The effect of strategic human resource management practices on company performance after a downsizing event

Abstract

Organisations downsize for a variety of reasons, but the effectiveness of these practices on the performance of a firm is inconclusive. Downsizing is defined as the actions that organisations implement to reduce the number of its employees. The causes for downsizing include endogenous and exogenous factors, depending on whether the downsizing event is prompted by causes within the scope and control of management, or whether the causes are external to the organisation. Previous studies have shown that the performance of a firm (employee productivity, flexibility, competitiveness, profitability) can be improved by implementing elements of strategic human resource management practices (SHRM). A qualitative, exploratory study was undertaken to gain insights into the effect that SHRM elements had on the performance of a firm after a downsizing event. Semi-structured, in-depth interviews were conducted with 18 senior managers across seven different industries that had experienced downsizing. The key findings of the study observed that a developmental and innovative culture, effective information sharing networks, and a focus on developing technical and leadership skills were key cornerstones of SHRM that supported company performance. The study also revealed that downsizing negatively impacts on the motivation levels of survivors and results in the loss of good skills.