategies as package of change. Human Relations, 52(12), 15051541.
Gowing, M. K., Kraft, J. D., Quick, J. C. (1998). The new organizational reality: Downsizing, restructuring, and revitalization. Washington, DC: American Psychological Association.
Hodgetts, R. M. (1996). Leadership in the midst of downsizing. Organizational Dynamics, 25(1), 7278.
Hu, L. T., Bentler, P. M. (1998). Fit indices in covariance structure modeling: Sensitivity to underparameterized model misspecification. Psychological Methods, 3(4), 424453.
Jung, D., Yammarino, J., Lee, J. K. (2009). Moderating role of subordinates’ attitudes on transformational leadership and effectiveness: A multi-cultural and multi-level perspective. Leadership Quarterly, 20(4), 586603.
Krueger, R., Casey, M. (2000). Focus Group: A Practical Guide for Applied Research, Thousand Oaks, CA: Sage Publications.
Likert, R. (1979). From product and employee centeredness to system 1-4. Journal of Management, 5, 147156.
Lippitt, R., Lippitt, G. (1984). Human downsizing: Organizational renewal versus organizational depression. Advanced Management Journal, 7, 1521.
Love, E. G., Kraatz, M. (2009). Character, conformity or the bottom line? How and why downsizing affected corporate reputation. Academy of Management Journal, 52(2), 314335.
Lowe, K. B., Galen, K. K. (1996). Effectiveness correlates of transformational and transactional leadership: A meta-analytic. Leadership Quarterly, 7(3), 385425.
Lowe, K. B. (1998). Downsizing and firm performance: panacea or paradise lost? Academy of Management Executive, 12(4), 130131.
Mckee-Ryan, F. M., Kinicki, A. J. (2002). Coping job loss: A life-facet perspective. International Review of Industrial and Organizational Psychology, 17, 129.
McKinley, W., Sanchez, C. M., Schick, A. G. (1995). Organizational downsizing: Constraining, cloning, learning. Academy of Management Executive, 9(3), 3244.
Millward, L. J., Brewerton, P. M. (2002). Psychological contracts: Employee relations for the twenty-first century? International Review of Industrial and Organizational Psychology, 15, 161.
Muñoz-Bullon, F., Sanchez-Bueno, M. J. (2011). Does downsizing improve organizational performance? An analysis of Spanish manufacturing firms. International Journal of Human Resource Management, 22(14), 29242945.
Naumann, E. S., Bies, J. R., Martin, L. C. (1995). The roles of organizational support and justice during a layoff. Academy of Management Journal, Special issue, 8995.
Naumann, E. S. (1998). Laid off, but still loyal: The influence of perceived justice and organizational support, International Journal of Conflict Management, 9(4), 356368.
Podsakoff, P. M., MacKenzie, S. B., Lee, J. Y., Podsakoff, N. P. (2003). Common Method Biases in Behavioral Research: A Critical Review of the Literature and Recommended Remedies. Journal of Applied Psychology, 88(5), 879903.
Porter, M. E. (1980, 1985). Competitive Strategy, New York: Free Press.
Reddin, W. J. (1970). Managerial effectiveness. New York, NY: McGraw-Hill.
Rigby, D. (2002). Look before you lay off. Harvard Business Review, 80(4), 2021.
Seligman, M. E. P. (1998). Learned optimism (2nd ed.). New York, NY: Simon & Schuster.
Shah, P. P. (2000). Network destruction: The structural implications of downsizing. Academy of Management Journal, 43(1), 101112.
Sherer, P. D., Leblebici, H. (2001). Bring Variety and Change into Strategic Human Resource Management Research, Research in Personnel and Human Resources Management, 20, 199230.
Smith, B. T. (2001). Downsizing: The survivor syndrome and proactive leadership: A review of the literature. Journal of Hospital Librarianship, 1(2), 9396.
Sutton, R. I. (2009). How to be a good boss in a bad economy? Harvard Business Review, 87(6), 4250.
Tsai, P. C. F., Yen, Y. F. (2008). A model to explore the mystery between organizations’ downsizing strategies and firm performance: Integrating the perspectives of organizational change, strategy and strategic human resource management. Journal of Organizational Change Management, 21(3), 367384.
Tsai, P. C. F., Shih, C. T. (2013). The role of labor union negotiations in responsible downsizing: Stepping stones or stumbling blocks? International Journal of Human Resource Management, 24(3), 601620.
Vigoda-Gadot, E., Beeri, I. (2012). Change-oriented organizational citizenship behavior in public administration: The power of leadership and the cost of organizational politics. Journal of Public Administration Research and Theory, 22(3), 573596.
Walter, F., Bruch, H. (2010). Structural impacts on the occurrence and effectiveness of transformational leadership: An empirical study at the organizational level of analysis. Leadership Quarterly, 21(5), 765782.



Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed