The informal side of communication: The role of rumor during employee downsizing

Abstract

Aimed at improving firm performance and competitiveness, employee downsizing has established itself as a widespread strategy in today’s business environment. The literature, however, highlights unequivocal findings that many downsizing initiatives fail to yield the expected results. Several scholars have therefore called for more research exploring critical moderators and antecedents of effective downsizing processes. In response to this call, this paper theoretically explores the role of rumor during employee downsizing processes. While prior research has frequently emphasized the importance of communication during downsizing, what has been largely neglected is the often-encountered grapevine activity during employee downsizing. By theoretically analyzing rumor as an informal sensemaking process, we extend and contribute insights into contingencies of employee downsizing and informal communication.