Journal Press India^®

Author Details ( * ) denotes Corresponding author

Purpose: The present research is an attempt to investigate the phenomenon of downsizing, rightsizing, smart-sizing or layoffs in IT organizations, which are longing for performance and sustainability in the changing business environment. It identifies the prevalent downsizing practices followed in Information Technology Industry in India and explores the impact of downsizing on organizational performance, mediated through organizational citizenship behavior.

Design/Methodology/Approach: The research design of the present study is descriptive-cum diagnostic in nature. From 10 best performing Information Technology companies chosen as ‘survey population’ on the basis of revenue, profit, and market capitalization, 302 samples have been selected to collect primary data for assessing the impact and efficacy of these strategies. Statistical tools like correlation, regression, and path analysis have been used for hypotheses testing. Secondary data have also been used to find out the performance of the industry.

Findings: An extensive literature review made in this study reveals that downsizing has been used as an organizational strategy by the firms, which directly impacts their financial performance. Similarly, organizational citizenship behavior also influences the organizational performance. But the present research discovers the impact of downsizing on organizational performance, mediated through organizational citizenship behavior.It explores how the organizational citizenship behavior of employees, especially (OCBO) is getting influenced by this employee-oriented personnel policy, which in turn affects their in-role behavior and contextual performance in the organizations.The study concluded that concurrent turbulent business environment at global and domestic front, has created various technological, economic, political and legal reasons, which compelled IT organizations to adopt downsizing or rightsizing strategy as a quick fix solution for performance enhancement. It has been found that whenever firms laid-off employees, the organizational citizenship behavior gets influenced, which has further affected the organizational performance. OCB-O parameters, namely Civic virtue, Sportsmanship and Conscientiousness determine the productivity and performance of employees in organizations. The OCB-O has emerged as a mediator between downsizing and performance. Conscientiousness, the third dimension of OCB-O, was not significantly related with the performance, whereas the other two, civic virtue and sportsmanship were significantly related. In practice, layoffs created more uncertainty and risk of losing job amongst surviving employees in the organisations, which compelled employees to comply with rules and forced commitment. As a result, in spite of downsizing, the organisational performance has improved marginally.

Research Limitations: The present research focuses on Information Technology sector only. The requisite secondary data for sample companies have been gathered from the information available on companies’ websites, so occurrence of minor discrepancy cannot be overruled. Financial performance has been associated with downsizing strategy only and other macro-economic variables responsible for performance have not been taken into account. Moreover, the study has been conducted on the basis of self-report measures of the respondents for collecting primary data, so, authenticity of the responses cannot be assured. For measurement of organizational performance, only organizational citizenship behaviour (OCB-O) has been taken into account and (OCB-I) has not been considered.

Managerial Implications: Downsizing is not a ready solution for ‘cost rationalization’, as it does not only reduce the burden of regular salaries of employees, but may create other costs to the organization, in form of overtime workers’ payments, expensive lawsuits filed by laid off employees, and the ‘severance packages’ etc. It may demotivate survivors and their work-behaviour and thus, performance can decline. Watching a colleague leaving involuntarily, other employees may also opt to leave the organization causing a loss of talent. The organizations making frequent layoffs, lose the trust of their stake-holders; which obstructs winning more projects and business expansion prospects in future. But on the contrary downsizing reinforces OCB-O, because the surviving work-force gets message and a warning as well. This increases the compliance to organizational rules by workers, improving their regularity, obedience, punctuality, and commitment. Along with it, the workers may also find such situation as growth opportunity to perform better and scale up.

Originality Value: Downsizing may enhance organisational performance as it improves productivity and quality relations in the organisations.

Keywords

Downsizing, Rightsizing, Smart-Sizing, layoffs, Global Economic Downturn, Cost Rationalization, Technological Changes.

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