MGMT3724 Lecture Week 4

SHRM and changes to business and

work organisation

Content
Changes to business and work
organisation since 1975
Implications for SHRM including
performance, selection & training,
commitment & engagement
OHS effects including age, gender &
ethnicity

Significant changes to
business organisation since
1975
Repeated rounds of restructuring/downsizing
by large
public and private sector organisations
Privatisation of many formerly government
instrumentalities and de-institutionalisation of some
health, disability, troubled youth & aged care activities
Growth of complex corporate structures, global business
outsourcing/subcontracting arrangements & supply
chains
Emergence/growth of new business arrangements
including franchising & new/revised work forms including
self-employed subcontractors, home-based work.
Facilitated by rise of neoliberalism

Significant changes to work

over past 30 years
Decline of secure employment & growth of flexible work
arrangements (temporary work, agency work, franchising),
subcontracting & home-based & remote work (eg FIFO)
Repeated rounds of restructuring/downsizing by large private
& public employers
Micro-electronic revolution has facilitated these changes
while also blurring work/non-work divide
Changes to pensionable age/extended working careers
Increased female participation in workforce & global
migration of labour, including temporary & illegal foreign
workers

Implications of business/work
reorganisation for SHRM
Impacts on recruitment/selection
More flexible staff means more recruitment activity

Impacts on staff training/development

For example increased short-term staff & staff turnover

Impacts on rewards, job security & other conditions

Impacts on organisation performance
Impacts on worker morale, voice & commitment
Evidence on performance effects often equivocal (see below)

Impacts on worker supervision and facilitating change

Can lead to more complex supervision (eg contractors on site)

Impacts on OHS
Evidence indicates effects predominantly negative (see below)

Review: Alternatives to Downsizing

(Gomez-Mejia, Balkin & Cardy, 2001)
Employment
policies

Changes in job
design

Pay/ benefits
policies

Training

Attrition

Transfers

Pay freeze

Retraining

Hiring freeze

Relocation

Cut overtime

Cuts to training

Cut Pt
employees

Job sharing

Use vacation &

leave days

Demotions
Cut interns &
temps

Pay cuts
Profit sharing

Voluntary time
off

Variable pay

Reduced work
hours
Prepared by Alannah Rafferty, edited by Varina
Paisley

Review: Downsizing and Other HR Systems

Loss of training
investment from
turnover
Training
Reputation
effects on
recruitment
Employment

Downsizing

Employee
Relations

Morale of
survivors

Performance
Management

Severance pay
& benefits

Reward Systems

Prepared by Alannah Rafferty, edited by Varina

Performance
evaluation
7
as layoff criteria

Review: Responsible
Downsizing
The harm caused by downsizing should be limited from the

viewpoint of all stakeholders (e.g., employees, management,

customers, shareholders, community) by developing a
comprehensive downsizing strategy
Responsible downsizing involves considering the long-term
costs and benefits of downsizing based on a firms strategy
and market
In addition, responsible downsizing means carefully evaluating
and considering the approach used when implementing
downsizing
Firms need to treat both victims (people who lose their jobs)
and survivors (remain in the organisation) well, which may
involve:
Participation in the decision-making processes
Application of fair procedures and processes
Communication about downsizing
Prepared by Alannah Rafferty, edited by Varina

Review: Reasons for Merging

Merger- when two companies become one
Merger activity is an example of integration taking
place within industries. This can be:
Vertical integration, where firms at different stages in the
production chain merge or
Horizontal integration, where competing firms in the same
industry merge

Firms view a merger as favourable in order to:

Achieve economies of scale
Increase competitiveness or eliminate competition
Spread production over a larger range of output
9
Prepared by Alannah Rafferty, edited by Varina
Paisley

Review: Merger Failure

Two thirds of mergers fail largely because of
inability to merge cultural and other
human factors
Barriers to change
Disrupting status quo may be met with
resistance by both employees and
managers
Costs and reallocation of resources
Employees will resist change unless they
Perceive need to change
See benefits from change
Risk and uncertainty; no guarantee of
improvements
Poor coordination and communication can
undermine change initiatives

10

Prepared by Alannah Rafferty, edited by Varina

Paisley

Review: Trends in Job

Redesign
Current and future work systems more broadly
defined, and more closely related to strategic choices
Workers becoming more involved in design and
reengineering of jobs
Cross-function teams strategically beneficial
Also create challenges in effectively managing themselves
Individuals can engage in social loafing
Takes away from individual performance

Employees raised in individualistic cultures need

training to be effective team members
Prepared by Alannah Rafferty, edited by Varina
Paisley

11

Effects of downsizing & restructuring on

organisation performance
Cascio study (1997) examined changes by top US companies
(Standard & Poors) between 1980-1994. Downsizing alone (722
instances) didnt improve performance (profitability return to assets)
compared to average, only improvement when combined with asset
restructuring (226 instances). Concluded despite significant of
downsizing as cot cutting strategy over past 15 years no compelling
evidence linking to improved performance
Baily et al 1997 examined downsizing in manufacturing, concluding
that while aggregate data indicated falling employment accompanied
by rise in productivity most of the variance of productivity and
employment growth is accounted for by idiosyncratic factors.
Spanish study (Munoz-Bullon* and Sanchez-Bueno, 2011) of
manufacturing 1993-2005 No significant difference in post-downsizing
performance arises between companies that downsize and those that
do not. Likewise, we find that substantial workforce reductions through
collective layoffs do not lead to improved performance levels either.

Effects of downsizing & restructuring on

organisation performance
German study of short term effects (Goeseart et al 2015) found
study the short-term effects of downsizing on operational and
financial performance of large firms found productivity and
profitability after downsizing areat the bestcomparable to their
pre-downsizing levels. Downsizing for efficiency (rather than
responding to business downturn) more likely to be unsuccessful.
Korean study (Yu & Park, 2006) of downsizing & financial
performance found firms implementing downsizing tended to
suffer more financial difficulties than their counterparts. Second,
downsizing showed a positive effect by improving a firms
profitability and efficiency, but no effect on employee productivity.
Third, the improvement of financial performance (ROA) by
downsizing was greater among companies that had not
experienced any loss than among those that had experienced
loss.

Effects of downsizing & restructuring on

organisation performance
Habel & Klarmann (2015) study of effect on customers
found negative effect of downsizing on customer
satisfaction, particularly for companies (1) with little
organizational slack, (2) with high labour productivity,
or (3) in industries with high R&D intensity and product
categories with (4) high risk importance and (5) low
probability for consumer errors as well as (6) low level
of brand consciousness. Customer satisfaction
mediates the effect of downsizing on financial
performance. The results provide an explanation for
why so many downsizing projects fail

Performance effects of job insecurity and

use of temporary agency/contract workers
Probst et al laboratory study (2007) found job insecurity
may have adverse effects on creativity, yet moderately
beneficial effects on productivity
Wachsen & Blind (2011) labour market flexibility didnt
influence innovation in entrepreneurial innovation regime
(eg Silicon Valley hire and fire mentality) characterised by
high competition, low market entry barriers and generally
available knowledge. But labour market flexibility
significantly reduces the likelihood of innovation in a
routinised innovation regime with leading innovators and
high entry barriers (eg US automobile and steel industry).
Findings emphasise that advocated structural labour
market reforms might hamper innovation as technological
change requires a level of security and stability.

Performance effects of job insecurity and

use of temporary agency/contract workers
Effects on cost reduction, flexibility benefits and those
firms that will benefit of using temporary workers
more contingent than presumed (eg Thommes &
Weiland, 2010)
Liu et al 2010 effective temporary work agency offers
reliable placement services, appears interpersonally
supportive in interacting with the temporary workers,
provides individualized and customized service, is
furnished with appealing tangible facilities and
equipment, and offers services that are conveniently
accessible before, during, and after the temporary job
assignments.

Performance effects of job insecurity and

use of temporary agency/contract workers
Bryson (2012) UK study using nationally representative
workplace data found use of temporary agency workers (TAW)
positively associated with financial performance in British private
sector and weakly associated with higher sales per employee.
However TAW not associated with value added per employee.
Knox (2014) noting that agencies relying on cost-based HRM,
coincided with substandard outcomes for TWA workers and
clients. Study compared TWAs reliant on cost-based and value
adding HRM within the hospitality industry findings value
adding HRM compatible and advantageous, yielding superior
outcomes for TWA workers and clients.
Selvarajan et al (2013) survey found female temporary
employees more positive work related attitudes toward the
client organization, with gender relationship moderated to some
degree by education and age (why?)

Performance effects of
outsourcing/offshoring
Less research into performance effects of but
Results mixed eg Wagner (2011) German study found
offshoring firms were larger and more productive, and
had a higher share of exports in total sales while
McCann (2014) study of banking & finance found
offshoring linked to collapse in worker morale and not
associated with a rise in skill levels of surviving jobs.
Many staff reported detachment and cynicism after
offshoring
Foster-McGregor et al (2013) found offshoring impacted
negatively on skill levels especially amongst medium
skilled workers

Performance effects of
outsourcing/offshoring
Evidence outsourcing can lead to organisational fragmentation &
affect human resource development (HRD) practices adversely
(eg Anderson 2015 and Sarina & Wright, 2015). Foster-McGregor
et al (2013) found offshoring impacted negatively on skill levels
especially amongst medium skilled workers
Rieple & Helm (2008) study outsourcing by legacy airlines found
degree of outsourcing of activities not always what theory would
predict to be advantageous ie provide competitive advantage
As with temporary work research suggests cost savings, flexibility
gains more variable than often presumed and can have adverse
effects on product/service quality & customer satisfaction &
anecdotal evidence suggests similar problems can occur because
organisations frequently under-estimate costs & overlook
disorganisation & other effects.

Flexibility & recruitment/selection,

training/development and
separation
Downsizing/restructuring often requires retraining where staff
assigned new/combined roles as well as care in selection to
separation (voluntary, older/longer serving workers etc). Also
need to consider implications for rehiring if downsizing spurred by
business cycle (BHP steel example)
Tsao et al 2016 Taiwan study found HRM retrenchment practices
had a negative influence on firm performance, and relationship
between HRM retrenchment practices and firm performance,
especially where significant family involvement in management.
Kriechela & Pfann (2013) German study found higher skill workers
better protected against downsizing due to larger productivity
shocks and larger firing costs

Flexibility & recruitment/selection,

training/development and
separation
More flexibility will increase hiring/selection, training and
supervision demands on HR departments
Hopp et al (2016) US study TAW assignments can act as learning
devices for employers about the underlying ability of TAEs. High
ability employees can show their qualities and fit with the
organization with the time spent on temporary work assignments,
albeit at decreasing rates. However, if TAE is assigned to
subsequent project after the first one, less likely to transitions
into permanent employment. Thus, division among TAEs: where
high ability employee may use it as stepping-stone to permanent
position, and others get trapped in sequence of temporary jobs
Harder to match flexible/contingent workforce with staff
development needs or to ensure all workers adequately trained

Impacts on workers supervision &

facilitating change
Restructuring can lead to breakdown of communication, more
aggressive management styles & resistance to change
Repeated rounds of restructuring rounds in past can induce
resistance and cynicism about change, especially when these
changes had adverse effects, poorly managed or the HR/organisation
rhetoric didnt match worker experiences
Need to address this including identify critical aggrieved groups who may be
instrumental in change process like line managers (Naughton, PhD on Wollongong
steelworks)

Evidence social support can enhance capacity of workers to deal with

change (eg Snorradottir et al 2016 on impact Icelandic bank
collapses)
Some evidence additional efforts at communication & keeping
workers informed can mitigate these effects
Tanner & Otto (2016) found attention to superior/subordinate communication
especially important where there was dispositional resistance to change (RTC)

Impacts on rewards, job security &

other conditions
Hkansson and Isidorsson (2012) Swedish study found
functional flexibility occurred when the work organization is
adapted to use low-skilled agency workers - easily introduced to
workplace and easily terminated but this use also influences
user firm employees, leading to deskilling and a deteriorated
work organization for all workers at that workplace.
Bryson (2012) UK study presence of TAW in the employees
occupation is associated with lower wages for employees in that
occupation. Furthermore, presence of TAW at the workplace
associated with lower job satisfaction and higher job anxiety
among employees. Findings consistent with TAW having an
adverse effect on employees experiences at work, perhaps due
a more labour intensive regime

Impacts on rewards, job security &

other conditions
Liu (2015) Chinese study in context of weak labour
institutions and poor enforcement, managers adopt
contingent employment practices to retain the power
to terminate employees at will, accrue benefits
through regulatory arbitrage, and promote their own
interests when handling conflicting intraorganizational demands.

Impacts on worker morale, voice &

commitment
Studies of agency workers indicate they have divided
loyalties/alignments (commitment) because of the tri-party nature of
their engagement (agency, client/host, worker)
Some firms use temps as form of probation (also unpaid internships)
Sometimes used as rate-busters/pace-setters
For commitment required shared responsibility for fair & favourable HRM
(Torka, 2011) with client being more responsible for performance review &
promotion while agency more responsible for person-task fit, job
satisfaction & feedback/problem solving
Aletraris (2010) agency workers report lower levels of job satisfaction and
that job security, control over the duration of work and autonomy are
important mediating mechanisms. They are also less satisfied with the
work itself, hours worked and their job security.

Hopkins (2014) varying absence rates between directly employed

temporary workers and agency workers result of differing levels of
managerial control over absence, which affects workers ability to use
absence to escape a low-skilled and monotonous work process

Impacts on worker morale, voice &

commitment
Chambel et al (2014) study of psychological contract and employment
status found permanent workers had higher levels of engagement than TAW
Wooden (2015) males, both casual employees and labor-hire
(agency) workers (but not fixed-term contract workers) report
noticeably lower levels of job satisfaction, though this association
diminishes with job tenure. Negative effects for women are mainly
restricted to labour-hire workers.
Note 1: Several studies find differences in attitude with females
somewhat less dissatisfied but caution required
Note 2: Less research into attitudes amongst some categories like
part-time, fixed term contract & almost no work on self-employed
contractors. Research of fixed term contract suggests can be
strongly disaffected especially if high skill because directly
compare with similarly qualified colleagues who have security

Impacts on worker morale, voice &

commitment
Evidence some workers impacted more
Where restructuring results in greater job insecurity/change of contract type
Older workers with greater commitments & future/bleaker alternate employment options

Unions often resistant to changes resulting in job losses, increased

workloads & poorer conditions but US study of hospital downsizing (Burke
et al 2016) found union support could be important & recommended close
discussion between management & union leadership
Doerflinger & Pulignano (2015) Belgian unions responded to firms
economic difficulties by improving working conditions of agency workers
by negotiating plant-level agreements that fostered equality between
agency workers and regular workers. In contrast, agency work became
instrumental in safeguarding the core workforces employment in the
German workplaces, where representation rights were absent & agency
workers remained vulnerable.

Flexible employment & family

friendly work practices
Flexible work potential to be more friendly but depends on
matching worker needs re shifts/hours of work,
career/promotion aims, income and job security (eg
significant proportion of part-time workers want more hours,
eg Eurostat 2015)
Heywood et al 2011 tested hypothesis family-friendly
practices including workplace nurseries, flexitime, home
working, and job sharing that promote the norm of the ideal
worker who concentrates on work. Because such practices
increase the ability of employers to direct worker effort, they
will be associated with a lower use of agency workers.
Findings confirmed hypothesis. Implication was growth in
family-friendly practices may work against the ongoing
expansion in agency jobs.

Flexible employment & family

friendly work practices
Niehaus (2013) German study found higher educated
TAW as largely beneficial to their partnerships,
whereas low-skilled workers relationships influenced
detrimentally by a lack of recognition at the
workplace and material deprivation. Both groups
evaluated job insecurity, low remuneration, and
geographical mobility as obstacles to parenthood.
Piotrowski et al (2015) Japanese study found men
working in non-regular jobs especially likely to
postpone marriage. Significant implications of the
growth of precarious work for changes in work and
family institutions

OHS effects of changing work

arrangements
Published international research 1966-2008
(IJHS)
Measures include injury rates, disease, mental
health, hazard exposures, violence, knowledge
& compliance
86 studies of job insecurity/downsizing (73 or
85% found adverse OHS effects)
25 studies of outsourcing/subcontracting &
home-based work (23 or 92% found adverse
effect, 2 mixed)
22 studies of temporary work/agency work (17
or 77% found adverse effect)

How restructuring and downsizing can

alter work systems, process &
environment
Reallocation of tasks/loads to smaller staff pool
Changes to job descriptions, multi-tasking
Changes to workplace facilities (space etc)
Changes to training, supervision (hard HR)
Disorganisation (communication, isolation etc)
Changes to hours (paid/unpaid), leave access
Changes to grievance/consultation mechanisms
Uncertainty and insecurity affects organisation priorities
Increased stress due to overload, insecurity &
disorganisation (externalities)
Increased risk of bullying & occupational violence (eg client)

Change/Flexibility & at risk

groups: Younger workers
Inexperience & eager to prove themselves
Inadequate induction, training & supervision
Concentrated in industries where OHS poorly
understood & contingent jobs eg hospitality
(also in high risk industries like construction)
Seldom unionised & often unaware of legal
rights & entitlements or unable to access
Ethnic and gender effects can exacerbate

Restructuring/flexibility & at
risk groups : older & mid-life
Older workers tend to experience
fewer injuries than younger workers
workers
but more susceptible to chronic injuries & have pre-existing health
issues, take longer to recover, find it harder to get another job if
injury results in job loss

Jobs not adapted to changing capacities

experience v cognitive decline, physical demanding work,
intensification
Some industries have more rapidly growing ageing workforce (eg
homecare, healthcare, road transport, mining)
Evidence older workers find it harder to cope with shift work (FIFO?)
Virtanen et al (2014) high control of work time important to extended
working careers (but despite growth of part-time work many older
workers have limited work time control)

Restructuring/flexibility & at
risk groups : older & mid-life
workers
Downsizing, job loss and presenteeism affect
worse

More committed and family responsibilities

Presenteeism, intensification & burnout (eg Aronsson et al, 2000)
Enforced job changes tend to be inferior
Health effects of unemployment

Increasing job churning due to rise of flexible

work arrangements (bifurcated labour market)
Breslin et al 2006 trial by fire study indicates general work
experience not protective)
Job specific knowledge critical & argue for lower labour turnover
(follows earlier French research)
Career fragmentation and injury risk (eg Giraudo et al 2016)

Restructuring/flexibility & at
risk groups : foreign/migrant
Often found in hazardous jobs (manufacturing, construction, harvest
workers
work) & in contingent jobs
Language/communication, Induction/training difficulties, fellow
worker communication & access to rights (via union, govt agencies
etc)
Inexperience and labour market vulnerability job specific
knowledge & prior safety knowledge
Examples
Immigrant female clothing outworkers and cleaners, Recent arrivals,
middlemen & subcontracting, intimidation, isolation, low pay & long hours
Backpackers , Labour hire -job changes without training, hazardous tasks
(eg asbestos removal without PPE)
Guestworkers (sect 457) (construction, restaurants, forestry, agricultural,
meatworks) lower pay/conditions, no-union contracts, indebtedness &
misuse (new indenturing?); retention & permanency depends on
employer sponsorship; hope to gain permanent residence; intimidation
& denial of workers compensation

Restructuring/flexibility & at
risk groups : female workers
Concentrated at lower end of organisational hierarchies in
lower status, repetitive jobs
Over-represented in part-time, temporary and nonprofessional home-based work
Less unionised (except government, teaching & health)
Gender
Sexual harassment/ bullying/ violence
Reproductive hazards
Double burden (health & workers comp)
Power - employers and agencies (workers comp)
Concentrated in industries where often OHS problems
poorly understood & in part-time, unstable jobs job strain
Ethnic effects can exacerbate