Exploring the Role of Information Technology in Organizational Downsizing: A Tale of Two American Cities

Abstract

This study explores the role information technology (IT) plays in organizational downsizing by studying two medium-sized American cities over a period of 10 years (1985-1995). Data were collected through 73 interviews, a questionnaire, and numerous documents. Four main findings emerged from the case studies. First, IT was found to facilitate organizational downsizing, but not to cause it. New City invested heavily in state-of-the-art IT over the years and more successfully downsized the organization than Old City, which lagged behind in IT investment and made no serious attempts to use IT as a tool to support strategic actions. Second, adverse environmental conditions triggered downsizing in both cities and determined the change strategies that managers used. When environmental pressures were mild (1985-1990), managers favored a convergent change strategy that resulted in limited downsizing efforts and small personnel reductions. In contrast, when environmental pressures were strong (1990-1995), managers of both cities engaged in strategic reorientation and in downsizing efforts that led to larger personnel reductions. Third, the role IT played in organizational downsizing varied according to the change strategy. IT was used to facilitate work redesign in a convergent change strategy and to facilitate more significant structural and work redesign in strategic reorientation. Fourth, more integrated and better use of IT allowed managers of New City to downsize more rationally and efficiently. It facilitated the transfer of personnel within departments, from middle management to the operations level, and across departments, from internally oriented to customer-oriented personnel. In doing so, managers of New City minimized operating costs while maintaining the same level of services. In contrast, IT in Old City did not facilitate such an agenda and managers downsized more superficially across the board, in all departments. Differences in IT consequences in the two cities are explained using the theory of slack resources in organizations.