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Journal of Industrial Technology Volume 15, Number 1 November 1998 to Januray 1999

The Official Electronic Publication of the National Association of Industrial Technology

1998

Downsizing Effects onOrganizational Development

Capabilities at an Electric Utility

ByJerry Wagner

Volume 15, Number 1 - November 1998 to January 1999

Reviewed Article

Human RelationsManagement

SociologyResearch

KEYWORD SEARCH

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Downsizing Effects onOrganizational Develop-ment Capabilities at anElectric UtilityMr. Jerry Wagner

observations it was believed that thiswould be true for electric utility employ-ees. However, deregulation of theelectric market is bringing the long eraof guaranteed prosperity of electricutilities to a close. The electric utilitywhere this study was completed envi-sions transforming to a competitive

learning organization. Currently itsculture is primarily static in nature. And,the entitlement mentality is deeplyingrained in its employees. Downsizingis taking place. This descriptive studyexamined the relationship of jobinsecurity to organizational culturechange in one business unit of theelectric utility. However, it did notattempt to establish a causal relationshipbetween job insecurity and resistance toorganizational culture shift.

Literature ReviewFour areas of literature werereviewed: employee job insecurity,organizational downsizing, learningorganizations, and entitlement mentality.

Job InsecurityAshford, Lee, and Bobko (1989)

argue that the lack of empirical attentionto job insecurity is an overlooked aspectof downsizing, restructuring, andmergers. The only previous attempt atdeveloping a multidimensional jobinsecurity model seems to be the 1984Greenhalgh and Rosenblatt studyreferenced by Ashford et al. (1989).That study divides job insecurity intofive components: importance of jobfeature, likelihood of losing job feature,importance of job loss, likelihood of jobloss, and perceived powerlessness.Using this model, Ashford et al. devel-oped a Job Insecurity Scale for this1989 study. The authors reported that

job insecurity is associated with declinesin commitment, trust in organization,and job satisfaction. They also reportedpositive relationships between jobinsecurity and both organizationalchange and role ambiguity, and that asignificant negative relationship existsbetween job insecurity and power to

control outcome.McCarthy (1993) used Ashford et

al.s Job Insecurity Scale as a measure-ment tool for his study of job insecurityin a merger environment. He reportedthat the measure of job insecurity didshow a significant difference betweenthe three locations as hypothesized. Inaddition, his results indicated that bothpowerlessness and organizational trustwere significantly related to job insecu-rity, further validating Ashford et al.sstudy. The McCarthy study is relevant

to the study being reported here. Itsuggests a relationship between thedegree of organizational change and themeasure of job insecurity. It alsosubstantiates several of Ashford et al.sresults with a high return rate thatsupports the inferential validity of theJob Insecurity Scale. Koesterer (1994)further validated Ashford et al.s JobInsecurity Scale. In her study, threevariables emerged as significant predic-tors of job insecurity: managementlevel, job changes, and relocation. Otherstudies are available in the literature.

Based on the review of literature in thisarea, it appears that there is a relation-ship between the measure of jobinsecurity and organizational change. Italso validates the use of the Ashford etal. Job Insecurity Scale and methods.

Organizational DownsizingThe literature on downsizing was

important to this study. Lee (1992)

Mr. Jerry Wagner is currently seekinghis Masters Degree in Industrial Tech-nology from Northern Illinois Universityand is also a full time employee of theBraidwood Nuclear Power Plant inBraceville, Illinois.

IntroductionThis study was submitted as a thesis

for partial fulfillment of a Master of

Science in Industrial Technology to theDepartment of Technology at NorthernIllinois University. In addition to being agraduate student, the author is also a fulltime employee of the BraidwoodNuclear Power Plant in Braceville,Illinois and is involved with refueloutage planning as well as other areas ofproject management. The purpose ofthis study was to determine if a relation-ship exists between job insecurity andresistance or receptiveness to anorganizational culture shift in an

organization where cultural-shiftactivities were being performed concur-rently with downsizing efforts. Thestudy focused on three hypotheses:There is no significant correlationbetween the measure of learningorganization attributes and the measureof job insecurity, There is no signifi-cant correlation between the measure oflearning- organization attributes and themeasure of entitlement mentality, andThere is no significant correlationbetween the measure of job insecurity

and the measure of entitlement mental-ity (Wagner, 1996, p. 6).Entitlement mentality is often

generated by a work history of regularraises, scheduled promotions, and asecure job; it seems that over time,organizational members simply seem tobecome entitled or to expect this tocontinue for their career or job life.Based on the structure of the regulatedmonopolies and the researchers

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reported that 50% of the companiesstudied were not prepared fordownsizing and a ripple effect reverber-ated throughout the various companiesfor months. There were neither policiesnor programs in place to minimize thenegative effects of cutting back. Heargues that most downsizings fail to

achieve their goals. He cited a studyconducted by Wyatt Co. (1991) where46% of 1,005 companies met theirexpense-reduction goals, less than 33%met their profit goals, and only 21%increased their shareholders return oninvestment. Eighty-six percent of thesecompanies had downsized three to fiveyears before this study. Lees studyshows several tendencies detrimental toa cultural shift, especially the lack ofpolicies. Also, multiple downsizingsmay tend to keep an organization in a

perpetual state of anticipation.Pedersen (1991) studied the effectsof layoffs on work performance ofengineers. He reported that a merit-based work-force reduction policycombined with timely communicationsabout the layoff process may tend toimprove the work performance of thesurvivors, enabling the organization toget back on track.

In 1994, Johns studied the effects ofdownsizing on middle managers. Thoseperceiving a significant role change orambiguity reported a decline in workperformance. This addresses the needfor reduction by design, not numberquotas and that restructuring requiresnew roles to be clearly defined.Duron (1994) reported that downsizingcorrelated negatively with both moraleand productivity variables. She alsoreported that the management practicesof clarity of expectations, communica-tion, and recognition correlated posi-tively with morale and had a greaterimpact on employees than the negativeconsequences of the downsizing event.

Based upon the literature review ondownsizing, it appears that there isadequate evidence to conclude that arelationship exists between organiza-tional downsizing and morale. It wouldalso appear that management methodsin implementing downsizings may tendto positively or negatively affect theimpact of downsizing on productivity,morale, and organizational perception.

There does not seem to be any empiricalevidence that would indicate a relation-ship between downsizing and cultural-shift capabilities.

Learning OrganizationsSenge (1990a) and Denton and

Wisdom (1991) referenced Dumaine

(1989) who said, The most successfulorganizations in the 1990s will besomething called a learning organiza-tion, a consummately adaptive enter-prise, with workers who think forthemselves, identify problems andopportunities, and go after them (p.54). Senge (1990a) further clarifiedthat the focus must be on generativelearning that is about creating as wellas on adaptive learning that is aboutcoping. Senge cited the evolvement ofthe total quality movement in Japan as

a transition from adaptive to generativelearning.Denton and Wisdom (1991)

referenced Hayes of the HarvardBusiness Schools who stated, Manag-ers have to encourage workers experi-mentation with finding better ways to dothings (p. 69). Senge (1990a) arguedthat business as well as other humanendeavors are systems bound by fabricsof interrelated actions that may takeyears for the effects to be fully realized.Since the individual is part of it, it isdifficult to see the whole pattern, andmany individuals tend to focus onsnapshots of isolated parts, wonderingwhy problems never get solved. Gen-erative learning requires seeing thesystems that control events. When wefail to grasp the systemic source ofproblems, we are left to push onsymptoms rather than eliminate underly-ing causes, and the best we can ever dois adaptive learning (Senge, 1990a, p.8). Denton and Wisdom referenced aHewlett-Packard study of 170 managersand argued that the most effective

managers had a willingness to chal-lenge the same old way and had a beliefthat things could be done better...theseleaders believed in continuous improve-ment (p. 71). Senge (1990b) alsoreferenced a study by Shell Oil Com-pany and argued that the key to long-term organizational survival is theability to run experiments in themargin, to continually explore new

business and organization opportunitiesthat create potential new sources ofgrowth (p. 7). Finally, Senge writesthat the primary institutions of oursociety are oriented toward controllingnot learning, and toward rewarding forperforming for others instead of reward-ing for cultivating the individuals

natural curiosity. He further argues thatfocusing on obtaining someone elsesapproval creates the conditions thatpredestine corporations to mediocreperformance. This focus on worthproving appears to be a detriment tosystems thinking and, as such, ameasure of the degree of this trail wouldappear to be appropriate for a systems-thinking measure construct.

Denton and Wisdom (1991) alsoargue that an understanding of thewhole business is imperative in the

learning organization. They cite theSpringfield Remanufacturing Corpora-tion where employees are told that 85%of their pay is for doing their job and theremaining 15% is for learning thebusiness. They believe that it is thecompanys responsibility to teach theiremployees a basic understanding of thewhole management area to develop agood understanding of how interdepen-dent the world is. The literature furthersupports Senges philosophies andconstructs with studies. The systems-thinking traits (those mentioned aboveand others not mentioned for the sake ofbrevity), while not all-encompassingmeasures, seem to be suitable traits forinclusion into a systemic construct.

Entitlement MentalityBardwick (1991) describes entitle-

ment mentality as an attitude. Sheidentifies those who possess this attitudeas individuals who believe that they donot have to earn what they get; they areowed it. In the work place, entitlementexists when people have so much

security that they are not required toproduce. They keep their jobs and getregular raises whether they do well ornothing. Promotions are based on lengthof time in the current position instead ofcompetence or ability to perform in thenew position. Some of the characteris-tics of an entitlement-mentality organi-zation described by Bardwick includehigh levels of risk avoidance, depen-

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dence, informal tenure, complacency,apathy, rules and rule checkers. Shecites a study performed at a utilitywhere employees were asked to charac-terize their company both before andafter deregulation. Words such asfamily oriented, caring, and loyalwere used to describe the old com-

pany. Insecure, chaotic, fear, andshort-sightedness were used tocharacterize the company after deregu-lation. Based on researcher observationsit was determined that these characteris-tics also fit the utility under study andthat they were appropriate for anentitlement mentality measure construct.For the purpose of this study, thefollowing terms were defined:

Job Insecurity Measure. A constructused to determine the degree to whichan individual is apprehensive about

losing his/her present position in theorganization, combining importance,perceived likelihood of occurrence, andperceived degree of powerlessness intoa single-interval data number.

Systems Thinking Measure. Aconstruct used to assess receptiveness toorganizational culture shift, from staticrole to learning organization, consistingof seven traits: cross-departmentteamwork, innovation, worth proving,focus on whole, shared vision, trust, andmove beyond blame.

Entitlement Mentality. A constructused to determine the degree to which aperson perceives that the organizationowes the individual security.

Methodology and ProceduresA questionnaire was mailed with an

introductory letter to all managementemployees at an electric-generatingstation. A response rate of 50% wasdetermined adequate. A response rateof 75% was required to preclude theneed for implementation of nonresponsemeasures. The survey contained 19

questions, four of which were com-pound questions that resulted in a totalof 35 answers. A one-time responserequired participants to answer thequestions based upon their presentpersonal experiences and attitudes.

There were three construct vari-ables: Systems Thinking Measure(STM), Job Insecurity Measure (JIM),and Entitlement Mentality (EM). There

were also four demographic variables.There were seven STM questions. Thepossible range of STM scores was amaximum of 35, which would indicatestrong resistance to systems thinking,and a minimum of 7, which wouldindicate a high degree of acceptance ofsystems thinking. There were four EM

questions. The possible range of scoreswas a maximum of 20, which wouldindicate a high degree of entitlementmentality, and a minimum of four,which would indicate a low degree ofentitlement mentality. Two questions onthe questionnaire were used to obtainimportance factors in determining theJIM. These questions required respon-dents to assign an importance factor tothem and then supply a likelihood offuture occurrence value. For each ofthe ten items, the importance value (IV)

was multiplied by the likelihood value(LV) to obtain a measure of an indi-vidual JIM component. The ten indi-vidual JIM components were thensummed to produce a preliminary JIM.One question on the questionnaire wasused to obtain an assessment of power-lessness. The JIM was obtained bymultiplying the powerlessness assess-ment (PA) by the preliminary JIM. Thepossible range of scores for the JIM wasa maximum of 1,250, which wouldindicate a high measure of job insecu-rity, and a minimum of 10, which wouldindicate a low measure of job insecurity.The remaining four questions repre-sented demographic variables and wereassigned ordinal values. These variableswere used for stratification of therespondents to determine if they werefactors in the correlation between thethree constructs.

The results were plotted onscattergrams to determine if a curvilin-ear relationship existed. A curvilinearrelationship was not suggested so thePearson r correlation method was

deemed appropriate. The followingelements were correlated:(a) JIM with STM, (b) JIM with EM,and (c) STM with EM. These correla-tions, as well as the scatter plots, weremade using both the total responsepopulation and with stratification usingthe four demographic variables of age,gender, years with company, and time incurrent position.

The JIM was an abbreviated versionof Ashford et al.s Job Insecurity Scale.Several studies, after the initial studyattested to its validity, thus its validitywas accepted for the study beingpresented here. The STM and EMconstructs were developed for thepresent study. Several steps were taken

to establish construct validity for both.The traits of the constructs wereselected by a review of the works ofnoted authors. Careful considerationwas given to ensure the adequacy oftraits without overloading on oneparticular characteristic. After theconstructs were completed, they wereforwarded to three subject-matterexperts for review: Barry Wisdom,Professor, Department of Management,Southwest Missouri State University;Joseph Yaney, Professor, Department of

Management, Northern Illinois Univer-sity; and William Reckmeyer, Professor,Department of Leadership and Systems,San Jose State University. The results ofthe review were positive. A small pilotstudy was recommended which em-ployed purposive sampling techniquesin participant selection. Refinementswere made accordingly.

Although reliability measures arenot generally designed for a one-time,self-report attitudinal survey, and nospecific statistical measures forreliability were used, several measureswere taken to maximize reliability.Correlation of the pilot study, size ofthe sample population, and specifyinga 75% response rate, were all intendedto enhance reliability of the measure-ment instrument. The usable returnrate was 78%.

ResultsThe correlation between the JIM

and the STM and the correlationbetween the STM and the EM wereboth found to be significant at the .001

level when computed for the entiresurvey. The correlation between the JIMand the EM was found to be significantat the .01 level for the same group.When the data were stratified by asingle demographic variable, signifi-cance at the .001 and .01 levels werefound for various groups and aresummarized in Tables 1, 2, and 3.Several single demographic variable

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groups showed significance. To furtherexplore the sample population, stratifi-cation was performed using twodifferent demographic variables withand logic to determine if groupspossessing several characteristics wouldshow significance. The results aresummarized in Tables 4 and 5. All

correlations between the JIM and EMusing two demographic variablesstratification failed to achieve signifi-cance at the .01 level. A three- variabledemographic stratification using andlogic was performed. While overallcorrelation increased for the JIM toSTM correlation, the reduction of N to32 using this stratification lowered the tvalue to below that which was requiredfor the .01 level of significance. A tvalue of 2.750 was required for the .01level of significance with 30 degrees of

freedom; the computed t value resultswere 2.667. However, significance, atthe .01 level was identified for threecorrelations of the JIM and STM at thethree demographic variables stratifica-tion level, and two correlations of STMand EM at the three demographicvariables stratification level. The resultsare in summarized in Table 6.

For most of the single demo-graphic variable stratification correla-tions that failed to achieve significanceat the .01 level, the groups showedmoderately low correlations that couldhave been significant had the groupbeen of adequate size. The demo-graphic groups that exhibited virtuallyno correlation are included in Table 7.These groups had correlation coeffi-cients of less than .110, positive ornegative, for the specified correlations.As an additional measure of dataanalysis, correlations between the threeconstructs were performed withexclusions made by demographicgroup. The exclusions were made atboth the single demographic variable

level as well as at the two- and three-demographic variables levels usingand logic. Table 8 displays the resultsof those groups failing to achievesignificance at the .01 level when asingle demographic group was ex-cluded from the sample population.

An analysis of the correlationresults when excluding by two demo-graphic variables and three demographic

variables stratifications yielded severalrepeating patterns. Specifically theexclusion of the years in company 11-20 demographic, in combination withany other demographic group or groups,always resulted in a correlation betweenJIM and STM that failed to achievesignificance at the .01 level. The only

other demographic group showsexclusion affected significance for thecorrelation between JIM and STM asage group 40-49. When used in twodemographic-groups exclusion correla-tions, four of nine correlations failed toachieve significance at .01. When usedin three demographic groups exclusion,28-40 failed to achieve significance at.01. Correlations between JIM and STMthat did not exclude either of thesedemographics almost always achievedsignificance at .01 or above. Correla-

tions between STM and EM using twoand three demographic groups exclu-sion also possessed patterns. Theexclusion of either the age group 40-49 or males in combination with anyother demographic group or groups,always resulted in a correlation betweenSTM and EM that failed to achievesignificance at the .01 level.

Finally, to develop predictionequations based on the survey data, alinear regression analysis was per-formed. The results were compiled

using the data for the entire samplepopulation as well as stratifying by asingle-level demographic group andexcluding by a single- level demo-graphic group. Table 9 contains theequations by which STM can bepredicted from the JIM or EM. It alsoshows the calculated standard error of

estimate.

Summary and ConclusionsThis study was designed to test for

the presence of a relationship betweenjob insecurity and resistance to anorganizational culture shift at anorganization where cultural-shiftactivities were being performedconcurrently with downsizing efforts.The organization was an electricity-production industry which was experi-encing a period of rapid transition as

market forces were working to deregu-late the electric markets, bringing thelong era of the regulated monopoly to aclose. It was felt that members of theorganization possessed a certain degreeof entitlement mentality because of thenature of the regulated monopoly. Thedesired direction of the organizationalcultural shift was toward that of alearning organization; the undesirablestarting point was that of a static-roleculture.

Table 1

JIM to STM Correlations at .01 or Above

Group Name Group Size (N) Level

Years with Company 11-20 165 .001

Years in Position 4-5 81 .01

Age Group 40-49 134 .01

Males 297 .01

Females 22 .001

Table 2

JIM to EM Correlations at .01 or Above



Males 297 .01

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Significance at the .001 level wasfound for the relationship between jobinsecurity and systems thinking, andalso for the relationship betweensystems thinking and entitlement whencorrelated for the entire survey re-

sponse population. The relationshipbetween job insecurity and entitlementwas found significant at the .01 levelfor the same group. Demographicgroups of the sample population whereresults of correlation (when stratified

by that group) were found significantwere also identified. Years withcompany, 11-20; years in currentposition, 4-6; and age range of 40-49were found significant for the relation-ship between job insecurity andsystems thinking. Years in currentposition, 1-3, and gender of male were

found significant for the relationshipbetween job insecurity and entitlement.Years with company, 11-20; years incurrent position, 1-3; age range of 40-49; and gender of male were foundsignificant for the relationship betweensystems thinking and entitlement.

The study provided evidence thatthe possession of either a high degree ofjob insecurity or a high degree ofentitlement mentality will tend topresent an obstacle to an organizationalculture shift in that organizations

members. While the contribution of jobinsecurity and entitlement mentality,when used as a predictor for resistanceto an organizational shift, account foronly a fraction of the variance, theresults clearly indicate that the threevariables, as defined for the study, arerelated.

The information obtained in thepresent study may be useful for theprediction of organizational acceptanceto cultural shift when either the levels ofjob insecurity or entitlement have beenassessed. The equations in Table 9 canserve as the basis for prediction if aquantitative assessment of the character-istics has been performed. If only aqualitative assessment has been per-formed, the conclusions of this studythat is, job insecurity and entitlementmentality affect receptiveness tolearning organizational attributes mayserve as a basis for postulating theeffectiveness that cultural-shift initia-tives will have when either of the traitsare present.

ReferencesAshford, S., Lee, C., & Bobko, P.

(1989). Content, causes, and conse-quences of job insecurity: A theorybased measure and substantive test.Academy of Management Journal, 32,827-829.

Bardwick, J. M. (1991). Danger inthe comfort zone. New York:AMACOM.

Table 3

STM to EM Correlations at .01 or Above


Years with Company 11-20 165 .001


Age Group 40-49 134 .001

Males 297 .001

Table 4

Two-Group JIM to STM Correlations at .01 or Above


Years with Company 11-20 and

Age Group 40-49 66 .001


Age Group 30-39 92 .01



Years with Com Ed 11-20 and Male 155 .001

Years with Com Ed < 5 and

Years in Position 1-3 11 .01Years in Position 1-3 and Female 8 .01

Years in Position 4-6 and Male 78 .01

Age Group 30-39 and Female 8 .01

Table 5

Two-Group STM to EM Correlations at .01 or Above



Age Group 40-49 66 .01Years with Company > 20 and

Age Group 40-49 36 .01

Years with Company 11-20 and Male 155 .001

Years with Position 1-3 and

Age Group 40-49 55 .01

Years in Position 1-3 and Male 123 .01

Age Group 40-49 and Male 123 .001

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Denton, D. K., & Wisdom, B. L.(1991, December). The learningorganization involves the entire workforce. Quality Progress, pp. 69-72.

Dumaine, B. (1989, July 3). Whatthe leaders or tomorrow see. Fortune,p. 54.

Duron, S. A. (1994). The reality of

downsizing: What are the productivityoutcomes? (Doctoral dissertation,Golden State University, 1994). Disser-tation Abstracts International, 54(09),4953.

Johns, M. (1994). Middle manag-ers perceived role changes and conse-quences in downsized organizations(Doctoral dissertation, Temple Univer-sity, 1994). Dissertation AbstractsInternational, 54(08), 4429.

Koesterer, S. J. (1994). The reliabil-ity between demographic variables and

job security in the survivors of acorporate downsizing (Webster Univer-sity, 1994). Dissertation AbstractsInternational, 55(12), 3915.

Lee, C. (1992, July). After the cuts.Training, pp. 17-23.

McCarthy, N. I. (1993). Validationof the job insecurity scale in a mergerenvironment (Doctoral dissertation,University of LaVerne, 1993). Disserta-tion Abstracts International, 53(11),3989.

Pedersen, L. B. (1991). The effectsof organization downsizing on thesurvivor work force: An investigation ofthe effects of layoff process on workperformance of those who remainwithin the organizational system (NovaUniversity, 1991). Dissertation AbstractsInternational, 52(08), 1986.

Senge, P. M. (1990a). The fifthdiscipline: The art and practice of thelearning organization. New York:Doubleday.

Senge, P. M. (1990b, Fall). Theleaders new work: Building learningorganizations. Sloan Management

Review, pp. 7-23.Wagner, J. D. (1996). Effects of

downsizing on organizational develop-ment capabilities at an electric utility.Unpublished masters thesis, NorthernIllinois University, DeKalb.

Table 6

Correlations Significant at .01 for Groups Stratified at the Three

Demographic Variable Levels

Group Name Group Size (N) Constructs

Years with Company < 5 and

Years in Position 1-3 and Male 10 JIM and STM


Years in Position 1-3 and Male 71 JIM and STM


Age Group 40-49 and Male 61 JIM and STM


Age Group 40-49 and Male 61 STM and EM

Years in Position 1-3 and

Age Group 40-49 and Male 52 STM and EM

Table 7

Stratified Groups that Exhibited Virtually No Correlation

Group Name Group Size (N) Constructs

Years with Company 5-10 70 JIM and STM

Years with Company > 20 49 JIM and STM

Years in Position < 1 56 JIM and EM

Age Group < 30 16 JIM and STM

Age Group > 30 16 STM and EM

Age Group 50 or More 25 STM and EM

Table 8

Correlations That Did Not Achieve Significance at the .01 Level

When a Single Demographic Group Was Excluded

Excluded Group Name

(all except the group) Group Size (N) Constructs

Years with Company 11-20 156 JIM and STM

Age Group 40-49 187 STM and EM

Males 24 STM and EM

Years with Company 5-10 249 JIM and EM

Years with Company 11-20 156 JIM and EM

Years in Position 1-3 189 JIM and EM

Years in Position > 6 270 JIM and EM

Age Group 40-49 187 JIM and EM

Age Group 50 or more 187 JIM and EM

Males 24 JIM and EM

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