The effects of employees downsizing on organizational behavior

JOURNAL OF ENGINEERING MANAGEMENT AND COMPETITIVENESS (JEMC) VOL. 9, NO. 2, 2019, 159-167 THE EFFECTS OF EMPLOYEES DOWNSIZING ON ORGANIZATIONAL BEHAVIOR UDC: 658.3:005.962 Review Paper Nemanja BERBER1, Zlata BRACANOVIĆ2 1 University of Novi Sad, Faculty of Economics, 24000 Subotica, Segedinski put 9-11, Republic of Serbia 2 IMR INSTITUT D.O.O., 11090 Beograd, Patrijarha Dimitrija 7, Republic of Serbia E-mail: Paper received: 14.11.2019.; Paper accepted: 28.11.2019. The main objective of this paper is to explain the concept of downsizing and the way of its implementation in enterprises. Also, the aim is to point out the inevitable negative consequences that occur in the company, related to employees and their behaviour. Under pressure from the global economy, businesses are in a constant race for high-level competitiveness and profitability. In most developed and developing countries, restructuring processes are intense and often present in companies. Downsizing, as one of the possible organizational restructuring strategies, can be implemented in several ways. The idea is mainly to reduce the number of employees, which reduced the cost of doing business, but at the same time, several negative consequences affected employees and organizational behaviour. Keywords: Organizational behaviour; Downsizing; Employees; Human resource management. INTRODUCTION Due to the constant pressure in both, local and global markets, businesses are forced to adapt to new requirements in order to sustain and enhance their business activities. Business adaptation involves transformation through restructuring processes. These are very complex processes and contain a large number of individual activities. These include mergers, acquisitions, defences against takeovers, and joint ventures. At the same time, this involves creating appropriate strategies, demergers, selling organizational parts, leaving the business, disinvesting into individual businesses or business segments. One of the strategies is the process of downsizing. This means reducing the number of organizational or managerial levels, changing technical and technological nature and new marketing strategies. What makes all these process similar is a reduction in the number of employees or a loss of a job, (Đorđević, Petković, & Đukić, 2018, p. 144). The consequences are inevitable and contain a number of negative psychological conditions for employees who have left and those who remain in the company, especially in the context of weaker trade unions and less possibilities for negotiation, (László, Sipos, & Slavić, 2018). The paper will deal with segments where a business crisis can be generated, it will outline the processes and forms of downsizing implementation in companies as well as ways of approaching employees. Also, it will be about the complexity of negative reactions of employees after the application of downsizing. The methodology applied in the study included exploration of available literature and results of previous research. CHANGE PROCESSES IN ENTERPRISES Restructuring processes in developed economies, initiated by strategic issues of survival and business development, encompass planned changes to cope with the crisis and increase profitability, (Amsden, Kochanovitcz, & Teylor, 1995). The changes relate to management, organizational structure, reorgani-zation of production and market portfolios, (Arnal, Ok, & Torres, 2003). At the same time, they relate to debt rescheduling, marketing repositioning, redefinition of investment ISSN 2334-9638 (Print) ©2019 University of Novi Sad, Technical faculty “Mihajlo Pupin” in Zrenjanin, Republic of Serbia Available online at http://www.tfzr.uns.ac.rs/jemc N. Berber and Z. Bracanović The effects of employees downsizing on organizational behavior policy and a number of other activities. Most often, businesses are unable to adapt to the changing daily environment. In the past, during 1980s, many large American corporations participated simultaneously in the downsizing of their operations, by leaving areas where competitive advantage was limited, (Savović, 2017, p. 132). Figure 1 shows the segments that generate change or restructuring bills. In these segments, uncertainties can occur that lead to a decline in the business of the company and should be analysed in a timely manner. COMPLEXITY WEALTH RESURA ENVIRONMENT ATTITUDE DYNAMICS DIVERSIFICATION Figure 1: Uncertainty segments that generate restructuring Source: Authors according to Jaško, Čudanov, Jevtić and Krivokapić (2013) Enterprise restructuring is a term used in the literature to signify significant changes in business volume and diversification, capital structure and organizational structure. It is usually implemented with the aim of increasing productivity and business efficiency, reducing costs and increasing shareholder value, (Elmuti, Kathewala, & Monippallil, 2005). In transition economies, restructuring is common after privatization of public and state enterprises, (Jednak, Kragulj, & 160 Parežanin, 2018), and usually was related to an increase of unemployment. Reducing a business or restructuring is one way of responding to a business crisis, (Stošić, 2014). Possible company restructuring operations are: mergers, acquisitions, downsizing, spin-offs, etc. Due to changes in the external environment, caused by increased market and competition liberalization, globalization and rapid technology development (Reinert, 2004), that create fears of liquidation, the restructuring process seeks to mitigate the crisis in the company's operations, (Bracanović, 2008). Since organizational restructuring certainly involves downsizing activity, it is necessary to carefully choose the right approach, (Cerović, 2009). This is the only way to mitigate the negative consequences for employees. The most difficult is to restructure large, mature businesses, (Stošić, 2015). Considering the complexity of such systems and already established ways of behaviour and thinking, transformation in such cases requires special effort. Figure 2 shows the time between business performance and transformation type. Business management often does not want to start this process at this stage, since it does not yet recognize the explicit need for it. Sometimes the resources are insufficient to trigger change. The right reaction is generally expected when the first symptoms of a decline in performance occur. In practice, many companies do not even respond yet, because they believe that this decline is temporary and transient. Most often, this means reduced sales and poor quality of the product or service, increased number of customer complaint, (Habel, & Klarmann, 2015). Such disruptions are becoming more common and spreading from department to sector through the overall organizational system of the enterprise. These are management warning signs that indicate a problem. Such a situation should not be neglected as it leads to serious conseque (...truncated)