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Organizational Virtues and Organizational Performance - Relationships After Downsizing

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ORGANIZATIONAL VIRTUES AND ORGANIZATIONAL PERFORMANCE:

RELATIONSHIPS AFTER DOWNSIZING

Kim Cameron

University of Michigan

A Presentation for the Conference on Positive Organizational Scholarship

5-7 December 2001

Ann Arbor, Michigan

THE PREVALENCE OF DOWNSIZING

BEFORE 911

* Almost all medium and large firms downsized in the last five years.

More than 90 percent of firms downsized in the last five years. A large majority downsized more than once in the last ten years.

* Downsizing is not a one-time action.

Approximately 62 percent of firms that downsized two years ago downsized again last year.

* Downsizing is not motivated solely by bad economic news.

Only 37 percent of firms downsized last year because of economic difficulties compared to 71 percent at the beginning of the 1990s. Only five percent downsized because of decreased market demand.

* In one third of all U.S. households, a family member lost a job.

Nearly three quarters of all U.S. households had a close encounter with layoffs in the last decade.

AFTER 911

* The number of layoffs has equaled the total of all previously announced layoffs for the year. 416,000 lost jobs in September alone.

RESULTS OF DOWNSIZING IN AMERICA

* Fewer than half the companies that downsized between 1990 and 2000 had short or long-term profit increases.

* Fewer than a quarter reported increases in employee productivity, product and service quality, and shareholder value.

* Three years after downsizing, the market share prices of downsized companies were an average of 26 percent below the share prices of their competitors.

* Among companies that downsized, those that laid off the fewest workers exhibited the largest return on assets.

* Almost all organizations that downsized--in the public sector and the private sector--experienced an emergence of the "dirty dozen" as a result of downsizing.

THE DIRTY DOZEN

Universal Consequences of Downsizing, Trauma, Crisis

* Centralization

* The Threat-Rigidity Response

* Loss of Innovativeness

* Decreasing Morale

* Politicized Environment

* Loss of Trust

* Increased Conflict

* Restricted Communication

* Lack of Teamwork

* Loss of Loyalty

* Scapegoating Leaders - Leadership Anemia

* Short-term Perspective - Resistance to Change

THE ABUNDANCE HYPOTHESIS

A decade of downsizing research led to the supposition that organizations characterized by virtuous behavior would predict superior performance after downsizing. Impressionistic data led to the presumption that indicators of performance such as employee satisfaction, productivity, quality, organizational innovation, and shareholder value would increase over time--and the dirty dozen would decrease--in organizations that fostered and facilitated the demonstration of organizational virtues.

In fact, a few firms were observed that displayed "positive deviance," that is, an affirmative exception to usual organizational behavior. They possessed characteristics that seemed to foster extraordinary value, remarkable performance, and high levels of excellence. Especially on the human dimension, they engendered virtuousness in relationships and in treatment of people. When they downsized they did so with caring and compassion. When they recovered from crises they did so with maturity and wisdom. When they set strategy they tended to do good as well as do well. They were unusual in demonstrating a capability that led to long term success, even in the face of difficulty.

THE ROLE OF

VIRTUOUS ORGANIZATIONAL BEHAVIOR

Long-term

+ Effectiveness

Organizational - Virtuous + Commitment,

Trauma (e.g., Organizational Loyalty,

downsizing) Behavior Retention

- Short-term

Effectiveness

WHAT DO WE MEAN BY "VIRTUES?"

The Relationships Between Virtues and Extraordinary Performance

PERSONAL

Physical Health Illness Health Fitness

Mental Health Abnormal Normal Thriving

| | |

ORGANIZATIONAL VIRTUES

Effectiveness Ineffective Effective Excellent

Efficiency Inefficient/Faulty Efficient/Reliable Flawless/Perfect

...

...

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