The Psychological Impact of Downsizing on Employee Survivors

Downsizing the workforce has become an ongoing phenomenon in organizations the world over. Downsizing has various effects on the employees and the organizations. The positive effects expected by organizations are faster decision making, smoother communications, greater, and increase in productivity and thus an increase in organizational effectiveness. Although organizations reduce workforces with the intention to get benefits, they must face the negative effects too. The negative effects are creation of climate of distrust, insecurity and demotivation,less commitment, increased absenteeism, emotional trauma, break-down of psychological contract, high level of stress, increased conflict, skills break down of communication and loss of creativity. Research reveals that most organizations do not even achieve financial gain from downsizing as expected. One of the reasons for the failure is ineffective handling of the people left after downsizing (survivors). This study conducts an in-depth research of the literature to understand the effect of downsizing on survivors.