Abstract
Despite the longevity and pervasiveness of downsizing, our knowledge about this practice is inadequate for at least two reasons. One involves underanalysis of the historical context in which downsizing has evolved and the other involves the tendency to equate downsizings with layoffs even though layoffs represent only one of numerous downsizing strategies. I address the one inadequacy by identifying two institutional factors—the spread of economic competition and shareholder activism—that have motivated large firms to embrace the “lean and mean” conception of control and thus to implement downsizings. I address the other inadequacy by distinguishing between involuntary and voluntary downsizings and by testing the ability of a theory of downsizing strategies to explain these two kinds of downsizing among Fortune 100 firms from 1979 to 1995. The findings support the theory: Involuntary downsizings occur when firms face economic pressures and when social processes define these acts as natural; voluntary downsizings occur when firms are shielded from economic pressures and when there is a social preference for these acts. There also is support for the hypothesis that the effects of economic factors on downsizings should decrease over time while those of institutional ones should increase. Finally, I emphasize the role that analyses of institutional contexts, conceptions of the firm, and corporate strategies and structures can play in advancing our understanding of the powerful large firm in America.
Similar content being viewed by others
REFERENCES
Allison, Paul 1984 Event History Analysis. Newbury Park, CA: Sage.
American Management Association 1987 Responsible Reductions in Force: Downsizing and Outplacement. New York: American Management Association.
1991 1991 AMA Survey on Downsizing and Assistance to Displaced Workers. New York: American Management Association.
Bantel, Karen, and Susan Jackson 1989 “Top management and innovations in banking: Does the composition of the top team make a difference?” Strategic Management Journal 10:107–124.
Batt, Rosemary 1996 “From bureaucracy to enterprise? The changing jobs and careers of managers in telecommunications service.” In Paul Osterman (ed.), Broken Ladders: Managerial Careers in the New Economy: Ch. 3. New York: Oxford University Press.
Boeker, Warren 1997 “Strategic change: The influence of managerial characteristics and organizational growth.” Academy of Management Journal 40:152–170.
Bruton, Garry, J.Keels, and Christopher Shook 1996 “Downsizing the firm: Answering the strategic questions.” Academy of Management Executive 10:38–45.
Budros, Art 1997 “The new capitalism and organizational rationality: The adoption of downsizing programs.” Social Forces 76:229–250.
1999 “A conceptual framework for analyzing organizational downsizing.” Organization Science 10:69–82.
2000 “Organizational types and organizational innovation: Downsizing among industrial, financial, and utility firms.” Sociological Forum 15:273–306.
Bureau of National Affairs 1991 Downsizing: Creative Approaches to Corporate Change. Washington, DC: Bureau of National Affairs.
Button, Kenneth, and Dennis Swann 1989 The Age of Regulatory Reform. Oxford, London: Clarendon.
Cappelli, Peter, Laurie Bassi, Harry Katz, David Knoke, Paul Osterman, and Michael Useem 1997 Change at Work. New York: Oxford University Press.
Cascio, Wayne 1993 “Downsizing: What do we know? What have we learned?” Academy of Management Executive 7:95–104.
Chase-Dunn, Christopher, Yukio Kawano, and Benjamin Brewer 2000 “Trade globalization since 1975: Waves of integration in the world-system.” American Sociological Review 65:77–95.
Davis, Gerald 1991 “Agents without principles? The spread of the poison pill through the intercorporate network.” Administrative Science Quarterly 36:583–613.
Davis, Gerald, Kristina Diekmann, and Catherine Tinsley 1994 “The decline and fall of the conglomerate firm in the 1980s: The de-institutionalization of an institutional form.” American Sociological Review 59:547–570.
Davis, Gerald, and Suzanne Stout 1992 “Organization theory and the market for corporate control: A dynamic of the characteristics of large takeover targets, 1980–1990.” Administrative Science Quarterly 37: 605–633.
Davis, Gerald, and Tracy Thompson 1994 “Asocial movement perspective on social control.” Administrative Science Quarterly 39:141–173.
De Meuse, Kenneth, Paul Vanderheiden, and Paul Bergmann 1994 “Announced layoffs: Their effects on corporate financial performance.” Human Resource Management 33:509–530.
DiMaggio, Paul, and Walter Powell 1983 “The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields.” American Sociological Review 48:147–160.
Dougherty, Deborah, and Edward Bowman 1995 “The effects of organizational downsizing on product innovation.” California Management Review 37: 28–44.
Edelman, Lauren 1990 “Legal environments and organizational governance.” American Journal of Sociology 95:1401–1440.
Finkelstein, Sidney, and Donald Hambrick 1996 Strategic Leadership: Top Executives and Their Effect on Organizations. St. Paul, MN: West.
Fligstein, Neil 1985 “The spread of the multidivisional form along large firms, 1919–1979.” American Sociological Review 50:377–391.
1990 The Transformation of Corporate Control. Cambridge, MA: Harvard University Press.
1991 “The structural transformation of American industry: An institutional account of the causes of diversification in the largest firms, 1919–1979.” In Walter Powell and Paul DiMaggio (eds.), The New Institutionalism in Organizational Analysis: Ch. 13. Chicago: University of Chicago Press.
1996 “Markets as Politics: A Political-Cultural Approach to Market Institutions.” American Sociological Review 61:656–673.
Forbes 1979–1995 Forbes.
Friedman, Jack 1987 Dictionary of Business Terms. New York: Barron's.
Globe and Mail 1979–1999 Globe and Mail.
Gordon, David 1996 Fat and Mean: The Corporate Squeeze of Working Americans and the Myth of Managerial “Downsizing.” New York: Free Press.
Gore, Al 1997 Serving the American Public: Best Practices in Downsizing. Washington, DC: National Performance Review.
Greenhalgh, Leonard, Anne Lawrence, and Robert Sutton 1988 “Determinants of work force reduction strategies in declining organizations.” Academy of Management Review 13:241–254.
Hall, Richard 1996 Organizations: Structures, Processes, and Outcomes. Englewood Cliffs, NJ: Prentice Hall.
Hambrick, Donald, and Phyllis Mason 1984 “Upper echelons: The organization as a reflection of its top managers.” Academy of Management Review 9: 193–206.
Hammer, Michael, and James Champy 1993 Reengineering the Corporation: A Manifesto for Business Revolution. New York: HarperBusiness.
Hardy, Cynthia 1987 “Investing in retrenchment: Avoiding the hidden costs.” California Management Review 29:111–125.
Harrison, Bennett 1994 Lean and Mean: The Changing Land-scape of Corporate Power in the Age of Flexibility. New York: Basic Books.
Hayes, Robert, and Abernathy, William 1980 “Managing our way to economic decline.” Harvard Business Review 58:67–77.
1993 “Interorganizational imitation: The impact of interlocks on corporate acquisition activity.” Administrative Science Quarterly 38:564–592.
Heckscher, Charles 1995 White-Collar Blues: Management Loyalties in an Age of Corporate Restructuring. New York: Basic Books.
Heenan, David 1990 “The downside of downsizing.” Across the Board 27:17–19.
Horwitz, Robert 1986 “Understanding deregulation.” Theory and Society 15:139–174.
Jaccard, James, Robert Turrisi, and Choi Wan 1990 Interaction Effects in Multiple Regression. Newbury Park, CA: Sage.
Journal of Mergers and Acquisitions 1979–1999 Journal of Mergers and Acquisitions.
Kannan, N.P., Kathy Rebibo, and Donna Ellis 1982 Downsizing Detroit: The Future of the U.S. Automobile Industry. New York: Praeger.
Kozlowski, Steve, George Chao, Eleanor Smith, and Jennifer Hedlund 1993 “Organizational downsizing: Strategies, interventions, and research implications.” International Review of Industrial and Organizational Psychology 8:263–332.
Lawrence, Anne, and Brian Mittman 1991 “What kind of downsizer are you?” Management Review 80:33–37.
Lee, Peggy 1997 “A comparative analysis of layoff announcements and stock price reactions in the United States and Japan.” Strategic Management Journal 18:879–894.
Levering, Robert, Milton Moskowitz, and Michael Katz 1984 The 100 Best Companies to Work For in America. New York: Signet.
Los Angeles Business Journal 1979–1995 Los Angeles Business Journal.
MacDuffie, John 1996 “Automotive white-collar: The changing status and roles of salaried employees in the North American auto industry.” In Paul Osterman (ed.), Broken Ladders: Managerial Careers in the New Economy: Ch. 4. NewYork: Oxford University Press.
Mascarenhas, Briance 1989 “Domains of state-owned, privately held, and publicly traded firms in international competition.” Administrative Science Quarterly 34:582–597.
McKinley, William, Mark Mone, and Vincent Barker 1998 “Some ideological foundations of organizational downsizing.” Journal of Management Inquiry 7:198–212.
McKinley, William, Carol Sanchez, and Allen Schick 1995 “Organizational downsizing: Constraining, cloning, learning.” Academy of Management Executive 9:32–42.
McKinley, William, Allen Schick, Huey-Lian Sun, and Alex Tang 1999 “The financial environment of layoffs: Adescriptive study.” Journal of Strategic Management 2:121–145.
McKinley, William, Jun Zhao, and Kathleen Rust 2000 “A sociocognitive interpretation of organizational downsizing.” Academy of Management Review.
Meyer, John, and Brian Rowan 1977 “Institutionalized organizations: Formal structure as myth and ceremony.” American Journal of Sociology 83:340–363.
Mroczkowski, Tomasz, and Masao Hanaoka 1997 “Effective right-sizing strategies in Japan and America: Is there a convergence of employee practices?” Academy of Management Executive 11:57–67.
New York Times 1979–1998 New York Times.
1996 The Downsizing of America. New York: Random House.
Newsweek 1979–1999 Newsweek.
Ocasio, William, and Hyosun Kim 1999 “The circulation of corporate control: Selection of functional backgrounds of new CEOs in large U.S. manufacturing firms, 1981–1992.” Administrative Science Quarterly 44:532–562.
O'Neill, Hugh, Richard Pouder, and Ann Buchholtz 1998 “Patterns in the diffusion of strategies across organizations: Insights from the innovation diffusion literature.” Academy of Management Review 23:98–114.
O'Shaughnessy, K.C., and David Flanagan 1998 “Determinants of layoff announcements following M&As: An empirical investigation.” Strategic Management Journal 19:989–999.
Palmer, Donald, Brad Barber, Xueguang Zhou, and Yasemin Soysal 1995 “The friendly and predatory acquisition of large U.S. corporations in the 1960s: The other contested terrain.” American Sociological Review 60: 469–499.
Perry, Lee 1986 “Least-cost alternatives to layoffs in declining industries.” Organizational Dynamics 14:48–61.
Peters, Thomas, and Robert Waterman 1982 In Search of Excellence: Lessons from America's Best-Run Companies. New York: Warner Books.
Pinsonneault, Alain, and Kenneth Kraemer 1997 “Middle management downsizing: An empirical investigation of the impact of information technology.” Management Science 43:659–679.
Porter, Michael 1987 “From competitive advantage to corporate strategy.” Harvard Business Review 87:43–59.
Powell, Walter 1990 “Neither market nor hierarchy: Network forms of organization.” Research in Organizational Behavior 12:295–336.
1991 “Expanding the scope of institutional analysis.” In The New Institutionalism in Organizational Analysis: Ch. 8. Chicago: University of Chicago Press.
Prechel, Harland 1994 “Economic crisis and the centralization of control over the managerial process: Corporate restructuring and neo-fordist decision-making.” American Sociological Review 59:723–745.
1997 “Corporate transformation to the multilayered subsidiary form: Changing economic conditions and state business policy.” Sociological Forum 12:405–439.
Prechel, Harland, and John Boies 1998 “Capital dependence, financial risk, and change from the multidivisional to the multilayered subsidiary form.” Sociological Forum 13:321–361.
Prechel, Harland, John Boies, and Timothy Woods 1999 “Debt, mergers and acquisitions, institutional arrangements, and change to the multilayered subsidiary form.” Social Science Quarterly 80:115–135.
Puffer, Sheila, and Joseph Weintrop 1991 “Corporate performance and CEO turnover: The role of performance expectations.” Administrative Science Quarterly 36:1–19.
Roach, Stephen 1991 “Services under seige-the restructuring imperative.” Harvard Business Review Sept.–Oct.: 82–92.
Ropp, Kirkland 1987 “Downsizing strategies.” Personnel Administrator 32:61–64.
San Francisco Examiner 1979–1998. San Francisco Examiner.
Scott, W.Richard 1998 Organizations: Rational, Natural, and Open Systems. Englewood Cliffs, NJ: Prentice-Hall.
Smith, Vicki 1990 Managing in the Corporate Interest: Control and Resistance in an American Bank. Berkeley, CA: University of California Press.
1998 “Review of Broken Ladders.” Contemporary Sociology 27:260–261.
Strang, David, and John Meyer 1993 “Institutional conditions for diffusion.” Theory and Society 22:487–511.
Thurow, Lester 1984 “Revitalizing American industry: Managing in a competitive world economy.” California Management Review 27:9–41.
1986 “White-collar overhead.” Across the Board 23:25–32.
Tolbert, Pam, and Lynne Zucker 1983 “Institutional sources of change in the formal structure of organizations: The diffusion of civil service reform, 1880–1935.” Administrative Science Quarterly 28:22–39.
Tomasko, Robert 1990 Downsizing: Reshaping the Corporation for the Future. New York: Amacom.
U.S.General Accounting Office 1987 Plant Closings: Limited Advance Notice and Assistance Provided Dislocated Workers. Washington, DC: U.S. General Acounting Office.
Useem, Michael 1993 Executive Defense: Shareholder Power and Corporate Reorganization. Cambridge, MA: Harvard University Press.
1996 Investor Capitalism: How Money Managers Are Changing the Face of Corporate America. New York: Basic Books.
Wall Street Journal 1979–1998 Wall Street Journal.
Weitzel, William, and Ellen Jonsson 1989 “Decline in organizations: A literature integration and extension.” Administrative Science Quarterly 33:91–109.
Whetten, David 1980 “Organizational decline: A neglected topic in organizational science.” Academy of Management Review 5:577–588.
Willis, Rod 1990 “What's happening to America's middle managers?” Management Review 76:24–33.
Yamaguchi, Kazuo>1991 Event History Analysis. Thousand Oaks, CA: Sage.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Budros, A. The Mean and Lean Firm and Downsizing: Causes of Involuntary and Voluntary Downsizing Strategies. Sociological Forum 17, 307–342 (2002). https://doi.org/10.1023/A:1016093330881
Issue Date:
DOI: https://doi.org/10.1023/A:1016093330881