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New corporate trends in downsizing

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Title:
New corporate trends in downsizing
Creator:
Garland, Lonnie S
Place of Publication:
Denver, CO
Publisher:
University of Colorado Denver
Publication Date:
Language:
English
Physical Description:
viii, 78 leaves : ; 29 cm

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Subjects / Keywords:
Downsizing of organizations ( lcsh )
Communication in organizations ( lcsh )
Communication in organizations ( fast )
Downsizing of organizations ( fast )
Genre:
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

Notes

Bibliography:
Includes bibliographical references (leaves 66-78).
Thesis:
Submitted in partial fulfillment of the requirements for the degree, Master of Arts, Communication and Theatre
Statement of Responsibility:
by Lonnie S. Garland.

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Source Institution:
|University of Colorado Denver
Holding Location:
|Auraria Library
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All applicable rights reserved by the source institution and holding location.
Resource Identifier:
37846879 ( OCLC )
ocm37846879
Classification:
LD1190.L48 1997m .G37 ( lcc )

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Full Text
NEW CORPORATE TRENDS IN DOWNSIZING
by
Lonnie S. Garland
B. A., University of Colorado in Boulder, 1992
This thesis is submitted to the
University of Colorado in Denver
in partial fulfillment
of the requirements for the degree of
Master of Arts
Communication and Theatre
1997


1997 by Lonnie S. Garland
All rights reserved.


This thesis for the Master of Arts
degree by
Lonnie S. Garland
has been approved by
Barbara Holmes
' Date


Garland, Lonnie S. (M. A., Communication)
New Corporate Trends in Downsizing
Thesis directed by Associate Professor Michael Monsour
ABSTRACT
Downsizing has been viewed as a new phenomenon in the
past ten years, but restructuring is not new to the history of
industrialization as this thesis will illustrate. Companies have
always downsized to increase profit. Downsizing has brought
issues of communication in conflict negotiation procedures that
stem from organizational structure as well as formal and
informal communication channels that are reflected to society as
a whole. This thesis investigates and incorporates literature
from these areas and proffers the idea that the present research
in these areas has not been sufficiently connected. Consequently,
the existing organizational channels of communication are
inadequate.
This abstract accurately represents the content of the
candidate's thesis. I recommend its publication.
Signed
Michael Monsour


DEDICATION
I dedicate this thesis to my daughter. For her faithful support,
while we traveled this long and winding road toward the goal of
advancing our knowledge together. You have taught me peace.
Because of you the journey was worth every step. I truly love
you...for your beautiful inner character, fun-loving spirit and
caring heart, you are my jewelry. I honor your intelligence and
insight. My sweet and absolutely beautiful daughter...You are my
hero...


ACKNOWLEDGMENTS
I would like to express my sincere appreciation to my thesis
committee: Michael Monsour, Barbara Holmes, and Cheryl
Pawlowski for their support, guidance, and encouragement.
To my family: Mother, Sally Alden-Graham for your guiding
faithfulness and prayer. Father, W. Verne Graham for being there
in any way you could. Brother, Mark Graham for reading drafts.
Sister, Tamara Spano your love sustained me.
To my spiritual parents: Kathryn and Jerry Kelderman, thanks
for keeping my car and heart running in the right direction.
To my friends, thanks for the comic relief, it went a long way.
To the love of my life, I greatly appreciate all the editing, time
listening, the pens you brought me so I could keep writing, and
for knowing when a drive in the mountains was the best gift I
needed to complete this project. Most of all, for always
believing in the pursuit of excellence over perfection along with
me, thanks. One of my best qualities has been perseverance, and
it took plenty of it to accomplish this goal. So I proudly applaud
myself for exercising possibility thinking.
This list is most certainly incomplete, my sincere thanks goes
out to everyone who helped me reach this goal.


CONTENTS
CHAPTER
1. INTRODUCTION........................................... 1
Downsizing Trends for the 1990s..................... 2
Subcategorical Downsizing Trends
for the 1990s................................. 4
History of Industrialization........................ 5
Definitions......................................... 1 1
Downsizing.................................... 1 1
Organizational Structure...................... 1 1
Configuration................................. 1 2
Complexity.................................... 1 2
Centralization and Decentralization........... 1 3
Formal Organizational Communication........... 1 4
Informal Organizational Communication......... 1 4
Communication................................. 1 5
Conflict...................................... 1 5
Organizational Climate........................ 1 6
Power......................................... 1 7
Purpose............................................. 1 9
2. REVIEW OF THE LITERATURE............................... 2 1
Organizational Structure............................21
v i i


Configuration.................................. 22
Complexity..................................... 26
Centralization................................. 2 9
Decentralization............................... 3 0
Formal Organizational Communication.................. 3 3
Informal Organizational Communication................ 34
Conflict Situations.................................. 3 8
3. DISCUSSION.............................................. 5 3
Social Discontentment................................ 5 5
The Perceived New Minority............................ 5 6
Customer Relationships................................ 5 7
Supplier Relationships............................... 5 8
Sabotage...............................................5 9
Future Implications.................................. 5 9
The Role of Communication in Downsizing....... 6 0
The Flow of Communication in Downsizing....... 61
Formal versus Informal Communication
in Downsizing................................... 6 2
Conclusion............................................ 6 3
REFERENCES........................................................ 6 6
v i i i


CHAPTER 1
INTRODUCTION
Downsizing is not a new organizational tool for
restructuring, corporations have used it in the past and may
continue to use it to increase profit (Blewett, 1990).
Downsizing has typically meant the reduction of the total
number of employees within a company, and by lowering labor
costs a company is enabled to produce its product for less
money, which ultimately increases profit (Naisbitt & Aburdene,
1985). Other names used to describe downsizing are:
reorganizing, shrinking, consolidating, resizing, restructuring,
maximizing, and getting lean (Ginzberg, 1985). According to Eli
Ginzberg (1985), downsizing as well as these other terms all
"relate to changing the corporation's organizational structure
and the utilization of its human resources with the aim of
increasing future productivity and profitability." In the next few
pages the history of downsizing will be reviewed, then this
thesis will focus on downsizing as it relates to organizational
structure, formal and informal organizational communication
and conflict negotiation procedures.
1


The term "downsizing" seems to be claimed by several
possible sources. In the 1970s, the auto industry related the
term to the shrinking of cars (Naisbitt & Aburdene, 1990). In
1985, William F. Zachmann, Vice President of Corporate
Research at International Data Corporation, claims to have
coined the term to refer to the emergence of the personal
desktop computer as compared to the large mainframe computers
once commonly used (Talbot, 1991). Starting in 1982, it came to
refer to human beings and found its way into the American
Heritage Dictionary (Naisbitt & Aburdene, 1985). Whoever
claims to have coined the term, the reasons for downsizing
include competition, cost structures, declining profits and
production, masses of businesses that are made up of different
and incongruous elements owned by one corporation,
nonfunctional organizational structures, and an excessive
number of middle managers (Ginzberg, 1985).
Downsizing Trends for the 1990's
There are three specific downsizing trends in the 1990's
predicted to take corporate America into the year 2000 (Naisbitt
& Aburdene, 1985). These powerful trends are transforming the
business environment from the industrial era to that of the
9


information age (Naisbitt & Aburdene, 1985). First, according to
futuristic researchers John Naisbitt and Patricia Aburdene
(1985), corporate organizations such as W. L. Gore and
Associates are putting "people before profits." Secondly, any
employee not deemed profitable is being downsized across all
major organizations. These two trends contradict one another,
until one looks at the specific differences in the definitions. The
first intends to treat an employee with respect by honoring his
or her intelligence while working for an organization (Naisbitt &
Aburdene, 1985). The second trend signifies that if an
employee's position or work performance is not considered
profitable by the organization he or she may be downsized.
The coming of the seller's market is the third new trend in
downsizing (Naisbitt & Aburdene, 1985). The coming of the
seller's market is defined as a work force that is increasingly
female, immigrant, and/or minority. The new employees are
dramatically different from those of a few years ago in the
coming sellers market (Greller & Knee, 1989; Naisbitt &
Aburdene, 1985). Of the hundred million current workers in the
labor force, forty-seven percent are white males, but only one in
six of the new entrants will be white males (Greller & Knee,
1989; Naisbitt & Aburdene, 1985). The challenge is not in
finding workers, but to find workers who are best for the job.
From this viewpoint, affirmative action takes on a whole new
3


meaning. Well developed strategies are to reach out, hire, and
sustain different gender and ethnic workers as new tools for
survival and an achievable advantage for corporations in the
coming sellers market (Greller & Knee, 1989). Industrial
corporations on a whole have presented prominent components
for notable economic progression. As America moves toward a
global economy, corporations are evolving in ways that no one
can afford to ignore. Out of the three specific trends in the
1990's for downsizing six areas of change are showing up as new
corporate trends.
Subcategorical Downsizing Trends for the 1990's
The six sub-categories of change resulting from the three
specific trends for the 1990s in downsizing that are shared by
organizations and pertain to all employees are: self-
management, large corporations emulating small businesses,
intrapreneurship, education, quality, and contract labor (Naisbitt
& Aburdene, 1985). A new shift in reinventing the corporation
is toward employees who are self-motivated and self-
disciplined, proving they can be self-managed (Naisbitt &
Aburdene, 1985). Intrapreneurs are people with entrepreneurial
skills employed by corporations who create new businesses as
4


independent business units for the corporate organization
(Naisbitt & Aburdene, 1985). Corporate organizations invest in
education to compete with each other for the best employee who
will work towards increasing their profit margins (Eurich, 1985;
Naisbitt & Aburdene, 1985). Corporations are listening and
working to develop happier employees who will, in turn, handle
customer service more effectively and increase quality (Naisbitt
& Aburdene, 1985). Companies are also instituting flexible work
hours, offering travel as a learning experience, and sabbaticals
to boost creativity and quality (Naisbitt & Aburdene, 1985).
Contracting work or outsourcing to businesses outside the
organization is a new creative trend organizations use to
decrease costs in payroll, Social Security, taxes, unemployment
insurance, and benefits in tuition reimbursement, and pension
plans (Naisbitt & Aburdene, 1985).
History of Industrialization
It is also important to look at the history of
industrialization to illustrate that downsizing is not a new
phenomenon. Throughout recorded industrial history each
generation has strived to maintain job stability, while
organizations have downsized to maintain their own profit
5


margins. Rather than looking at chronological time periods in
the history of industrialization this thesis will examine five
specific occurrences and their relevancy to downsizing: 1) The
Enclosure Act (Cleland, 1995); 2) Lowell Mills (Blewell, 1990);
3) Unions (Singer, 1958); 4) World War II (Colman, 1905;
McLaughlin, Melbert, Billy, Zimmie, Winger & Johnson, 1988;
Miriam, 1982); and 5) Laws: The Equal Pay Act and Title VII of
the Civil Rights Act (Blau & Ferber, 1986; Brown, 1994; Naisbitt
& Aburdene, 1984).
The Enclosure movement was the first major instance in
the history of the industrial revolution which clearly shows the
beginning of what we now know as downsizing (Cleland, 1995).
Between 1450 and 1640 British Parliament permitted large land
owners to purchase, consolidate, and fence their holdings, which
resulted in the dominance of cunning individuals, who controlled
a large portion of the marketplace (Cleland, 1995). The
Enclosure movement forced many farmers off the land simply
because they were too economically insignificant to survive
between the years of 1750 to 1860 (Cleland, 1995). By the end
of the 19th century the enclosure of the common lands in England
was virtually complete (Cleland, 1995; Dubofsky, 1995).
As a result of the Enclosure Act many people had to move
to urban areas to work in textile mills. Lowell Mills is one such
place in Massachusetts. The industrial era continued to be
6


prejudicial and distressing for those who left farming and
relocated to urban areas (Blewett, 1990). With the production of
inexpensive cotton goods and serious competition from
competitor textile mills for control of the industry, major
downsizing had already taken place by 1840. This prompted
Lowell Mills managers to cut production costs, in order to
maintain their profits and stock dividends (Blewett, 1990). Mill
managers did this by increasing the speed at which the
machinery operated, and increasing the work load by making all
workers responsible for third looms as well as extra spinning
frames (Blewett, 1990).
As a consequence, Unions rose up in response to economic
organizations' and political groups' unresponsiveness to
downsizing non-whites, immigrants, migrant workers, women,
children, and increasing the work load without compensation.
This led Mill managers to seek a different persuasion of worker,
such as new immigrant workers of Irish descent (Singer, 1958,
vol. 5). Mill managers were mainly interested in maintaining
production, and less concerned who did the work, as long as
profit margins stayed competitive (Singer, 1958, vol. 5).
Amazingly enough, after experiencing the same mistreatment as
the Anglo-American workers, in 1859, the Irish immigrants
followed suit to strike against the Mills (Singer, 1958, vol. 5).
People were still experiencing downsizing in the industrial
7


era of World War II (Blau & Ferber, 1986). As men went off to
war, women were called into the labor force in greater numbers.
After World War II, the men returned home and women were no
longer needed in the work force outside of the home resulting in
major downsizing efforts (Colman, 1905; McLaughlin, Melbert,
Billy, Zimmie, Winger & Johnson, 1988; Miriam, 1982). Other
classes of people, such as blacks, immigrants, and migratory
workers received little more, if any, support from organized
labor to improve their working conditions than what previously
existed (Blau & Ferber, 1986). Ultimately, government
investigations took place inquiring into factory working
conditions, child labor, and women's issues as well as
addressing non-whites, immigrants, and migrant worker issues
which resulted in a new approach to equal rights in the
workplace (Blau & Ferber, 1986; Singer, 1958, vol. 5).
The fifth and last occurrence in the history of
industrialization and its relevancy to downsizing to be reviewed
are laws. Specifically, The Equal Pay Act and Title VII of the
Civil Rights Act (Blau & Ferber, 1986; Brown, 1994; Naisbitt &
Aburdene, 1984).
In 1961, President Kennedy issued an Executive Order
calling for a Presidential Commission on the status of women.
In 1963, the Equal Pay Act was passed (Blau & Ferber, 1986). It
states that employers are required to pay the same wages to
8


men and women who do substantially equal work, involving equal
skill, effort, and responsibility, which is performed under
similar conditions in the same establishment. In 1964, an
amendment was made to change Title VII of the Civil Rights Act.
Title VII prohibits discrimination in the workplace based on
race, religion, and national origin. Title VII now includes the
word "sex," which encompasses all aspects of sex
discrimination, in all aspects of employment, for businesses of
15 or more workers on the local, state and federal levels (Blau &
Ferber, 1986). Executive Order 11375, issued in 1967, now bars
discrimination of or against all federal employees. It also
requires an affirmative action clause that carries timetables for
hiring women and minorities as a goal. These orders are all
enforced by the Equal Employment Opportunity Commission
(Brown, 1994). These laws are important when discussing
downsizing because organizations can no longer discriminate as
to who they will downsize. Downsizing has become an equal
opportunity for all employees, white males included (Blau &
Ferber, 1986; Brown, 1994; Naisbitt & Aburdene, 1984).
Though there are many concepts relevant to downsizing
this thesis will focus on downsizing as it relates to
organizational structure, formal and informal organizational
communication, and conflict negotiation procedures. These three
areas will be reviewed more extensively in Chapter Two. Then
9


Chapter Three will present a discussion of these issues and new
areas for future research. This chapter will briefly explain the
connection between downsizing, organizational structure, formal
and informal organizational communication, and conflict
negotiation procedures as they relate to downsizing in the
following section on definitions.
Downsizing brings about change in corporate organizational
structure that causes conflict for those who have lost their
jobs, as well as those who have retained their jobs (Uchitelle &
Kleinfield, 1996). Understanding organizational structure with
regards to the flow of communication, and conflict situations
that result from downsizing, are important to employees'
success in the workplace, and the company to successfully
interact with customers, increase productivity and profit
(Gottlieb & Conkling, 1995; Koehler, Anatol & Applbaum, 1978,
1981). Before a full understanding of organizational structure
with regards to the flow of communication, and conflict
situations that result from downsizing can occur central terms
need to be defined.


Definitions
Downsizing
Downsizing has typically meant the reduction of the total
number of employees within a company, and by lowering labor
costs a company is enabled to produce its product for less
money, which ultimately increases profit (Naisbitt & Aburdene,
1985). Other names used to describe downsizing are:
reorganizing, shrinking, consolidating, resizing, restructuring,
maximizing, and getting lean (Ginzberg, 1985).
Organizational Structure
Downsizing challenges the formal and personal goals in an
organization, making it important to define and discuss
organizational structure (Mitchell & Larson, 1987). The
structure of an organization as defined by Mintzberg (1979) is,
"simply the sum total of the ways in which it divides its labor
into distinct tasks and then achieves coordination among them."
Specific features of organizations have been shown to be related
to organizational performance (Jablin, 1987; Mitchell & Larson,
1 1


Larson, 1987; Porter & Roberts, 1976).
Configuration
Configuration is the first specific feature of
organizational structure to be discussed, and refers to the
location and distribution of formal roles and work units within
an organization (Jablin, 1987). The structural characteristics of
organizational configuration are span of control (Hage, 1971;
Jablin, 1987; Meyer, 1968), hierarchical level (Blankenship &
Miles, 1968; Daft & Lengels, 1984; Jablin, 1987), and
organizational size (Bass, 1960; Jablin, 1987; Klaus & Bass,
1982).
Complexity
Complexity is the next specific feature of organizational
structure to be discussed and deals with the structural units
employees and organizations can be categorized into (Jablin,
1987). The structural characteristics of organizational
complexity are vertical differentiation (Rousseau, 1978;
Mitchell & Larson, 1987; Jablin, 1987), and horizontal


differentiation (Hage, 1971; Jablin, 1987; Mitchell & Larson,
1987).
Centralization and Decentralization
Centralization and decentralization is the final feature of
organizational structure to be defined and discussed (Hage,
1965; Mitchell & Larson, 1987).
Centralization is the degree to which decisions are made
at high levels in the organization (Hage, 1965; Jablin, 1987).
Decentralization is the delegation of important decisions
to lower levels within an organization (Hage, 1965; Jablin,
1987).
An organizations structure can strongly affect the degree
of conflict that occurs among organizational members (Kolb &
Putnam, 1992; Nadler, Hackman & Lawler, 1979). There is a
potential for a great deal of conflict with regards to the most
appropriate way to achieve overall goals in an organization
undergoing downsizing (Kolb & Putnam, 1992; Nadler, Hackman &
Lawler, 1979). This area is one of the most commonly
researched when reviewing change in the organization (Kolb &
Putnam, 1992; Nadler, Hackman & Lawler, 1979). Formal and
informal organizational communication structures is another


area where a great deal of conflict exists when an organization
is undergoing downsizing (Hoy & Miskel, 1978).
Formal Organizational Communication
Formal organizational communication is related to the
chain of command to the extent to which there is a reliance on
formal, written communications that follow the hierarchical
chain of command (Hage, 1965; Mitchell & Larson, 1987; Rachman
& Mescon, 1987). Formal organizational communication is
defined as bureaucratic procedures, administrative orders, rules,
regulations, and organizational policy (Kolb & Putnam, 1992).
Informal Organizational Communication
Informal organizational communication consists of but is
not limited to facts, rumors, gossip, attitudes, suspicion,
opinions, and directives that flow freely through informal
channels (Etzioni, 1961; Kolb & Putnam, 1992). When
communication of downsizing is kept in informal channels
destructive power balancing comes into play for individuals in
formal organizational positions (Kolb & Bartunek, 1992). It is


important now to define communication and conflict and briefly
review conflict, organizational climate and power structures in
this chapter in order to introduce a more extensive review of
these areas that will be investigated in Chapter Two.
Communication
According to Simons (1974), communication is "the means
by which conflict gets socially defined, the instrument through
which influence is exercised." Frost and Wilmot (1978) state,
"It is through communicative behaviors that conflicts are
recognized, expressed and experienced."
Conflict
Conflict is defined as a natural human process which is
inherent in all interpersonal relationships and organizational
structures (Hocker & Wilmot, 1990). A conflict can also be
defined in terms of rights that are violated, interests that could
be served or power that is exerted as a matter of choice and
custom (Silbey & Sarat, 1988; Ury, Brett & Goldberg, 1988).


Organizational Climate
Organizational climate is an area within conflict that
determines and/or characterizes the style an employee or
organization may operate in to balance power structures, and
refers to the overall psychological atmosphere that is
experienced in an organization (Hocker & Wilmot, 1991; Kolb &
Putnam, 1992). Examples of climate are avoidance, tolerance,
competition, and collaboration. Avoidance is a conflict style
that can be characterized by denial of the conflict, or when using
tolerance, one can actually avoid a conflict (Hocker & Wilmot,
1991; Kolb & Putnam, 1992). Competition is defined as
aggressive and uncooperative behavior, but may be useful when
quick decisive decision need to be made (Hocker & Wilmot, 1991;
Kolb & Putnam, 1992). Collaboration works towards finding
mutually agreeable solutions to problems with others (Hocker &
Wilmot, 1991; Kolb & Putnam, 1992). According to Mather &
Ynguesson (1980), conflict styles, issues and problems have no
meaning apart from the context in which they are enacted.
Furthermore, employees in organizations seek balance in power
through rewards and costs by means of climate structures
(Hocker & Wilmot, 1991; Mitchell & Larson, 1987).


Power
Power in organizations according to Mintzberg (1983), is
the degree to which outcomes can be attributed to individuals
actions. Forms of power are information, legitimacy, expertise,
referent power, and linkages of power (Hocker & Wilmot, 1991;
Mitchell & Larson, 1987; Winter, 1973). Information refers to
who should know what, and can be both formally and informally
gathered and distributed (Mitchell & Larson, 1987). Legitimacy
refers to formal authority in the organizational structure
hierarchy (Mitchell & Larson, 1987). Expertise refers to special
knowledge, skills, experience and talents that are useful for the
task at hand (Hocker & Wilmot, 1991). Referent power is
something one person gives to another because they have
charisma and personal qualities others deem valuable (Mitchell &
Larson, 1987). Linkages of power refers to a persons position in
an organization that connects two or more individuals or groups
by means of information others need, or bridging individuals or
groups through contacts and networks (Hocker & Wilmot, 1991;
Mitchell & Larson, 1987; Winter, 1973). Ultimately, all parties
in an organization seek balance in power and fairness in
resources, especially during times of downsizing (Hocker &
Wilmot, 1991; Mitchell & Larson, 1987). A persons level of
reward and cost depends on his or her access to organizational


resources, and the conflict situation (Hocker & Wilmot, 1991;
Kolb & Putnam, 1992; Mitchell & Larson, 1987).
In discussing downsizing, organizational structure is
linked to formal and informal structures of communication,
which clearly defines the organizational climate (atmosphere)
and power structures, that when used appropriately will
increase productivity for the individual and profit for the
organization (Arnold & McClure, 1989; Fisher & Ury, 1983;
Gottlieb & Conkling, 1995; Hocker & Wilmot, 1990). For this
reason, in any organization people reach the most successful
decisions through negotiations where the rewards outweigh the
costs for both sides (Fisher & Ury, 1983). No longer can a
organization and the people within it be viewed in a vacuum
(Gottlieb & Conkling, 1995). An organizations productivity and
success to increase profit depends on the nature and quality of
its flow of communication (Arnold & McClure, 1989; Gottlieb &
Conkling, 1995). Organizational structure, formal and informal
organizational communication, and conflict will be discussed in
greater detail in Chapter Two.


Purpose
The purpose of this thesis is to look at downsizing, with
respect to how restructuring an organization can bring about
conflict situations and a need for new approaches to
communication (Constantino & Merchant, 1966). Improving
communication in an organization can promote a better work
environment, productivity, and profitability, which is reflected
to a greater social structure. This thesis will look at
downsizing, not as a new phenomenon, but one which has evolved
over time, from each generation's struggle to improve their own
lives and the path for the next generation. This thesis will
review two areas of literature: 1) Organizational structure, and
2) Formal and informal organizational communication.
Intermingled into these two literatures will be a discussion of
conflict and a brief review of some of the conflict findings
relevant to organizational structure and formal and informal
communication as each relates to downsizing. By integrating
these areas of literature this thesis will illustrate that the
current literature in these areas as they relate to downsizing is
fragmented and brings about a need to tie these areas of
literature together in hopes of drawing some new conclusions
about downsizing.
The second chapter entails an extensive review of the


related literature, concerning organizational structure, formal
and informal organizational communication, and conflict
situations resulting from downsizing.
The third chapter is a synthesis and integration of the
fragmented literature relevant to downsizing with an emphasis
on reaching new conclusions related to downsizing.


CHAPTER 2
REVIEW OF THE LITERATURE
Organizational structure creates a foundation, and is a key
element in downsizing and conflict/negotiation procedures
(Albrecht, 1979; Mintzberg, 1979; Naisbitt & Aburdene, 1990;
Putnam & Wilson, 1982; Riggs, 1983; Stohl, 1985). Variables
such as configuration, complexity, centralization/
decentralization and formal and informal organizational
communication structures are included in order to analyze
specific areas where conflict arises surrounding downsizing.
Formal and informal organizational communication structures
will be reviewed subsequent to discussing organizational
structure.
Organizational Structure
It is important to examine organizational structure in
communication and corporate restructuring (downsizing) in order
to better understand how and why the characteristics of
organizational structure influence communication within and


among groups. Organizations have downsized management, and
streamlined departments into small work teams which
restructured the channels of communication (Naisbitt &
Aburdene, 1985). The structure of an organization as defined by
Mintzberg (1979) is, "simply the sum total of the ways in which
it divides its labor into distinct tasks and then achieves
coordination among them."
Porter and Roberts (1976) state that, "the total
configuration of an organization undoubtedly exerts a strong
influence on the characteristics of communication within it."
There are numerous organizational characteristics that affect
communication. Jablin (1987) recognizes three key structural
dimensions which this thesis will review. They are:
1) Configuration: span of control, hierarchical level and
organizational size, 2) Complexity: vertical and horizontal
communication, and 3) Centralization and decentralization.
Configuration
Organizational configuration has several structural
characteristics which are: span of control, hierarchical level,
and organizational size (Jablin, 1987). These characteristics
are a result of the location and distribution of formal roles and


work units within an organization (Jablin, 1987). This is
important when discussing downsizing because these areas have
either been eliminated or restructured as a result of downsizing
(Naisbitt & Aburdene, 1985).
Span of control deals with the number of subordinates who
report directly to their superiors (Byrne, 1994; Jablin, 1987;
Nasibitt & Aburdene, 1990). Downsizing has resulted in the
restructuring of an organizations span of control, and often
superior-subordinate hierarchical levels are eliminated
altogether (Byrne, 1994; Ginzberg, 1985; Jablin, 1987; Nasibitt
& Aburdene, 1990). Miller, Johnson and Grau (1994), state that
organizations undergoing change can produce resistance among
employees when there is a lack of information concerning change
between superior-subordinate hierarchical linkages. Yet simply
receiving information concerning change is not sufficient by
itself to reduce employee resistance to change. According to
Miller and Monge (1985), "the information needs to be timely,
answer employee questions and be delivered appropriately from
a credible source." When information concerning change does not
meet these fundamental elements conflict is created. It is very
important for organizations who are changing the span of control
to understand how the communication of information effects
employee attitudes to resist corporate change (Ellis, 1992;
Miller & Monge, 1985; Salancik & Pfeffer, 1978). Also the
23


frequency of communication is affected when the number of
channels communication has to flow through changes and this
creates conflict as well (Brown, 1994; Putnam & Wilson, 1982;
Riggs, 1983; Stohl, 1985).
Hierarchical level refers to an individual's position in a
line of authority within an organization, ranging from non-
supervisory positions to the top executives (Jablin, 1987). This
is important to downsizing because findings on communication
in hierarchical levels indicate that higher-level organizational
members spend more time in message sending and receiving
activities than lower-level members (Bass, 1960; Blankership &
Miles, 1986; Fulk & Mani, 1985; Mintzberg, 1979; Putnam &
Wilson, 1982). According to Daft and Lengels (1984), upper level
managers use "richer" media for communication than lower level
counterparts. They use more face-to-face communication and
telephone calls. Findings also support the fact that upper level
managers tend to involve their subordinates in decision making
more than do lower-level managers and lower-level managers
tend to have decisions initiated for them by their superiors
(Blankenship & Miles, 1968). This area is especially affected by
downsizing when the number of hierarchy levels change and
small work teams are utilized (Mayer, 1972; Naisbitt &
Aburdene, 1990; Porter & Lawler, 1976). These areas are
connected to conflict in two ways. First, the meaning of a


message may be lost when written in memo form, because people
often interpret the meaning of words differently (Morris &
Sashkin, 1976; Naisbitt & Aburdene, 1990). Secondly, when the
number of employees is reduced, but not the work load, it means
extra time at work for retained employees (Byrne, 1994; Markels
& Murry, 1996). This causes conflict because extra time is spent
making phone calls and sending memos, while the amount of time
in face-to-face communication is reduced (Byrne, 1994; Markels
& Murry, 1996).
Findings on organizational size and communication indicate
that as an agency's size changes, information exchanged about
policies and procedures decreases (Koehler, Anatol & Applbaum,
1981; Naisbitt & Aburdene, 1990; Strong, 1992; Uchitelle &
Kleinfield, 1996). These findings suggest that managers can
influence character and quality of performance by controlling
size (Koehler, Anatol & Applbaum, 1981; Hellreigel & Slocum,
1974). The ideology behind downsizing would seem to support
these ideas. Yet downsizing can attack the cohesiveness or
internal strength of an organizational group, which is the very
success factor of an effective organization to successfully
increase profit (Brown, 1987; Mintzberg, 1979). According to
Klaus & Bass (1982), "If the inner strength of a group is
threatened by changing organizational size, members may not be
motivated to cooperate with one another." Cohesiveness does
25


affect the variance of performance (Klaus & Bass, 1982; Koehler,
Anatol & Applbaum, 1981). Conflict arises when the number of
employees being downsized is high, which does not foster group
cohesiveness, but rather an individual system that fosters
distrust in management (Fulk & Mani, 1985; Koehler, Anatol &
Applbaum, 1981). As distrust and a lack of cohesiveness is
brought about by changing organizational size, hierarchical
levels and span of control, distortion of messages is imminent
(Fulk & Mani, 1985; Koehler, Anatol & Applbaum, 1981).
This completes Jablin's (1987) first key structural
dimension of configuration. Complexity is the second key
structural dimension that will be reviewed. Vertical and
horizontal communication structures are the two main
components of complexity that will be reviewed within this
section on complexity.
Complexity
Complexity deals with the structural units that employees
and organizations can be categorized into (Jablin, 1987;
Mintzberg, 1979). It categorizes the division of labor and the
number of both vertical hierarchical levels and horizontal
departmental divisions within an organization (Jablin, 1987;
26


Mintzberg, 1979). Categorization can compliment or negate
discourse in an organization (Jablin, 1987). Under conditions of
downsizing and conflict, horizontal communication tends to
increase whereas vertical communication decreases (Koehler,
Anatol & Applbaum, 1981).
One aspect of decreasing vertical communication is the
distortion of a message (Fulk & Mani, 1985). According to
Campbell (1958), "distortion is the process of modifying
messages transmitted to receivers." Distortion is an important
problem in organizational change and message sending, which
causes misdirectives to be transmitted, nondirectives to be
issued, incorrect information to be passed on, and problems
related to the quantity and quality of information (Goldhaber,
Yates, Porter & Lasniak, 1978; Hellreigel & Slocum, 1974).
Mellinger (1958), investigated four factors in his study,
"Interpersonal Trust as a Factor in Communication," that relate
to distortion of vertical communication: 1) A supervisor's
power, 2) A supervisor's upward influence, 3) A subordinates
aspirations for upward mobility, and 4) The subordinates trust in
the supervisor. Fulk & Mani (1985), used Mellinger's research in
their own study "Upward Distortion," and added two other
variables: 1) Subordinates role stress and 2) Perceptions of
supervisory communication behaviors. Fulk and Mani (1985),
support Mellinger's (1958), main point, "failure to communicate


role requirements effectively produces distrust and conflict,
which results from leadership vacuums." According to Kahn
(1964), role conflict (stress) is a "simultaneous occurrence of
two (or more) sets of pressures such that compliance with one
would make it more difficult to comply with the other."
Therefore conflict pressures come from a failure not to
communicate information accurately (Fulk & Mani, 1985;
Mellinger, 1958; Schuler, 1979).
Information not accurately communicated is the reason for
a decrease in vertical (superior to subordinate) communication
and an increase among horizontal (peer) group member
communication (Byrne, 1994; Fulk & Mani, 1985; Mellinger,
1958). Subsequently, moral can be low for employees going
through change, causing conflict (Kolb & Bartunek, 1992;
Rousseau, 1978). Especially when employees know a change
(downsizing) is underfoot but do not have access to information
of what those changes are or when they will be implemented
(Byrne, 1994; Uchitelle & Kleinfield, 1996). According to Hage
(1971), "it is the flow of communication with people on the
same status levels in different departments that is most
associated with measures of complexity." Yet, the ideology
behind downsizing would seem to support restructuring vertical
and horizontal hierarchies in an organization. Downsizing has
affected complexity by changing the number of levels and
28


divisions information has to flow through, which increases
conflict (Bartunek, Kolb & Lewicki, 1992; Hage, 1958; Kolb &
Putnam, 1992; Mintzberg, 1979; Naisbitt & Aburdene, 1985;
Rousseau, 1978).
This completes Jablin's (1987) second key structural
dimension of complexity. Centralization and decentralization is
the third and last key structural dimension that will be
reviewed.
Centralization
Centralization is defined as the degree to which authority
is not delegated but is concentrated at higher levels of
management (Hage, 1971; Mintzberg, 1979). The problem with
downsizing is when an organization operates in full
centralization (Jablin, 1987; Mintzberg, 1979). For example, all
decisions are made by one individual, and then implemented
through direct supervision (Mintzberg, 1979). According to
Mintzberg (1979), "having legitimate power to make decisions
does not mean one has the information or cognitive capacity to
make them." One person can hardly make all the decisions for
everyone in an organization, which is all to often the outcome of
downsizing (Driver & Steufert, 1969; Glasbury & Mendola, 1992).
29


Organizations who downsize managers are losing expertise
and experience these employees have from years on the job.
Losing this caliber of employee often means losing credibility
with customers and clients of the organization (Byrne, 1994;
Rachman & Ginzberg, 1992). As a result, these employees may
take valuable customers with them when they are downsized
(Byrne, 1994; Rachman & Ginzberg, 1992). Generally, because
they were the ones who were in direct contact with the
customer, they know specific information about the customers'
needs, and has spent the time to build a customer/client
relationship (Byrne, 1994; Ginzberg, 1992; Markels & Murry,
1996).
Decentralization
Decentralization is defined as the delegation of
organizational decisions to many individuals (Hage, 1971;
Mintzberg, 1979). Decentralizing decision making power
provides better service to customers and clients (Mintzberg,
1979). It is important to decentralize because not all
information can be comprehended by one individual (Jablin, 1987
Mintzberg, 1979). For example, a president of a conglomerate
corporation can not possibly learn 100 different product lines.
30


Even if a report could be written on each, he or she would lack
the time to study them all (Jablin, 1987; Mintzberg, 1979). Top
managers, empowered to design organizational structure see
errors made by subordinate managers and believe they can do
better, as a result those managers are downsized (Driver &
Steufert, 1969; Mintzberg, 1979).
In complex conditions this leads to a state Driver and
Steufert (1969), calls "information overload," and refers to the
idea that the more information the brain tries to receive, the
less the total amount of information is actually processed. Past
some point top managers can neither be smarter nor better
coordinators individually, making decentralization important
(Driver & Steufert, 1969; Mintzberg, 1979). When employees are
downsized it increases the workload, which exemplifies Driver
and Steufert's (1969), "information overload" state, and
increases power imbalances for employees who are retained
(Gottlieb & Conkling, 1995; Mintzberg, 1979). If power is
dispersed in an organization, not only does volume of
communication increase, but the flow of communication across
departmental boundaries is also increased (Hage, 1971).
Downsizing can cause dramatic change in centralization
and decentralization (Kolb, Putnam & Lewicki, 1992; Mintzberg,
1979). When a manager is downsized, employees who followed
centralization are often left to be self managed, taking on extra


work, which creates role conflict (Fulk & Mani, 1985; Mellinger,
1958; Schuler, 1979). As a result, centralization of strategic
decision making is negatively related to the volume of oral
communication in organizations, and subordinates' message
sending strategies may vary under different forms of
centralization (Hage, 1971; Jablin, 1987).
This completes the discussion of the three key structural
dimensions identified by Jablin (1987), 1) Configuration: span
of control, hierarchical level and organizational size,
2) Complexity: vertical and horizontal communication, and
3) Centralization and decentralization. These three key
structural dimensions have reviewed some explanations why an
organization going through downsizing relies on its
communication structure to implement restructuring, and
explains how restructuring may be unsuccessful and cause
conflict when an organization does not appropriately present
information of corporate change to employees (Monge &
Eisenberg, 1987; Rogers & Agarwala-Rogers, 1976). An
organizations' communication structure consists of two distinct
channels: Formal and informal (Monge & Eisenberg, 1987; Rogers
& Agarwala-Rogers, 1976). Formal and informal organizational
communication structures will now be reviewed.


Formal Organizational Communication
Formal organizational communication is defined as
bureaucratic procedures, administrative orders, rules,
regulations and organizational policy (Kolb & Putnam, 1992).
Organizations rely on these procedures and policies when
implementing their downsizing efforts, because they are largely
formulated based on interpretation of Federal and State laws,
which are intended to address social issues concerning race,
gender, class, age, religion, national origin, and individual rights
(Kolb & Putnam, 1992).
Federal and State law permeates the boundaries of an
organization and influences managerial activity (Kolb & Putnam,
1992). Legalization of the workplace is growing. This is seen
through an increase in labor-management relations, the rights of
minorities, issues surrounding hiring, firing and promotions. As
a result, organizations have formed formal complaint systems
that are intended to give employees a platform to voice their
grievances (Kolb & Putnam, 1992; Rowe, 1987; Ury, Brett &
Goldberg, 1988). The basis of the organization complaint system
is to keep conflicts contained within the organization and out of
Federal or State legislation (Westin & Feliu, 1988). Yet,
according to Kolb and Putnam (1992), of the few studies that do
look into this issue, they show that "few disputes find their way


into the formal channels and that negative consequences (in
terms of performance evaluations, and promotions) attend their
use." This brings about conflict in political power imbalances
when an employee can not air his or her grievances and any
questioning of the formal system can mean an automatic
dismissal (Byrne, 1994). When this happens many employees
seek outside litigation, which increases their power (Albrecht,
1979; Hocker & Wilmot, 1991; Martin & Cusella, 1985).
Especially in light of the fact that downsizing has targeted many
older, highly educated and experienced employees of all race,
gender, class and status levels (Byrne, 1994; Kolb & Putnam,
1992; Thompson, 1967; Uchitelle & Keinfield, 1996).
Informal Organizational Communication
Informal organizational communication is defined as facts,
gossip, attitudes, suspicion, rumors and directives that flow
freely through informal organizational communication channels
(Hoy & Miskel, 1978). Given the power structures of negative
consequences to employees utilizing the formal grievance
procedures, many conflicts are worked out in informal
communication channels (Kolb & Putnam, 1992). Information
regarding downsizing is often kept within the formal
34


organizational system. Yet informal communication channels
exist in spite of an elaborate formal system. Keeping
information about when, how, and who will be downsized in the
formal organizational channels, creates informal dispute
patterns to rise up among employees (Byrne, 1994; Kolb &
Putnam, 1992).
Informal channels are built around social relationships
among employees and at all organizational levels (Hoy & Miskel,
1978). Organizational conflicts rooted in class, gender, race and
ethnicity have become more prominent in the last 10 years, with
the advent of downsizing (Kolb & Putnam, 1992). Social
conflicts have found their way into organizations because of
these social relationships (Kolb & Putnam, 1992). The formal
system assumes all people have equal access and equal
opportunity to sources of power (Hyman, 1978; Lukes, 1994).
However, the informal network may be more predominant (Black,
1990; Riggs, 1983; Simpson, 1996). In many organizations, part
of the vision statement is harmony and integration (Bartunek,
1992). Employees who can keep personal conflict in check and
exhibit self-control earn the respect of peers as well as the
organization (Bartunek, 1992). This explains why existing
organizational structures and systems go unchallenged. Unlike
the formal communication system, informal disputes occur in
covert or hidden conflict. Consequently, they are rarely labeled


as disputes and most likely considered organizational sabotage
and disloyalty because it goes against the vision statement
(Mechanix, 1962; Kolb & Putnam, 1992). This reinforces existing
structures of authority, current power/status levels of an
organization and influences ways conflict is handled, by
avoidance, tolerance, competition or passive resistance
(Bartunek, 1992; Putnam & Wilson, 1982; Riggs, 1983).
There is a tendency for conflict to be interpreted as
personal rather than structural in cause, blaming the nearest
person in the organizational structure (Pettigrew, 1973).
According to Kriesberg (1973), in defining the causes of conflict,
over emphasis is given to interpersonal and group conflict to the
neglect of the structural and societal bases in which these
differences are embedded. In Thompson (1976) and Pruitt's
(1981) research, they suggest this is the reason why
interpersonal conflict management studies are more popular than
structural bases of conflict. According to Bartunek (1992),
interpersonal conflict and organizational structure need to be
looked at together in order for the existing systems and
structures to advance.
According to Kolb & Putnam (1992), informal conflicts are
not independent of formal ones. They believe "informal forms of
disputing enable public debates, formal negotiations, and
grievance hearings to function smoothly. The private chats


outside meeting rooms, the coalition building at the lunchroom,
on the golf course, and gossip sessions in the halls make the
formal meeting look rational and cooperative." Conflict is often
resolved through informal discussion at social activities and not
at board meetings. Informal conflict-handling processes help
employees to collect more data about a dispute. According to
Bartunek, Kolb & Lewicki (1992), "data can come in the form of
facts, events, behaviors, actions, perceptions, feelings,
reactions, attitudes, biases, and judgments." This helps
employees to better choose a handling style such as avoidance,
tolerance, competition, or collaboration in dealing with conflict.
Whereas, strictly using formal procedures may not present
enough information to negotiate the conflict. The formal
meeting to resolve conflicts then become a formal procedural
atmosphere, which is merely a platform, where acceptance of an
organizational decision is agreed upon which actually had
already been decided upon in informal communication channels
(Bartunek, Kolb & Lewicki, 1992). Formal conflicts are governed
by organizations and social structures, while management
officials carry titles as human relation personnel, negotiators,
mediators, and employee relations specialists (Kolb, 1987).
According to Kolb & Putnam (1992), "Managers are not natural
mediators." They contend that, "conflict management by
superiors and subordinates looks more like the exercise of


authority than third party facilitation." Therefore, formal
disputes work within the organizational legal system, official
procedures and protocol for grievances (Kolb & Putnam, 1992).
Informal conflicts focus on the actions and processes of
organizational members. Informal norms sanction hidden
agendas, such as ignoring requests and other practices to
balance power (Kolb & Putnam, 1992). The need to maintain and
balance power is manifest in two ways: 1) to gain power, and
2) to protect oneself from becoming powerless. Parties in
conflict are likely to focus on personal issues to the neglect of
structural ones. But to the degree that disputes are
personalized, their organizational and societal origins are
minimized or ignored, and so challenge to existing formal
systems and structures is unlikely (Abel, 1982). This is
explained in the next section on conflict situations.
Conflict Situations
Conflict situations happen when downsizing occurs in an
organizational structure, formal and informal communication
channels and employees have little control over the flow of
communication within the organization. Downsizing affects
people interpersonally and intrapersonally inside as well as


outside the work place as the following examples will illustrate.
For example, this section will illustrate conflict situations that
come about when experienced sales people are downsized and
customers are left without a reliable organizational contact.
Conflict is further exemplified in this situation when a retained
employee takes on the extra customers of those who were
downsized. Also, organizations may hire contract workers to
fill in the gaps only to discover a lack in quality work. These
and other situations are explained in more detail in this section
that may happen because of a breakdown in the flow of
communication in organizational structure, formal and informal
communication channels and conflict/negotiation situations.
The most ironic aspect of reorganization is when it breaks
established ties between experienced sales people and major
customers, and small accounts are transferred to outside
contractors. Digital Equipment Corporation downsized hundreds
of sales and marketing jobs in its health-industries group. This
downsized group had been producing $800 million annually
selling computers to hospitals and other health care providers
globally. This reorganization took place without prior
communication to the customer, and without planning for a
smooth transfer. According to Joseph Leseca, a marketing
manager for Digital Equipment Corporation, "I had customers
coming up to me saying, I havent seen a Digital sales rep in nine


months. Whom do I talk to now?" He further states, "That really
hurt our credibility. I was embarrassed" (Markels & Murry,
1996). Digital appeared to have walked away from the very thing
they downsized for, profit. As a result, many customers turned
to International Business Machines Corporation (IBM), and
Hewlett-Packard Company as their new suppliers (Markels &
Murry, 1996).
In 1989, Kohlberg Kravis Roberts & Company bought out
Nabisco Corporation. Consultants for Nabisco recommended
merging Nabisco foods with Planters and Lifesavers Company.
The two businesses having very different products obviously
have different outlets. The sales representatives were
overwhelmed, and unable to know all the products, let alone
adequately serve the buyers. According to John W. Seeley,
president of American Consulting group, Inc., "You had a new
salesperson calling on a buyer where there was no established
relationship. It clearly put them at a competitive disadvantage"
(Markels & Murry, 1996).
Between 1991 and 1994, advertising was slashed at
Planters Nuts by 70%. According to Steve Martinez, a sales
representative, "Mr. Peanut disappeared, they had the most
recognized figure in nuts, and they just said, See Ya" (Markels &
Murry, 1996). Although John Mitchell, Planters president blames
the profit deficit on outside forces: a price war, changing
40


consumer tastes, and new labeling requirements. Unfortunately
for Planters, cost cutting had adverse effects. Planters had
control of the market and inadvertently relinquished their
standing as the number one brand in the industry (Markels &
Murry, 1996).
This problem does not only exist for buyers who deal with
sales representatives of corporations. It operates for the little
guy too. For example, Continental Airlines stopped carrying
aspirin on their flights, a move thought to save money. Soon, the
customer hotline was full of complaints. Amazingly enough the
flight attendants even had to inform headquarters that
customers on flights needed headache relief. A year later
aspirin was back on board (Markels & Murry, 1996).
Even as customers are changing loyalties, employees who
are downsized are switching to competitors also. In fact, they
often take loyal clients with them. Corporations are
experiencing conflict by not adequately considering where their
profit comes from, or who builds it... the customer, and employee
relationships.
The corporation today does not seem to be well organized
even though it is a time of reorganization. At Mutual Life
Insurance Company in Connecticut, 1,675 employees were
offered a substantial downsizing plan. Around 900 employees
took the offer to leave. Unfortunately, it was more than twice


the anticipated amount of workers the company estimated would
leave, which left them with 400 positions to refill. According
to John J. Pajak, the vice-chairman in charge of downsizing, "We
clearly underestimated how many people would opt out. We
should have done a better job of communicating about the
opportunities that are going to exist after the merger" (Markels
& Murry, 1996).
All too often experienced workers who have been
downsized are hired back. For example, Maryellen Ford was laid
off by Eastman Kodak Company. Her new employer is a local
contract labor business. Her first job the contract labor
company sent her to was Eastman Kodak, where she was working
on the exact project before being downsized. Eastman Kodak
Company originally paid her $15.00 an hour, plus benefits. The
contract labor company charges Eastman Kodak $65.00 an hour
for Maryellens employment. Maryellen makes $20.00 an hour
without benefits from the contract labor company. The result to
Eastman Kodak downsizing effort in this case and many others
has actually meant they are paying more for the same work, by
the same employees (Markels & Murry, 1996).
Peoples, a unit of Consolidated Natural gas Company have
experienced first hand a major conflict surrounding the use of
contract labor. They have filed a law suit against Bermex, Inc., a
major contract labor company in Southfield, Michigan, accusing


them of breach of contract by allegedly failing to conduct proper
background checks, as promised. Peoples clearly believed its
own employees were more carefully screened.
Peoples motive in using Bermex Inc., was to save over one
million dollars by replacing its 35 meter readers with contract
workers. According to Elmore Lockley, a spokesperson for
Peoples, "We thought we would be able to get the same quality by
outsourcing as we would with our own employees" (Markels &
Murry, 1996). The law suit is over the tragedy that one of the
contract workers raped a female customer of Peoples Inc., while
out on a job. Peoples had to set up a special unit at their
expense to receive customers concerns. They also had to return
house keys to 6,000 customers along with $60.00 so they could
install new locks in their homes. Until a decision is made as to
whether electronic meter reading equipment would be more
appropriate, and a new office unit is set up at a greater expense
to Peoples to handle this matter, they have stopped reading
meters altogether.
Although the question still lies as to whether this is an
isolated case, the facts speak for themselves. Peoples never
experienced a problem of this magnitude that negatively
affected their reputation and hit them so hard monetarily before
outsourcing labor, which resulted from downsizing (Markels &
Murry, 1996).


A lack of quality employees is a result of downsizing.
Companies are reducing employment costs by replacing
knowledgeable, intuitive, talented, and experienced workers
with those who are too young to have developed expertise. Why?,
because younger workers can be paid a lower wage. The conflict
is whether or not saving money in this way will genuinely offset
the loss of experience and knowledge that only comes through
years on the job (Markels & Murry, 1996).
Nancy P. Karen of Nynex is worried the company will lose
expertise and talent as a result of downsizing. That would mean
for her and other managers like herself, there wont be enough of
the right people to perform the tasks before them. Karen says,
"Its not going to work perfectly. There will be cases when the
downsizing occurs before the reengineering" (Byrne 1994).
Nynexs downsizing effort has resulted in labor shortages,
of experienced workers. Nynex has had to hire back managers
who are already receiving retirement benefits, and now pay them
a weekly salary as well. For example, John McGovern, a former
field technician foreman was hired back by Nynex. He says,
"They have a lot of new employees and a lot who have little
experience. They needed people to watch quality and train"
(Markels & Murry, 1996). From this experience, over 150
employed at Nynex are filing a class action suit alleging they
were selected for dismissal because of age discrimination.
44


Too many companies are still pushing early retirement.
Yet there are some who by the example of needing to rehire
retired workers for their expertise, are retiring outdated
policies rather than senior workers. Polaroid and Chicagos
Bankers Life and Casualty are two such companies (Naisbitt,
1985).
Downsizing efforts have also left many employees feeling
overworked. Nancy P. Karen, who works for Nynex, as director of
their personal-computer network now puts in 50-60 hours a
week compared to her usual 40. Where she once supervised 26
employees, she now supervises 79. Time away from work was
once her own, she now carries a beeper and cellular phone and
checks her voice mail every hour no matter where she is. Karen
says, "Its very different mentally. My weekends and holidays
are not reserved." On a recent vacation she was required to call
her office at least once a day (Byrne, 1994). Despite her
increased workload, and concern over employee morale she
considers herself lucky, because she has retained her job (Byrne,
1994). Yet, Nancy P. Karen and many others in a similar
situation are finding themselves sitting next to many empty
desks of colleagues who have been downsized. As a result, they
are calculating the best angles to keep their jobs. It has
generally come to mean working harder, longer hours, becoming


more shrewd, and realizing a pay check is not an entitlement
(Uchitelle & Kleinfield, 1996).
White-collar workers are increasingly victimized when it
comes to downsizing. They have worked hard for many years to
gain experience that bought them their positions and top
salaries. They are calling themselves 'the new lower class,'
which means what used to be a normal salary for them of
approximately $120,000.00 a year, as a result of downsizing
they are extremely lucky to bring home $15,000.00 a year at a
new job (Uchitelle & Kleinfield, 1996; Winter, 1973). The stress
and strain is all too evident in their lives as they are too often
unable to find another job to maintain, let alone improve their
standard of living (Uchitelle & Kleinfield, 1996). Their grief,
fear, and anger from experiencing downsizing is also affecting
their families, friends, and communities, surrounding the
extreme changes downsizing has brought into all aspects of their
lives (Winter, 1973). Large companies such as Nynex, Eastman
Kodak, Digital Equipment Corporation, Nabisco, Continental
Airlines, Consolidated Natural Gas, and many others are
reporting statistical research comparing profits and labor cost
to justify downsizing. What the statistics do not show is the
cost of emotional trauma to everyone involved and society as a
whole.
46


Job insecurity is causing the white-collar worker to
believe they are a new minority. Their anger is directing itself
to all sorts of targets in the form of scapegoating. In other
words, they are adopting harsher views towards those more
needy than themselves. According to Daniel Yankelovich,
president of DYG Inc., a polling firm, "Polls have shown this
anger directed at targets as diverse as immigrants, welfare
recipients, computers, politics, the very rich and capitalism
itself." He further states that, "Membership of so called hate
groups is traceable to disaffected downsized workers" (Uchitelle
& Kleinfield, 1996; Winter, 1973). Examples of this are seen in
'the new lower class' growing intolerant of having their tax
dollars applied to social programs benefiting the disadvantaged.
Even their children are subversely affected by this attitude,
with major school budget cuts in physical education, and the
arts. Computer programs in schools are drastically cut because
Apple Computer could not receive sufficient tax credits to make
it cost effective for them to continue to donate computers to
schools. So unless those in 'the new lower class' are in a more
monetarily advantaged group, and can afford to buy their own
computer and essential equipment, their children will be
disadvantaged by not being able to learn computer skills any
longer in the schools, not unlike the disadvantaged (Glastonbury
& LaMendol, 1992). Politically speaking, people in this group are


becoming less faithful to one party, and less likely to vote. They
are more likely to enter the idea of a third party, according to
pollsters (Uchitelle & Kleinfield, 1996).
Steven Holthausens story is a good example of what a
person experiences from being downsized. He was a executive
loan officer before being downsized, he is now a tourist guide.
He has worked at several odd jobs since his layoff. Where he
once made $1,000.00 a week, he now brings home $1,000.00 a
month. For over a year he scraped by on severance pay, meager
commissions earned as a freelance mortgage broker and on
unemployment insurance. The fact that his new lower income
was taxed made him resent the government. He says, "If the
federal budget were balanced by scaling back spending, less of
my income would be taken from me" (Uchitelle & Kleinfield,
1996). Holthausen is frazzled, distraught and angry. He asks,
"Why did I give so many evenings and weekends to my employer?
Why didnt I see my job was doomed?" He tried to accept his
dismissal, until he learned his duties were taken over by a 22
year old at a fraction of his pay (Uchitelle & Kleinfield, 1996).
Holthausen had marital problems before downsizing,
however, downsizing exacerbated the conflicts in his family
relationships. Any type of reconciliation seemed to become
bleak when he lost his job, within six months they were in
divorce proceedings. His wife had not worked outside of the
48


home, she now works as a medical secretary. He says his two
children avoid him. He thinks they are acting this way because,
"he must have shortcomings or he would not be jobless"
(Uchitelle & Kleinfield, 1996).
This went against the structure Holthausen knows as the
traditional family. The impact of his job loss, resulted in a
second loss of his family. This seems to be very common in
families where one wage earner, usually the man, has lost his
job and is unable to find another one equivalent in position and
salary as the last. On the other hand, in families where both
adults work, and exhibit less traditional roles, there seems to be
different dynamics that pull them together to face job
insecurity. Unfortunately, this was not the case for Holthausen
(Auringer, 1997; Blau & Ferber, 1986; Uchitelle & Kleinfield,
1996).
Holthausen became so discouraged he withdrew from
outside activities as well. He had been Co-Chairman of Trusties
in his church as well as Vice-Chairman of the Police Board in his
area. He quit both posts. Holthausen story further confirms the
idea that ones identity is directly linked to ones job. A loss of
this caliber brings with it insurmountable stress, which can be
linked to illnesses of many types: mentally, physically, and
emotionally (Auringer, 1997; Uchitelle & Kleinfield, 1996).


Another man, who wishes to remain nameless because of
retribution, has experienced the same plight. He was a middle
manager at Nynex. He says, "People are frightened of the future.
This affects their self-esteem and pocketbooks. Most people
arent going from something, to something. They have no place
to go." His fear is mostly over the fact that, he truly believes,
Nynex will not recover from what he calls this, "bloodletting."
He recalls the days when commitment to his job took the form of
walking through a major snow storm to get to work. A
commitment he believes employees wont likely feel in the
future. He talks about an example related to the issue of
commitment. It has to do with whether or not employees in the
future will rush to a crisis to set up emergency communication
equipment, as employees did, during the bombing of the World
Trade Center, in New York. He goes on to say, "This may be the
consequences to Nynexs inadequate strategy of putting profits
before people" (Byrne, 1994).
The fear this man is experiencing in wishing to remain
anonymous is based on actual company practices surrounding
downsizing. This example took place at New York and New
England Telephone of Nynex, that any questioning by a senior
manager means an automatic dismissal. Robert J. Thrasher was
hired by Nynex to execute downsizing efforts at this corporation.
He was given approval to move forward and cut salaries by 1.6
50


billion. He told the Board of Directors, "If the corporation could
achieve twenty-five percent of their goals, they would see a two
hundred twenty-six percent return in a three year payback"
(Byrne, 1994). Although the actual cost of cutbacks grew from
seven hundred million to two billion as a result of Union
negotiations. Senior managers questioned this process, and in
Thrashers response he said, "What weve got to do is find them,
and get them out of the business" (Byrne, 1994). This affirms
the use of formal versus informal communication channels when
organizations and employees are going through downsizing.
The Denver, Colorado metro area experienced first hand the
King Soopers/Safeway strike lead by the United Food and
Commercial Workers International Union, Local #7 (CWIU#7).
King Soopers and Safeway wanted to drain a $20 million pension
fund, eliminate work hours, cut health care benefits, and limit
full time jobs as well as promotional opportunities. As the
strike continued many customers grew weak in their support
toward the strikers. Where there were once empty parking lots
with strikers waving to those driving by, fewer strikers held
signs outside their posts, and parking lots once again filled with
customers. People are increasing unable to rally together as a
community to support strikers, when the experience hits too
close to home.


From this example of the King Soopers/Safeway strikers,
Steven Holthausens life, and the man from Nynex who wishes to
remain anonymous, psychologists say, these are all examples of
"survivors syndrome" (Gottlieb & Conkling, 1995; Uchitelle &
Kleinfield, 1996). This means that people are too exhausted and
frustrated from being overworked or facing the possibility of
being overworked, underworked, losing benefits or worse a job
to even think about let alone participating in activities they
once enjoyed (Gottlieb & Conkling, 1995). This does not only
encompass personal activities a person can do alone, but
activities that impact others such as: Little League coaches, Girl
Scout leaders, and Sunday School teachers, to name a few
(Uchitelle & Kleinfield, 1996).
These conflict situations illustrate a need for new
approaches to conflict resolution in downsizing organizational
structures and formal and informal communication channels.
Next a discussion will be presented that tie these areas of
downsizing, organizational structure, formal and informal
communication channels, and conflict together in hopes of
drawing some new conclusions.


CHAPTER 3
DISCUSSION
This thesis examined downsizing with respect to how
restructuring an organization brings about conflict and a need
for new approaches to communication. Improving communication
in an organization can promote a better work environment,
improve productivity, and enhance profitability. In this final
chapter there will first be a brief overview of downsizing,
organizational structure, formal and informal organizational
structures, communication and conflict. Then five areas of
concern that result from this thesis will be presented: 1) Social
discontentment, 2) The perceived new minority and/or new lower
class, 3) Customer relationships, 4) Supplier relationships, and
5) Sabotage. Finally, some new conclusions will be drawn that
tie the current literature together for the purposes of advancing
knowledge for future research.
The history of industrialization has shown downsizing not
to be a new phenomenon, corporations have always used it as a
means to increase profit. Traditionally large corporations
believed downsizing organizational structures would streamline
the channels that communication had to flow through, and it did.
53


Unfortunately, downsizing has proven to have an opposite effect
on the organizational structure with regards to its flow of
communication. The concept of downsizing as a means of
improving organizational efficiency may have only proven to be
in the interest of corporate profits in order to invest in other
corporate ventures, and has not enhanced communication within
the corporation.
When organizational structures are changed and
information regarding these changes remains in formal
communication channels, employees experience a lack of control
and resist restructuring by not cooperating with management.
When formal communication channels do not present information
to employees by an appropriate method it generates distrust in
management. An appropriate method would be one that is useful,
timely, and delivered by a person of trust who has referent
power, who can answer employee questions without negative
consequences in terms of negative performance evaluations and
promotions, only then will employees be open to change.
Typically this is not done, and conflict continues to exist in
informal communication channels, because the process takes
time and energy which is not profitable for the corporation.
Now that the areas of downsizing, organizational
structure, formal and informal organizational structures,
communication and conflict have been reviewed, this discussion


will focus on five areas of concern that resulted from this
investigation: 1) Social discontentment, 2) The perceived new
minority and/or new lower class, 3) Customer relationships,
4) Supplier relationships, and 5) Sabotage.
Social Discontentment
Social discontentment is a big issue for people in the
history of industrialization and downsizing. Restructuring has
consistently been accomplished by increasing work hours for the
same or less pay, increasing the speed an individual has to work,
or downsizing individuals and organizational departments
altogether. This creates angry employees who have sought out
Unions and Congress for help. Federal and State laws have been
passed to protect individual rights in hiring, firing and
promotions. Yet formal organizational structures can use Title
VII of The Civil Rights Act to their advantage because
organizations have a legal right not to discriminate against who
they will downsize. Downsizing has become an equal opportunity
to discriminate against all employees, white males included.
This type of discrimination downsizing has created, develops
distrust and disloyalty in organizations. Subsequently, when an
employee who is downsized is angry and has lost trust in an


organization and is rehired by another corporation, the new
corporation may be hiring a disgruntled disloyal employee.
The Perceived New Minority
The perceived new minority and/or new lower class,
involves, angry disgruntled employees who have worked for a
company for 20, 30, or 40 years and having found themselves
downsized are now struggling to get by on a fraction of the
salary they used to make. They are experiencing emotional
trauma from lost job security which ultimately effects society
as a whole. Angry disgruntled employees see themselves as less
advantaged and are turning their anger toward others who are
really the less fortunate; i.e.: minorities, immigrants, welfare
recipients, and the elderly to name a few. They are pressuring
Congress to restructure programs that were set up to help the
poor and elderly. Congress is unwilling to give up their own
perks to balance the Federal budget, but are supporting
intolerance by advocating a reduction of social welfare programs
that benefited the disadvantaged.
Society is further affected by what psychologists call
"survivor syndrome" (Gottlieb & Conkling, 1995; Uchitelle &
Kleinfield, 1996). When people are too exhausted and frustrated


from being overworked, under employed, suffering lost benefits,
or unemployed, to even think let alone participate in
extracurricular activities such as: coaching Little League, being
Girl Scout or Boy Scout leaders, or helping with their children's
education. Downsizing on a large scale victimizes practically
everyone (Uchitelle & Kleinfield, 1996).
Customer Relationships
A corporation is negatively affected by downsizing when
customer relationships are weakened. This happens when
valuable employees or whole organizational departments which
are responsible for customers' needs are downsized. As a result,
vital communication channels are lost which hurts the customer
because no one knows who is in charge anymore. Customers are
shuffled around from department-to-department or person-to-
person trying to find someone to meet their needs. Subsequently,
no one knows the answer to questions required to meet the
customers' needs. This generates distrust because information
is not forthcoming in a useful, timely manner, from a trusted
individual with referent power. When too much time is required
to respond to the customers' needs, the result can be the loss of
a loyal customer.


Supplier Relationships
Supplier relations are affected by downsizing when the
supplier base itself is downsized. The suppliers an organization
chooses must be able to perform and meet all the organizational
needs. This new demand may force the supplier to deal with
problems associated with rapid growth and expansion required to
meet this demand. This type of business/supplier relationship
can create a precarious situation where the supplier is overly
dependent on a company for its survival. Should the company
decide to withdraw or decrease its business, the supplier may
find themselves in financial distress, ultimately downsizing its
organization in an effort to survive the loss of business. The
suppliers who were not chosen may find the loss of business
significant enough to force them to downsize their organizations
or close their doors altogether. Suppliers servicing several
companies who are all downsizing may find that going out of
business is imminent.
Suppliers may be customers too. If an organization does
not properly take care of its suppliers the corporation can
ultimately lose customers. Often, because of the relationships
that are built between customer, suppliers and corporate
employees, when an employee is downsized valuable customers
and suppliers go with them to the new organization.


Sabotage
It is undeniable that disgruntled employees perpetrating
acts of sabotage upon the company creates chaos and has wide
spread implications. For example, when employees are
disgruntled and angry they can retaliate by switching a shipping
label from one shipment meant for a customer and place it on a
different shipment. This upsets the customer creating customer
dissatisfaction and costs the company because the order is
wrong and has to be returned to the company. Sabotage of this
kind creates a misuse of an organization's time and monetary
resources. If an employee is not productive the organizational
assets are not productive. Disgruntled and angry employees can
use informal communication channels to spread misinformation
to other employees. Sabotage of this type can lead to poor
morale and inspire others to instigate their own forms of
sabotage, affecting the organization's resources.
Future Implications
Three new conclusions will be drawn that will tie the
current literature together for the purpose of advancing
knowledge for future research: 1) The role of communication in
59


downsizing, 2) The flow of communication in downsizing, and
3) Formal versus informal communication in downsizing.
The suggestions presented in this paper by no means
address everything. There are other applications that need to be
explored before communication with regards to downsizing,
organizational structure, formal and informal structures, and
conflict/ negotiation can fully be resolved. Understanding the
role and flow of communication in downsizing, organizational
structure, formal and informal organizational structures, and
conflict/negotiation is essential to the survival of the
effectiveness of any organization and its relationship to its
employees.
The Role of Communication in Downsizing
Current research ignores the role of communication in both
the design and measurement of ways to handle conflict
surrounding downsizing. An area extensively researched is
conflict management styles, without applying or linking them to
organizational structure as a whole. There is also very little
research linking formal and informal communication channels
when downsizing (change) occurs. Researchers have regrettably
concluded that communication is only a variable in downsizing,
60


organizational structure, formal and informal communication
channels, and conflict/negotiation procedures, when in fact it
may be the key or primary component that holds everything
together or tears it apart. Subsequently, research in these areas
is limited, which confirms the need to connect the different
academic disciplines together in order to create a better
understanding of the bigger picture.
The Flow of Communication in Downsizing
Downsizing has been established not to be a new
phenomenon citing the history of industrialization, and
traditionally organizational restructuring has supported the
ideology that the flow of communication having fewer formal
channels to move through would improve communication. Yet the
literature confirms informal communication channels are more
dominant in an organization, affirming the idea that downsizing
has not helped to increase the flow of communication. The
issues thus far only support a negative use of informal
communication channels. A new area of research may be, how to
use informal communication channels to positively impact the
corporation.


Formal versus Informal Communication in Downsizing
The literature supports the use of formal communication
channels as a way of addressing positive and negative conflict,
but this approach leads to avoidance, intolerance, and passive
resistance in organizations. In the interest of preserving
harmony within the organization, company protocol advocates
the use of formal grievance procedures as a method of resolving
conflict. Yet, the use of formal grievance procedures is often
perceived as contradictory to the organizations attempt to
preserve harmony. Subsequently, the employee is considered
disloyal to the organization. Handling conflict this way sets up
an atmosphere that allows the organization to keep people in
conflict handling styles of tolerance and avoidance, while the
organization proceeds with downsizing. Ultimately, tolerance
and avoidance keeps conflict below the surface in informal
communication channels which makes it more difficult to change
existing structures and systems. Revealing how power and
authority of formal communication channels function in conflict.
This cycle seems to repeat itself over and over again. Further
exemplifying how informal communication channels are
predominate in organizations and need to be further researched.
When disputes are kept in informal channels it makes conflict


more difficult to deal with and power relationships remain
unchanged.
Conclusion
It has become the mantra of American industry that
companies must become competitive if they are to compete
successfully in the global economy. The need to remain
competitive has been used as a rationalization for corporate
downsizing, and for moving manufacturing jobs off shore.
Downsizing is hardly a quick fix. It is not an effective strategy,
and it is not a panacea for poor management. Healthy companies
that slash payrolls instead of devising new game plans for
growth are sending a demoralizing message to employees.
Has anyone really considered the ramifications of
downsizing, when it is implemented without appropriately
communicating organizational change? It seems everyone is
jumping on the downsizing bandwagon, similar to the total
quality movement in the early 1980's. American corporate
executives are unwilling to sacrifice their own wages or perks
or take on longer work hours. They pass those consequences on
to production workers and middle management. Downsizing does
not mean there is less work to do, but fewer employees to take


on that workload, while top executives benefit from greater
wage increases.
We cannot reinvent the wheel. We can make a new one, or
improve upon its design, but it still is round, and functions the
same. Corporations are in business for profit, that will not
change. Corporations must remember that employees generate
profit or loss.
People are angry because they are finding that companies
are no longer respecting their expertise, experience, and years of
dedication to the company. They are finding that there is not
room for collaboration or negotiation when the company decides
to downsize. Although there are significant issues to be
addressed, i.e.: loss of benefits, job security, wage decreases,
dislocated employees, and overall trust in the organization, the
corporations' main focus is not in resolving these conflicts but
restructuring in an effort to enhance profitability. When an
employee seeks resolution concerning these issues they discover
that the formal organization structure is designed to support the
companie's motives and does not resolve the employees'
concerns. Therefore, litigation appears to be a viable means of
resolving their own downsizing issues.
Then again, one may ask, so what? Roughly three million
people are affected by layoffs each year which is 50% more than
the two million annual victims of violent crimes (Uchitelle &
64


Kleinfield, 1996). While there may be stiffer jail sentences
there has not been any agreed upon antidotes to this problem of
downsizing. This is not a saga about unemployment like the
Great Depression, but one about an emerging redefinition of
employment. The stress of downsizing is compared by many to
facing the death of a relative. The effects are devastating
personally, and to society at large. Corporate cutbacks appear to
threaten the economic security and self-esteem of survivors and
victims alike. It causes turmoil and shatters morale inside
organizations as well as offsets customer/supplier relations.
The public view is then further confirmed that profit always
comes before people, and not the other way around as
corporations and futuristic researchers would have us believe.


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Full Text

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NEW CORPORATE TRENDS IN DOWNSIZING by Lonnie S. Garland B. A., University of Colorado in Boulder, 1992 This thesis is submitted to the University of Colorado in Denver in partial fulfillment of the requirements for the degree of Master of Arts Communication and Theatre 1997

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1997 by Lonnie S. Garland All rights reserved.

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This thesis for the Master of Arts degree by Lonnie S. Garland has been approved by Michael Monsour Barbara Holmes /t: /;?y?Z Date

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Garland, Lonnie S. (M. A., Communication) New Corporate Trends in Downsizing Thesis directed by Associate Professor Michael Monsour ABSTRACT Downsizing has been viewed as a new phenomenon in the past ten years, but restructuring is not new to the history of industrialization as this thesis will illustrate. Companies have always downsized to increase profit. Downsizing has brought issues of communication in conflict negotiation procedures that stem from organizational structure as well as formal and informal communication channels that are reflected to society as a whole. This thesis investigates and incorporates literature from these areas and proffers the idea that the present research in these areas has not been sufficiently connected. Consequently, the existing organizational channels of communication are inadequate. This abstract accurately represents the content of the candidate's thesis. I recommend its publication. Signed.Michael Monsour IV

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DEDICATION I dedicate this thesis to my daughter. For her faithful support, while we traveled this long and winding road toward the goal of advancing our knowledge together. You have taught me peace. Because of you the journey was worth every step. I truly love you ... for your beautiful inner character, fun-loving spirit and caring heart, you are my jewelry. I honor your intelligence and insight. My sweet and absolutely beautiful daughter ... You are my hero ...

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ACKNOWLEDGMENTS I would like to express my sincere appreciation to my thesis committee: Michael Monsour, Barbara Holmes, and Cheryl Pawlowski for their support, guidance, and encouragement. To my family: Mother, Sally Alden-Graham for your guiding faithfulness and prayer. Father, W. Verne Graham for being there in any way you could. Brother, Mark Graham for reading drafts. Sister, Tamara Spano your love sustained me. To my spiritual parents: Kathryn and Jerry Kelderman, thanks for keeping my car and heart running in the right direction. To my friends, thanks for the comic relief, it went a long way. To the love of my life, I greatly appreciate all the editing, time listening, the pens you brought me so I could keep writing, and for knowing when a drive in the mountains was the best gift needed to complete this project. Most of all, for always believing in the pursuit of excellence over perfection along with me, thanks. One of my best qualities has been perseverance, and it took plenty of it to accomplish this goal. So I proudly applaud myself for exercising possibility thinking. This list is most certainly incomplete, my sincere thanks goes out to everyone who helped me reach this goal.

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CONTENTS CHAPTER 1. INTRODUCTION ................................................................................. 1 Downsizing Trends for the 1990s..... .. . . .. . .. . . . . . .. . .. 2 Subcategorical Downsizing Trends for the 1990s. .. .. .. .. ... . ...... ... .. ... ...... ..... .. .. ... .. . ... .. .. ... .. 4 History of Industrialization............................................... 5 Definitions................................................................................. 1 1 Downsizing ..................................................................... 11 Organizational Structure ......................................... 1 1 Configuration................................................................ 1 2 Complexity..................................................................... 1 2 Centralization and Decentralization .................. 1 3 Formal Organizational Communication ............. 1 4 Informal Organizational Communication .......... 1 4 Communication............................................................. 1 5 Conflict........................................................................... 1 5 Organizational Climate ............................................ 1 6 Power ............................................................................... 1 7 Purpose ........................................................................................ 1 9 2. REVIEW OF THE LITERATURE ..................................................... 2 1 Organizational Structure ..................................................... 21 vii

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Configuration ................................................................ 2 2 Complexity..................................................................... 2 6 Centralization .............................................................. 2 9 Decentralization .......................................................... 3 0 Formal Organizational Communication ......................... 3 3 Informal Organizational Communication ...................... 3 4 Conflict Situations................................................................ 3 8 3. DISCUSSION..................................................................................... 53 Social Discontentment......................................................... 55 The Perceived New Minority ............................................... 56 Customer Relationships ....................................................... 57 Supplier Relationships......................................................... 58 Sabotage ...................................................................................... 59 Future Implications............................................................... 59 The Role of Communication in Downsizing ...... 6 0 The Flow of Communication in Downsizing ..... 61 Formal versus Informal Communication in Downsizing............................................................... 6 2 Conclusion.................................................................................. 6 3 REFERENCES....................................................................................................... 6 6 VIII

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CHAPTER 1 INTRODUCTION Downsizing is not a new organizational tool for restructuring, corporations have used it in the past and may continue to use it to increase profit (Blewett, 1990). Downsizing has typically meant the reduction of the total number of employees within a company, and by lowering labor costs a company is enabled to produce its product for less money, which ultimately increases profit (Naisbitt & Aburdene, 1985). Other names used to describe downsizing are: reorganizing, shrinking, consolidating, resizing, restructuring, maximizing, and getting lean (Ginzberg, 1985). According to Eli Ginzberg (1985), downsizing as well as these other terms all "relate to changing the corporation's organizational structure and the utilization of its human resources with the aim of increasing future productivity and profitability." In the next few pages the history of downsizing will be reviewed, then this thesis will focus on downsizing as it relates to organizational structure, formal and informal organizational communication and conflict negotiation procedures.

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The term "downsizing" seems to be claimed by several possible sources. In the 1970s, the auto industry related the term to the shrinking of cars (Naisbitt & Aburdene, 1990). In 1985, William F. Zachmann, Vice President of Corporate Research at International Data Corporation, claims to have coined the term to refer to the emergence of the personal desktop computer as compared to the large mainframe computers once commonly used (Talbot, 1991 ). Starting in 1982, it came to refer to human beings and found its way into the American Heritage Dictionary (Naisbitt & Aburdene, 1985). Whoever claims to have coined the term, the reasons for downsizing include competition, cost structures, declining profits and production, masses of businesses that are made up of different and incongruous elements owned by one corporation, nonfunctional organizational structures, and an excessive number of middle managers (Ginzberg, 1985). Downsizing Trends for the 1990's There are three specific downsizing trends in the 1990's predicted to take corporate America into the year 2000 (Naisbitt & Aburdene, 1985). These powerful trends are transforming the business environment from the industrial era to that of the 2

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information age (Naisbitt & Aburdene, 1985). First, according to futuristic researchers John Naisbitt and Patricia Aburdene (1985), corporate organizations such as W. L. Gore and Associates are putting "people before profits." Secondly, any employee not deemed profitable is being downsized across all major organizations. These two trends contradict one another, until one looks at the specific differences in the definitions. The first intends to treat an employee with respect by honoring his or her intelligence while working for an organization (Naisbitt & Aburdene, 1985). The second trend signifies that if an employee's position or work performance is not considered profitable by the organization he or she may be downsized. The coming of the seller's market is the third new trend m downsizing (Naisbitt & Aburdene, 1985). The coming of the seller's market is defined as a work force that is increasingly female, immigrant, and/or minority. The new employees are dramatically different from those of a few years ago in the coming seller's market (Greller & Knee, 1989; Naisbitt & Aburdene, 1985). Of the hundred million current workers m the labor force, forty-seven percent are white males, but only one in six of the new entrants will be white males (Greller & Knee, 1989; Naisbitt & Aburdene, 1985). The challenge is not in finding workers, but to find workers who are best for the job. From this viewpoint, affirmative action takes on a whole new 3

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meaning. Well developed strategies are to reach out, hire, and sustain different gender and ethnic workers as new tools for survival and an achievable advantage for corporations in the coming seller's market (Greller & Knee, 1989). Industrial corporations on a whole have presented prominent components for notable economic progression. As America moves toward a global economy, corporations are evolving in ways that no one can afford to ignore. Out of the three specific trends in the 1990's for downsizing six areas of change are showing up as new corporate trends. Subcategorical Downsizing Trends for the 1990's The six sub-categories of change resulting from the three specific trends for the 1990's in downsizing that are shared by organizations and pertain to all employees are: self management, large corporations emulating small businesses, intrapreneurship, education, quality, and contract labor (Naisbitt & Aburdene, 1985). A new shift in reinventing the corporation is toward employees who are self-motivated and self disciplined, proving they can be self-managed (Naisbitt & Aburdene, 1985). Intrapreneurs are people with entrepreneurial skills employed by corporations who create new businesses as 4

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independent business units for the corporate organization (Naisbitt & Aburdene, 1985). Corporate organizations invest in education to compete with each other for the best employee who will work towards increasing their profit margins (Eurich, 1985; Naisbitt & Aburdene, 1985). Corporations are listening and working to develop happier employees who will, in turn, handle customer service more effectively and increase quality (Naisbitt & Aburdene, 1985). Companies are also instituting flexible work hours, offering travel as a learning experience, and sabbaticals to boost creativity and quality (Naisbitt & Aburdene, 1985). Contracting work or outsourcing to businesses outside the organization is a new creative trend organizations use to decrease costs in payroll, Social Security, taxes, unemployment insurance, and benefits in tuition reimbursement, and pension plans (Naisbitt & Aburdene, 1985). History of Industrialization It is also important to look at the history of industrialization to illustrate that downsizing is not a new phenomenon. Throughout recorded industrial history each generation has strived to maintain job stability, while organizations have downsized to maintain their own profit 5

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margins. Rather than looking at chronological time periods in the history of industrialization this thesis will examine five specific occurrences and their relevancy to downsizing: 1) The Enclosure Act (Cleland, 1995); 2) Lowell Mills (Biewell, 1990); 3) Unions (Singer, 1958); 4) World War II (Colman, 1905; Mclaughlin, Melbert, Billy, Zimmie, Winger & Johnson, 1988; Miriam, 1982); and 5) Laws: The Equal Pay Act and Title VII of the Civil Rights Act (Biau & Ferber, 1986; Brown, 1994; Naisbitt & Aburdene, 1984). The Enclosure movement was the first major instance in the history of the industrial revolution which clearly shows the beginning of what we now know as downsizing (Cleland, 1995). Between 1450 and 1640 British Parliament permitted large land owners to purchase, consolidate, and fence their holdings, which resulted in the dominance of cunning individuals, who controlled a large portion of the marketplace (Cleland, 1995). The Enclosure movement forced many farmers off the land simply because they were too economically insignificant to survive between the years of 1750 to 1860 (Cleland, 1995). By the end of the 19th century the enclosure of the common lands in England was virtually complete (Cleland, 1995; Dubofsky, 1995). As a result of the Enclosure Act many people had to move to urban areas to work in textile mills. Lowell Mills is one such place in Massachusetts. The industrial era continued to be 6

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prejudicial and distressing for those who left farming and relocated to urban areas (Blewett, 1990). With the production of inexpensive cotton goods and serious competition from competitor textile mills for control of the industry, major downsizing had already taken place by 1840. This prompted Lowell Mills managers to cut production costs, in order to maintain their profits and stock dividends (Blewett, 1990). Mill managers did this by increasing the speed at which the machinery operated, and increasing the work load by making all workers responsible for third looms as well as extra spinning frames (Blewett, 1990). As a consequence, Unions rose up in response to economic organizations' and political groups' unresponsiveness to downsizing non-whites, immigrants, migrant workers, women, children, and increasing the work load without compensation. This led Mill managers to seek a different persuasion of worker, such as new immigrant workers of Irish descent (Singer, 1958, vol. 5). Mill managers were mainly interested in maintaining production, and less concerned who did the work, as long as profit margins stayed competitive (Singer, 1958, vol. 5). Amazingly enough, after experiencing the same mistreatment as the Anglo-American workers, in 1859, the Irish immigrants followed suit to strike against the Mills (Singer, 1958, vol. 5). People were still experiencing downsizing in the industrial 7

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era of World War II (Biau & Ferber, 1986). As men went off to war, women were called into the labor force in greater numbers. After World War II, the men returned home and women were no longer needed in the work force outside of the home resulting in major downsizing efforts (Colman, 1905; Mclaughlin, Melbert, Billy, Zimmie, Winger & Johnson, 1988; Miriam, 1982). Other classes of people, such as blacks, immigrants, and migratory workers received little more, if any, support from organized labor to Improve their working conditions than what previously existed (Biau & Ferber, 1986). Ultimately, government investigations took place inquiring into factory working conditions, child labor, and women's issues as well as addressing non-whites, immigrants, and migrant worker issues which resulted in a new approach to equal rights in the workplace (Biau & Ferber, 1986; Singer, 1958, val. 5). The fifth and last occurrence in the history of industrialization and its relevancy to downsizing to be reviewed are laws. Specifically, The Equal Pay Act and Title VII of the Civil Rights Act (Biau & Ferber, 1986; Brown, 1994; Naisbitt & Aburdene, 1984). In 1961, President Kennedy issued an Executive Order calling for a Presidential Commission on the status of women. In 1963, the Equal Pay Act was passed (Biau & Ferber, 1986). It states that employers are required to pay the same wages to 8

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men and women who do substantially equal work, involving equal skill, effort, and responsibility, which is performed under similar conditions in the same establishment. In 1964, an amendment was made to change Title VII of the Civil Rights Act. Title VII prohibits discrimination in the workplace based on race, religion, and national origin. Title VII now includes the word "sex," which encompasses all aspects of sex discrimination, in all aspects of employment, for businesses of 15 or more workers on the local, state and federal levels (Biau & Ferber, 1986). Executive Order 11375, issued in 1967, now bars discrimination of or against all federal employees. It also requires an affirmative action clause that carries timetables for hiring women and minorities as a goal. These orders are all enforced by the Equal Employment Opportunity Commission (Brown, 1994). These laws are important when discussing downsizing because organizations can no longer discriminate as to who they will downsize. Downsizing has become an equal opportunity for all employees, white males included (Biau & Ferber, 1986; Brown, 1994; Naisbitt & Aburdene, 1984). Though there are many concepts relevant to downsizing this thesis will focus on downsizing as it relates to organizational structure, formal and informal organizational communication, and conflict negotiation procedures. These three areas will be reviewed more extensively in Chapter Two. Then 9

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Chapter Three will present a discussion of these issues and new areas for future research. This chapter will briefly explain the connection between downsizing, organizational structure, formal and informal organizational communication, and conflict negotiation procedures as they relate to downsizing in the following section on definitions. Downsizing brings about change in corporate organizational structure that causes conflict for those who have lost their jobs, as well as those who have retained their jobs (Uchitelle & Kleinfield, 1996). Understanding organizational structure with regards to the flow of communication, and conflict situations that result from downsizing, are important to employees' success in the workplace, and the company to successfully interact with customers, increase productivity and profit (Gottlieb & Conkling, 1995; Koehler, Anatol & Applbaum, 1978, 1981 ). Before a full understanding of organizational structure with regards to the flow of communication, and conflict situations that result from downsizing can occur central terms need to be defined. I 0

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Definitions Downsizing Downsizing has typically meant the reduction of the total number of employees within a company, and by lowering labor costs a company is enabled to produce its product for less money, which ultimately increases profit (Naisbitt & Aburdene, 1985). Other names used to describe downsizing are: reorganizing, shrinking, consolidating, resizing, restructuring, maximizing, and getting lean (Ginzberg, 1985). Organizational Structure Downsizing challenges the formal and personal goals in an organization, making it important to define and discuss organizational structure (Mitchell & Larson, 1987). The structure of an organization as defined by Mintzberg (1979) is, "simply the sum total of the ways in which it divides its labor into distinct tasks and then achieves coordination among them." Specific features of organizations have been shown to be related to organizational performance (Jablin, 1987; Mitchell & Larson, 1 1

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Larson, 1987; Porter & Roberts, 1976). Configuration Configuration is the first specific feature of organizational structure to be discussed, and refers to the location and distribution of formal roles and work units within an organization (Jablin, 1987). The structural characteristics of organizational configuration are span of control (Hage, 1971; Jablin, 1987; Meyer, 1968), hierarchical level (Blankenship & Miles, 1968; Daft & Lengels, 1984; Jablin, 1987), and organizational size (Bass, 1960; Jablin, 1987; Klaus & Bass, 1982). Complexity Complexity is the next specific feature of organizational structure to be discussed and deals with the structural units employees and organizations can be categorized into (Jablin, 1987). The structural characteristics of organizational complexity are vertical differentiation (Rousseau, 1978; Mitchell & Larson, 1987; Jablin, 1987), and horizontal 1 2

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differentiation (Hage, 1971; Jablin, 1987; Mitchell & Larson, 1987). Centralization and Decentralization Centralization and decentralization is the final feature of organizational structure to be defined and discussed (Hage, 1965; Mitchell & Larson, 1987). Centralization is the degree to which decisions are made at high levels in the organization (Hage, 1965; Jablin, 1987). Decentralization is the delegation of important decisions to lower levels within an organization (Hage, 1965; Jablin, 1987). An organization's structure can strongly affect the degree of conflict that occurs among organizational members (Kolb & Putnam, 1992; Nadler, Hackman & Lawler, 1979). There is a potential for a great deal of conflict with regards to the most appropriate way to achieve overall goals in an organization undergoing downsizing (Kolb & Putnam, 1992; Nadler, Hackman & Lawler, 1979). This area is one of the most commonly researched when reviewing change in the organization (Kolb & Putnam, 1992; Nadler, Hackman & Lawler, 1979). Formal and informal organizational communication structures is another I 3

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area where a great deal of conflict exists when an organization is undergoing downsizing (Hoy & Miskel, 1978). Formal Organizational Communication Formal organizational communication is related to the chain of command to the extent to which there is a reliance on formal, written communications that follow the hierarchical chain of command (Hage, 1965; Mitchell & Larson, 1987; Rachman & Mescon, 1987). Formal organizational communication is defined as bureaucratic procedures, administrative orders, rules, regulations, and organizational policy (Kolb & Putnam, 1992). Informal Organizational Communication Informal organizational communication consists of but is not limited to facts, rumors, gossip, attitudes, suspicion, opinions, and directives that flow freely through informal channels (Etzioni, 1961; Kolb & Putnam, 1992). When communication of downsizing is kept in informal channels destructive power balancing comes into play for individuals in formal organizational positions (Kolb & Bartunek, 1992). It is I 4

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important now to define communication and conflict and briefly review conflict, organizational climate and power structures m this chapter in order to introduce a more extensive review of these areas that will be investigated in Chapter Two. Communication According to Simons (1974), communication is "the means by which conflict gets socially defined, the instrument through which influence is exercised." Frost and Wilmot (1978) state, "It is through communicative behaviors that conflicts are recognized, expressed and experienced." Conflict Conflict is defined as a natural human process which is inherent in all interpersonal relationships and organizational structures (Hocker & Wilmot, 1990). A conflict can also be defined in terms of rights that are violated, interests that could be served or power that is exerted as a matter of choice and custom (Silbey & Sarat, 1988; Ury, Brett & Goldberg, 1988). I 5

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Organizational Climate Organizational climate is an area within conflict that determines and/or characterizes the style an employee or organization may operate in to balance power structures, and refers to the overall psychological atmosphere that is experienced in an organization (Hocker & Wilmot, 1991; Kolb & Putnam, 1992). Examples of climate are avoidance, tolerance, competition, and collaboration. Avoidance is a conflict style that can be characterized by denial of the conflict, or when using tolerance, one can actually avoid a conflict (Hocker & Wilmot, 1991; Kolb & Putnam, 1992). Competition is defined as aggressive and uncooperative behavior, but may be useful when quick decisive decision need to be made (Hocker & Wilmot, 1991; Kolb & Putnam, 1992). Collaboration works towards finding mutually agreeable solutions to problems with others (Hocker & Wilmot, 1991; Kolb & Putnam, 1992). According to Mather & Ynguesson (1980), conflict styles, issues and problems have no meaning apart from the context in which they are enacted. Furthermore, employees in organizations seek balance in power through rewards and costs by means of climate structures (Hocker & Wilmot, 1991; Mitchell & Larson, 1987). 1 6

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Power Power in organizations according to Mintzberg (1983), is the degree to which outcomes can be attributed to individuals actions. Forms of power are information, legitimacy, expertise, referent power, and linkages of power (Hocker & Wilmot, 1991; Mitchell & Larson, 1987; Winter, 1973). Information refers to who should know what, and can be both formally and informally gathered and distributed (Mitchell & Larson, 1987). Legitimacy refers to formal authority in the organizational structure hierarchy (Mitchell & Larson, 1987). Expertise refers to special knowledge, skills, experience and talents that are useful for the task at hand (Hocker & Wilmot, 1991 ). Referent power is something one person gives to another because they have charisma and personal qualities others deem valuable (Mitchell & Larson, 1987). Linkages of power refers to a persons position in an organization that connects two or more individuals or groups by means of information others need, or bridging individuals or groups through contacts and networks (Hocker & Wilmot, 1991; Mitchell & Larson, 1987; Winter, 1973). Ultimately, all parties in an organization seek balance in power and fairness in resources, especially during times of downsizing (Hocker & Wilmot, 1991; Mitchell & Larson, 1987). A persons level of reward and cost depends on his or her access to organizational 1 7

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resources, and the conflict situation (Hocker & Wilmot, 1991; Kolb & Putnam, 1992; Mitchell & Larson, 1987). In discussing downsizing, organizational structure is linked to formal and informal structures of communication, which clearly defines the organizational climate (atmosphere) and power structures, that when used appropriately will increase productivity for the individual and profit for the organization (Arnold & McClure, 1989; Fisher & Ury, 1983; Gottlieb & Conkling, 1995; Hocker & Wilmot, 1990). For this reason, in any organization people reach the most successful decisions through negotiations where the rewards outweigh the costs for both sides (Fisher & Ury, 1983). No longer can a organization and the people within it be viewed in a vacuum (Gottlieb & Conkling, 1995). An organizations productivity and success to increase profit depends on the nature and quality of its flow of communication (Arnold & McClure, 1989; Gottlieb & Conkling, 1995). Organizational structure, formal and informal organizational communication, and conflict will be discussed in greater detail in Chapter Two. I 8

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Purpose The purpose of this thesis is to look at downsizing, with respect to how restructuring an organization can bring about conflict situations and a need for new approaches to communication (Constantino & Merchant, 1966). Improving communication in an organization can promote a better work environment, productivity, and profitability, which is reflected to a greater social structure. This thesis will look at downsizing, not as a new phenomenon, but one which has evolved over time, from each generation's struggle to improve their own lives and the path for the next generation. This thesis will review two areas of literature: 1) Organizational structure, and 2) Formal and informal organizational communication. Intermingled into these two literatures will be a discussion of conflict and a brief review of some of the conflict findings relevant to organizational structure and formal and informal communication as each relates to downsizing. By integrating these areas of literature this thesis will illustrate that the current literature in these areas as they relate to downsizing is fragmented and brings about a need to tie these areas of literature together in hopes of drawing some new conclusions about downsizing. The second chapter entails an extensive review of the I 9

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related literature, concerning organizational structure, formal and informal organizational communication, and conflict situations resulting from downsizing. The third chapter is a synthesis and integration of the fragmented literature relevant to downsizing with an emphasis on reaching new conclusions related to downsizing. 20

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CHAPTER 2 REVIEW OF THE LITERATURE Organizational structure creates a foundation, and is a key element in downsizing and conflict/negotiation procedures (Albrecht, 1979; Mintzberg, 1979; Naisbitt & Aburdene, 1990; Putnam & Wilson, 1982; Riggs, 1983; Stohl, 1985). Variables such as configuration, complexity, centralization/ decentralization and formal and informal organizational communication structures are included in order to analyze specific areas where conflict arises surrounding downsizing. Formal and informal organizational communication structures will be reviewed subsequent to discussing organizational structure. Organizational Structure It is important to examine organizational structure in communication and corporate restructuring (downsizing) in order to better understand how and why the characteristics of organizational structure influence communication within and 2 1

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among groups. Organizations have downsized management, and streamlined departments into small work teams which restructured the channels of communication (Naisbitt & Aburdene, 1985). The structure of an organization as defined by Mintzberg (1979) is, "simply the sum total of the ways in which it divides its labor into distinct tasks and then achieves coordination among them." Porter and Roberts (1976) state that, "the total configuration of an organization undoubtedly exerts a strong influence on the characteristics of communication within it." There are numerous organizational characteristics that affect communication. Jablin (1987) recognizes three key structural dimensions which this thesis will review. They are: 1) Configuration: span of control, hierarchical level and organizational size, 2) Complexity: vertical and horizontal communication, and 3) Centralization and decentralization. Configuration 0 rganizational configuration has several structural characteristics which are: span of control, hierarchical level, and organizational size (Jablin, 1987). These characteristics are a result of the location and distribution of formal roles and 22

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work units within an organization (Jablin, 1987). This is important when discussing downsizing because these areas have either been eliminated or restructured as a result of downsizing (Naisbitt & Aburdene, 1985). Span of control deals with the number of subordinates who report directly to their superiors (Byrne, 1994; Jablin, 1987; Nasibitt & Aburdene, 1990). Downsizing has resulted in the restructuring of an organizations span of control, and often superior-subordinate hierarchical levels are eliminated altogether (Byrne, 1994; Ginzberg, 1985; Jablin, 1987; Nasibitt & Aburdene, 1990). Miller, Johnson and Grau (1994), state that organizations undergoing change can produce resistance among employees when there is a lack of information concerning change between superior-subordinate hierarchical linkages. Yet simply receiving information concerning change is not sufficient by itself to reduce employee resistance to change. According to Miller and Monge (1985), "the information needs to be timely, answer employee questions and be delivered appropriately from a credible source." When information concerning change does not meet these fundamental elements conflict is created. It is very important for organizations who are changing the span of control to understand how the communication of information effects employee attitudes to resist corporate change (Ellis, 1992; Miller & Monge, 1985; Salancik & Pfeffer, 1978). Also the 23

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frequency of communication is affected when the number of channels communication has to flow through changes and this creates conflict as well (Brown, 1994; Putnam & Wilson, 1982; Riggs, 1983; Stohl, 1985). Hierarchical level refers to an individual's position in a line of authority within an organization, ranging from nonsupervisory positions to the top executives (Jablin, 1987). This is important to downsizing because findings on communication in hierarchical levels indicate that higher-level organizational members spend more time in message sending and receiving activities than lower-level members (Bass, 1960; Blankership & Miles, 1986; Fulk & Mani, 1985; Mintzberg, 1979; Putnam & Wilson, 1982). According to Daft and Lengels (1984), upper level managers use "richer" media for communication than lower level counterparts. They use more face-to-face communication and telephone calls. Findings also support the fact that upper level managers tend to involve their subordinates in decision making more than do lower-level managers and lower-level managers tend to have decisions initiated for them by their superiors (Blankenship & Miles, 1968). This area is especially affected by downsizing when the number of hierarchy levels change and small work teams are utilized (Mayer, 1972; Naisbitt & Aburdene, 1990; Porter & Lawler, 1976). These areas are connected to conflict in two ways. First, the meaning of a 24

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message may be lost when written in memo form, because people often interpret the meaning of words differently (Morris & Sashkin, 1976; Naisbitt & Aburdene, 1990). Secondly, when the number of employees is reduced, but not the work load, it means extra time at work for retained employees (Byrne, 1994; Markels & Murry, 1996). This causes conflict because extra time is spent making phone calls and sending memos, while the amount of time in face-to-face communication is reduced (Byrne, 1994; Markels & Murry, 1996). Findings on organizational size and communication indicate that as an agency's size changes, information exchanged about policies and procedures decreases (Koehler, Anatol & Applbaum, 1981; Naisbitt & Aburdene, 1990; Strong, 1992; Uchitelle & Kleinfield, 1996). These findings suggest that managers can influence character and quality of performance by controlling size (Koehler, Anatol & Applbaum, 1981; Hellreigel & Slocum, 1974). The ideology behind downsizing would seem to support these ideas. Yet downsizing can attack the cohesiveness or internal strength of an organizational group, which is the very success factor of an effective organization to successfully increase profit (Brown, 1987; Mintzberg, 1979). According to Klaus & Bass (1982), "If the inner strength of a group is threatened by changing organizational size, members may not be motivated to cooperate with one another." Cohesiveness does 25

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affect the variance of performance (Klaus & Bass, 1982; Koehler, Anatol & Applbaum, 1981 ). Conflict arises when the number of employees being downsized is high, which does not foster group cohesiveness, but rather an individual system that fosters distrust in management (Fulk & Mani, 1985; Koehler, Anatol & Applbaum, 1981). As distrust and a lack of cohesiveness is brought about by changing organizational size, hierarchical levels and span of control, distortion of messages is imminent (Fulk & Mani, 1985; Koehler, Anatol & Applbaum, 1981). This completes Jablin's ( 1987) first key structural dimension of configuration. Complexity is the second key structural dimension that will be reviewed. Vertical and horizontal communication structures are the two main components of complexity that will be reviewed within this section on complexity. Complexity Complexity deals with the structural units that employees and organizations can be categorized into (Jablin, 1987; Mintzberg, 1979). It categorizes the division of labor and the number of both vertical hierarchical levels and horizontal departmental divisions within an organization (Jablin, 1987; 26

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Mintzberg, 1979). Categorization can compliment or negate discourse in an organization (Jablin, 1987). Under conditions of downsizing and conflict, horizontal communication tends to increase whereas vertical communication decreases (Koehler, Anatol & Applbaum, 1981 ). One aspect of decreasing vertical communication is the distortion of a message (Fulk & Mani, 1985). According to Campbell (1958), "distortion is the process of modifying messages transmitted to receivers." Distortion is an important problem in organizational change and message sending, which causes misdirectives to be transmitted, nondirectives to be issued, incorrect information to be passed on, and problems related to the quantity and quality of information (Goldhaber, Yates, Porter & Lasniak, 1978; Hellreigel & Slocum, 1974). Mellinger (1958), investigated four factors in his study, "Interpersonal Trust as a Factor in Communication," that relate to distortion of vertical communication: 1) A supervisor's power, 2) A supervisor's upward influence, 3) A subordinates aspirations for upward mobility, and 4) The subordinates trust in the supervisor. Fulk & Mani (1985), used Mellinger's research 1n their own study "Upward Distortion," and added two other variables: 1) Subordinates role stress and 2) Perceptions of supervisory communication behaviors. Fulk and Mani (1985), support Mellinger's (1958), main point, "failure to communicate 27

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role requirements effectively produces distrust and conflict, which results from leadership vacuums." According to Kahn (1964), role conflict (stress) is a "simultaneous occurrence of two (or more) sets of pressures such that compliance with one would make it more difficult to comply with the other." Therefore conflict pressures come from a failure not to communicate information accurately (Fulk & Mani, 1985; Mellinger, 1958; Schuler, 1979). Information not accurately communicated is the reason for a decrease in vertical (superior to subordinate) communication and an increase among horizontal (peer) group member communication (Byrne, 1994; Fulk & Mani, 1985; Mellinger, 1958). Subsequently, moral can be low for employees going through change, causing conflict (Kolb & Bartunek, 1992; Rousseau, 1978). Especially when employees know a change (downsizing) is underfoot but do not have access to information of what those changes are or when they will be implemented (Byrne, 1994; Uchitelle & Kleinfield, 1996). According to Hage (1971 ), "it is the flow of communication with people on the same status levels in different departments that is most associated with measures of complexity." Yet, the ideology behind downsizing would seem to support restructuring vertical and horizontal hierarchies in an organization. Downsizing has affected complexity by changing the number of levels and 28

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divisions information has to flow through, which increases conflict (Bartunek, Kolb & Lewicki, 1992; Hage, 1958; Kolb & Putnam, 1992; Mintzberg, 1979; Naisbitt & Aburdene, 1985; Rousseau, 1978). This completes Jablin's (1987) second key structural dimension of complexity. Centralization and decentralization 1s the third and last key structural dimension that will be reviewed. Centralization Centralization is defined as the degree to which authority is not delegated but is concentrated at higher levels of management (Hage, 1971; Mintzberg, 1979). The problem with downsizing is when an organization operates in full centralization (Jablin, 1987; Mintzberg, 1979). For example, all decisions are made by one individual, and then implemented through direct supervision (Mintzberg, 1979). According to Mintzberg (1979), "having legitimate power to make decisions does not mean one has the information or cognitive capacity to make them." One person can hardly make all the decisions for everyone in an organization, which is all to often the outcome of downsizing (Driver & Steufert, 1969; Glasbury & Mendola, 1992). 29

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Organizations who downsize managers are losing expertise and experience these employees have from years on the job. Losing this caliber of employee often means losing credibility with customers and clients of the organization (Byrne, 1994; Rachman & Ginzberg, 1992). As a result, these employees may take valuable customers with them when they are downsized (Byrne, 1994; Rachman & Ginzberg, 1992). Generally, because they were the ones who were in direct contact with the customer, they know specific information about the customers' needs, and has spent the time to build a customer/client relationship (Byrne, 1994; Ginzberg, 1992; Markels & Murry, 1996). Decentralization Decentralization is defined as the delegation of organizational decisions to many individuals (Hage, 1971; Mintzberg, 1979). Decentralizing decision making power provides better service to customers and clients (Mintzberg, 1979). It is important to decentralize because not all information can be comprehended by one individual (Jablin, 1987; Mintzberg, 1979). For example, a president of a conglomerate corporation can not possibly learn 100 different product lines. 30

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Even if a report could be written on each, he or she would lack the time to study them all (Jablin, 1987; Mintzberg, 1979). Top managers, empowered to design organizational structure see errors made by subordinate managers and believe they can do better, as a result those managers are downsized (Driver & Steufert, 1969; Mintzberg, 1979). In complex conditions this leads to a state Driver and Steufert (1969), calls "information overload," and refers to the idea that the more information the brain tries to receive, the less the total amount of information is actually processed. Past some point top managers can neither be smarter nor better coordinators individually, making decentralization important (Driver & Steufert, 1969; Mintzberg, 1979). When employees are downsized it increases the workload, which exemplifies Driver and Steufert's (1969), "information overload" state, and increases power imbalances for employees who are retained (Gottlieb & Conkling, 1995; Mintzberg, 1979). If power is dispersed in an organization, not only does volume of communication increase, but the flow of communication across departmental boundaries is also increased (Hage, 1971 ). Downsizing can cause dramatic change in centralization and decentralization (Kolb, Putnam & Lewicki, 1992; Mintzberg, 1979). When a manager is downsized, employees who followed centralization are often left to be self managed, taking on extra 3 I

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work, which creates role conflict (Fulk & Mani, 1985; Mellinger, 1958; Schuler, 1979). As a result, centralization of strategic decision making is negatively related to the volume of oral communication in organizations, and subordinates' message sending strategies may vary under different forms of centralization (Hage, 1971; Jablin, 1987). This completes the discussion of the three key structural dimensions identified by Jablin (1987), 1) Configuration: span of control, hierarchical level and organizational size, 2) Complexity: vertical and horizontal communication, and 3) Centralization and decentralization. These three key structural dimensions have reviewed some explanations why an organization going through downsizing relies on its communication structure to implement restructuring, and explains how restructuring may be unsuccessful and cause conflict when an organization does not appropriately present information of corporate change to employees (Monge & Eisenberg, 1987; Rogers & Agarwala-Rogers, 1976). An organizations' communication structure consists of two distinct channels: Formal and informal (Monge & Eisenberg, 1987; Rogers & Agarwala-Rogers, 1976). Formal and informal organizational communication structures will now be reviewed. 32

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Formal Organizational Communication Formal organizational communication is defined as bureaucratic procedures, administrative orders, rules, regulations and organizational policy (Kolb & Putnam, 1992). Organizations rely on these procedures and policies when implementing their downsizing efforts, because they are largely formulated based on interpretation of Federal and State laws, which are intended to address social issues concerning race, gender, class, age, religion, national origin, and individual rights (Kolb & Putnam, 1992). Federal and State law permeates the boundaries of an organization and influences managerial activity (Kolb & Putnam, 1992). Legalization of the workplace is growing. This is seen through an increase in labor-management relations, the rights of minorities, issues surrounding hiring, firing and promotions. As a result, organizations have formed formal complaint systems that are intended to give employees a platform to voice their grievances (Kolb & Putnam, 1992; Rowe, 1987; Ury, Brett & Goldberg, 1988). The basis of the organization complaint system is to keep conflicts contained within the organization and out of Federal or State legislation (Westin & Feliu, 1988). Yet, according to Kolb and Putnam (1992), of the few studies that do look into this issue, they show that "few disputes find their way 3 3

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into the formal channels and that negative consequences (in terms of performance evaluations, and promotions) attend their use." This brings about conflict in political power imbalances when an employee can not air his or her grievances and any questioning of the formal system can mean an automatic dismissal (Byrne, 1994). When this happens many employees seek outside litigation, which increases their power (Albrecht, 1979; Hocker & Wilmot, 1991; Martin & Cusella, 1985). Especially in light of the fact that downsizing has targeted many older, highly educated and experienced employees of all race, gender, class and status levels (Byrne, 1994; Kolb & Putnam, 1992; Thompson, 1967; Uchitelle & Keinfield, 1996). Informal Organizational Communication Informal organizational communication is defined as facts, gossip, attitudes, suspicion, rumors and directives that flow freely through informal organizational communication channels (Hoy & Miske!, 1978). Given the power structures of negative consequences to employees utilizing the formal grievance procedures, many conflicts are worked out in informal communication channels (Kolb & Putnam, 1992). Information regarding downsizing is often kept within the formal 34

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organizational system. Yet informal communication channels exist in spite of an elaborate formal system. Keeping information about when, how, and who will be downsized in the formal organizational channels, creates informal dispute patterns to rise up among employees (Byrne, 1994; Kolb & Putnam, 1992). Informal channels are built around social relationships among employees and at all organizational levels (Hoy & Miske!, 1978). Organizational conflicts rooted in class, gender, race and ethnicity have become more prominent in the last 10 years, with the advent of downsizing (Kolb & Putnam, 1992). Social conflicts have found their way into organizations because of these social relationships (Kolb & Putnam, 1992). The formal system assumes all people have equal access and equal opportunity to sources of power (Hyman, 1978; Lukes, 1994). However, the informal network may be more predominant (Black, 1990; Riggs, 1983; Simpson, 1996). In many organizations, part of the vision statement is harmony and integration (Bartunek, 1992). Employees who can keep personal conflict in check and exhibit self-control earn the respect of peers as well as the organization (Bartunek, 1992). This explains why existing organizational structures and systems go unchallenged. Unlike the formal communication system, informal disputes occur in covert or hidden conflict. Consequently, they are rarely labeled 35

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as disputes and most likely considered organizational sabotage and disloyalty because it goes against the vision statement (Mechanix, 1962; Kolb & Putnam, 1992). This reinforces existing structures of authority, current power/status levels of an organization and influences ways conflict is handled, by avoidance, tolerance, competition or passive resistance (Bartunek, 1992; Putnam & Wilson, 1982; Riggs, 1983). There is a tendency for conflict to be interpreted as personal rather than structural in cause, blaming the nearest person m the organizational structure (Pettigrew, 1973). According to Kriesberg (1973), in defining the causes of conflict, over emphasis is given to interpersonal and group conflict to the neglect of the structural and societal bases in which these differences are embedded. In Thompson (1976) and Pruitt's (1981) research, they suggest this is the reason why interpersonal conflict management studies are more popular than structural bases of conflict. According to Bartunek (1992), interpersonal conflict and organizational structure need to be looked at together in order for the existing systems and structures to advance. According to Kolb & Putnam (1992), informal conflicts are not independent of formal ones. They believe "informal forms of disputing enable public debates, formal negotiations, and grievance hearings to function smoothly. The private chats 36

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outside meeting rooms, the coalition building at the lunchroom, on the golf course, and gossip sessions in the halls make the formal meeting look rational and cooperative." Conflict is often resolved through informal discussion at social activities and not at board meetings. Informal conflict-handling processes help employees to collect more data about a dispute. According to Bartunek, Kolb & Lewicki (1992), "data can come in the form of facts, events, behaviors, actions, perceptions, feelings, reactions, attitudes, biases, and judgments." This helps employees to better choose a handling style such as avoidance, tolerance, competition, or collaboration in dealing with conflict. Whereas, strictly using formal procedures may not present enough information to negotiate the conflict. The formal meeting to resolve conflicts then become a formal procedural atmosphere, which is merely a platform, where acceptance of an organizational decision is agreed upon which actually had already been decided upon in informal communication channels (Bartunek, Kolb & Lewicki, 1992). Formal conflicts are governed by organizations and social structures, while management officials carry titles as human relation personnel, negotiators, mediators, and employee relations specialists (Kolb, 1987). According to Kolb & Putnam (1992), "Managers are not natural mediators." They contend that, "conflict management by superiors and subordinates looks more like the exercise of 37

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authority than third party facilitation." Therefore, formal disputes work within the organizational legal system, official procedures and protocol for grievances (Kolb & Putnam, 1992). Informal conflicts focus on the actions and processes of organizational members. Informal norms sanction hidden agendas, such as ignoring requests and other practices to balance power (Kolb & Putnam, 1992). The need to maintain and balance power is manifest in two ways: 1) to gain power, and 2) to protect oneself from becoming powerless. Parties in conflict are likely to focus on personal issues to the neglect of structural ones. But to the degree that disputes are personalized, their organizational and societal origins are minimized or ignored, and so challenge to existing formal systems and structures is unlikely (Abel, 1982). This is explained in the next section on conflict situations. Conflict Situations Conflict situations happen when downsizing occurs in an organizational structure, formal and informal communication channels and employees have little control over the flow of communication within the organization. Downsizing affects people interpersonally and intrapersonally inside as well as 38

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outside the work place as the following examples will illustrate. For example, this section will illustrate conflict situations that come about when experienced sales people are downsized and customers are left without a reliable organizational contact. Conflict is further exemplified in this situation when a retained employee takes on the extra customers of those who were downsized. Also, organizations may hire contract workers to fill in the gaps only to discover a lack in quality work. These and other situations are explained in more detail in this section that may happen because of a breakdown in the flow of communication in organizational structure, formal and informal communication channels and conflict/negotiation situations. The most ironic aspect of reorganization is when it breaks established ties between experienced sales people and major customers, and small accounts are transferred to outside contractors. Digital Equipment Corporation downsized hundreds of sales and marketing jobs in its health-industries group. This downsized group had been producing $800 million annually selling computers to hospitals and other health care providers globally. This reorganization took place without prior communication to the customer, and without planning for a smooth transfer. According to Joseph Leseca, a marketing manager for Digital Equipment Corporation, "I had customers coming up to me saying, I haven't seen a Digital sales rep in nine 39

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months. Whom do I talk to now?" He further states, "That really hurt our credibility. I was embarrassed" (Markels & Murry, 1996). Digital appeared to have walked away from the very thing they downsized for, profit. As a result, many customers turned to International Business Machines Corporation (IBM), and Hewlett-Packard Company as their new suppliers (Markels & Murry, 1996). In 1989, Kohlberg Kravis Roberts & Company bought out Nabisco Corporation. Consultants for Nabisco recommended merging Nabisco foods with Planters and Lifesavers Company. The two businesses having very different products obviously have different outlets. The sales representatives were overwhelmed, and unable to know all the products, let alone adequately serve the buyers. According to John W. Seeley, president of American Consulting group, Inc., "You had a new salesperson calling on a buyer where there was no established relationship. It clearly put them at a competitive disadvantage" (Markels & Murry, 1996). Between 1991 and 1994, advertising was slashed at Planters Nuts by 70%. According to Steve Martinez, a sales representative, "Mr. Peanut disappeared, they had the most recognized figure in nuts, and they just said, See Ya" (Markels & Murry, 1996). Although John Mitchell, Planters president blames the profit deficit on outside forces: a price war, changing 40

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consumer tastes, and new labeling requirements. Unfortunately for Planters, cost cutting had adverse effects. Planters had control of the market and inadvertently relinquished their standing as the number one brand in the industry (Markels & Murry, 1996). This problem does not only exist for buyers who deal with sales representatives of corporations. It operates for the little guy too. For example, Continental Airlines stopped carrying aspirin on their flights, a move thought to save money. Soon, the customer hotline was full of complaints. Amazingly enough the flight attendants even had to inform headquarters that customers on flights needed headache relief. A year later aspirin was back on board (Markels & Murry, 1996). Even as customers are changing loyalties, employees who are downsized are switching to competitors also. In fact, they often take loyal clients with them. Corporations are experiencing conflict by not adequately considering where their profit comes from, or who builds it... the customer, and employee relationships. The corporation today does not seem to be well organized even though it is a time of reorganization. At Mutual Life Insurance Company in Connecticut, 1,675 employees were offered a substantial downsizing plan. Around 900 employees took the offer to leave. Unfortunately, it was more than twice 4 I

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the anticipated amount of workers the company estimated would leave, which left them with 400 positions to refill. According to John J. Pajak, the vice-chairman in charge of downsizing, "We clearly underestimated how many people would opt out. We should have done a better job of communicating about the opportunities that are going to exist after the merger" (Markels & Murry, 1996). All too often experienced workers who have been downsized are hired back. For example, Maryellen Ford was laid off by Eastman Kodak Company. Her new employer is a local contract labor business. Her first job the contract labor company sent her to was Eastman Kodak, where she was working on the exact project before being downsized. Eastman Kodak Company originally paid her $15.00 an hour, plus benefits. The contract labor company charges Eastman Kodak $65.00 an hour for Maryellen's employment. Maryellen makes $20.00 an hour without benefits from the contract labor company. The result to Eastman Kodak downsizing effort in this case and many others has actually meant they are paying more for the same work, by the same employees (Markels & Murry, 1996). Peoples, a unit of Consolidated Natural gas Company have experienced first hand a major conflict surrounding the use of contract labor. They have filed a law suit against Bermex, Inc., a major contract labor company in Southfield, Michigan, accusing 42

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them of breach of contract by allegedly failing to conduct proper background checks, as promised. Peoples clearly believed its own employees were more carefully screened. Peoples motive in using Bermex Inc., was to save over one million dollars by replacing its 35 meter readers with contract workers. According to Elmore Lockley, a spokesperson for Peoples, "We thought we would be able to get the same quality by outsourcing as we would with our own employees" (Markels & Murry, 1996). The law suit is over the tragedy that one of the contract workers raped a female customer of Peoples Inc., while out on a job. Peoples had to set up a special unit at their expense to receive customers concerns. They also had to return house keys to 6,000 customers along with $60.00 so they could install new locks in their homes. Until a decision is made as to whether electronic meter reading equipment would be more appropriate, and a new office unit is set up at a greater expense to Peoples to handle this matter, they have stopped reading meters altogether. Although the question still lies as to whether this is an isolated case, the facts speak for themselves. Peoples never experienced a problem of this magnitude that negatively affected their reputation and hit them so hard monetarily before outsourcing labor, which resulted from downsizing (Markels & Murry, 1996). 43

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A lack of quality employees is a result of downsizing. Companies are reducing employment costs by replacing knowledgeable, intuitive, talented, and experienced workers with those who are too young to have developed expertise. Why?, because younger workers can be paid a lower wage. The conflict is whether or not saving money in this way will genuinely offset the loss of experience and knowledge that only comes through years on the job (Markels & Murry, 1996). Nancy P. Karen of Nynex is worried the company will lose expertise and talent as a result of downsizing. That would mean for her and other managers like herself, there won't be enough of the right people to perform the tasks before them. Karen says, "Its not going to work perfectly. There will be cases when the downsizing occurs before the reengineering" (Byrne 1994). Nynex's downsizing effort has resulted in labor shortages, of experienced workers. Nynex has had to hire back managers who are already receiving retirement benefits, and now pay them a weekly salary as well. For example, John McGovern, a former field technician foreman was hired back by Nynex. He says, "They have a lot of new employees and a lot who have little expenence. They needed people to watch quality and train" (Markels & Murry, 1996). From this experience, over 150 employed at Nynex are filing a class action suit alleging they were selected for dismissal because of age discrimination. 44

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Too many companies are still pushing early retirement. Yet there are some who by the example of needing to rehire retired workers for their expertise, are retiring outdated policies rather than senior workers. Polaroid and Chicago's Bankers Life and Casualty are two such companies (Naisbitt, 1985). Downsizing efforts have also left many employees feeling overworked. Nancy P. Karen, who works for Nynex, as director of their personal-computer network now puts in 50-60 hours a week compared to her usual 40. Where she once supervised 26 employees, she now supervises 79. Time away from work was once her own, she now carries a beeper and cellular phone and checks her voice mail every hour no matter where she is. Karen says, "It's very different mentally. My weekends and holidays are not reserved." On a recent vacation she was required to call her office at least once a day (Byrne, 1994). Despite her increased workload, and concern over employee morale she considers herself lucky, because she has retained her job (Byrne, 1994). Yet, Nancy P. Karen and many others in a similar situation are finding themselves sitting next to many empty desks of colleagues who have been downsized. As a result, they are calculating the best angles to keep their jobs. It has generally come to mean working harder, longer hours, becoming 45

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more shrewd, and realizing a pay check is not an entitlement (Uchitelle & Kleinfield, 1996). White-collar workers are increasingly victimized when it comes to downsizing. They have worked hard for many years to gain experience that bought them their positions and top salaries. They are calling themselves 'the new lower class,' which means what used to be a normal salary for them of approximately $120,000.00 a year, as a result of downsizing they are extremely lucky to bring home $15,000.00 a year at a new job (Uchitelle & Kleinfield, 1996; Winter, 1973). The stress and strain is all too evident in their lives as they are too often unable to find another job to maintain, let alone improve their standard of living (Uchitelle & Kleinfield, 1996). Their grief, fear, and anger from experiencing downsizing is also affecting their families, friends, and communities, surrounding the extreme changes downsizing has brought into all aspects of their lives (Winter, 1973). Large companies such as Nynex, Eastman Kodak, Digital Equipment Corporation, Nabisco, Continental Airlines, Consolidated Natural Gas, and many others are reporting statistical research comparing profits and labor cost to justify downsizing. What the statistics do not show is the cost of emotional trauma to everyone involved and society as a whole. 46

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Job insecurity is causing the white-collar worker to believe they are a new minority. Their anger is directing itself to all sorts of targets in the form of scapegoating. In other words, they are adopting harsher views towards those more needy than themselves. According to Daniel Yankelovich, president of DYG Inc., a polling firm, "Polls have shown this anger directed at targets as diverse as immigrants, welfare recipients, computers, politics, the very rich and capitalism itself." He further states that, "Membership of so called hate groups is traceable to disaffected downsized workers" (Uchitelle & Kleinfield, 1996; Winter, 1973). Examples of this are seen 1n 'the new lower class' growing intolerant of having their tax dollars applied to social programs benefiting the disadvantaged. Even their children are subversely affected by this attitude, with major school budget cuts in physical education, and the arts. Computer programs in schools are drastically cut because Apple Computer could not receive sufficient tax credits to make it cost effective for them to continue to donate computers to schools. So unless those in 'the new lower class' are in a more monetarily advantaged group, and can afford to buy their own computer and essential equipment, their children will be disadvantaged by not being able to learn computer skills any longer in the schools, not unlike the disadvantaged (Glastonbury & LaMendol, 1992). Politically speaking, people in this group are 47

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becoming less faithful to one party, and less likely to vote. They are more likely to enter the idea of a third party, according to pollsters (Uchitelle & Kleinfield, 1996). Steven Holthausen's story is a good example of what a person experiences from being downsized. He was a executive loan officer before being downsized, he is now a tourist guide. He has worked at several odd jobs since his layoff. Where he once made $1,000.00 a week, he now brings home $1,000.00 a month. For over a year he scraped by on severance pay, meager commissions earned as a freelance mortgage broker and on unemployment insurance. The fact that his new lower income was taxed made him resent the government. He says, "If the federal budget were balanced by scaling back spending, less of my income would be taken from me" (Uchitelle & Kleinfield, 1996). Holthausen is frazzled, distraught and angry. He asks, "Why did I give so many evenings and weekends to my employer? Why didn't I see my job was doomed?" He tried to accept his dismissal, until he learned his duties were taken over by a 22 year old at a fraction of his pay (Uchitelle & Kleinfield, 1996). Holthausen had marital problems before downsizing, however, downsizing exacerbated the conflicts in his family relationships. Any type of reconciliation seemed to become bleak when he lost his job, within six months they were in divorce proceedings. His wife had not worked outside of the 48

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home, she now works as a medical secretary. He says his two children avoid him. He thinks they are acting this way because, "he must have shortcomings or he would not be jobless" (Uchitelle & Kleinfield, 1996). This went against the structure Holthausen knows as the traditional family. The impact of his job loss, resulted in a second loss of his family. This seems to be very common in families where one wage earner, usually the man, has lost his job and is unable to find another one equivalent in position and salary as the last. On the other hand, in families where both adults work, and exhibit less traditional roles, there seems to be different dynamics that pull them together to face job insecurity. Unfortunately, this was not the case for Holthausen (Auringer, 1997; Blau & Ferber, 1986; Uchitelle & Kleinfield, 1 996). Holthausen became so discouraged he withdrew from outside activities as well. He had been Co-Chairman of Trusties in his church as well as Vice-Chairman of the Police Board in his area. He quit both posts. Holthausen story further confirms the idea that one's identity is directly linked to one's job. A loss of this caliber brings with it insurmountable stress, which can be linked to illnesses of many types: mentally, physically, and emotionally (Auringer, 1997; Uchitelle & Kleinfield, 1996). 49

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Another man, who wishes to remain nameless because of retribution, has experienced the same plight. He was a middle manager at Nynex. He says, "People are frightened of the future. This affects their self-esteem and pocketbooks. Most people aren't going from something, to something. They have no place to go." His fear is mostly over the fact that, he truly believes, Nynex will not recover from what he calls this, "bloodletting." He recalls the days when commitment to his job took the form of walking through a major snow storm to get to work. A commitment he believes employees won't likely feel in the future. He talks about an example related to the issue of commitment. It has to do with whether or not employees in the future will rush to a crisis to set up emergency communication equipment, as employees did, during the bombing of the World Trade Center, in New York. He goes on to say, "This may be the consequences to Nynex's inadequate strategy of putting profits before people" (Byrne, 1994). The fear this man is experiencing in wishing to remain anonymous is based on actual company practices surrounding downsizing. This example took place at New York and New England Telephone of Nynex, that any questioning by a senior manager means an automatic dismissal. Robert J. Thrasher was hired by Nynex to execute downsizing efforts at this corporation. He was given approval to move forward and cut salaries by 1.6 50

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billion. He told the Board of Directors, "If the corporation could achieve twenty-five percent of their goals, they would see a two hundred twenty-six percent return in a three year payback" (Byrne, 1994). Although the actual cost of cutbacks grew from seven hundred million to two billion as a result of Union negotiations. Senior managers questioned this process, and 1n Thrasher's response he said, "What we've got to do is find them, and get them out of the business" (Byrne, 1994). This affirms the use of formal versus informal communication channels when organizations and employees are going through downsizing. The Denver, Colorado metro area experienced first hand the King Soopers/Safeway strike lead by the United Food and Commercial Workers International Union, Local #7 (CWIU#7). King Soopers and Safeway wanted to drain a $20 million pension fund, eliminate work hours, cut health care benefits, and limit full time jobs as well as promotional opportunities. As the strike continued many customers grew weak in their support toward the strikers. Where there were once empty parking lots with strikers waving to those driving by, fewer strikers held signs outside their posts, and parking lots once again filled with customers. People are increasing unable to rally together as a community to support strikers, when the experience hits too close to home. 5 1

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From this example of the King Soopers/Safeway strikers, Steven Holthausen's life, and the man from Nynex who wishes to remain anonymous, psychologists say, these are all examples of "survivors syndrome" (Gottlieb & Conkling, 1995; Uchitelle & Kleinfield, 1996). This means that people are too exhausted and frustrated from being overworked or facing the possibility of being overworked, underworked, losing benefits or worse a job to even think about let alone participating in activities they once enjoyed (Gottlieb & Conkling, 1995). This does not only encompass personal activities a person can do alone, but activities that impact others such as: Little League coaches, Girl Scout leaders, and Sunday School teachers, to name a few (Uchitelle & Kleinfield, 1996). These conflict situations illustrate a need for new approaches to conflict resolution in downsizing organizational structures and formal and informal communication channels. Next a discussion will be presented that tie these areas of downsizing, organizational structure, formal and informal communication channels, and conflict together in hopes of drawing some new conclusions. 52

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CHAPTER 3 DISCUSSION This thesis examined downsizing with respect to how restructuring an organization brings about conflict and a need for new approaches to communication. Improving communication in an organization can promote a better work environment, improve productivity, and enhance profitability. In this final chapter there will first be a brief overview of downsizing, organizational structure, formal and informal organizational structures, communication and conflict. Then five areas of concern that result from this thesis will be presented: 1) Social discontentment, 2) The perceived new minority and/or new lower class, 3) Customer relationships, 4) Supplier relationships, and 5) Sabotage. Finally, some new conclusions will be drawn that tie the current literature together for the purposes of advancing knowledge for future research. The history of industrialization has shown downsizing not to be a new phenomenon, corporations have always used it as a means to increase profit. Traditionally large corporations believed downsizing organizational structures would streamline the channels that communication had to flow through, and it did. 53

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Unfortunately, downsizing has proven to have an opposite effect on the organizational structure with regards to its flow of communication. The concept of downsizing as a means of improving organizational efficiency may have only proven to be in the interest of corporate profits in order to invest in other corporate ventures, and has not enhanced communication within the corporation. When organizational structures are changed and information regarding these changes remains in formal communication channels, employees experience a lack of control and resist restructuring by not cooperating with management. When formal communication channels do not present information to employees by an appropriate method it generates distrust in management. An appropriate method would be one that is useful, timely, and delivered by a person of trust who has referent power, who can answer employee questions without negative consequences in terms of negative performance evaluations and promotions, only then will employees be open to change. Typically this is not done, and conflict continues to exist in informal communication channels, because the process takes time and energy which is not profitable for the corporation. Now that the areas of downsizing, organizational structure, formal and informal organizational structures, communication and conflict have been reviewed, this discussion 54

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will focus on five areas of concern that resulted from this investigation: 1) Social discontentment, 2) The perceived new minority and/or new lower class, 3) Customer relationships, 4) Supplier relationships, and 5) Sabotage. Social Discontentment Social discontentment is a big issue for people in the history of industrialization and downsizing. Restructuring has consistently been accomplished by increasing work hours for the same or less pay, increasing the speed an individual has to work, or downsizing individuals and organizational departments altogether. This creates angry employees who have sought out Unions and Congress for help. Federal and State laws have been passed to protect individual rights in hiring, firing and promotions. Yet formal organizational structures can use Title VII of The Civil Rights Act to their advantage because organizations have a legal right not to discriminate against who they will downsize. Downsizing has become an equal opportunity to discriminate against all employees, white males included. This type of discrimination downsizing has created, develops distrust and disloyalty in organizations. Subsequently, when an employee who is downsized is angry and has lost trust in an 55

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organization and is rehired by another corporation, the new corporation may be hiring a disgruntled disloyal employee. The Perceived New Minority The perceived new minority and/or new lower class, involves, angry disgruntled employees who have worked for a company for 20, 30, or 40 years and having found themselves downsized are now struggling to get by on a fraction of the salary they used to make. They are experiencing emotional trauma from lost job security which ultimately effects society as a whole. Angry disgruntled employees see themselves as less advantaged and are turning their anger toward others who are really the less fortunate; i.e.: minorities, immigrants, welfare recipients, and the elderly to name a few. They are pressuring Congress to restructure programs that were set up to help the poor and elderly. Congress is unwilling to give up their own perks to balance the Federal budget, but are supporting intolerance by advocating a reduction of social welfare programs that benefited the disadvantaged. Society is further affected by what psychologists call "survivor syndrome" (Gottlieb & Conkling, 1995; Uchitelle & Kleinfield, 1996). When people are too exhausted and frustrated 56

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from being overworked, under employed, suffering lost benefits, or unemployed, to even think let alone participate in extracurricular activities such as: coaching Little League, being Girl Scout or Boy Scout leaders, or helping with their children's education. Downsizing on a large scale victimizes practically everyone (Uchitelle & Kleinfield, 1996). Customer Relationships A corporation is negatively affected by downsizing when customer relationships are weakened. This happens when valuable employees or whole organizational departments which are responsible for customers' needs are downsized. As a result, vital communication channels are lost which hurts the customer because no one knows who is in charge anymore. Customers are shuffled around from department-to-department or person-toperson trying to find someone to meet their needs. Subsequently, no one knows the answer to questions required to meet the customers' needs. This generates distrust because information is not forthcoming in a useful, timely manner, from a trusted individual with referent power. When too much time is required to respond to the customers' needs, the result can be the loss of a loyal customer. 57

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Supplier Relationships Supplier relations are affected by downsizing when the supplier base itself is downsized. The suppliers an organization chooses must be able to perform and meet all the organizational needs. This new demand may force the supplier to deal with problems associated with rapid growth and expansion required to meet this demand. This type of business/supplier relationship can create a precarious situation where the supplier is overly dependent on a company for its survival. Should the company decide to withdraw or decrease its business, the supplier may find themselves in financial distress, ultimately downsizing its organization in an effort to survive the loss of business. The suppliers who were not chosen may find the loss of business significant enough to force them to downsize their organizations or close their doors altogether. Suppliers servicing several companies who are all downsizing may find that going out of business is imminent. Suppliers may be customers too. If an organization does not properly take care of its suppliers the corporation can ultimately lose customers. Often, because of the relationships that are built between customer, suppliers and corporate employees, when an employee is downsized valuable customers and suppliers go with them to the new organization. 58

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Sabotage It is undeniable that disgruntled employees perpetrating acts of sabotage upon the company creates chaos and has wide spread implications. For example, when employees are disgruntled and angry they can retaliate by switching a shipping label from one shipment meant for a customer and place it on a different shipment. This upsets the customer creating customer dissatisfaction and costs the company because the order is wrong and has to be returned to the company. Sabotage of this kind creates a misuse of an organization's time and monetary resources. If an employee is not productive the organizational assets are not productive. Disgruntled and angry employees can use informal communication channels to spread misinformation to other employees. Sabotage of this type can lead to poor morale and inspire others to instigate their own forms of sabotage, affecting the organization's resources. Future Implications Three new conclusions will be drawn that will tie the current literature together for the purpose of advancing knowledge for future research: 1) The role of communication in 59

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downsizing, 2) The flow of communication in downsizing, and 3) Formal versus informal communication m downsizing. The suggestions presented in this paper by no means address everything. There are other applications that need to be explored before communication with regards to downsizing, organizational structure, formal and informal structures, and conflict/ negotiation can fully be resolved. Understanding the role and flow of communication in downsizing, organizational structure, formal and informal organizational structures, and conflict/negotiation is essential to the survival of the effectiveness of any organization and its relationship to its employees. The Role of Communication m Downsizing Current research ignores the role of communication m both the design and measurement of ways to handle conflict surrounding downsizing. An area extensively researched 1s conflict management styles, without applying or linking them to organizational structure as a whole. There is also very little research linking formal and informal communication channels when downsizing (change) occurs. Researchers have regrettably concluded that communication is only a variable in downsizing, 60

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organizational structure, formal and informal communication channels, and conflict/negotiation procedures, when in fact it may be the key or primary component that holds everything together or tears it apart. Subsequently, research in these areas is limited, which confirms the need to connect the different academic disciplines together in order to create a better understanding of the bigger picture. The Flow of Communication in Downsizing Downsizing has been established not to be a new phenomenon citing the history of industrialization, and traditionally organizational restructuring has supported the ideology that the flow of communication having fewer formal channels to move through would improve communication. Yet the literature confirms informal communication channels are more dominant in an organization, affirming the idea that downsizing has not helped to increase the flow of communication. The issues thus far only support a negative use of informal communication channels. A new area of research may be, how to use informal communication channels to positively impact the corporation. 6 1

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Formal versus Informal Communication in Downsizing The literature supports the use of formal communication channels as a way of addressing positive and negative conflict, but this approach leads to avoidance, intolerance, and passive resistance in organizations. In the interest of preserving harmony within the organization, company protocol advocates the use of formal grievance procedures as a method of resolving conflict. Yet, the use of formal grievance procedures is often perceived as contradictory to the organizations attempt to preserve harmony. Subsequently, the employee is considered disloyal to the organization. Handling conflict this way sets up an atmosphere that allows the organization to keep people in conflict handling styles of tolerance and avoidance, while the organization proceeds with downsizing. Ultimately, tolerance and avoidance keeps conflict below the surface in informal communication channels which makes it more difficult to change existing structures and systems. Revealing how power and authority of formal communication channels function in conflict. This cycle seems to repeat itself over and over again. Further exemplifying how informal communication channels are predominate in organizations and need to be further researched. When disputes are kept in informal channels it makes conflict 62

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more difficult to deal with and power relationships remain unchanged. Conclusion It has become the mantra of American industry that companies must become competitive if they are to compete successfully in the global economy. The need to remain competitive has been used as a rationalization for corporate downsizing, and for moving manufacturing jobs off shore. Downsizing is hardly a quick fix. It is not an effective strategy, and it is not a panacea for poor management. Healthy companies that slash payrolls instead of devising new game plans for growth are sending a demoralizing message to employees. Has anyone really considered the ramifications of downsizing, when it is implemented without appropriately communicating organizational change? It seems everyone is jumping on the downsizing bandwagon, similar to the total quality movement in the early 1980's. American corporate executives are unwilling to sacrifice their own wages or perks or take on longer work hours. They pass those consequences on to production workers and middle management. Downsizing does not mean there is less work to do, but fewer employees to take 63

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on that workload, while top executives benefit from greater wage increases. We cannot reinvent the wheel. We can make a new one, or improve upon its design, but it still is round, and functions the same. Corporations are in business for profit, that will not change. Corporations must remember that employees generate profit or loss. People are angry because they are finding that companies are no longer respecting their expertise, experience, and years of dedication to the company. They are finding that there is not room for collaboration or negotiation when the company decides to downsize. Although there are significant issues to be addressed, i.e.: loss of benefits, job security, wage decreases, dislocated employees, and overall trust in the organization, the corporations' main focus is not in resolving these conflicts but restructuring in an effort to enhance profitability. When an employee seeks resolution concerning these issues they discover that the formal organization structure is designed to support the companie's motives and does not resolve the employees' concerns. Therefore, litigation appears to be a viable means of resolving their own downsizing issues. Then again, one may ask, so what? Roughly three million people are affected by layoffs each year which is 50% more than the two million annual victims of violent crimes (Uchitelle & 64

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Kleinfield, 1996). While there may be stiffer jail sentences there has not been any agreed upon antidotes to this problem of downsizing. This is not a saga about unemployment like the Great Depression, but one about an emerging redefinition of employment. The stress of downsizing is compared by many to facing the death of a relative. The effects are devastating personally, and to society at large. Corporate cutbacks appear to threaten the economic security and self-esteem of survivors and victims alike. It causes turmoil and shatters morale inside organizations as well as offsets customer/supplier relations. The public view is then further confirmed that profit always comes before people, and not the other way around as corporations and futuristic researchers would have us believe. 65

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