Research literature on downsizing and its effects has highlighted that downsizing can significantly decrease the morale and the job satisfaction of the surviving employees. A study based on the relationship between downsizing and innovativeness undertaken in 2006 revealed that “while low and medium levels of downsizing have no significant impact on innovation output, high level downsizing is more likely to have a significant negative impact on innovation output” (‘The Impact of Downsizing on Innovation Output’, 2006).
The impact of downsizing is not only limited to the morale and the job satisfaction of the human resource. The psychological state of the employees is also affected with concerns for job security, increased stress, tension and in some cases depression as well that can lead to lower productivity of the surviving employees. “The conceptual model suggests that layoffs have an impact on the induced psychological states of the individuals affected. At play in the model is the moderating variable of re-affirmation. This, in turn, will affect the attitudes and work behaviours of those same individuals and their ability to maintain their self-image.” (Petzall et al, 2000)
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