Organizational Downsizing in the Public Opinion: Investigating the Social Legitimization of Layoffs

Abstract

Organizational downsizing continues to be popular management practice. Using arguments derived from cognitive dissonance theory, we examined whether and why individuals legitimize downsizing despite its well-known negative consequences both for organizations and for individuals. In two studies, we surveyed working people from different companies regarding their perceptions of downsizing as (a) financially effective, (b) inevitable, and (c) liberating, as well as psychological constructs influencing these perceptions. In general, we found support for our dissonance argument: Employees’ subjective perception of the prevalence of downsizing (Studies 1 and 2), past layoff experiences (Studies 1 and 2) and belief in a just world (Study 2) predicted its legitimization as financially effective and inevitable. Past layoff experiences and belief in a just world were also associated with the perception of downsizing as liberating for those laid off. Contrary to our expectations, the prevalence of downsizing was negatively associated with its perception as liberating in both studies. In Study 2, however, job insecurity moderated this relationship in line with cognitive dissonance theory: People with high job insecurity perceived downsizing as particularly liberating if they believed downsizing to be less prevalent. In sum, individuals’ cognitive legitimization of downsizing may contribute to its growth, even though implications for laid-off employees, layoff survivors and organizations are largely negative.