Administrative Cuts Amidst Decline in American Railroads

Abstract

During organizational decline, the administrative component grows in some organizations and shrinks in others. Why do such differences occur? In a study of U.S. railroads, efficient organizations were found to be most prone to make administrative cuts. Furthermore, railroads making such cuts improved their chances of long-term survival. When an organization is faced with organizational decline, the results suggest that managers must cut to survive.