Asia Pacific Journal of Management, 22, 23–39, 2005

2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.

Organizational Restructuring: Impact on Trust

and Work Satisfaction
GRACE LEE biztayg@nus.edu.sg
ALBERT TEO bizteocy@nus.edu.sg
Department of Management and Organization, School of Business, National University of Singapore,
1 Business Link, Singapore 117592

Abstract. After the Asian financial crisis, companies are now contending with the current global economic
slowdown. Whether it is at the national, industry or organizational levels, restructuring has gained currency as
a strategic decision to realign internal structure with changing macro environmental factors. Faced with more
competitive markets and greater demands on costs controls, organizations and businesses are taking the fast
track to cost-cutting by downsizing, reorganizing their divisions, streamlining their operations, and closing down
unprofitable divisions.
Changes that are introduced in an organizational restructuring will affect the socio-psychological well-being of
organization members given the potential for uncertainty that may accompany such changes. There is a need to
better understand the consequences of organizational restructuring and consider some of its potential side effects
on the work environment. Employees in a post-restructuring context are understandably wary about the future
direction of the organization and their roles within it.
This study is an attempt to examine the social-psychological impact of organizational restructuring on trust
and work satisfaction. Additionally the inter-relationships between trust and work satisfaction, including their
antecedents in the work environment are examined.
Trust and work satisfaction levels were tracked before and three months after organizational restructuring for
varying types of changes that were initiated during the restructuring. Both trust and satisfaction with working
in the organization declined significantly when compared to pre-restructuring levels. Independent t-tests analysis
indicated that there was a significant decline in trust for the work group which had a newly hired manager and a
change in work processes. Results showed that there was a negative relationship between both work satisfaction
and trust with the extent of change required of employees.
The findings also showed that there was a positive relationship between trust and work satisfaction and that
trust contributed to work satisfaction. Perception of colleagues’ willingness to help solve job-related problems
contributed significantly to strengthening of trust relations among colleagues. Additionally, colleagues and super-
visor’s willingness to listen to employee problems contributed significantly to work satisfaction.
Results of the study highlighted the need for strategic decision-makers to consider the social impact of or-
ganizational restructuring. Top managers must realize that both trust and work satisfaction are important ingre-
dients for the effective functioning of an organization and to actively ensure that support systems or structures
are adequate and available to mitigate the negative impact, particularly if the changes to be implemented are
extensive.

Keywords: organizational change, work satisfaction, trust

Organizational restructuring: Impact on trust and work satisfaction

The countries of east and south-east Asia started to experience an unprecedented financial
crisis after decades of dramatic economic growth in 1997. Countries like Thailand, Indonesia
24 LEE AND TEO

and Korea experienced an abrupt fall of real GNP from 7 percent or more annual growth
down to zero or negative in just a few months.1 Rapid devaluation of currencies, combined
with falling property prices caused marked declines in production, consumption and average
incomes. The region’s economic growth plummeted.
The Asian financial crisis affected the profitability of many companies in the region. Orga-
nizations and businesses had to contend with shrinking purchasing power, rising production
costs and excessive staffing levels (Andrews, 2001). As the crisis deepened and corporate
productivity continued to decline, local subsidiaries of foreign multinational companies
came under pressure from their headquarters to restructure their business operations (Wah,
1999). Many organizations started to restructure and downsize their internal operations as
a strategic policy decision to cope with the intense competitive pressures (Andrews, 2001;
Fisher, Lee and John, 2004).
While there have been encouraging signs that currency and financial markets have started
to stabilize, many organizations are still being restructured because it enables unproductive
units to be culled and costs to be reduced. It has gained currency as a strategic managerial
decision to improve profitability and streamline operations in Asia (Yeung, 2001; Mitchell
and Shaver, 2002; Fisher et al., 2004). McKinley and Scherer (2000) suggested that orga-
nizational restructuring produced the unanticipated consequences of generating cognitive
order for executives in turbulent environments and contributed to long-term environmental
turbulence at the environmental level. The cognitive order experienced by top executives
and the disruption of environmental conditions, provided the stimulus for further restructur-
ing. Restructuring thus becomes a learned and self-perpetuating phenomenon (McKinley
and Scherer, 2000).
As in most strategic decisions, the common driver has been the assumption that or-
ganizational restructuring will spur business performance. The prevailing belief is that
organizational restructuring will provide a better alignment with the external competitive
environment, improve financial indicators, and ultimately improve stock price performance.
Organizations in decline often attribute their performance to inefficient processes and ex-
cessive bureaucracy (Cascio, 1993). To remedy these inefficiencies, organizations attempt
to restructure to improve productivity and reduce costs. Better earnings and improved com-
petitiveness should logically lead to better financial performance and drive the stock price
upward. However, the intended benefits of restructuring, such as productivity improvement,
cost reduction, increased shareholder value, or a better alignment of the organization with a
changing environment, are not always realized (Bowman and Singh, 1993; Bowman et al.,
1999). This prompted Bowman and his colleagues (1999) to pose this question:
“After more than a decade of extensive restructuring of large companies, company exec-
utives should now be able to address the more complex but pragmatically more important
question: When does restructuring improve economic performance?” (p. 33)
Cascio et al., (1997) examined the effectiveness of organizational restructuring in its
ability to deliver the intended objectives of improved financial performance. In their study,
Cascio and his colleagues noted that strategic policy decision-makers often neglect the
impact of organizational restructuring on employee morale and productivity. For example,
employee motivation could be so negatively affected that it leads to employee behaviors
that hinder rather than enhance productivity. Consequently, productivity decrements may
ORGANIZATIONAL RESTRUCTURING 25

offset labor cost savings, resulting in the basically flat relative financial and still deflated
share price performance. Their study highlighted the potentially negative implications of
organizational restructuring on cooperation, trust, productivity and morale, which can affect
economic and financial consequences.
Unfortunately, strategic policy decision makers are not paying heed to the potentially
negative impact on employee morale and work satisfaction (Wah, 1999). The social impli-
cations of economic decisions should be taken into account as they can impose a heavy
social cost that is not immediately visible (Lee, 1998).
This study aims to examine the social repercussions of an organizational restructuring.
It seeks to firstly address the social impact of organizational restructuring by focusing on
its impact on trust among employees and their work satisfaction and secondly, to examine
antecedent factors in the work environment that contribute to work satisfaction and trust.
Research on strategic management and organizational behavior are often conducted in-
dependent of each other. This is evident in the different research agendas of organizational
psychologists, who take a micro-level view, and strategic management scholars, who take
a macro-level view. Scholars of strategy are often not concerned with organizational dy-
namics or micro-organizational variables. Thus, investigating the implications of a strategic
decision like organizational restructuring from a micro-organizational perspective should
provide a valued contribution to both strategic management literature and organizational
studies.
In the last decade, there has been a great deal of empirical work on changes within organi-
zations in crisis (Cascio, 1993; Buch and Aldridge, 1991; D’Aveni, 1989; Tombaugh et al.,
1990; Dougherty and Bowman, 1995). In more recent years, many scholars have focused on
workforce reduction or downsizing (Koretz, 1998). This trend does not seem to be dissipat-
ing, with a reported 60 percent of companies planning to continue downsizing over the next
few years (Andrews, 2001). Organizations routinely displace and hire large segments of
their workforces in a permanent restructuring process (Mckinley and Scherer, 2000). Faced
with more competitive markets and greater demands on costs controls, companies are taking
the fast track to cost-cutting by downsizing, reorganizing their divisions, streamlining their
operations, and closing down unprofitable divisions (Bowman et al., 1999). Organizational
restructuring has been, and will continue to be used as a turnaround strategy to control costs
and to realign internal structure to meet changing environmental conditions. It is therefore
important to enhance our understanding of the socio-psychological outcomes of organi-
zational restructuring, particularly when past studies have been predominantly focused on
financial outcomes.
Both trust in colleagues and work satisfaction have yet been investigated in the orga-
nizational restructuring literature, even though these are anticipated to have significant
bearings on cooperation, morale and productivity. An understanding of the changes in
the work environment within the organization that have undergone restructuring is im-
portant so that corrective measures can be taken promptly to address negative changes
as a consequence of restructuring (Bowman and Singh, 1993). An understanding of what
affects trust among colleagues and work satisfaction will yield practical insights for man-
agers who want to buffer the negative effects of change on trust and work
satisfaction.
26 LEE AND TEO

Hypotheses development

Changes in organizations are marked by high levels of uncertainty and chaos (Tombaugh
and White, 1990). There is often strong resistance to changes and a tendency towards
rigid behavior patterns (Cameron, Sutton and Whetton, 1988). Threat-rigidity theory (Staw,
Sandelands and Dutton, 1981) offers a perspective on why changes in the work environment
may occur. The theory explains that individuals, groups and organizations that perceive im-
pending negative or harmful consequences for their vital interests will tend toward rigidity.
Threat-rigidity theory implies that, under the types of radical changes that are likely to
accompany organizational restructuring, the resulting effects will be dysfunctional. Un-
certainty is inherent in the restructuring process itself, particularly in its initial phases.
Threat-rigidity theory has received considerable empirical support, primarily from studies
of organizational crisis and studies of resistance to change (Cameron, Whetten and Kim,
1987; D’Aveni, 1989; Tjosvold, 1984; Whetten, 1981).
If the change required by employees is extensive and perceived to be negative, for instance,
redesigned workflow and reorganization leading to expansion of duties and work overload,
then employees will be less receptive to the changes (Mishra and Spreitzer, 1998). Even if
the changes are perceived to be beneficial, it is envisaged that a transitional period of time
for adaptation is necessary. For changes of a greater magnitude, the consequent need for
adjustment and change by the employee will be greater. In the direct aftermath of change,
uncertainties and role confusion are likely to have an initial negative bearing on work
satisfaction levels.
Uncertainties will increase corresponding to the magnitude of the change required. Even
if employees are informed of the details of the changes, there will be a period of adjustment
where they will need to familiarize themselves with their new roles and how they would fit
into the company’s new strategy. The uncertainties may have a negative bearing on morale
and work satisfaction.

Hypothesis 1. There is likely to be a negative relationship between employee work

satisfaction and the extent of changes required in the organizational restructuring in the
immediate term (3 months) following organizational restructuring.

As Krackkardt and Hanson (1993) pointed out, what is neglected in organizational re-
structuring is the informal organization, which they defined as the networks of relationships
that employees form across functions to accomplish tasks fast. These informal networks
cut through formal reporting procedures. Many top managers do not realize that massive
changes in organizational relationships could result from reorganization. Restructuring in-
advertently cause dramatic changes in the deep-seated, informal organization (Fisher and
White, 2000). These informal networks can easily block communication and create oppo-
sition to change. In creating changes to reporting and administrative structures, employees
may find themselves working with entirely new colleagues and managers whom they are
not familiar with. A lack of familiarity in the new relationships will affect trust among
colleagues. This is aggravated in a restructuring that includes downsizing. In general, trust
allows individuals to cooperate with others because it minimizes the threat of malfea-
sance (Mishra and Spreitzer, 1998). Conversely, a lack of it may result in the hoarding of
ORGANIZATIONAL RESTRUCTURING 27

information and resources from each other (Farjoun, 2000). This would affect the level of
help and support among colleagues and between employee and supervisor.
Studies have shown that organizations appear to suffer a deterioration of trust (Buch and
Aldridge, 1991; Cascio, 1993) and an increase in fear (Buch et al., 1991) during the process
of change. Trust exists between two parties when one party believes that the other party is
trustworthy and is willing to be vulnerable to the other (Granovetter, 1985). However, trust
is easily lost when either party perceives the other as being self-interested or unreliable
(Mayer et al., 1995).
Trust is defined as the willingness to take risks and to be vulnerable to the action of others
based on the assumption that the other will act in a manner beneficial to the trustor (Gilbert
and Tang, 1998). In a situation of change where there is great volatility in work group
membership and a change in work group leadership, it is expected that trust levels will be
negatively affected because the assumption that other members (particularly new ones) will
act in a manner beneficial to oneself cannot be made. With work group attrition and new
members added into the work group, there will be a transitional period of uncertainty. A
newly hired manager will also have implications on the trust levels in the work group. Work
groups facing a change in leadership involving an external hire as opposed to an internally
hired manager is likely to face greater stress on trust levels because of unfamiliarity in
management (Mishra and Spreitzer, 1998).
Additionally, if there is a restructuring of systems and procedures such as in a major
reorganization, it is not uncommon to have new workflows that are put in place. If the new
workflows cut across departmental boundaries, coordination between each department is
critical. In the short-term following the changes, there is likely to be a phase of uncertainty
and a lack of familiarity with the new workflow. Effectiveness of teamwork is tested espe-
cially where there is mutual dependence on each other. If there is ambiguity and uncertainty
in the new workflows, relationships of individuals working together are subject to greater
stress on their relationships (Lazarus and Folkman, 1984).
Coordination problems and possibly greater conflict in the immediate term following
the work flow changes between departments whose tasks are interdependent may have a
negative impact on trust among colleagues. It is envisaged that employees facing a lack of
familiarity and greater uncertainties associated with a greater extent of changes required,
for instance a change in work group leadership and work processes, will likely suffer a
greater decline in trust with each other. Extensive changes in work systems and procedures,
work roles and personnel will directly have an impact on organizational relationships with
possibly a greater stress on trust among colleagues. Following the above discussion, the
following hypothesis is proposed:

Hypothesis 2. There is likely to be a negative relationship between employee trust in

each other and the extent of changes required in the organizational restructuring in the
immediate term (3 months) following organizational restructuring.

Although both trust and work satisfaction are popular subjects of research in the literature,
the interrelationship between these two have not been addressed properly. Both concepts are
similar in the sense that they represent some overall evaluation, feeling, or attitude towards
a subject. According to Ravald and Gronroos (1996), trust is an aggregate evaluation at
28 LEE AND TEO

some higher level than satisfaction, and satisfaction is in fact an important source for trust.
Satisfaction is achieved when expectations are fulfilled or confirmed. It is a manifestation
of the other party’s ability to meet relational norms, and thus manifest trust (Ring and Van
de Ven, 1994). It follows that both concepts should be closely connected, and a positive
relationship between trust and work satisfaction is expected.

Hypothesis 3. The higher the level of trust in colleagues, the higher the level of work
satisfaction.

Given that trust and satisfaction are core concepts in understanding the dynamics of how
relationships evolve, it is important to understand variables in the work environment that
affect them. Kanter (1994) maintained that work environments that provided access to in-
formation, resources, support, and the opportunity to learn and develop were empowering
and enabled employees to accomplish their work. As a result, employees would be more sat-
isfied with their work and would perceive that management could be trusted to do whatever
was necessary to ensure that high quality outcomes were achievable. According to Kanter
(1994), employees in open environments characterized by easy access to information, re-
sources and support would be more committed to the organization and more likely to engage
in positive organizational activities. Kanter’s theory provides an explanatory framework for
investigating the role of employee freedom to suggest changes and supervisory receptiv-
ity to employees’ problems to work satisfaction in a restructured organizational setting. If
post-restructuring fluidity provides an opportunity to employees to develop more freedom
to define their roles according to their own preferences, it may not necessarily cause dissat-
isfaction after the initial period of transition and adjustment is over and work roles become
clearer. According to Kanter (1994), the ability of management to ensure that employees
have access to support, resources and feedback results in increased levels of organizational
commitment, feelings of autonomy, and self-efficacy. Consequently, employees are more
productive and satisfied. Given the above discussion, it is hypothesized that:

Hypothesis 4. Freedom to suggest changes positively impacts work satisfaction.

Hypothesis 5. Supervisory receptiveness to employee’s problems positively impacts

work satisfaction.

Mishra and Morrissey (1990) proposed that open communication, sharing of critical
information, sharing of perceptions and feelings, facilitate trust in organizations. Gilbert
and Tang (1998) had found a strong positive relationship between organizational trust and
the nature and extent of organizational communication. They suggested that formal, and
more importantly, informal access to organizational communication channels enhances
organizational trust. It is therefore anticipated that strong workgroup support characterized
by an open exchange of information and advice for solving work-related problems will
increase trust in colleagues.

Hypothesis 6a. The exchange of information among colleagues increases the level of
trust in colleagues.
ORGANIZATIONAL RESTRUCTURING 29

Hypothesis 6b. Colleagues’ ability to offer ideas for work-related problems increases
the level of trust in colleagues.

Hypothesis 6c. Colleagues’ willingness to listen to employees’ problems increases the

level of trust in colleagues.

Research design

Employee responses were tracked at two points in time: baseline (pre-restructuring) and
3 months after restructuring (post-restructuring). The work groups that were affected by the
restructuring formed the baseline (n 1 = 72, 92%) for comparison with post restructuring
data. The organizational restructuring initiatives included a change in work group leadership
and a change in workflow and work process.
Different work groups were affected in different ways. The first work group had a newly
promoted internal manager with no change in work processes. Because the newly promoted
manager was already the deputy manager before restructuring, they reportedly experienced
the least adjustments. The second group had an externally hired manager with no change
in work processes. The third group required the greatest extent of change from employees
because they had an externally hired manager and a change in work processes.
For the purpose of this study, only employees who have been directly affected by the
restructuring and who have participated in the previous survey qualified for the post-
restructuring survey. Newly recruited employees in the work groups who have not par-
ticipated in the first employee opinion survey were excluded. A total of 71 (n 2 = 71,
97.2%) respondents out of 73 from the affected work groups were surveyed and individu-
ally interviewed. The subjects were interviewed in 20–45 minute sessions in person. The
questions focused on changes experienced during the restructuring, perceptions of various
aspects of the work environment, general motivational and social changes experienced or
observed, suggestions for management about the restructuring. Data from the 71 respon-
dents after restructuring (n 2 = 71) was compared with their responses (n 1 = 72) in the
earlier baseline survey that was conducted before organizational restructuring.

Measures

Respondents in the first phase of data collection completed an employee opinion survey that
covered significant aspects of the organization. The survey was adapted from Van de Ven’s
(1980) organizational assessment and change instrument. The 91-item inventory asks re-
spondents to indicate the extent to which each statement describes their work environment,
career development opportunities, job contents, organization loyalty, communications, or-
ganizational image and quality. In the second phase of data collection, a pared down version
of the original survey with items pertaining to the criterion variables was used. The instru-
ments were shown to have satisfactory psychometric properties in terms of reliability. The
items pertaining to the baseline survey had a Cronbach’s alpha of a = .974 and a Cronbach’s
alpha of a = .848 in the post-restructuring survey. The work satisfaction scale comprises
four items: (1) satisfaction with working in the organization; (2) satisfaction with job;
30 LEE AND TEO

(3) satisfaction with immediate boss and (4) satisfaction with colleagues. The reliability
alpha for the work satisfaction scale is 0.80. The trust scale is measured by the extent of
agreement with the item: “I feel free to trust my colleagues with confidential information
or concerns about my work” on a scale ranging from 1, “to a very little extent” to 5 “to a
very great extent”. The work group support scale comprising of three items2 has alpha of
0.86. These variables were measured on a scale ranging from 1, “to a very little extent” to 5
“to a very great extent” on the degree to which the variable exists in the work environment.

Findings

Results from the independent t-tests showed that trust in colleagues and satisfaction with
working in the organization declined significantly compared to pre-restructuring levels.
(See Table 1). Results from independent t-tests for trust and work satisfaction by group
showed that trust in colleagues declined significantly for the group with an externally hired
new manager and a change in work process. (See insert Table 2).
Significant negative relationships were found between both trust and work satisfaction and
the extent of change required from employees. (See insert Table 3). Hierarchical regression
analysis was conducted to test whether the independent variable measuring the extent of
change required from employees had a significant impact on the dependent variables of trust
among colleagues and work satisfaction respectively. All the control variables for individual
attributes were entered into a regression equation (Step I). The question of interest, then,
is whether the independent variable significantly increased variance above that already
explained by the control variables. Adding the extent of change required from employees

Table 1. Independent T -tests—post restructuring versus pre restructuring.

Type of changes experienced N Mean t

Internally promoted Manager

Trust Before restructuring 72 3.81 −2.44∗
3 months after restructuring 71 3.45
Work Satisfaction Before restructuring 72 3.72 −0.50
3 months after restructuring 71 3.65
Satisfaction with working in the organization Before restructuring 72 3.65 −2.54∗
3 months after restructuring 71 3.23
Satisfaction with the Job Before restructuring 72 3.74 −0.08
3 months after restructuring 71 3.72
Satisfaction with immediate supervisors Before restructuring 72 3.78 −0.27
3 months after restructuring 71 3.73
Satisfaction with colleagues Before restructuring 72 3.92 −1.40
3 months after restructuring 71 3.69
∗p < .05. ∗∗ p < .01.
ORGANIZATIONAL RESTRUCTURING 31

Table 2. Independent T -tests—post restructuring changes for trust in colleagues and work satisfaction by group.

Mean

Types of changes N Mean diff t

(1) Internally promoted Manager Trust in colleagues (Baseline and 3 months 14 −0.36 −1.28
post restructuring)
Satisfaction Index 14 −0.07 −0.27
Satisfaction with working in the organization 14 −0.36 −0.98
Satisfaction with the job 14 0.00 0.00
Satisfaction with immediate supervisors 14 0.14 0.49
Satisfaction with colleagues 14 −0.07 −0.27
(2) Externally hired Manager Trust in Colleagues (Baseline and 3 months 12 −0.67 −1.68
post restructuring)
Satisfaction Index 12 −0.05 −0.20
Satisfaction with working in the organization 12 −0.10 −0.37
Satisfaction with the job 12 0.24 0.80
Satisfaction with immediate supervisors 12 −0.17 −0.54
Satisfaction with colleagues 12 −0.17 −0.43
(3) Externally hired Manager and Trust in Colleagues (Baseline and 3 months 35 −0.37 −2.01∗
change in work process post restructuring)
Satisfaction index 35 −0.16 −0.83
Satisfaction with working in the organization 35 −0.49 −1.90+
Satisfaction with the job 35 −0.09 −0.38
Satisfaction with immediate supervisors 35 −0.40 −1.66
Satisfaction with colleagues 35 −0.31 −1.45
+p < 0.10. ∗ p < .05. ∗∗ p < .01.

into the equation in step II increased the total variance explained by 6 percent (F =
2.648, p < 0.05) for the dependent variable of trust levels among colleagues. A negatively
significant beta ( p < 0.05) was observed for the extent of change required from employees,
while controlling for the effects of the other personal attributes. This suggests that the more
changes required from employees, the lower the trust levels among colleagues.
Similarly, adding the extent of change required from employees into the equation in
step II for the dependent variable of work satisfaction increased the total variance explained
by 3 percent (F = 2.393, p < 0.05). A marginally significant negative beta ( p < 0.10)
indicated that the extent of change had a negative impact on work satisfaction. This indicates
that the greater the change required from employees, the lower the work satisfaction (see
insert Table 4). This finding provides some evidence to confirm Hypotheses 1 and 2, which
postulated that there would be a negative relationship between both work satisfaction and
trust with the extent of change required of employees.
Hierarchical regression analysis was also carried out with work environment variables as
independent variables and dependent variables of trust and work satisfaction, controlling for
Table 3. Intercorrelations for the variable measures. 32
Variables 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1. Gender 1
2. Tenure .04 1
3. Age −.27∗∗ .52∗∗ 1
4. Education −.42∗∗ −.20∗ −.20* 1
5. Rank .08 −.07 −.20∗ −.04 1
6. Extent of change .26∗∗ .22∗∗ −.01 −.36∗∗ .41∗∗ 1
7. Satisfaction of working −.29∗ −.067 .01 .27∗∗ −.08 −.13 1
in organization
8. Satisfaction with job −.17∗ −.14 −.10 .16 −.01 −.21∗ .60∗∗ 1
9. Satisfaction with −.21∗ −.07 .04 .09 −.02 −.21∗ .43∗∗ .55∗∗ 1
immediate supervisor
10. Satisfaction with colleagues −.13 −.14 −.11 .09 −.02 −.16 .37∗∗ .51∗∗ .54∗∗ 1
11. Work satisfaction index −.22∗ −.13 −.05 .20∗ −.04 −.22∗∗ .76∗∗ .83∗∗ .81∗∗ .76∗∗ 1
12. Trust in colleagues −.09 −.05 −.10 .20∗ −.11 −.29∗∗ .35∗∗ .40∗∗ .39∗∗ .42∗∗ .49∗∗ 1
in the organization
13. Colleagues exchange −.03 −.16 −.02 .07 −.05 −.17∗ .12 .24∗∗ .11 .39∗∗ .26** .41∗∗ 1
opinions and ideas
14. Colleagues offer new .01 −.20∗ −.06 .07 .02 −.16 .18∗ .31∗∗ .19∗ .52∗∗ .37∗∗ .48∗∗ .82∗∗ 1
ideas to solve job problems
15. Colleagues are willing −.13 −.13 −.09 −.01 −.02 −.12 .28∗∗ .44∗∗ .30∗∗ .56∗∗ .50∗∗ .40∗∗ .55∗∗ .62∗∗ 1
to listen to my problems
16. Free to suggest changes −.12 −.21∗ −.16 .16 −.05 −.12 .27∗∗ .40∗∗ .27∗∗ .34∗∗ .40∗∗ .24∗∗ ..29∗∗ .35∗∗ .41∗∗ 1
to improve job effectiveness
17. Immediate supervisor listens −.13 −.20∗ −.03 .14 .03 −.11 .52∗∗ .48∗∗ .49∗∗ .30∗∗ .57∗∗ .31∗∗ .20* .31∗∗ .41∗∗ .43∗∗
to employee problems

N = 143, ∗ p < .05, ∗∗ p < .01

LEE AND TEO
ORGANIZATIONAL RESTRUCTURING 33

Table 4. Regression models for extent of change on trust and work satisfaction—step
R 2 .

Dependent variables

Trust Work satisfaction

Standardized Standardized
coefficients (Beta) Step
R 2 coefficients Step
R 2

Control variables
Gender −.026 .057 −.172 .079
Tenure .063 −.066
Age −.131 −.056
Education .063 .036
Formal rank −.011 .043
Independent variables
Extent of change required −.290* .056 −.196+ 0.026
from employees
R 2 statistics .113 .105
Adjusted R2 statistics .070 .061
F 2.648∗ 2.393∗

N = 143, +p < .10, ∗ p < 0.05, ∗∗ p < 0.01.

gender, tenure, age, education and rank (see insert Table 5). Findings indicated that trust and
work satisfaction contributed significantly to each other’s variance. Therefore, the findings
confirmed Hypothesis 3, which suggested that the higher the level of trust, the higher is the
level of work satisfaction. As for the variables within work group support, the findings reveal
that colleagues who offer new ideas for solving job-related problems contributed signifi-
cantly to the strengthening of trust among colleagues (i.e., Hypothesis 6b is supported). For
the other dependent variable of work satisfaction, a significant, positive beta was observed
for immediate supervisor’s receptiveness to listen to employee’s problems (i.e., Hypothesis
5 is supported). Contrary to the expectation of Hypothesis 4, freedom to suggest changes
did not have a significant impact on work satisfaction. Please see insert Table 5.

Changes in the work environment

The interviewees’ comments largely reinforce findings from the quantitative analysis that
levels of work satisfaction and trust among colleagues had deteriorated after the restructur-
ing. For example, several commented on supervisor support; one interviewee stated this:
“Supervisory support? The managers are new and they are also learning on the job and
are very busy. Most of the time, we check with one another if we do have any problems.”
Another commented: “The new manager does not have a clinical background. I think it is
important to recruit someone who has experience in a hospital or clinical setting. The new
 34 LEE AND TEO

Table 5. Regression models for independent variables on work satisfaction and trust—step
R 2 .

Dependent variables

Trust Work satisfaction

Standardized Step Standardized Step

coefficients (Beta)
R 2 coefficients
R 2

Control variables
Gender −.006 .057 −.070 .079
Tenure .137 −.019
Age −.142 .032
Education .097 .058
Formal Rank −.115 −.012
Independent variables
Work satisfaction index .383∗∗ .311 −
Trust in colleagues in the organization − 0.280∗∗ 0.459
Colleagues exchange opinions and ideas .051 −0.134
Colleagues offer new ideas for solving .308∗ 0.041
job-related problems
Colleagues are willing to listen to my problems −.005 0.284∗∗
Freedom to suggest changes to improve −.066 0.063
job effectiveness
Immediate supervisor is willing to .006 0.362∗∗
listen to employee’s problems
R 2 statistics .368 .538
Adjusted R2 statistics .308 .494
F 6.132∗∗ 12.292∗∗

N = 143, ∗ p < 0.05, ∗∗ p < 0.01

workflows have many problems in implementation. Maybe it is because she does not have
the experience nor the clinical training.” Many of the interviewees’ comments focused on
how the restructuring affected their work environment; for example, one employee said the
following: “Changes are necessary and we accept them. But, the way some of the changes
were implemented . . . our previous managers were just asked to leave suddenly. After all,
they have made their contributions. Before this, trust and cooperation were not promoted;
now it’s promoted even less.” Another said, “How can we trust them (management) when
they send spies to check on our performance and to report on what we are doing that is
not right.” How can you talk about trust when you don’t show it yourself.” Many described
structural changes relating to uncertainty and chaos: “During and after the restructuring,
there was frustration especially on the tracing of patients records. Before this, we are at least
not dependent on customer service (department) to provide us with the patients’ records.
Now we can’t find the records and we (nurses) are faced with angry and frustrated patients
who shout at us for being so slow when it is not our fault.” Another interviewee said this:
“The quality of our customer service has dropped because patients’ records are missing.
ORGANIZATIONAL RESTRUCTURING 35

I think they (colleagues in the other department) are not familiar with the new workflow.
Often times, I will have to go personally to find the records. The people in the sorting room
are stressed out because they can’t cope with the workload.”
On a more positive note, some felt that they were more informed about what was going
on in other departments. One employee commented: “At least now we get more information
than in the past. I can get into my email to read what is going on.” Another one said: “I
hear what is going on in our departmental meetings, which is conducted quite regularly.
But in the course of our work, we seldom have to communicate with other colleagues in
other departments . . . only on a few occasions, when we need to check on details in pa-
tients’ records.” A number of respondents mentioned social changes; often, these changes
interfered with departmental functioning: “The impact has been negative in some respects.
Communication is not as open and honest. Keep this confidential, but I do not trust any-
body in this organization. I don’t know what I say will be repeated to my boss. Trust and
cooperation in this organization have gone down.”

Discussion

This study offers some insights on work environment changes in the immediate term follow-
ing organizational restructuring. The study focused on trust and work satisfaction because
both variables play a significant role in the successful implementation of the changes. The
results supported the propositions that both trust and work satisfaction will be negatively
affected by the extent of change required from employees in the immediate term (three
months) following organizational restructuring. Significant declines from pre-restructuring
trust levels are noted for the work group with changes in work group leadership and in
workflow. Both trust and work satisfaction levels were significantly lower for the work
group with a new externally hired manager and change in work process compared to the
work group with a change that solely involved a newly promoted manager.
The findings also provided some insights on how work satisfaction and trust among
colleagues may be strengthened. Having colleagues and the immediate supervisor listen to
problems significantly enhanced work satisfaction. These findings highlight the need for
supportive environments that provide a listening ear to problems. This may mitigate the
problem of declining work satisfaction, particularly when extensive changes are required
and confusion abound when changes are rapid and roles and expectations are less clear.
An examination of the relationships between the work group subscales and trust provides
insight into dynamics by which trust operates. A strong relationship is found between trust
in colleagues and perceived willingness of colleagues to solve work related problems. Work
group support, particularly in meeting task demands and solving work related problems,
significantly contributed to the strengthening of trust among colleagues. Trusting another
individual is based on the assumption that the other will act in a manner that is beneficial
to the truster, and this assumption is validated and confirmed when the other party offers
tangible help that genuinely enables the trustor to better meet tasks and job demands (Gilbert
and Tang, 1998).
The significant effect of supervisory willingness in listening to problems on work satisfac-
tion are consistent with expectations of Kanter’s theory and the findings of other research
36 LEE AND TEO

linking trust to open communication and information sharing, increased employee de-
cisional involvement, and supportive leadership practices (Mishra and Spreitzer, 1998).
When employees feel they have leaders, managers and supervisors who are empathetic
and understanding, they are more likely to be cooperative and constructive. Consequently,
they will be satisfied with their work and more committed to achieving organizational
change.

Limitations, implications and future research

Clearly, the conclusions that can be drawn from this study are limited. First, and perhaps most
importantly, this is a case study of one organization and the findings are far from conclusive.
Conceptual replications in other organizations will be required before firm conclusions can
be drawn. Significantly, the use of pre-restructuring (baseline) data and post-restructuring
information within the organization could mitigate at least some of the retrospective biases
that might have entered into many previous field studies of organization change. There are
other limitations. The measures were based on self-reports, it would be desirable in future
research to have additional external measures of work satisfaction and measures of trust in
the work environment.
It is possible however to identify several implications for management practice. Sup-
port for the model proposed in this study provides encouraging guidance for managers
interested in creating high trust work environments that benefit both employees and ulti-
mately the customers they serve. The creation of work environments that encourage em-
ployees to have peer mentors and mutually assist each other in work-related problems will
go a long way in helping to build trust among colleagues. Training employees to exer-
cise the practice of empathetic listening and building this value in the culture and reward
systems may be useful to arrest problems of declining work satisfaction within organiza-
tions undergoing change. Moreover, the building of high trust environments will lead to
increased employee satisfaction; ultimately ensuring the desired results of organizational
restructuring.
This approach will require a transformation in the role of management. Managers tradi-
tionally have managed through control. Such an approach will require managers to focus
less on control and more on the coordination, integration, and facilitation of employees work
after an organizational restructuring. As restructured work environments recover from the
impact of possibly downsizing and increased turnover, managers must seek ways to regain
the trust of employees by ensuring structures are in place to allow feedback and support.
Employees must be willing to work together to develop a climate of mutual trust that fosters
work satisfaction and genuine commitment to organizational goals to achieve the intended
results of organizational restructuring.
Are there ways to mitigate the negative impact of change? For employee buy-in, it is
necessary to actively involve employees in the planning phase of any restructuring effort.
Additionally, it may be helpful to undertake team-building efforts as soon as new groups are
formed—especially if these are groups from which high levels of productivity are desired.
A future line of research would be to conduct a longitudinal study in which trust and
work satisfaction are tracked for a longer period of time after organizational restructuring
ORGANIZATIONAL RESTRUCTURING 37

so that subsequent reactions are examined. One promising avenue of research could be
the investigation of the mechanisms by which change events in organizations, particularly
restructuring, might lead to changes in the work environment. Threat-rigidity theory (Staw
et al., 1981) is helpful in guiding such investigations, because it directly addresses pos-
sible changes in organizational environments under negative circumstances such as those
accompanying restructuring. Another perspective is to understand changes in work envi-
ronment in organizations undergoing restructuring through a social network lens. Fisher
and White (2000) have asserted that downsizing—or any restructuring that involves broad-
based personnel reduction or movement—may seriously damage the learning capacity of
organizations. Using the social network perspective, they have illuminated the magnitude of
potential learning capacity loss resulting from the deletion of one individual from an organi-
zational network and have demonstrated that, because it is a nonlinear function, this loss is
likely to be far greater than that indicated by linear head-count ratios. They pointed out that
the magnitude of the potential risk makes it critical for top managers to analyze the impact
of downsizing and restructuring on learning networks—both formal and informal—before
implementing these strategies. Following their suggestion, a similar study may also be
undertaken to examine how informal networks are affected by organizational restructuring.
In concluding, this study has shown that there are potentially negative consequences on
the work environment in the immediate term after organizational restructuring. If work
satisfaction and trust in the organization continued to be depressed well beyond the end
of the restructuring, and well beyond an apparent improvement in some aspects of the
work environment, the productivity of the organization could be in serious danger. A key
ingredient that is necessary to sustain effective change is high morale. Employees must
“buy in” to the management strategy of change. They must align their interests with those
of management, and they must become involved and committed to bring about genuine,
lasting improvements in the organization. Otherwise, this may set back the organization’s
efforts to achieve the anticipated goals of restructuring.

Notes

1. The Asian financial crisis: Origins and social outlook. A perspective, in International Labour Review (Geneva),
vol. 137, no. 1. pp. 81–93, 1998.
2. The three items for work group support are: (1) exchange of information among colleague; (2) colleagues’
ability to offer ideas for work-related problems; (3) colleagues’ willingness to listen to employees’ problems.

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