Resizing The Organization 12 potx

If the issues are effectively addressed, a more positive psychological contract will exist between the employee and the em-ployer, and resizing efforts will be facilitated.. In other wor

tions and behaviors are driven by their emotions Once an organi-zation has decided that resizing is the only feasible response to com-petitive pressures on the organization, management must identify the specific actions it will implement to maintain a sound psycho-logical contract between the organization and its employees

We believe that organizations will have a better chance of up-holding their psychological contracts and achieving the goals and objectives of their resizing initiative by honestly addressing four key questions:

1 Why is resizing necessary?

2 What processes should be in place to address employee per-ceptions of justice?

3 How will resizing affect the various positions and responsibili-ties throughout the company?

4 How will resizing modify the personal outcomes that organi-zational members will receive?

Communicating this information should greatly increase em-ployee satisfaction and performance levels during (and after) re-sizing If the issues are effectively addressed, a more positive psychological contract will exist between the employee and the em-ployer, and resizing efforts will be facilitated

The Importance of Open Communication

Perhaps the most important component when resizing an organi-zation is to have an effective communication system When change

is implemented, managers obviously are concerned about what types of information need to be communicated to employees to en-sure that change activities run as smoothly as possible A longer-term concern is how human resource practices can be used to ensure open communication persists over time in order for future change initiatives to be effective Organizations that are successful

in their resizing efforts need to have good communication through-out the organization We describe why communication across mul-tiple levels of the organization is an important part of resizing efforts by introducing the concept of a communication triad Table 5.2 summarizes how each triad member contributes to effective communication during resizing

R ESIZING AND THE P SYCHOLOGICAL C ONTRACT 91

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Table 5.2 Communication Strategies of

Triad Members During Resizing Initiatives.

Key

Organizational Communication

Chief executive Discuss with all employees why the organizational officer (CEO) change initiative was necessary to improve the

organization’s performance and ability to compete

Maintain constant dialogue to answer questions and provide additional input to meet employee expectations and needs

Communicate with organizational members about their role in the organization’s ability to achieve the leader’s vision for the future

Human resource Monitor employee attitudes and needs to

staff determine when future public forums between

the CEO and employees are needed

Facilitate many of the resizing benefits provided

to employees who are being displaced (for example, schedule outplacement services, coordinate employee severance packages, and provide counseling services)

Engage in activities such as providing counseling, updates on new compensation packages, and additional job training to those who are remaining with the organization

First-line Serve as the change liaison between top

supervisors management and employees on a daily basis

Provide information and answers to questions that arise as the organizational change effort evolves

Correct inaccurate rumors that are traveling along the corporate grapevine

Allocate time to respond to questions concerning what is now expected from employees in the organization over the short and long terms

Due to today’s constantly changing business environment, or-ganizations may alter the nature of the psychological contracts they have with their employees Obligations that the organization pre-viously acknowledged may no longer be fulfilled as prepre-viously promised During these dynamic times, employees become more focused on whether they feel the organization is treating them fairly In other words, employees take time to process the infor-mation being presented to them by the organization and its agents (the supervisors) and assess whether they perceive the change ini-tiatives as necessary responses to a dynamic business environment

or violations of psychological contract obligations regarding fair-ness Therefore, this is a time where it is important for organiza-tions to communicate more (not less) with their employees The employer and employee may not always share a mutual un-derstanding of the psychological contract obligations that are being offered Open communication is a vital mechanism for in-creasing the chances of mutual understanding It is important to remember that whether employees’ perceptions of psychological contract breach are accurate does not matter Perceived breaches still will lead to negative attitudinal and behavioral responses The development of an effective communication network is an essen-tial element of an organization’s resizing strategy

The Communication Triad

It is important that the organization develop a truly integrative communication team to deal with both employees who are being laid off and those who are being relied on to execute the new or-ganizational strategies There are three key levels that must be highly involved in this communication process The chief execu-tive officer (CEO), the human resources staff, and the first-line su-pervisors all must be sensitive to the uncertainty in this changing environment

Chief Executive Officer

Although employees may look to their immediate supervisors first when assessing levels of psychological contract fulfillment, they are likely to focus more attention on top executives when making

attributions as to why psychological contract breaches are occurring The CEO’s role is to meet with all employees to explain why resiz-ing is necessary and how the action will improve the organization’s performance and ability to compete in the marketplace It is im-portant that the CEO remain visible throughout the change period (De Meuse, Vanderheiden, & Bergmann, 1994) If the CEO is not willing to interact with employees and answer difficult questions dur-ing these transitional times, employees are likely to perceive that the organization does not value them This inference will lead to barri-ers in the implementation of resizing activities and possibly have a negative effect on perceived psychological contract fulfillment Other writers have suggested that in the interest of effective time management, CEOs should communicate only to supervisors and managers (Larkin & Larkin, 1996) Although we acknowledge this may be prudent for routine business activities, it is important for employees to hear directly from executives when major change initiatives are under consideration Resizing organizations must work hard to gain their employees’ commitment to their vision for the organization’s future Often this becomes an issue of leadership Successful leaders are able to communicate a vision of success to their followers (Conger & Kanungo, 1987) Leaders also can inspire higher performance levels by communicating to each organiza-tional member how he or she will play a pivotal role in the organi-zation’s ability to achieve the leader’s vision for the future In other words, organizations need to go beyond merely explaining why re-sizing and other change initiatives are necessary and communicate why their employees should expect to be successful in the new busi-ness environment If employees comprehend the potential benefits

of the changes, they will be more likely to perceive that they have been treated justly These perceptions of procedural and interac-tional justice will lead to higher levels of psychological contract ful-fillment and increase organizational commitment

Human Resource Staff

Resizing organizations must have a good idea of where they want

to go and ensure to the best of their ability that they will be able to convince employees that this new direction is desirable for all par-ties involved First, organizations need to gather information con-cerning what psychological contract obligations employees perceive

as being most valuable Probably the best way to do that is to gather feedback from an employee survey In essence, organizations need

to know what employees want if they hope to retain and motivate the key people in their workforce Understanding what employees value most will allow an organization to be more prudent in the implementation of its resizing efforts, because organizational lead-ers will be better equipped to minimize the number of employees who perceive serious psychological contract breaches

The organization must constantly monitor the changing need structure of its employees This process should be tied to the strate-gic direction of the organization Human resource managers need

to be aware that as the strategic direction of the organization changes, the operational design of the total reward package and its method of implementation (performance assessment) also must change in order to increase the likelihood that it will satisfy the needs of employees By looking at all of the total reward dimen-sions (for example, pay, benefits, and employee development), the organization may be able to satisfy the needs of a larger number

of employees during resizing

In addition, human resource managers are facilitators for many

of the resizing benefits provided to employees who are being dis-placed, as well as to employees who remain with the organization For example, the human resource staff should schedule outplace-ment services, coordinate employee severance packages, and pro-vide counseling services to assist layoff victims To respond to the needs of surviving employees, the human resource staff should en-gage in activities such as providing counseling, updates on new compensation packages, and additional job training

When there have to be changes in the psychological contract, employers should seek to modify it in terms that are reflective of the new employment conditions Both procedural and interper-sonal remedies may be used to reduce some of the adverse conse-quences that may arise for the organization when changes to the psychological contract are made (Morrison & Robinson, 1997; Rousseau, 1995) Remedies to reestablish a relationship may in-clude instituting communication mechanisms that inform employ-ees how decisions are made and implementing procedures that allow employees to challenge or appeal job decisions made by the firm Human resource managers should ensure that employees

understand how the organization is trying to meet their multiple needs In addition, they should give employees the opportunity to express any new changes in their expectations of what they believe their organization should provide to them By focusing on their needs, in conjunction with organizational capabilities and re-sources, the manager may enable the company to retain key talent

First-Line Supervisors

First-line supervisors are an integral part of a successful change ini-tiative, because they serve as the change liaison between top man-agement and employees on a daily basis (Larkin & Larkin, 1996) Although companies are very cognizant of the detrimental impact

of layoffs on those who lose their jobs, they often forget about the struggles of those who remain with the organization Noer (1993) labels these struggles “layoff survivor sickness” and identifies the debilitating symptoms that may accompany this sickness, such as anger, guilt, fatigue, stress, anxiety, and fear Noer recognizes a major reason for the long-term suffering of layoff survivors is that they feel violated by changes in the psychological contract Employees are dependent on supervisors to provide information and answers to questions that arise as resizing evolves By keeping employees informed, these individuals can increase the likelihood that employees will view the changes in a more positive light Man-agers need to be sensitive about correcting inaccurate rumors trav-eling along the corporate grapevine and set aside time to respond

to questions concerning what is now expected for the company in the short term and the long term

Social Accounts During Resizing Efforts

From a theoretical perspective, social accounts have been defined

as managerial justifications used to explain the actions undertaken

by an organization and its representatives (Sitkin & Bies, 1993; Rousseau & Tijoriwala 1999) These social accounts are intended

to address employees’ questions concerning who is responsible for the actions taken, what the motives are for the action, and how un-favorable this action might be for employees (Sitkin & Bies, 1993) Previous research has demonstrated that social accounts can play

an important role in facilitating a variety of desirable outcomes, such as helping to socialize new employees into an organization, managing conflict among a wide variety of parties (Sitkin & Bies, 1993), and avoiding retaliatory behaviors when employee pay has been cut or budget proposals have been rejected (Greenberg, 1990; Bies & Shapiro, 1988)

Cobb and Wooten (1998) discuss why social accounts may have

a significant effect on perceptions of fairness and consequently per-ceptions of psychological contract fulfillment in the midst of or-ganizational change They conclude that “social accounts can address the full range of justice issues that emerge in change” (p 77) The full range of justice issues are distributive justice, proce-dural justice, and interactional justice Distributive justice deals with the fairness of the outcome itself (such as job loss during a downsizing), procedural justice addresses the fairness of the pro-cedures that guided the action (such as what the layoff criteria were and how they were determined), and interactional justice is the extent to which employees were treated with respect and dig-nity (for example, whether managers were empathetic when in-forming layoff victims of their job loss) Because social accounts can address all these issues, they are versatile and powerful justice interventions (Cobb & Wooten, 1998)

Managers who effectively use social accounts during change initiatives are more likely to convince their followers that the changes taking place are fair, because they were caused by matters beyond the organization’s control (mitigating responsibility), im-plemented in order to facilitate the achievement of shared goals (exonerating motives), or far more desirable than any of the other feasible alternatives (reframing; Sitkin & Bies, 1993) In summary, reactions to changes in the psychological contract will be more pos-itive when social accounts are taken at face value

Human Resource Practices That Increase

the Likelihood of Resizing Success

Previous research has demonstrated the adverse consequences of a poorly implemented downsizing effort Negative effects can range from financial losses to reductions in employee morale and satis-faction to increased absenteeism and turnover (Mishra & Spreitzer,

1998; De Meuse, Bergmann, & Vanderheiden, 1997) In recent studies that have examined the longitudinal effects of downsizing

on an organization’s financial performance, the results are incon-clusive There is a lack of strong data to support the belief that downsizing will solve the financial woes of an organization (Cascio, 1998; De Meuse et al., 1994; Vanderheiden, De Meuse, & Berg-mann, 1999) Downsizing is only one type of resizing strategy Nev-ertheless, this strategy highlights the reality that organizations can

no longer promise lifetime employment Figure 5.1 summarizes and illustrates the value and importance of the human resource strategies discussed in this section as they relate to resizing and the psychological contract

Figure 5.1 The Value and Importance of

Human Resource Strategies During Resizing.

Continual Organizational Change Process

• Change can be viewed

as an opportunity for

employees to acquire

or update their skill set

• Employees learn how

to successfully adapt

to change initiatives

Employee Training

and Development

• Employees are aware of their job, role, and position within the organization through realistic job previews

• Opportunity to target highly valued psychological contract areas in job previews

Recruitment and Selection

• Opportunity to align organizational and departmental strategies with employee needs

• Better understanding of expectations and future organizational changes

Performance Appraisal

Employee Training and Development

Without the promise of job security, employees frequently con-ceptualize other inducements they receive from the organization

as part of the organization’s total rewards system Employee train-ing and development is a key facet of this reward system (Berg-mann & Scarpello, 2001) Employees expect that if they do not have job security with the new psychological contract, their em-ployer should at least guarantee that it will provide them the train-ing needed to maintain their marketability ( Jaffe & Scott, 1998) Although future employment may not be with their current em-ployer, the employee will have a positive perception of the employ-ment relationship because the employer is assisting the employee

in two important ways First, organizations allow the employee to view change as an opportunity by ensuring that they are able to ac-quire and update their skill sets Second, organizations enable the employee to learn how to adapt to resizing initiatives successfully

In the context of downsizing, a critical piece to managing lay-off survivors effectively is to communicate what, if any, changes to their jobs will occur as a result of the downsizing In addition, man-agement must allay their fears by providing training programs to employees who will experience significant changes in their re-sponsibilities If employees are confident that they can be success-ful in the resized organization, they will not be as inclined to resist the change Resizing efforts also can bring about new opportuni-ties for employees A crucial aspect of managing a resizing process

is to make sure that the remaining employees are clearly informed

of the opportunities that exist in the changed work environment (Brockner, 1992)

Performance Appraisal

Supervisory and managerial personnel within organizations should receive guidance on giving employees adequate explanation of all job and role changes Many of these recommendations may be in-tegrated within the performance appraisal process where employee expectations can be aligned with organizational and departmen-tal strategies and objectives Roles and responsibilities that are de-fined and delegated in conjunction with an employee’s needs and

development may provide them with additional motivation and en-couragement toward the common goals of the organization For example, supervisors should assess how their subordinates’ needs and values may have changed during the year Relational as-pects of the employment relationship, such as relations with coworkers, growth and development issues, and work-family as-pects, should be examined within the context of the performance appraisal process Rewarding employees’ contributions in terms of their needs and expectations may give them additional incentive

to achieve their job and role requirements, as well as engage in or-ganizational citizenship behaviors (Organ, 1988)

Recruitment and Selection

Given that employee attitudes and behaviors are generally nega-tive following a psychological contract violation, organizations may want to reexamine policies and practices that directly influence how employees formulate and create a psychological contract One practice that can be applied to manage promises that the organi-zation makes is to give realistic information (such as realistic job previews; Wanous, 1980) This information should be made salient

to employees throughout their tenure in the organization, begin-ning during the recruitment and selection process

From an organizational cost-saving perspective, the imple-mentation of realistic job previews can be quite substantial In a re-cent meta-analysis, Phillips (1998) found that employees who were given realistic job previews prior to hiring were less likely to leave the organization Given these findings, organizations should reeval-uate their recruitment policies and procedures and ensure they allow the applicant to fully understand the type of job, work group, organization, and employment relationship they are entering The costs associated with using realistic job information are minimal and could be used by a business to reduce turnover, as well as in-crease employee satisfaction and performance (Wanous, 1980; Phillips, 1998)

Furthermore, organizations may enhance their ability to fulfill psychological contract obligations by targeting highly valued psy-chological contract areas in their job previews In other words, re-cruiters could gather information about an employee’s most valued outcomes (early in the process) and then specifically address what