The Structural Consequesnces of Downsizing

The Structural Consequesnces of Downsizing - ORGANIZATION...

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ORGANIZATION SCIENCE Vol. 4, No. 1, February 1993 Primed in U.S.A. THE STRUCTURAL CONSEQUENCES OF DOWNSIZING* ROCKI-LEE DeWITT Smeal College of Business, Pennsylvania State University, Department of Management and Organization, 415 Beam, University Park, Pennsylvania 16802 This paper examines the impact of downsizing strategy on dimensions and types of organizational structure. Four downsizing strategies are developed to address organization and environment decline. Understanding where and how these strategies modify an organiza- tion's activities helps clarify how downsizing impacts organization structure. Propositions are offered that show how downsizing can result in both mechanistic and organic shifts in organization structure. Mechanistic shifts are caused by downsizing strategies that increase the domain of an organization and the structural processes used to support that domain. Organic shifts are caused by downsizing strategies that decrease the domain of an organization and the structural processes used to support that domain. The rationale provided for these shifts offers a strategic explanation for decreases in administrative intensity that lag decreases in organization size. Propositions about the impact of downsizing on organizational structure are offered as a stimulus to further thought and research. (DOWNSIZING; DECLINE; STRUCTURE) Increased foreign competition, corporate raiding, government deregulation, and changes in consumer preferences have increased pressure on managers to improve the performance of their organizations through downsizing. Through reductions in human and/or capital resources, managers attempt to improve both their organiza- tion's alignment with its competitive environment and the internal alignment of its resources (Drazin and Van de Ven 1985, Gresov 1989). The downsizing literature provides a number of alternatives for reductions in human and capital resources (DeWitt, 1991; Greenhalgh, Lawrence and Sutton 1988) but has yet to be integrated with the literature that examines the impact of decreases in size on organization structure (Cullen, Anderson and Baker 1986; Cullen and Baker 1984; Ford 1980a, b; Freeman and Hannan 1975; Marsh and Mannari 1989; McKinley 1987; Sutton and D'Aunno 1989). The integration of strategic alternatives for downsizing with their expected organi- zation structure outcomes enables us to extend our knowledge of the impact of decline beyond its effect on administrative intensity. By examining the impact of decreased organization size on other dimensions of organization structure, we not only improve our ability to explain the persistence of administrative intensity, but we also increase our ability to explain shifts in structural types. Furthermore, outlining how downsizing strategies determine organizational structure links management decisions about domain with internal administrative processes and increases the likelihood that performance will be enhanced (Beyer and Trice 1979, Miles and Snow
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This note was uploaded on 11/02/2010 for the course MISM is535 taught by Professor Lam during the Spring '10 term at Keller Graduate School of Management.

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The Structural Consequesnces of Downsizing - ORGANIZATION...

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