organization downsizing research paper

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Organizational Downsizing, Work Conditions, and Employee Outcomes: Identifying Targets for Workplace Intervention among Survivors

Michael r. frone.

1 Department of Psychology, University at Buffalo, The State University of New York, Buffalo, NY 14203, USA

Ann-Renee Blais

2 Department of National Defence, Ottawa, ON K1A 0K2, Canada; [email protected]

Associated Data

This study broadly assesses the association of organizational downsizing to work conditions and employee outcomes, and the extent to which work conditions mediate the association of downsizing to employee outcomes, thereby serving as targets for workplace intervention to reduce the harmful effects of downsizing on surviving workers. The cross-sectional data came from a national probability sample of 2297 U.S. workers. A parallel multiple-mediator model with multiple outcomes was estimated, adjusting for personal, occupational, geographic, and temporal covariates. Exposure to downsizing was the predictor. A set of 12 work conditions, representing four dimensions of the work environment, served as simultaneous mediators ( Work Role: work demands, role conflict, role ambiguity, and work autonomy; Interpersonal Relationships: supervisor aggression, coworker aggression, friendship formation, and dysfunctional leadership; Rewards: distributive justice and promotion opportunities; Security: job insecurity and employment insecurity). A set of 16 employee consequences, representing five categories of outcomes, served as simultaneous outcomes ( Inability to Detach from Work: negative work rumination and inability to unwind after work; Energetic Resource Depletion: physical, mental, and emotional work fatigue; Negative Affect: depression, anxiety, and anger; Positive Affect: happiness, confidence, and vigor; Health: physical and mental health; Work Attitudes: job satisfaction, organizational commitment, and turnover intentions). The results indicated that downsizing had an adverse association with nine of the 12 work conditions (higher levels of work demands, role conflict, supervisor aggression, dysfunctional leadership, job insecurity, and employment insecurity, and lower levels of friendship formation, distributive justice, and promotion opportunities) and all 16 employee outcomes. Moreover, the associations of downsizing to the employee outcomes were indirect, collectively mediated by the nine work conditions. This study provides the broadest evaluation of the deleterious effects of downsizing on U.S. workers surviving a downsizing, identifies affected work conditions that can serve as targets for workplace interventions, and provides insight into why organizational downsizing often fails to deliver anticipated financial and performance benefits to organizations. In terms of serving as targets for workplace intervention, some work conditions meditated the associations of downsizing to a broad set of employee outcomes, whereas other work conditions were specific to certain outcomes. The broad mediators should be targets of any intervention aimed at reducing the adverse effects of downsizing, with additional workplace targets depending on the class of outcomes to be addressed by the intervention.

1. Introduction

Organizational downsizing represents the strategic reduction of an organization’s workforce to reduce labor costs, increase profitability, and in times of severe economic shock (e.g., recession), to prevent organizational collapse [ 1 ]. Once viewed as an aberration in organizational strategy [ 2 , 3 ], over the prior four decades, downsizing became a widely used reactive strategy to deal with macroeconomic shock and an accepted proactive tool for short-term profit maximization among healthy companies [ 3 , 4 , 5 ]. Regardless of the reasons for downsizing, it creates two groups of workers: (a) displaced workers who involuntarily lose their jobs (victims) and (b) workers who survived the downsizing (survivors). A large body of research shows that involuntary job loss from downsizing is stressful and results in a variety of adverse outcomes among victims, such as poor physical and mental health and excessive alcohol use [ 6 , 7 , 8 , 9 ], as well as scarring effects after reemployment, such as wage penalties and sustained poor mental health [ 10 , 11 ].

Although research also implicates downsizing in detrimental effects on surviving employees, Maertz, Wiley, LeRouge, and Campion [ 12 ] pointed out that “there have been few valid direct tests of the supposed negative main effects [of downsizing] on survivor reactions and retention. Instead, most prominent research on survivor reactions has simply examined empirical relationships among survivors ” (italics in original, p. 277). Therefore, we use a large national sample of U.S. workers that contains downsizing survivors and unexposed workers to address two prominent gaps in this literature. The first gap is the relative lack of research that broadly assesses the work characteristics and employee outcomes that may be affected by organizational downsizing. This lack of broad research leaves primary stakeholders (i.e., employers, labor unions, healthcare providers, and governments) ill-informed regarding the potential impact of downsizing on surviving employees. Whether downsizing has narrow or broad consequences for surviving employees is an issue central to determining policy and the response of primary stakeholders. The second gap is the lack of information on the mediating role of work conditions in the association of organizational downsizing to employee outcomes. The development of policy and the response of stakeholders also is contingent on knowing the work conditions that carry the effect of downsizing on employee outcomes. These work conditions provide targets for workplace intervention that may help mitigate the adverse impact of downsizing on surviving employees.

2. Conceptual Model

We use Pearlin and Bierman’s [ 13 ] general model of stress to address these gaps and to expand our knowledge of the effects of organizational downsizing on survivors. Pearlin and Bierman’s [ 13 ] model proposes that primary stressors can lead to a proliferation of secondary stressors, which subsequently lead to various deleterious outcomes. Building from this general model, the conceptual model of organizational downsizing in Figure 1 leads to three general predictions. First, organizational downsizing represents a macro-organizational primary stressor that can lead to a multitude of secondary workplace stressors characterized by an increase in negative work conditions (e.g., work demands, interpersonal aggression, job insecurity) and a decrease in positive work conditions (e.g., work autonomy, friendship formation, promotion opportunity). Second, downsizing is potentially associated with a broad set of adverse employee outcomes (e.g., inability to detach from work, poor health, negative work attitudes). Third, work conditions will mediate (i.e., explain) the association of downsizing to the adverse employee outcomes. Relatedly, depending on the extent to which the assessed work conditions fully capture the effect of downsizing on employee outcomes, there may or may not be a residual direct association of downsizing with the outcomes.

Conceptual model of organizational downsizing, work conditions, and employee outcomes. a = the direct effect of organizational downsizing on work conditions, b = the direct effect of work conditions on the outcomes, and c′ = the direct effect of organizational downsizing on the outcomes.

3. Prior Research

3.1. downsizing, work conditions, and employee outcomes.

Although downsizing may affect a broad set of work conditions, few studies have explored this issue, and among those that did, relatively few work conditions were assessed. A study of Finnish municipal employees during a severe recession in the early 1990s found that the extent of downsizing in the surveyed companies (minor, <8%; intermediate, 8–18%; major, >18%) was significantly and positively associated with physical demands and job insecurity; significantly and negatively associated with skill discretion and participation in decision making; and was not significantly related to psychological demands, work autonomy, supervisor social support, and coworker social support [ 14 ]. A national study of Norwegian workers in 2003 found that compared with workers unexposed to downsizing, downsizing survivors reported significantly higher levels of work demands and job insecurity, and no difference for work autonomy [ 15 ].

A study of Polish workers in 2011 found that compared with workers unexposed to downsizing, downsizing survivors reported significantly higher levels of quantitative work demands and job insecurity; and significantly lower levels of job control (i.e., work autonomy), task clarity (i.e., low role ambiguity), and work-related social support [ 16 ]. A study of Korean banking employees explored the impact of downsizing across two banks that differed in the extent of workforce reduction (15% vs. 40%) during a 1997 recession [ 17 ]. The results indicated that, among surviving employees, more severe downsizing was associated with lower levels of supervisor support, promotion opportunities, participation in decision making, three types of organizational justice (distributive, procedural, and interpersonal), and job complexity. Finally, a national study of U.S. workers in 1997 found that compared with workers unexposed to downsizing, downsizing survivors reported significantly higher levels of job pressure and coworker social support; and significantly lower levels of work autonomy and organizational support [ 18 ].

Employee outcomes have received more attention than work conditions, but most studies have assessed only one or two outcomes. Several studies have shown that organizational downsizing is associated with various employee outcomes, such as higher levels of sickness absence [ 14 , 19 ] and overall work exhaustion [ 20 ], as well as lower levels of job satisfaction [ 20 , 21 ], organizational commitment [ 17 , 18 , 22 ], and physical or mental health [ 23 ]. Also, two studies explored the association of downsizing to a broader set of employee outcomes. A study of Polish workers found that compared with unexposed workers, downsizing survivors reported higher levels of stress and turnover intentions; lower levels of job satisfaction, work engagement, and job performance; and no significant difference in overall work exhaustion and sickness absence [ 16 ]. A large national study of U.S workers found that organizational downsizing was significantly and negatively related to organizational commitment and perceived performance, significantly and positively related to turnover intentions, and not significantly related to job satisfaction [ 12 ].

As shown in Figure 1 , we build upon and expand prior research by exploring the association of downsizing to a broader set of work conditions (four general categories—work role conditions, interpersonal relationships, rewards, and security—comprised of 12 constructs) and employee outcomes (six general categories—inability to detach from work, energetic resource depletion, health, negative moods, positive moods, and work attitudes—comprised of 16 constructs). Some of the work conditions and outcomes assessed in the present study overlap with research described earlier, thereby providing replication, and many new work conditions and employee outcomes are assessed in order to extend our understand of the potential impact of organizational downsizing on survivors.

3.2. Mediating Role of Work Conditions

Although understanding the work conditions that mediate the association of organizational downsizing to employee outcomes is important because they may serve as potential targets for workplace intervention, surprisingly little research has explored this issue [ 17 ]. We identified four studies, described earlier, that tested indirect effects that might inform the development of workplace interventions. A study of Finnish employees [ 14 ] reported that downsizing was associated with four (physical demands, skill discretion, participation in decision making, and job insecurity) of the eight work conditions described earlier. Controlling for these four work conditions simultaneously reduced the size of the association between downsizing and sickness absence by 49%, though the direct association of downsizing remained statistically significant, suggesting that other unassessed work conditions may act as mediators [ 24 ]. However, the study did not report estimates of the four simultaneous individual indirect effects. Instead, the authors provided evidence suggesting each of the four work conditions acted as a mediator of the association between severity of downsizing and sickness absence if the size of the downsizing association became smaller after statistically controlling for each work condition individually. Because the four work conditions likely were intercorrelated, it is not clear if all four work conditions represent significant mediating variables.

A study of Korean banking employees [ 17 ] found that when the seven work conditions described earlier were considered as simultaneous mediating variables, the association of downsizing severity to reduced organizational commitment was fully mediated by three of the seven work conditions: lower levels of promotion opportunities, procedural justice, and job complexity. Knudsen et al.’s [ 18 ] national study of U.S. workers found that each of the four assessed work conditions (work demands, work autonomy, coworker support, and organizational support) simultaneously mediated the association between downsizing survivorship and reduced organizational commitment. However, the direct association of downsizing survivorship to reduced organizational commitment remained statistically significant, suggesting that other unassessed work conditions may act as mediators. Finally, a national study of Irish workers reported that work demands mediated the association organizational downsizing to lower levels of job satisfaction and higher levels of overall work exhaustion [ 20 ]. However, the direct effects of downsizing to the two outcomes were statistically significant, suggesting that other unassessed work conditions may act as mediators.

Collectively, these four studies exploring the mediating effects of work conditions in the association of organizational downsizing to employee outcomes provide limited information regarding targets for workplace interventions. These studies assessed relatively few work conditions and even fewer employee outcomes. Two studies assessed organizational commitment, one study assessed sickness absence, and one study assessed both job satisfaction and overall work exhaustion.

4. The Present Study

We used the model in Figure 1 as a framework to explore four broad research questions. RQ1: Does organizational downsizing have a narrow or broad association with work conditions representing secondary stressors? RQ2: Does organizational downsizing have a narrow or broad association with employee outcomes? RQ3: Which work conditions mediate the association of organizational downsizing to employee outcomes? RQ4: Do the mediating work conditions have general mediating effects across a range of employee outcomes or more narrow mediating effects associated with specific types of outcomes (e.g., inability to psychologically detach from work, health, or work attitudes)? Knowledge of which work conditions have broad or narrow mediating effects would help focus intervention efforts in order to have a maximal impact on reducing the potential deleterious employee outcomes. We address these research questions by comparing workers who were employed by organizations that had layoffs during the preceding year (survivors) to workers who reported that their employer had no layoffs (unexposed), using data from a large national probability sample of U.S. wage and salary workers.

5. Materials and Methods

5.1. sample and study design.

Data came from 2975 U.S. workers who took part in a national random-digit-dial telephone survey, called the National Survey of Work Stress and Health, conducted from December 2008 to April 2011. The study design is described in more detail elsewhere [ 25 ]. To be included in the present analyses, participants had to meet three sequential selection criteria: (a) answered the question about company downsizing (510 workers were excluded because the question was added after the survey was in the field), (b) were wage and salary workers (144 owner/operators were not included), and (c) had data on all covariates described later (24 wage and salary workers were missing information on the covariates). These selection criteria resulted in a final sample of 2297 workers. The study protocol (Study #2448) was approved by the University at Buffalo’s Human Research Institutional Review Board. All study participants provided verbal informed consent before participating in the study.

5.1.1. Sampling Weights

The participants were weighted using sampling weights to better generalize to the target population of U.S. wage and salary workers. The sampling weights adjust for differential probabilities of selection, nonresponse, and noncoverage, and are described in more detail elsewhere [ 25 ].

5.1.2. Respondent Characteristics

The respondent characteristics (constructs used as covariates) are described in Table 1 .

Sample characteristics.

Note: Weighted means or percentages differed across Studies 1 and 2 at * p < 0.05, ** p < 0.01, *** p < 0.001. See the Measures section for a description of the variables.

5.2. Measures

Descriptive statistics (means and standard deviations) and correlations for all variables are presented in Appendix S1 .

5.2.1. Organizational Downsizing

Participants reported if their employer had laid off employees during the preceding 12 months (not including usual seasonal layoffs). Responses were scored as 0 (no) and 1 (yes).

5.2.2. Work Conditions

Work demands were assessed with six commonly used items [ 26 , 27 , 28 ]. Example items are as follows: During the past 12 months, how often did you have too much work to do? and During the past 12 months, how often did your job require you to work under time pressure? Response anchors ranged from 0 (never) to 4 (every day). Coefficient alpha was 0.87.

Role conflict was assessed with three items—two items from Peterson et al. [ 29 ] and one item from House, Schuler, and Levanoni [ 30 ]. Role ambiguity was assessed with four items developed by House et al. [ 30 ]. An example role conflict item is I often have to meet the conflicting demands from various people at work . An example role ambiguity item is My work responsibilities are clearly defined (reverse scored). Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.86 for role conflict and 0.82 for role ambiguity.

Work autonomy was assessed with six items adapted from Morgeson and Humphrey [ 31 ]. Example items are I can make my own decisions about how to schedule my work, and I can make decisions about what methods I use to complete my work. Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.86.

Supervisor and coworker aggression were each assessed with three parallel items adapted from prior research [ 32 , 33 ]. Items for supervisor aggression were Thinking back over the past 12 months, how often has a supervisor done any of the following to you? Was rude or talked down to you? Made negative comments about your intelligence, competence, or productivity? Insulted you or called you names in front of other people? Response anchors ranged from 0 (never) to 4 (every day). Coefficient alpha was 0.82 for supervisor aggression and 0.80 for coworker aggression.

Friendship formation —the extent to which respondents formed strong friendships at work—was assessed with a three-item measure developed for this study. An example item is I feel close to some of the people I work with . Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.90.

Dysfunctional leadership was assessed with items assessing passive and undermining leadership. Of the five items assessing passive leadership—two items were adapted from Den Hartog, Van Muijen, and Koopman [ 34 ], two were from Pearce and Sims [ 35 ], and one item was developed for this study. An example item is Your supervisor tends to be unavailable when staff need help with a problem . Undermining leadership was assessed with five items [ 36 ]. An example item is Your supervisor changes goals without telling you . Response anchors for all 10 items ranged from 1 (strongly disagree) to 4 (strongly agree). Because the passive and undermining leadership measures correlated highly (r = 0.75), the items were combined into an overall measure of dysfunctional leadership. Coefficient alpha for the overall measure was 0.92.

Distributive justice —the extent to which individuals are rewarded fairly, given their efforts and contributions—was assessed with four items [ 37 ]. An example item is My rewards reflect the effort I put into my work . Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.94.

Promotion opportunity was assessed with two items adapted from Spector [ 38 ], and one item developed for this study. An example item is There is little chance of promotion on my job (reverse scored). Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.85.

Job and employment insecurity were each assessed with three items [ 39 ]. Job insecurity represents the perceived likelihood of involuntarily losing one’s current job, whereas employment insecurity represents the perceived likelihood of not finding comparable new employment in the event of job loss [ 40 ]. An example job insecurity item is I am not really sure how long my present job will last. An example employment insecurity item is If I lost my present job, I would probably be unemployed for a long time . The response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.80 for job insecurity and 0.85 for employment insecurity.

5.2.3. Employee Outcomes

Negative work rumination , which represents preoccupation with and repetitive thoughts focused on negative work experiences that may extend beyond the workday, was assessed with five items [ 25 ]. An example item is How often do you replay negative work events in your mind even after you leave work? The response anchors ranged from 0 (never) to 3 (often). Coefficient alpha was 0.91.

Inability to unwind was assessed with the following single item developed for this study: During the past 12 months, how often did you find it difficult to unwind and relax after you leave work? The response anchors ranged from 0 (never) to 4 (every day).

Physical, mental, and emotional work fatigue were each assessed with six parallel items from the Three-Dimensional Work Fatigue Index (3D-WFI) [ 41 ]. Example emotional fatigue items are During the past 12 months, how often did you feel emotionally exhausted at the end of the workday? ; and During the past 12 months, how often did you want to emotionally shut down at the end of the workday? Response anchors ranged from 0 (never) to 4 (every day). Coefficient alpha was 0.94 for physical work fatigue, 0.95 for mental work fatigue, and 0.95 for emotional work fatigue.

Three dimensions of negative and positive affect were assessed by asking how often the participants experienced each emotion during the prior 12 months. Each negative and positive emotion was assessed with three adjectives: depression (depressed, sad, gloomy), anxiety (nervous, anxious, worried), anger (hostile, furious, angry), happiness (joyful, happy, cheerful), confidence (confident, proud, strong), and vigor (lively, active, energetic). The emotion adjectives were taken from the Brunel mood scale [ 42 ] and the PANAS-X [ 43 ]. Response anchors for the emotion adjectives ranged from 0 (never) to 3 (often). Coefficient alpha was 0.75 for depression, 0.74 for anxiety, 0.69 for anger, 0.81 for happiness, 0.68 for confidence, and 0.77 for vigor.

Physical and mental health were each assessed with two-items [ 44 ]. Physical health was assessed with the following two items: In general, would you say your physical health is poor, fair, good, very good, or excellent?; and In general, compared to most (men/women) your age, is your physical health much better, somewhat better, about the same, somewhat worse, or much worse? (reverse-scored). Mental health was assessed with parallel items substituting mental or emotional health for physical health. The item responses were scored from 1 (poor/much worse) to 5 (excellent/much better). Coefficient alpha was 0.74 for physical health and 0.78 for mental health.

Job satisfaction was assessed with three items from the Michigan Organizational Assessment Questionnaire [ 45 ]. An example item is All in all, I am satisfied with my job . Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.91.

Affective organizational commitment was assessed with three items from Meyer and Allen’s revised measure [ 40 , 46 ]. An example item is This organization has a great deal of personal meaning to me . Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.88.

Turnover intentions were assessed with three items [ 47 ]. An example item is I am seriously thinking about quitting my job . Response anchors ranged from 1 (strongly disagree) to 4 (strongly agree). Coefficient alpha was 0.85.

5.2.4. Covariates

Several covariates were included in the analyses to adjust for potential compositional differences in the samples of downsizing survivors and unexposed employees (see Table 1 for more detail): gender (0 = women, 1 = men), race (0 = White, 1 = minority), age (in years), level of formal education (10 ordinal categories, scored 1 to 10), total annual family income from all sources (in units of 10,000 U.S. dollars), U.S. Census geographic divisions (8 dummy variables, scored 0 and 1, from 9 nominal categories with New England as the referent category), occupation (8 dummy variables, scored 0 and 1, from 9 aggregated nominal categories with management/business/financial occupations as the referent category, based on the Standard Occupational Classification system), industry (11 dummy variables, scored 0 and 1, from 12 aggregated nominal categories with agriculture/forestry/mining/construction industries serving as the referent category, based on the North American Industry Classification System), employer has more than one work location (0 = no, 1 = yes), number of employees at the respondent’s work location (11 ordinal categories, scored 1 to 11), number of total employees in organization (11 ordinal categories, scored 1 to 11), job tenure (in years), number of weekly work hours , seasonal job (0 = no, 1 = yes), precarious employment (0 = no, 1 = yes), union membership (0 = no, 1 = yes), and the calendar quarter in which the respondent was interviewed (nine ordinal quarters from 1st quarter 2009 to 1st quarter 2011 were scored 1 to 9).

5.3. Data Analysis

Before discussing the estimation and results of the structural model shown in Figure 1 , we report a confirmatory factor analysis (CFA), estimated using M plus [ 48 ], to verify the factor structure of the 27 multi-item constructs shown in Figure 1 . The downsizing and inability to unwind variables were excluded because they were assessed with single items. The indicator items were treated as ordinal, and the analysis used a robust weighted least squares estimator (WLSMV). The analysis also used sampling weights and took into account missing data in the items.

To assess overall CFA model fit, we report the model chi-square with its degrees of freedom, and because this statistic can be overly sensitive to large samples [ 49 , 50 ], we also report the following approximate fit indices: (a) the comparative fit index (CFI), (b) the Tucker-Lewis index (TLI), and (c) the root mean square error of approximation (RMSEA) and its 90% confidence interval. Excellent model fit is suggested when CFI ≥ 0.95, TLI ≥ 0.95, and RMSEA ≤ 0.06 [ 51 ].

The correlated 27-factor model with 104 indicator variables provided an excellent fit to the data: χ 2 (4901; n = 2297) = 6493.60, p < 0.001; CFI = 0.988; TLI = 0.987; and RMSEA = 0.012 (90% CI [0.011, 0.013]). Also, the standardized factor loadings shown in Appendix S2 revealed that each indicator variable loaded highly on its intended latent construct.

The structural model shown in Figure 1 was estimated using M plus [ 48 ] to explore RQs 1–4. All work conditions and employee outcomes were modeled simultaneously, which represents a parallel multiple-mediator model [ 52 , 53 ] with multiple outcomes. The multiple work conditions that served as parallel mediators were allowed to correlate among themselves, as were the multiple outcomes [ 53 ]. The covariates shown in Table 1 were included in the analysis as exogenous variables that correlated among themselves and with the downsizing variable and were predictors of each work condition and employee outcome. Maximum likelihood estimation and sampling weights [ 48 ] were used, coupled with full information maximum likelihood procedures to address missing data in the work conditions and employee outcomes [ 48 , 54 ]. Finally, robust nonparametric bootstrap standard errors are reported for all model coefficients and the significance of individual indirect effects was based on 95% bias-corrected bootstrap confidence intervals. All bootstrap standard errors and confidence intervals were based on 5000 bootstrapped samples [ 52 ].

6.1. Research Question 1: Association of Downsizing with Work Conditions

Table 2 displays the effect of downsizing on each of the 12 work conditions. Downsizing had significant positive associations with work demands, role conflict, supervisor aggression, dysfunctional leadership, and job and employment insecurity. Conversely, it had significant negative associations with friendship formation, distributive justice, and promotion opportunities. Overall, downsizing was significantly related to nine of the 12 work conditions, providing evidence for its broad impact on the work environment.

Unstandardized path coefficients relating organizational downsizing to work conditions (weighted).

Note: n = 2297. All coefficients are adjusted for the covariates shown in Table 1 . Robust nonparametric bootstrap standard errors are reported. * p ≤ 0.05, ** p ≤ 0.01, *** p ≤ 0.001.

6.2. Research Question 2: Association of Downsizing with Employee Outcomes

Table 3 shows the total effect of downsizing on the 16 employee outcomes. It also shows the decomposition of each total effect into the total indirect effect and the direct effect of organizational downsizing on each outcome. In standard path analytic nomenclature, a total effect (c) is the sum of the total indirect effect (a × b; i.e., the sum of all individual indirect effects across the 12 work conditions) and the direct effect (c′) (see Figure 1 ) [ 52 , 55 , 56 ]. Although the total effects are reported, we focus on the total indirect effects to determine if organizational downsizing is associated with each employee outcome. We do this for two reasons. First, if the direction of the direct effect (c′) and the total indirect effect (a × b) are of opposite sign, the size of the total effect can be suppressed [ 24 , 56 ]. Second, in the case of full mediation (no significant direct effect, c′), where the total effect (c) is approximately equivalent to the total indirect effect (a × b), the statistical power of the total indirect effect is higher than that of the total effect [ 55 , 56 ]. Both of these situations can result in a total effect that is not statistically significant, though the total indirect effect is statistically significant.

Unstandardized total effects, total indirect effects, and direct effects of organizational downsizing on employee outcomes (weighted).

The results in Table 3 indicate that downsizing had significant total indirect effects on all 16 employee outcomes. More specifically, downsizing was positively related to all variables representing the inability to detach from work, energy depletion, and negative affect, as well as to the work attitude variable intentions to turnover. Conversely, it was negatively associated with all variables representing positive affect and health, as well as with the work attitudes of job satisfaction and organizational commitment. Downsizing exhibited a significant direct effect with only one of the 16 outcomes—the experience of anger. Collectively, these findings provide support for a broad impact of downsizing on employee outcomes and that, except for anger, these associations were mediated fully by the nine significant work conditions discussed earlier.

6.3. Research Questions 3 and 4: Work Conditions as Mediators

Table 4 shows the individual indirect effects of downsizing involving each outcome, where the bootstrap confidence interval did not include zero, whereas Table 5 summarizes these indirect effects by work condition. Table 4 shows that although downsizing was indirectly associated with all 16 outcomes (see Table 3 ), the pattern of mediated effects differed across the work conditions. This is seen more clearly in the summary provided in Table 5 , which shows that the mediating effect of some work conditions on employee outcomes is narrow. Reduced promotion opportunities only mediated the associations between downsizing and the three work attitudes, and supervisor aggression only had mediating effects on the three energy depletion outcomes and poor mental health. On the other hand, several other work conditions, including friendship formation, dysfunctional leadership, distributive justice, and job and employment insecurity, had broader mediating effects across a wide range of outcomes, representing all six categories of employee outcomes. Finally, there was one unique pattern of results involving employment insecurity. Downsizing was significantly related to higher levels of employment insecurity and other poor working conditions, which resulted in a wide range of adverse outcomes. However, downsizing was indirectly and negatively, rather than positively, related to turnover intentions via employment insecurity, suggesting that some employees may feel unable to leave the poor work conditions and the resulting adverse outcomes associated with downsizing.

Statistically significant mediators of the associations of organizational downsizing to employee outcomes.

Note: n = 2297. BC CI = Bias corrected bootstrap confidence intervals based on 5000 bootstrapped samples. All coefficients are adjusted for the covariates shown in Table 1 .

Mapping statistically significant mediating work conditions to employee outcome groups and specific outcomes.

Note: Of the 12 work conditions, only role ambiguity, work autonomy, and coworker aggression failed to act as a mediating variable in the associations of organizational downsizing to the employee outcomes. The plus and minus signs represent the direction of the indirect effect of organizational downsizing to a specific employee outcome (column 3) via a specific work condition (column 1).

7. Discussion

The goals of this study were to determine (a) if organizational downsizing has a narrow or broad impact on work conditions, (b) if organizational downsizing has a narrow or broad impact on employee outcomes, (c) if work conditions mediate the association of organizational downsizing to employee outcomes, and (d) if the mediating work conditions have narrow or general effects across a range of employee outcomes. As discussed in more detail below, the present results extend prior research by showing that organizational downsizing had a broad impact on both work conditions and employee outcomes. Moreover, nine of the 12 work conditions collectively mediated the association of downsizing to all 16 employee outcomes, representing both broad and narrow mediational processes. These work conditions represent potential targets for multicomponent workplace interventions aimed at mitigating the broad set of harmful outcomes.

7.1. Association of Downsizing with Work Conditions

Downsizing had an adverse association with nine of the 12 work conditions explored in this study, which represented all four groups of work conditions: work role (work demands, role conflict), interpersonal (supervisor aggression, friendship formation, dysfunctional leadership), rewards (distributive justice, promotion opportunities), and security (job insecurity, employment insecurity). These results support and extend past research. In terms of work role conditions, our results support prior findings that downsizing is positively associated with work demands [ 14 , 15 , 16 , 18 ]. The results extend prior research by showing that downsizing is positively associated with role conflict. Only one prior study examined and found a positive association between downsizing and role ambiguity [ 16 ], although the present study did not replicate this association. Of the five prior studies that explored work autonomy, there was some support in four studies for a negative association between downsizing and work autonomy [ 14 , 16 , 17 , 18 ], whereas one study failed to find an association [ 15 ]. Consistent with the study by Østhus [ 15 ], the present study also failed to find a significant association between downsizing and work autonomy.

Prior research looking at downsizing and interpersonal work conditions focused exclusively on work-related social support [ 14 , 16 , 17 , 18 ]. However, these studies provided inconsistent evidence for an association. Two studies reported a significant negative association between downsizing and either overall support [ 16 ] or supervisor support [ 17 ]. In contrast, one study reported a positive association between downsizing and coworker support [ 18 ], and one study failed to find an association between downsizing and both supervisor and coworker support [ 14 ]. In the present study, we extended prior research by exploring the association of downsizing to a new set of interpersonal work conditions that may more broadly represent the interpersonal climate at work: coworker aggression, supervisor aggression, friendship formation, and dysfunctional leadership. We failed to find a significant association between downsizing and coworker aggression. However, downsizing was significantly and positively associated with two negative supervisor behaviors—exhibiting psychological aggression and dysfunctional leadership (passive supervision and undermining the performance of direct reports). We also documented a significant negative association between downsizing and reports of friendship formation. Compared to unexposed employees, downsizing survivors were less likely to report feeling close to coworkers or that they considered some coworkers as close friends. Downsizing may result in interpersonal distancing because it is possible that more coworkers may lose their jobs, which may have a broad effect on coworker communication and workplace support. Overall, the interpersonal work conditions assessed in this study may be more proximal outcomes of downsizing than social support and better represent interpersonal deterioration during downsizing.

In terms of reward characteristics, only one prior study examined distributive justice (fairness of rewards) and promotion opportunities [ 17 ]. Consistent with that study, we found that downsizing was significantly related to lower levels of both distributive justice and promotion opportunities. Finally, in terms of work-related security, downsizing should increase concerns about job insecurity among survivors. Each of the three prior studies exploring this association reported a significant positive association between downsizing and job insecurity [ 14 , 15 , 16 ]. However, insecurity over the continuity of employment extends beyond fear of job loss (i.e., job insecurity) and includes fear of not being able to obtain another job in the event of job loss (employment insecurity) [ 40 ]. Our results both support prior research by showing that downsizing was significantly and positively related to job insecurity and extend this body of research by showing that downsizing also was significantly and positively related to employment insecurity. Although employment insecurity has received little research attention compared with job insecurity [ 40 ], as noted later, it also acted as a mediator of the associations of downsizing to employee outcomes along with job insecurity.

7.2. Association of Downsizing with Employee Outcomes

As discussed earlier, prior research has shown that downsizing is associated with several deleterious outcomes. However, most studies assessed no more than two potential outcomes, and the range of outcomes across studies was limited. The present results revealed that downsizing had a broad adverse association with 16 employee outcomes. Our study supports prior findings that organization downsizing is positively associated with overall work exhaustion [ 20 ] and turnover intentions [ 12 , 16 ] and is negatively associated with job satisfaction [ 16 , 20 , 21 ], organizational commitment [ 12 , 17 , 18 , 22 ], and physical and mental health [ 23 ]. More importantly, the present study provides new evidence that organizational downsizing is positively related to two dimensions of employees’ inability to detach from work (negative work rumination and inability to relax), with three specific forms of energy depletion at work (physical, mental, and emotional work fatigue), and three dimensions of negative affect (depression, anxiety, and anger), and that downsizing is negatively related to three dimensions of positive affect (happiness, confidence, and vigor).

In addition to demonstrating the broad impact of organizational downsizing on surviving employees, the present results showed that downsizing was indirectly associated with each of the 16 outcomes via some combination of the nine work conditions. Finally, the only direct association observed was between downsizing and anger, suggesting that unassessed work conditions might mediate this association or that anger represents a direct, visceral response to the experience of organizational downsizing that is not mediated fully by work conditions.

7.3. Work Conditions as Mediators

Only four prior studies examined work conditions as mediators of the association of organizational downsizing to employee outcomes [ 14 , 17 , 18 , 20 ]. As noted earlier, these studies provided limited evidence for mediation by work outcomes to three employee outcomes. More importantly, three of the four studies [ 14 , 18 , 20 ] found a direct association of downsizing to the outcomes examined, suggesting that unassessed work conditions may act as mediators. The present study found that some combinations of the nine out of 12 work conditions mediated the association of downsizing to the 16 employee outcomes. As discussed earlier, we found only one significant direct association of downsizing to employee anger.

There were several noteworthy patterns of mediational effects. Five of the nine work conditions (friendship formation, dysfunctional leadership, distributive justice, job insecurity, and employment insecurity) each mediated the association of downsizing to a broad set of employee outcomes, representing from four to five of the six outcome categories. In contrast, four work conditions had more specific mediating effects. Work demands only had mediating effects for outcomes representing an inability to detach from work (negative work rumination and inability to unwind), energy depletion (physical, mental, and emotional work fatigue), and negative affect (depression, anxiety, and anger). Supervisor aggression acted as a mediator for energy depletion (physical, mental, and emotional work fatigue) and mental health. The mediating effect of promotion opportunities was constrained to the three work attitudes (job satisfaction, organizational commitment, and turnover intentions). Finally, the least import work condition was role conflict, which meditated only three outcomes showing no coherent theme (inability to unwind, emotional work fatigue, turnover intentions).

Finally, there was one distinct pattern of mediational results involving employment insecurity. Although organizational downsizing was indirectly and adversely related to 10 of the 16 outcomes via employment insecurity, the direction of the indirect association of downsizing to turnover intentions was negative rather than positive. In other words, in the face of downsizing and its negative influence on work conditions and subsequent outcomes, individuals who were concerned about not finding another job if they lost their present job reported lower levels of intentions to quit their job. Because of their perceived lack of external employment options, these individuals might feel trapped in a toxic work environment, thereby resulting in several deleterious outcomes, as the present study demonstrates.

It should be noted, however, that this last finding may be affected by the macroeconomic context in which downsizing is embedded. Feeling trapped in an undesirable work environment may be more likely when downsizing occurs during periods of economic decline than when it occurs during periods of economic growth. The present study was conducted during the Great Recession and its aftermath in the U.S., which was associated with high rates of long-term unemployment that lasted many years [ 40 ]. In general, the transition from the traditional recession to the modern or structural recession in the early 1990s brought with it a higher likelihood of permanent job loss and protracted periods of jobless recoveries [ 57 ]. Given these circumstances, it is understandable that downsizing survivors might feel that they are unable to escape poor work conditions by leaving their job during an economic decline.

7.4. Organizational and Public Health Implications

Despite decades of research showing that in the intermediate and long term, organizational downsizing often fails to deliver the anticipated financial and performance benefits, and may result in further financial and performance declines, it has become a staple of organizational strategy [ 2 , 3 , 58 ]. This lack of benefit has been attributed to the potential negative, though often less visible, impact of downsizing on work conditions and employees [ 3 , 58 ]. The present results support this contention. To minimize the potential adverse organizational outcomes of downsizing, firms can consider alternatives to layoffs, such as organizational and job redesign, as well as broad cultural change, to increase the likelihood of improved organizational performance [ 2 , 3 , 58 ]. Companies that more successfully manage the impact of external demands (e.g., recession and investor expectations for short-term profit maximization) put people first and engage them in the process of change; in other words, these companies treat employees as resources rather than costs to be eliminated [ 2 , 3 , 59 ].

If alternatives are not feasible, the present results suggest that the implementation of downsizing needs to carefully consider its potentially broad negative impact on the work environment and survivors. However, research shows that organizational downsizing is often implemented quickly with little planning and is often the result of mimicking what other organizations are doing without a critical assessment of its utility [ 3 , 58 ]. Unfortunately, our findings support previous qualitative observations, which were based on discussions with management about the reasons for and process used to implement layoffs, that downsizing may be implemented all too frequently with little consideration of its consequences on surviving employees [ 3 , 58 ].

Therefore, to better serve survivors experiencing stress, employee assistance program staff and mental health professionals need to understand the potentially broad, negative impact on survivors. Also, in the absence of direct organizational and job redesign efforts, several strategies for intervening at the level of the employee may exist. For example, there is growing evidence that training to increase psychological resilience may help minimize adverse personal outcomes in the face of undesirable work conditions [ 60 ]. Although resilience training is a reactive method of dealing with poor work conditions, a more proactive strategy that has received growing attention is job crafting [ 61 , 62 ]. Job crafting represents employees proactively “shaping the task boundaries of the job (either physically or cognitively), the relational boundaries of the job, or both” (p. 179) [ 61 ]. Such active job crafting may alter the nature of work in ways that reduce exposure to adverse working conditions. Recent research has begun to show that interventions to teach and stimulate job crafting may be effective [ 63 ]. Nonetheless, despite the early promise of interventions to develop psychological resilience and job crafting skills, more attention needs to focus on the development and evaluation of such interventions, especially in terms of long-term effectiveness and under various macroeconomic conditions.

7.5. Study Limitations

The present study utilized a large probability sample of U.S. workers, which provides (a) more variation in the variables, (b) adequate statistical power to detect hypothesized effects, and (c) more accurate estimates of population parameters [ 64 , 65 , 66 ]. Nonetheless, two study limitations should be considered. The first limitation was that because the variables were assessed at the same time, the possibility of reverse or bidirectional associations cannot be ruled out. Nonetheless, associations between organizational downsizing with both the nine work conditions and 16 employee outcomes may be less likely to be the result of reverse causation. When reporting the occurrence of downsizing, participants were reporting on an objective condition that was more likely driven by the macroeconomic conditions at the time of data collection. The second limitation was that the variables were all obtained from self-reports. Although it is typically assumed that common method variance (CMV) can inflate observed associations relative to the true population associations, CMV can lead to deflated associations as well [ 67 , 68 ]. To minimize processes that lead to CMV, such as consistency biases, demand characteristics, and social desirability biases, the design of this study incorporated several procedural remedies to minimize the likelihood of CMV [ 69 ]. These remedies included maintaining anonymity regarding the participants’ place of employment; interviewer training to build rapport with participants to enhance honest reporting; selection and development of items and response anchors to minimize the cognitive demands of the survey; and separation of the present measures across sections of a larger questionnaire to minimize response consistency and stylistic and careless responding, which was enhanced by the interviewer-administered telephone survey that makes prior responses physically unavailable and less likely to be available in short-term memory.

8. Conclusions

This study shows that the adverse effects of organizational downsizing go beyond those who lose jobs. Employees who survive a downsizing experience a wide range of harmful secondary effects (i.e., poor work conditions), which are associated with a wide variety of adverse outcomes. Downsizing was adversely related to nine of the 12 work conditions, which represented work role conditions, interpersonal relationships, rewards, and security. Downsizing also was adversely related to all 16 employee outcomes, which represented the inability to detach from work, energetic resource depletion, negative affect, positive affect, health, and work attitudes. Finally, the nine work conditions collectively mediated the association of downsizing to all 16 employee outcomes, representing both broad and narrow mediational processes. The nine mediating work conditions represent potential targets for multicomponent workplace interventions aimed at mitigating the broad set of harmful outcomes, though the specific work conditions to target in interventions may depend on the class of outcomes to be addressed by the intervention.

These adverse work conditions and outcomes occur in a context where employers must rely more heavily on a smaller group of surviving employees. Therefore, organizational leaders, unions, and public health researchers need to understand the broad adverse impact of downsizing on survivors and develop both top-down (e.g., organization-driven job resign) and bottom-up (e.g., employee job crafting) approaches to minimize both the need for layoffs and their impact on surviving employees.

Acknowledgments

The authors would like to thank Marie-Cecile O. Tidwell, project director, for overseeing data collection for the National Survey of Work Stress and Health.

Supplementary Materials

The following are available online at https://www.mdpi.com/1660-4601/17/3/719/s1 , Appendix S1: Descriptive statistics and correlations, and Appendix S2: Standardized factor loadings.

Author Contributions

Conceptualization, M.R.F.; methodology, M.R.F.; formal analysis, A.-R.B. and M.R.F; writing—original draft preparation, M.R.F..; writing—review and editing, M.R.F. and A.-R.B..; project administration, M.R.F.; funding acquisition, M.R.F. All authors have read and agreed to the published version of the manuscript.

Data collection was supported by a National Institute on Alcohol Abuse and Alcoholism grant (R01-AA016592) to Michael R. Frone.

Conflicts of Interest

The authors declare no conflict of interest. The content of this project is solely the responsibility of the authors and does not necessarily represent the official views of the National Institute on Alcohol Abuse and Alcoholism and the National Institutes of Health, or the Canadian Armed Forces and the Department of National Defence. These agencies had no role in study design; in the collection, analysis, and interpretation of data; in the writing of the report; or in the decision to submit the paper for publication.

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Organizational downsizing: a review of literature for planning and research

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• 1 Management and Marketing Department, University of Alabama, Tuscaloosa. [email protected]
• PMID: 12789706

The use of downsizing as management's strategic response to environmental and institutional changes is prevalent in all U.S. industries, including healthcare. The popular and research literature is inundated with reports on companies undergoing various stages of restructuring, which often include one or more staff reductions. This article provides a review of downsizing literature published from 1985 to 2002. Although the findings and conclusions of these articles are generally inconsistent, the prevailing opinion is that for downsizing to be successful, effective planning must occur long before, during, and after downsizing. Additionally, a downsizing plan should be included in the strategic management plan of all organizations, regardless of whether they plan to downsize or not. By including such a plan, the organization will be better prepared to begin the staff-reduction process should it be forced to do so in response to environmental changes. Finally, providing ample support and protection for staff is key to the organization's recovery and growth. The lessons provided in this literature review should assist healthcare managers in deciding how to plan and structure potential staff reductions.

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Employment Downsizing: Causes, Costs, and Consequences

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Employment downsizing is a bald fact of organizational life that has become etched into the corporate culture. This chapter begins by exploring some of the most common explanations for why downsizing happens, including its economic rationale. It then considers when employment downsizing is appropriate, and some alternative downsizing strategies - attrition, voluntary termination (including buy-outs), early-retirement incentives, and compulsory termination - and what to do when downsizing outside the United States. We then consider the direct and indirect costs of employment downsizing, in the short term as well as in the long term, as well as its effects on the broader economy and on the organization itself, including subsequent firm performance and innovation.

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Cascio, W.F. (2010). Employment Downsizing: Causes, Costs, and Consequences. In: More than Bricks in the Wall: Organizational Perspectives for Sustainable Success. Gabler. https://doi.org/10.1007/978-3-8349-8945-1_9

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Strategies for successful organizational downsizing

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Organizational development and change: 3 co-authors honoured

Patrick groulx, francis maisonneuve and kevin j. johnson.

August 27, 2024

The Rupert F. Chisholm Best Theory-to-Practice Paper Award, presented by the Organizational Development & Change Division of the Academy of Management, was given to alumnus Patrick Groulx (PhD 2023), Assistant Professor at ESG UQAM, PhD student Francis Maisonneuve , and Professor Kevin J. Johnson , Associate Director of Pôle Santé HEC Montréal, and Director of the MBA Program and the Research Centre on Organizational Transformation (CÉTO).

The winning publication entitled “When Participation Leads to Change Fatigue: The Moderating Effect of Laissez-Faire Leadership”, addresses a significant organizational challenge: how to effectively engage employees in the change process while preventing change fatigue.

Communication and participation strategies are pivotal in change management, yet little research has explored their varying effectiveness under different conditions. Building on the Job Demand-Resource theory ( JD-R ), and through an empirical study conducted among 340 employees in a Canadian governmental organization undergoing cultural and digital transformations, the 3 co-authors propose that these strategies enhance affective engagement to change by reducing change fatigue, with the moderation effect of laissez-faire leadership.

“Our team at Pôle Santé and CÉTO has always valued the applied impact of research in the management of current and future organizational transformations. So, we are especially proud that our paper won this award from among so many other relevant and first-rate publications.” Kevin J. Johnson

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What employees say matters most to motivate performance

The past few years have been a confounding time in performance management. Disruptions of long-standing workplace norms have led many employees to rethink their expectations of employers  regarding remote work, employee burnout, and work–life balance. Compounding these challenges, an inflationary economy and a slower hiring market have put pressure on employers to “do more” with the talent they already have.

Organizations have responded to this volatility by seeking new formulas to motivate talent, including rethinking their approaches to performance management. Of course, tweaking performance management is not new: McKinsey’s prepandemic research  found that most companies had made at least one major change to their approaches in the prior 18 months. But recently, we have seen companies consider more sweeping changes. Some have streamlined goal setting and formal review processes, separated performance and compensation conversations, or simply done away with ratings altogether.

Yet as organizations weigh changes to performance management, it’s difficult to understand what will yield the highest ROI. Leaders are often forced to rely on anecdotal case studies and success stories from others’ experiences to help boost employee motivation to perform. While a plethora of books and articles have been published on the topic in recent years, a “data desert” remains, with a lack of quantitative insights derived from what employees say most inspires and motivates them.

McKinsey’s 2024 performance management survey

Our survey of more than 1,000 employees across the globe sought to shed light on what matters most to employees and offer a new fact base for employers to weigh varied performance management methodologies (see sidebar, “McKinsey’s 2024 performance management survey”). We tested a range of options to understand employee perceptions, including approaches to goals, performance reviews, ongoing development, and rewards.

The survey responses in some cases confirm what intuition has long suggested. In other cases, responses indicate ways to tailor performance management to the unique needs of an organization. Overall, the responses point to essential areas of focus as organizations weigh performance management redesigns. New data helps to better identify options most worthy of investment, based on sources of employee motivation.

A consistent and clearly articulated performance management framework wins the day

The most resonant overall survey finding was this: performance management is most effective when it features strong, consistent internal logic that employees understand.

In recent years, some companies have shifted away from results-based performance management goals and metrics in favor of measures that balance what an employee achieved with how they achieved it. The rationale is partly to make employees feel they are assessed in a more holistic way that considers external factors that contributed to their ability to deliver on a result. The holistic approach also measures how well employees adhered to company cultural norms and leadership expectations. However, the survey results revealed that respondents did not view results-based assessments particularly negatively. Instead, what worked less well were systems without clear and easily understood structures, which respondents viewed as significantly less motivating and fair.

These findings stress that when it comes to building the overall framework for performance management, consistency and simplicity win the day (Exhibit 1). Approaching each element of performance management separately had a lower effect on motivation to perform. Instead, the way the four pillars work together made a difference for respondents. Approaches with a coherent, connected framework across goal setting, performance reviews, feedback, and rewards correlated with the highest motivation to perform. Each company can design a fit-for-purpose approach tailored to the needs of its organization , ensuring core elements are well connected and articulated to employees.

Goal setting has impact when goals are measurable and clearly linked to company priorities

Goal setting has long been accepted as a critical tool for improving performance. The survey puts some hard data behind the decision to invest time and energy into goal setting: 72 percent of respondents cited it as a strong motivator. However, the “what” and “how” of setting those goals are less definitively understood. The survey results shed light on both questions.

What makes an effective goal? The survey revealed that employees felt more motivated when their performance goals included a mix of both individual and team-level goals and when their goals were clearly linked to their company’s goals. Respondents also reported feeling more motivated by goals that felt measurable (Exhibit 2).

However, the survey also suggests that just as important as the content of a goal is the process by which it is set. Employees tended to be more motivated and perceive the performance management approach as fair when they were involved in the process and the goals were updated throughout the year to align with team and company priorities.

These findings suggest high ROI when managers spend time throughout the year counseling employees on updates to align goals with current business priorities and articulating the connection between individual and team goals.

Performance reviews with skilled managers are crucial to employee performance

As employers meet evolving employee expectations, many have rethought their approaches to performance reviews by focusing on changes to ratings. Some have shifted from numerical scales (for example, one through five) to word-based systems (for example, from “underperforming” to “exceeds expectations”) or have done away with ratings altogether.

But the survey showed that different ratings scales (for example, those that measured results versus behavior) yielded negligible differences in how much motivation employees reported.

There was also no significant difference between receiving no rating and receiving a rating on a two-point scale (such as a “pass or fail”) or a three- or five-point scale.

Instead, the survey responses suggest employers may be overemphasizing ratings frameworks and overlooking the criticality of how ratings are given. Our survey indicated employees were significantly more motivated by performance reviews when they were offered by a skilled manager and reflected the individual achievement of a performance goal. This was especially true when managers were involved in setting goals and, therefore, well informed when it came time to assess performance (Exhibit 3).

Investments in manager training to foster meaningful development discussions pay dividends

The survey data also shows how big a difference ongoing development discussion outside the review cycle can make. Only 21 percent of respondents who had no development conversations felt motivated by their companies’ performance management, compared with 77 percent of those who received ongoing feedback.

When it comes to providing feedback, manager training is critical, given that nearly 25 percent of survey respondents said their managers or feedback providers did not have sufficient skills or capabilities to conduct their performance reviews. At large companies (with 10,000 to 50,000 employees), 34 percent of respondents cited this lack of skills. Large companies in particular could designate more power and resources to middle managers —traditionally the most passionate and capable coaches within an organization.

But how can employers empower managers without creating excessive workloads? Because both managers and employees often find the process of providing and receiving feedback taxing , some companies try to limit these exchanges to only once a year. However, given the decisive benefit of regular feedback that our survey revealed, a better approach may be to equip managers with the right tools. Generative AI can make it easier for managers to deliver better feedback —for example, by synthesizing insights from the colleagues who work closely with an employee.

Rewards that include nonfinancial incentives provide a boost

Money matters, of course. But the survey also suggests that, as work–life expectations continue to shift, nonfinancial rewards, like opportunities for upskilling or professional development, can play an increasingly important role in performance management strategies.

The survey showed a strong relationship between employers’ use of both financial and nonfinancial rewards and employees’ perceptions of their personal motivation and performance improvement. The survey also shed light on a unique distinction: employees were more likely to perceive that their organizations’ performance management systems were improving company performance overall when nonfinancial rewards were used. Taken together, these findings suggest that nonfinancial rewards can serve as a critical booster for the success of a cohesive performance management system (Exhibit 4).

Previous McKinsey research has found that nonfinancial incentives should appeal to five sources of meaning : society, client, company, team, and self. These findings align with abundant social science research. 1 Jena McGregor, “What companies get wrong about motivating their people,” Washington Post , November 25, 2016.   Nonfinancial incentives could include an immediate manager’s praise, a step-up opportunity to lead a high-profile project, greater autonomy, or more workplace flexibility.

Nonfinancial incentives, like other aspects of an effective approach, should be both frequent and explicitly tied to desired behaviors. They can be used to reward progress toward large, company-wide goals; small, private goals specific to individual employees; or career moves, among other things. Thoughtful deployment of these rewards can help reinforce elements from across the four pillars of a cohesive system.

Economic volatility and shifting workplace norms have sparked many employers’ renewed interest in creating the right performance management formula. Our survey suggests that cohesive overall design and effective execution are the most important focus points.

As organizations consider their approaches across the four performance management pillars—goal setting, performance reviews, ongoing feedback, and rewards—we urge them to pay close attention to the “what” and the “how” to motivate and inspire employees.

Asmus Komm is a partner in McKinsey’s Hamburg office; Brooke Weddle is a senior partner in the Washington, DC, office, where Vivian Breaux is an associate partner; Dana Maor is a senior partner in the Tel Aviv office; and Katharina Wagner is an associate partner in the Berlin office.

The authors wish to thank Karla Martinez and Katherine Boorstein for their contributions to this article.

This article was edited by Katy McLaughlin, an executive editor in the Southern California office.

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The Potential Long-Run Implications of a Permanently-Expanded Child Tax Credit

For many of those who worked to include an expanded Child Tax Credit in the 2021 American Rescue Plan, an important motivation was to test the feasibility and effectiveness of a permanent U.S. child allowance similar to those provided in other rich countries. Because this expansion was short-lived, however, evaluations of its effects cannot provide complete evidence on the long-run effects of a permanently expanded CTC. We leverage theoretical predictions from standard economic models, behavioral science, and child development frameworks, along with empirical evidence from literature evaluating previous long-term cash and quasi-cash transfers to families with children, to predict the likely long-run impacts of a permanent child allowance. We find that it would lead to increased future earnings and tax payments, improved health and longevity, and reduced health care, crime, and child protection costs; using conventional valuations, benefits to society outweigh costs nearly 10 to 1, with most benefits due to credit refundability.

There are no funding sources or material or relevant financial relationships to disclose. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

MARC RIS BibTeΧ

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• Copy URL https://www.pbs.org/newshour/politics/fact-checking-warnings-from-democrats-about-project-2025-and-donald-trump

Fact-checking warnings from Democrats about Project 2025 and Donald Trump

This fact check originally appeared on PolitiFact .

Project 2025 has a starring role in this week’s Democratic National Convention.

And it was front and center on Night 1.

WATCH: Hauling large copy of Project 2025, Michigan state Sen. McMorrow speaks at 2024 DNC

“This is Project 2025,” Michigan state Sen. Mallory McMorrow, D-Royal Oak, said as she laid a hardbound copy of the 900-page document on the lectern. “Over the next four nights, you are going to hear a lot about what is in this 900-page document. Why? Because this is the Republican blueprint for a second Trump term.”

Vice President Kamala Harris, the Democratic presidential nominee, has warned Americans about “Trump’s Project 2025” agenda — even though former President Donald Trump doesn’t claim the conservative presidential transition document.

“Donald Trump wants to take our country backward,” Harris said July 23 in Milwaukee. “He and his extreme Project 2025 agenda will weaken the middle class. Like, we know we got to take this seriously, and can you believe they put that thing in writing?”

Minnesota Gov. Tim Walz, Harris’ running mate, has joined in on the talking point.

“Don’t believe (Trump) when he’s playing dumb about this Project 2025. He knows exactly what it’ll do,” Walz said Aug. 9 in Glendale, Arizona.

Trump’s campaign has worked to build distance from the project, which the Heritage Foundation, a conservative think tank, led with contributions from dozens of conservative groups.

Much of the plan calls for extensive executive-branch overhauls and draws on both long-standing conservative principles, such as tax cuts, and more recent culture war issues. It lays out recommendations for disbanding the Commerce and Education departments, eliminating certain climate protections and consolidating more power to the president.

Project 2025 offers a sweeping vision for a Republican-led executive branch, and some of its policies mirror Trump’s 2024 agenda, But Harris and her presidential campaign have at times gone too far in describing what the project calls for and how closely the plans overlap with Trump’s campaign.

PolitiFact researched Harris’ warnings about how the plan would affect reproductive rights, federal entitlement programs and education, just as we did for President Joe Biden’s Project 2025 rhetoric. Here’s what the project does and doesn’t call for, and how it squares with Trump’s positions.

Are Trump and Project 2025 connected?

To distance himself from Project 2025 amid the Democratic attacks, Trump wrote on Truth Social that he “knows nothing” about it and has “no idea” who is in charge of it. (CNN identified at least 140 former advisers from the Trump administration who have been involved.)

The Heritage Foundation sought contributions from more than 100 conservative organizations for its policy vision for the next Republican presidency, which was published in 2023.

Project 2025 is now winding down some of its policy operations, and director Paul Dans, a former Trump administration official, is stepping down, The Washington Post reported July 30. Trump campaign managers Susie Wiles and Chris LaCivita denounced the document.

WATCH: A look at the Project 2025 plan to reshape government and Trump’s links to its authors

However, Project 2025 contributors include a number of high-ranking officials from Trump’s first administration, including former White House adviser Peter Navarro and former Housing and Urban Development Secretary Ben Carson.

A recently released recording of Russell Vought, a Project 2025 author and the former director of Trump’s Office of Management and Budget, showed Vought saying Trump’s “very supportive of what we do.” He said Trump was only distancing himself because Democrats were making a bogeyman out of the document.

Project 2025 wouldn’t ban abortion outright, but would curtail access

The Harris campaign shared a graphic on X that claimed “Trump’s Project 2025 plan for workers” would “go after birth control and ban abortion nationwide.”

The plan doesn’t call to ban abortion nationwide, though its recommendations could curtail some contraceptives and limit abortion access.

What’s known about Trump’s abortion agenda neither lines up with Harris’ description nor Project 2025’s wish list.

Project 2025 says the Department of Health and Human Services Department should “return to being known as the Department of Life by explicitly rejecting the notion that abortion is health care.”

It recommends that the Food and Drug Administration reverse its 2000 approval of mifepristone, the first pill taken in a two-drug regimen for a medication abortion. Medication is the most common form of abortion in the U.S. — accounting for around 63 percent in 2023.

If mifepristone were to remain approved, Project 2025 recommends new rules, such as cutting its use from 10 weeks into pregnancy to seven. It would have to be provided to patients in person — part of the group’s efforts to limit access to the drug by mail. In June, the U.S. Supreme Court rejected a legal challenge to mifepristone’s FDA approval over procedural grounds.

WATCH: Trump’s plans for health care and reproductive rights if he returns to White House The manual also calls for the Justice Department to enforce the 1873 Comstock Act on mifepristone, which bans the mailing of “obscene” materials. Abortion access supporters fear that a strict interpretation of the law could go further to ban mailing the materials used in procedural abortions, such as surgical instruments and equipment.

The plan proposes withholding federal money from states that don’t report to the Centers for Disease Control and Prevention how many abortions take place within their borders. The plan also would prohibit abortion providers, such as Planned Parenthood, from receiving Medicaid funds. It also calls for the Department of Health and Human Services to ensure that the training of medical professionals, including doctors and nurses, omits abortion training.

The document says some forms of emergency contraception — particularly Ella, a pill that can be taken within five days of unprotected sex to prevent pregnancy — should be excluded from no-cost coverage. The Affordable Care Act requires most private health insurers to cover recommended preventive services, which involves a range of birth control methods, including emergency contraception.

Trump has recently said states should decide abortion regulations and that he wouldn’t block access to contraceptives. Trump said during his June 27 debate with Biden that he wouldn’t ban mifepristone after the Supreme Court “approved” it. But the court rejected the lawsuit based on standing, not the case’s merits. He has not weighed in on the Comstock Act or said whether he supports it being used to block abortion medication, or other kinds of abortions.

Project 2025 doesn’t call for cutting Social Security, but proposes some changes to Medicare

“When you read (Project 2025),” Harris told a crowd July 23 in Wisconsin, “you will see, Donald Trump intends to cut Social Security and Medicare.”

The Project 2025 document does not call for Social Security cuts. None of its 10 references to Social Security addresses plans for cutting the program.

Harris also misleads about Trump’s Social Security views.

In his earlier campaigns and before he was a politician, Trump said about a half-dozen times that he’s open to major overhauls of Social Security, including cuts and privatization. More recently, in a March 2024 CNBC interview, Trump said of entitlement programs such as Social Security, “There’s a lot you can do in terms of entitlements, in terms of cutting.” However, he quickly walked that statement back, and his CNBC comment stands at odds with essentially everything else Trump has said during the 2024 presidential campaign.

Trump’s campaign website says that not “a single penny” should be cut from Social Security. We rated Harris’ claim that Trump intends to cut Social Security Mostly False.

Project 2025 does propose changes to Medicare, including making Medicare Advantage, the private insurance offering in Medicare, the “default” enrollment option. Unlike Original Medicare, Medicare Advantage plans have provider networks and can also require prior authorization, meaning that the plan can approve or deny certain services. Original Medicare plans don’t have prior authorization requirements.

The manual also calls for repealing health policies enacted under Biden, such as the Inflation Reduction Act. The law enabled Medicare to negotiate with drugmakers for the first time in history, and recently resulted in an agreement with drug companies to lower the prices of 10 expensive prescriptions for Medicare enrollees.

Trump, however, has said repeatedly during the 2024 presidential campaign that he will not cut Medicare.

Project 2025 would eliminate the Education Department, which Trump supports

The Harris campaign said Project 2025 would “eliminate the U.S. Department of Education” — and that’s accurate. Project 2025 says federal education policy “should be limited and, ultimately, the federal Department of Education should be eliminated.” The plan scales back the federal government’s role in education policy and devolves the functions that remain to other agencies.

Aside from eliminating the department, the project also proposes scrapping the Biden administration’s Title IX revision, which prohibits discrimination based on sexual orientation and gender identity. It also would let states opt out of federal education programs and calls for passing a federal parents’ bill of rights similar to ones passed in some Republican-led state legislatures.

Republicans, including Trump, have pledged to close the department, which gained its status in 1979 within Democratic President Jimmy Carter’s presidential Cabinet.

In one of his Agenda 47 policy videos, Trump promised to close the department and “to send all education work and needs back to the states.” Eliminating the department would have to go through Congress.

What Project 2025, Trump would do on overtime pay

In the graphic, the Harris campaign says Project 2025 allows “employers to stop paying workers for overtime work.”

The plan doesn’t call for banning overtime wages. It recommends changes to some Occupational Safety and Health Administration, or OSHA, regulations and to overtime rules. Some changes, if enacted, could result in some people losing overtime protections, experts told us.

The document proposes that the Labor Department maintain an overtime threshold “that does not punish businesses in lower-cost regions (e.g., the southeast United States).” This threshold is the amount of money executive, administrative or professional employees need to make for an employer to exempt them from overtime pay under the Fair Labor Standards Act.

In 2019, the Trump’s administration finalized a rule that expanded overtime pay eligibility to most salaried workers earning less than about $35,568, which it said made about 1.3 million more workers eligible for overtime pay. The Trump-era threshold is high enough to cover most line workers in lower-cost regions, Project 2025 said.

The Biden administration raised that threshold to $43,888 beginning July 1, and that will rise to $58,656 on Jan. 1, 2025. That would grant overtime eligibility to about 4 million workers, the Labor Department said.

It’s unclear how many workers Project 2025’s proposal to return to the Trump-era overtime threshold in some parts of the country would affect, but experts said some would presumably lose the right to overtime wages.

Other overtime proposals in Project 2025’s plan include allowing some workers to choose to accumulate paid time off instead of overtime pay, or to work more hours in one week and fewer in the next, rather than receive overtime.

Trump’s past with overtime pay is complicated. In 2016, the Obama administration said it would raise the overtime to salaried workers earning less than $47,476 a year, about double the exemption level set in 2004 of $23,660 a year.

But when a judge blocked the Obama rule, the Trump administration didn’t challenge the court ruling. Instead it set its own overtime threshold, which raised the amount, but by less than Obama.

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