A Resource-Acquisition Perspective: Examining the Effects of Downsizing on Work-Related Relationships and Performance

Abstract

Today’s corporations increasingly use downsizing as a change strategy to improve organizational performance. Although downsizing and employee networks have garnered attention from both scholars and practitioners, few studies have investigated the influence of downsizing on the temporal dynamics of communication networks among surviving employees or how changes in communication patterns in organizations affect performance. To study how downsizing affects layoff survivors—extending Conservation of Resources theory to longitudinal network and employee-performance data—we examine the impact of downsizing on both the behavioral and structural consequences in an organizational network and test whether temporal changes in network members’ degree centrality predict how employees who survive a downsizing event perform in their jobs. Results indicate that, during the period immediately following a downsizing event, survivors’ new tie-seeking behavior results in gains in degree centrality when compared with degree centrality before the downsizing or after organization routines stabilize. Moreover, survivors with lower pre-downsizing degree centrality achieved greater gains in degree centrality than those with higher degree centrality. We find that substantial gains in degree centrality are positively related to post-downsizing performance. Efforts to regain degree centrality are abandoned during the stabilization period, and changes in degree centrality are no longer positively related to post-downsizing performance. Our results demonstrate that dynamic changes in degree centrality during disruption and stabilization periods following a downsizing event have differential effects on work-related relationships and performance. We discuss the theoretical and managerial implications of these results and suggest future research directions.