drive their behavior and that customers experience these attitudes and behaviors either directly, in the case of service organizations, or indirectly, through the quality of goods they purchase. Because employee satisfaction, whether it is influenced by or is a determi- nant of service quality (Heskett, Jones, Loveman, Sasser, & Schles- inger, 1994; Rucci, Kirn, & Quinn, 1998; Wiley, 1996), influences their behavior and performance, plummeting morale and disen- chantment following downsizing activities make it less likely that such important organizational outcomes as customer satisfaction, loyalty, and revenue growth will be realized. Downsizing initiatives also can break down communication and information sharing, potentially limiting the flow of informal information (tacit knowl- edge) about how to handle certain customers or suppliers (Hilsen- rath, 2001). Organizational Reputation Although there is a tendency to use job cuts as a short-term response to economic turbulence, a layoff decision can have long-term reper- cussions for the image and reputation of the organization. Firms that are perceived to use downsizing to increase an already ade- quate profit margin risk developing a negative reputation (Van Buren, 2000). The media openly question the wisdom of such de- cisions, running headline stories on corporate “killers” and “exe- cutioners,” often with pictures of chief executive officers (CEOs) alongside the number of layoffs undertaken by their firms. Implicit in many of these stories are links between such mass firings and CEO compensation, suggesting that top executives continue to re- ceive huge bonuses for putting people out of work (Boroshok, 2001; Van Buren, 2000), which further contributes to a negative image of these companies and their senior management. Even small businesses, which in the past have resisted the pressures to downsize, are creating resentment by trimming their workforces (Bailey, 2001), which will make it difficult for them to reattract workers in more prosperous economic times. Once a company begins to develop a negative reputation, it is extremely difficult to improve its image. Advertising campaigns aimed at enhancing public awareness and the reputation of such firms often are seen as little more than public relations gimmicks (Alsop, 2001). Because the reputation of a company is an important THE HIDDEN COSTS AND BENEFITS OF ORGANIZATIONAL RESIZING ACTIVITIES 321 TEAMFLY Team-Fly ® 322 RESIZING THE ORGANIZATION factor in how people relate to that organization—from the will- ingness of consumers to purchase its products, to the attractiveness of the company as a place to work—a negative image can take its toll on a company for years, even decades (Alsop, 2001; Dunham, 2001). Rampant downsizing decisions also appear to be contributing to a growing movement among labor activists, especially in indus- tries where there has been little unionization initiative. In Seattle, for example, the ongoing cutbacks in e-commerce and the tele- communications industry have prompted the Washington Alliance of Technology Workers to focus more of its attention on organiz- ing employees at Amazon.com and Microsoft (Shadid, 2001). Both companies enjoyed stellar reputations during the economically prosperous 1990s, but recent cutbacks have begun to raise ques- tions about the true values of the companies, giving union activists the opening for which they have been looking. At the Societal Level The continued emphasis on organizational retrenchment through cutbacks, serial layoffs, and downsizing initiatives is undermining the traditional social contract that the business system has had with the workforce and its surrounding communities (Cooper, 1997; Dudley, 1994; Murray, 1995; Watson, Shepard, & Stephens, 1999). Many critics contend that the social contract—the reciprocal as- sumption that successful companies will provide continuing em- ployment for competent organizational members—is eroding as firms that are seen as profitable continue to lay off employees re- gardless of their performance. Many companies are perceived as closing profitable operations in search of greater profitability else- where. The results reflect the increasingly tenuous nature of mod- ern employment, where community obligation is undermined and many of the ties that bind the larger society are disrupted (Don- aldson & Dunfee, 1999; Miller, 2001). Downsizing often has significant dysfunctional effects on indi- viduals losing their jobs, a problem magnified at the societal level as the number of downsizing victims grows. Marriages, families, and communities are all vulnerable to the devastating effects of mass layoffs, especially as rising unemployment creates even greater pressures on those losing their jobs. Poorly managed down- sizing initiatives further contribute to discontent and disillusion- ment with our business system and a growing cynicism that is fur- ther associated with general increases in withdrawal and aberrant behavior, to the point of overt violence in the workplace (Griffin, O’Leary-Kelly, & Collins, 1998; Kanter & Mirvis, 1989; Robinson & Greenberg, 1998). A Detached Citizenry Social critics suggest that the rush toward continuous change and continual flexibility in our organizations contributes to a pervasive sense of irony in our lives. The resultant “ironic” person, as elo- quently captured by Sennett (1998), is one who engages in “deep acting” rather than genuine behaviors that promote cohesion and community. The cost of continually letting go of the attachments we have, which is the essence of the resized, flexible organization, contributes to a mentality of withdrawal and detachment. A situa- tion surfaces where we do not take ourselves sufficiently serious to question, much less challenge, existing power arrangements and relationships. An outcome is an unwitting adoption of what might be thought of as a postmodern worldview. It is a mentality that might accurately capture the realities of downsized organizations but offers little in the way of creating a meaningful narrative re- garding our lives in the workplace (Leana, 2000). Given the traditional role of work as a central life interest in our society (Anderson, 1964; Morse & Weiss, 1955), the resulting void contributes to increased cynicism, social distance, and emo- tional detachment among a growing number of people as they struggle with the loss of their jobs, their positions, and, for many, their identity in what feels like an anchorless world. Thus, a sig- nificant portion of the population appears to be retreating from idealism and involvement in favor of the virtue of being realistic in an increasingly impersonal, detached society (Kanter & Mirvis, 1989; see also Reichers, Wanous, & Austin, 1997). Executive Health and Weakened Organizational Contributions to Society Some observers argue that executive health is a key factor in safe- guarding the wealth of a nation, since top management is directly linked with organizational success and, by extension, the creation of wealth (Quick, Gavin, Cooper, & Quick, 2000). While the pressures THE HIDDEN COSTS AND BENEFITS OF ORGANIZATIONAL RESIZING ACTIVITIES 323 324 RESIZING THE ORGANIZATION and demands of leading a corporation carry their own burdens and related health risks, this stress can be exacerbated by the transition- based difficulties associated with organizational resizing initiatives. Resizing can further disconnect key executives, who are already isolated due to the confidentiality requirements of their jobs, which can have a further impact on the financial and emotional well- being of a company and undermine its contributions to the larger society (Quick et al., 2000; Worrell, Davidson, Chandy, & Garrison, 1986). The Benefits of Resizing: Goals, Objectives, and Challenges The downsizing era has created a myriad of problems and associ- ated costs in an effort to shore up short-term performance. The ideal underlying resizing, in contrast, is to move an organization to a new state of well-being, concentrating on seeking an appro- priate size and organizational focus rather than on how much to cut. The underlying challenge is a far more difficult task than sim- ply restoring the firm to its previous healthy state. Key foci that are part of this process concern organizational competence (ensuring appropriate know-how and expertise), connection (the sense of belonging and involvement that people develop through interac- tion with peers, bosses and the organization as a whole), and com- mitment (the psychological contract that binds the individual and the organization together; Caplan & Teese, 1997). The goal should be to align workforce reductions with concomitant changes in or- ganizational structure, roles, and responsibilities. Rather than view- ing such change as a short-term fix, a key challenge is to integrate resizing decisions into a thoughtful, well-crafted, credible vision that clarifies how the requisite changes will revitalize the firm, en- suring that it keeps pace with environmental change, creating or restoring competitive advantage (Mishra et al., 1998). In an era of rapid technological change, resizing is often cru- cial for organizational survival, especially for companies faced with technological innovations in production processes or products that abruptly alter basic industry dynamics (Anderson & Tushman, 1990; Edwards, 2000). Because such technological discontinuities can ac- celerate the obsolescence of worker skills and capabilities, organi- zations are faced with the decision to reskill or downsize their work- force. Some of these changes are competence enhancing, allow- ing the organization to build on existing techniques and skills to improve organizational performance. Competency-destroying dis- continuities, in contrast, create a different reality where organiza- tional survival depends on concomitant changes in the application of and response to the new technology, which often included re- allocating resources, reengineering work processes, and resizing organizational functions (Tushman & Anderson, 1986). Especially if radically changing technologies require fewer workers to pro- duce equivalent or even greater amounts of output, a reduction in force is necessary to avoid an uneconomical, inflated workforce. Failing to resize in such environments can readily place the orga- nization at a competitive disadvantage, since the cost of maintain- ing unnecessary workers and functions creates a substantial drain on the organization’s resources (Edwards, 2000). It is important to remember that many of the negative out- comes associated with downsizing are related to poorly planned and poorly implemented programs that attempt to use a reduction in force as a short-term fix for longer-term organizational prob- lems. However, organizational resizing initiatives do not have to be unduly painful. By taking a holistic approach to creating and im- plementing appropriate strategies to guide the process, organiza- tions can improve the probability of creating a healthy, committed workforce and successful organization. By building on our under- standings of the limitations of traditional approaches to downsiz- ing, resizing can present a number of benefits at the individual, organizational, and societal levels. At the Individual Level The focus of resizing on developing new skills and investing in or- ganizational members bodes well for those individuals and groups that remain a critical part of the organization. While much of the attention on downsizing is placed on the negative impact that such change can have on individuals and their careers, a critical element of resizing is identifying and nurturing talent, building leadership and change-related skills, and empowering these individuals with the appropriate authority and responsibility to make job-related THE HIDDEN COSTS AND BENEFITS OF ORGANIZATIONAL RESIZING ACTIVITIES 325 326 RESIZING THE ORGANIZATION decisions (Hitt et al., 1994). As organizations reframe the change from mere downsizing to a true corporate transformation, orga- nizational members are provided with the prospect of embracing and developing new learning opportunities and innovative work practices (Kets de Vries & Balazs, 1997). Enhanced Opportunities and Personal Growth Ironically, the opportunity to improve one’s position can be greater during organizational downturns than it is during periods of high growth and confidence. For survivors, the uncertainty and ambi- guity that accompany the resizing process and its concomitant changes can be disorienting and anxiety provoking. However, that same uncertainty also creates opportunities for these individuals, opening challenging projects and assignments that may not have been available prior to the change (Rothman, 2001). If organiza- tions work with survivors to help them conceptualize and under- stand the challenges that face them and their changing spheres of influence and control, managers can facilitate their employees’ as- sessments of and willingness to seek out new opportunities (Buono & Nurick, 1992). Indeed, transformational leaders, with the right mix of visionary and charismatic leadership skills, can energize or- ganizational members around the notion that the resizing was not only a necessary response to the realities of the marketplace but an opportunity to improve work-related processes and individual contributions (Marks, 1994). By helping survivors to differentiate between what they can and cannot control, organizational mem- bers can experience personal growth and renewal by focusing their energies on areas where they can exert influence. Enriched Jobs While traditional downsizing decisions are typically made by a handful of upper-level executives, resizing decisions, especially those assessing alternative work processes and redesign possibili- ties, demand the broader involvement of a range of organizational members. Planning for a resizing strategy may still be initiated by top management, but much of the analysis, formulation, and im- plementation must be performed by other members of the orga- nization, individuals, and task forces that can provide the requisite insight and devote the necessary time and attention to these activ- ities (Walton, 1986). One of the concerns associated with downsizing reflects the un- balanced workloads that can result from such retrenchment, as or- ganizations assign fewer employees to perform larger shares of the work (Marks, 1994). Organizational members, however, can see such change as a challenge. Increasing levels of responsibility can motivate employees if the change is viewed as enriching their work lives. Organizational members frequently respond very well to the challenges associated with meaningful change and an upsurge in vertical responsibilities. Although the underlying goal of the or- ganization might still be to accomplish more with less, by having a select group of highly skilled, well-trained, and committed em- ployees, resized organizations provide their members with greater levels of autonomy, authority, and opportunity. Consequently, em- ployees in these organizations can feel more empowered and be- come more adept at problem solving, decision making, and innovation (Applebaum & Donia, 2000; Frazee, 1996). Difficulties ensue when the additional work is perceived as little more than job enlargement, a mere extension of the initial tasks for which their downsized coworkers were previously responsible (Rosenblatt & Sheaffer, 2001). Thus, it is essential that role clarification—where each employee’s new role, responsibility and workload are assessed and communicated—is part of the resizing process (Kets de Vries & Balazs, 1997). One of the lessons that has emerged from experiences with downsizing is that employees need more skills and technology training to handle larger workloads and changes in goals and methods successfully (Hornestay, 1999). Developing employees as part of a resizing strategy is crucial in order to build the essential skill sets needed to support the new organization. The underlying ideal is to create a new organizational mind-set where employees are engaged in continuous learning in search of innovative work- place practices supported by the skills and capabilities necessary to carry out these initiatives (Kets de Vries & Balazs, 1997). At the Organizational Level Resizing is more closely aligned to the idea of organizational rein- vention (Carr, 1999) and re-creation (Nadler, 1988) than reducing organizational head count. When a company resizes, it essentially THE HIDDEN COSTS AND BENEFITS OF ORGANIZATIONAL RESIZING ACTIVITIES 327 328 RESIZING THE ORGANIZATION reinvents and recreates itself to be in a better position to deal with the competitive realities of the marketplace. The guiding mental- ity is that flexibility and change are no longer options but rather requirements for success (Carr, 1999). The underlying perspective entails radical departures from past practices and traditional ways of carrying out business decisions. Outcomes often include a retrained, more flexible workforce, upgraded technology to facil- itate performance, reduced costs and enhanced economic effi- ciency, and improved productivity (Applebaum & Donia, 2000; McKinley et al., 2000). Thus, resizing emphasizes cutting layers or levels in the organization, decentralizing decision-making pro- cesses, and reducing the time necessary to gain approval for im- plementing new ideas and innovations (Hitt et al., 1994). Whether the specific outcome is an internal merger of different depart- ments or work units, the centralization of support units, reduced organizational levels or work units, outsourcing of major functions, or a reconfiguration of staff specialists, the results are based on sys- tematic organizational analysis rather than the mere reduction of the number of individuals in particular jobs (Freeman, 1999; Nien- stedt, 1989). Flatter Organizational Structures As centralized, multilayered organizations resize, a guiding deter- minant of successful resizing is the identification and elimination of unnecessary and wasteful work processes and tasks. Organiza- tional analysis should focus on the appropriateness of the existing structure (for example, managerial control, reporting relation- ships, and organizational layers), the identification of redundan- cies and overlaps in managerial and work-related functions, the new organizational structure, and excess positions in that new structure (Applebaum & Donia, 2000). By eliminating needless or- ganizational layers and roles, the new, flatter organization that emerges from this process is often more flexible and better able to respond to marketplace needs, since greater autonomy and re- sponsibility are delegated to organizational members (Mathys & Burack, 1993). Flattening organizations in this manner also can translate into improved communication flows, with increased in- formation sharing within and between departments and work units (McClelland & Wilmot, 1990). Strengthening Core Competencies A growing number of companies are resizing with the intent of strengthening their core competencies and protecting key areas such as research and development, customer support, and the sales force in anticipation of future growth and development. Al- though the need to control expenses may still underlie such re- trenchment decisions, a goal should be to ensure that the core competencies and strengths of the organization are enhanced. One of the ways to facilitate such decisions is through an audit of the organization’s human resources. By developing a focused pro- file of the organization—which might include such categories as business unit, functional group, occupational specialization, technical expertise, and location—the unique needs and contri- butions of different subgroups can be identified (Bargerstock, 2000). By measuring current and anticipated service levels, the or- ganization can then develop an action plan for the requisite re- alignment and reductions. Similarly, through a careful analysis of the social networks in different departments and work units, man- agers can identify how communication and innovation patterns in the organization function (Fisher & White, 2000). While there are a myriad of concerns related to the application of such prescrip- tions, understanding the ways in which organizational members in- teract with each other and contribute to organizational processes and objectives enables organizations to make more informed de- cisions that strengthen rather than undermine employee attitudes and capabilities. Team Orientation One of the ramifications of resizing to a flatter organizational struc- ture is a resulting emphasis on teamwork and collaboration. In a lean environment, collaborative interactions across different func- tions and organizational levels become increasingly important (Hitt et al., 1994; Mirvis, 1997). Decentralizing decision making and responsibility and integrating functional expertise at the team level also can have a number of benefits: broadening jobs, re- sponsibilities, and spans of control; enhancing motivation; creat- ing more flexible coordination and control systems; and creating a more adaptable organization where people feel valued. As deci- sions are made at lower levels, influence is based less on positional THE HIDDEN COSTS AND BENEFITS OF ORGANIZATIONAL RESIZING ACTIVITIES 329 330 RESIZING THE ORGANIZATION authority than on the individual’s knowledge, skill, and ability base, which further enhances the role of organizational members (Wal- ton, 1986). Work teams also can serve as a focal point for recovery and re- vitalization following organizational resizing (Marks, 1994). Teams, in essence, can be thought of as the new link between the individ- ual and the organization. Team members can experiment with new work methods and explore organizational learning possibilities, testing to see if the resized organization and its management truly are dedicated to long- as well as short-term goals. The resulting sense of team and openness helps people envision the possibility of creating a larger pie if they were to work together (Mishra et al., 1998). This team orientation enhances commitment to organi- zational goals, builds competence in solving problems, broadens capabilities for self-management, and in general facilitates a will- ingness to collaborate with key stakeholders, both internal and ex- ternal (Walton, 1986). While this type of delayering and team-based initiative can have a myriad of benefits for an organization, it is still important to be wary of reducing middle management layers to the point where the company is endangering a future shortage of top management talent (Hitt et al., 1994). Many organizations draw executive-level talent from the middle ranks of the company. Consequently, a dras- tic shortage of these individuals could hamper longer-term growth and development. Moreover, team effectiveness in resized organi- zations is, to a large extent, still dependent on the initial structure and guidance provided by middle management. While a team ori- entation requires these individuals to redefine their roles—for instance, becoming more customer focused and holistic in rec- ommending service improvements that are consistent with the process ownership by the team (Winchell, 2001)—management support is still needed to ensure long-term success. Enhanced Organizational Commitment Although the idea that resizing can result in higher levels of orga- nizational commitment might not be readily apparent, the manner in which organizations formulate and implement these strategies sends out clear signals about the value they place on their human resources. Senior-level managers can instill a sense of confidence . extension, the creation of wealth (Quick, Gavin, Cooper, & Quick, 2000). While the pressures THE HIDDEN COSTS AND BENEFITS OF ORGANIZATIONAL RESIZING ACTIVITIES 323 324 RESIZING THE ORGANIZATION and. peers, bosses and the organization as a whole), and com- mitment (the psychological contract that binds the individual and the organization together; Caplan & Teese, 1997). The goal should be. empowering these individuals with the appropriate authority and responsibility to make job-related THE HIDDEN COSTS AND BENEFITS OF ORGANIZATIONAL RESIZING ACTIVITIES 325 326 RESIZING THE ORGANIZATION decisions