MANAGERS REACTIONS TO IMPLEMENTING LAYOFFS: RELATIONSHIP TO HEALTH PROBLEMS AND WITHDRAWAL BEHAVIORS

Transcription

1 MANAGERS REACTIONS TO IMPLEMENTING LAYOFFS: RELATIONSHIP TO HEALTH PROBLEMS AND WITHDRAWAL BEHAVIORS LEON GRUNBERG, SARAH MOORE, AND EDWARD S. GREENBERG In the present study, we investigate several outcome differences among 410 managers who either had or had not implemented layoffs (i.e., handing out warn notices) during one or more years between 2000 and Using survey data, our findings show that issuing warn notices significantly predicts increased self-reported health problems, seeking treatment for those health problems, sleep problems, feelings of depersonalization, and intent to quit. Emotional exhaustion fully mediates the relationship between issuing warn notices and health problems, depersonalization, and intent to quit, whereas it partially mediates the relationship to seeking treatment and sleep problems. A similar pattern was found for the mediating variable of job security Wiley Periodicals, Inc. Downsizing and mass layoffs can be traumatic for those who are laid off and for those who survive the downsizing and remain employed (Iversen & Sabroe, 1988; Noer, 1993). But what are the effects on the managers who make and implement the decision to lay off hundreds or thousands of their employees? While top executives may make general, almost abstract decisions about the total number of employees to be laid off, first- and second-line supervisors are often the ones who have to select and then personally inform the particular individuals to be let go. These front-line managers are caught in the middle, between their responsibilities to the organization and to their subordinates (DeWitt, Trevino, & Mollica, 2003). Laying off employees who may be long-time acquaintances or friends is likely to be a very painful process, one that leaves an indelible imprint on managers who implement these decisions (Kets de Vries & Balazs, 1997). Indeed, firing or letting people go creates so much discomfort for managers that psychologists note a common tendency among them to try to minimize the discomfort by avoidance and distancing behaviors. For example, they may hold very short, curt Correspondence to: Leon Grunberg, Department of Comparative Sociology, University of Puget Sound, 1500 N. Warner, Tacoma, WA Phone: (253) grunberg@ups.edu Human Resource Management, Summer 2006, Vol. 45, No. 2, Pp Wiley Periodicals, Inc. Published online in Wiley InterScience ( DOI: /hrm.20102

2 160 HUMAN RESOURCE MANAGEMENT, Summer 2006 meetings to inform the employee of the layoff (Cameron, Freeman, & Mishra, 1993; Clair & Dufresne, 2004; Folger & Skarlicki, 1998; Kets de Vries & Balazs, 1997). Systematically exploring the effects of downsizing on this neglected group of organizational stakeholders, when added to existing research on layoff victims and survivors, can provide researchers and practitioners with a more complete understanding of the human costs of mass layoffs. Studying managers reactions to the actual implementation of downsizing decisions is also important, because how managers Generally, results react and behave in the postlayoff environment helps to shape indicate that the attitudes and behaviors of managers or employees and, hence, the morale and effectiveness of the supervisors are less workforce (Wiesenfeld, Brockner, & Thibault, 2000). Employ- affected by layoffs. ees appear to be particularly attentive to the attitude of their supervisors for cues about how to interpret major events such as layoffs (Wiesenfeld et al., 2000). Managers who handle the process with sensitivity rather than with distancing behaviors can substantially reduce negative reactions from survivors and victims (Folger & Skarlicki, 1998). Similarly, managers who have knowledge about, or a sense of control over, the decisions and who do not fear for their own jobs may reduce feelings of helplessness and insecurity among the remaining workforce (DeWitt et al., 2003). Research on managerial reactions to large-scale layoffs is limited and has tended to compare managers responses to those of other surviving employees in the organization. Generally, results indicate that managers or supervisors are less affected by layoffs. They remain more committed to the organization, are more likely to see the reasons for the layoffs as fair, and tend to be less worried about job security (Armstrong- Stassen, 1993; Luthans & Sommer, 1999). Explanations for why managers are less affected by these negative outcomes include the greater involvement and access to information that managers have about the reasons for, and the process of, layoffs. Nevertheless, longitudinal studies report declines in levels of organizational commitment and in job performance among managers who operate in a downsizing environment (Armstrong-Stassen, 1998). What is missing in the literature is a body of research that examines systematically and empirically the attitudinal and health effects on managers who act as implementers or executioners of the layoff decision (Kets de Vries & Balazs, 1997). The study by Kets de Vries and Balazs (1997) is one of the few to explore the various ways executives cope with the considerable amount of distress caused by making and implementing layoff decisions. Using open-ended, clinical interviews with 80 executives from large multinational companies, Kets de Vries and Balazs noted a range of reactions to layoffs among the executives, from seemingly welladjusted to manifestations of dissociation, depression, insomnia, and a diminished ability to feel. Executives also showed signs of role conflict and role ambiguity as they tried to reconcile their role as builder of the organization and protector of employees to their role of executioner. The guilt and inner conflict created often resulted in burnout and a sense of failure, particularly in situations with repeated layoffs (Kets de Vries & Balazs, 1997). Given the saliency and importance of layoffs for both managers and workers, we believe the effects on managers of implementing layoffs is deserving of research attention. We have two aims in this article. First, using data collected from a large sample of managers, we examine whether implementing layoffs is associated with two distinct categories of outcomes: well-being and work-related withdrawal. Recent work suggests that job stressors may result not only in a variety of strains, such as exhaustion and health problems, but also in withdrawal, as indicated by turnover intentions, cynicism, and depersonalization (Taris, Schreurs, & Van Iersel-Van Silfhout, 2001). A secondary purpose is to identify pathways through which the implementation of layoffs produce their

3 Managers Reactions to Implementing Layoffs 161 negative effects, as well as the conditions or circumstances that might exacerbate or ameliorate these effects. As we will describe in detail, laying off employees in many large companies is rarely a quick, one-step process. Rather, it involves a series of steps that can span several months. To distinguish managers who have implemented layoffs from those who have not, we focus on a single step in the layoff process those managers who have handed out warn notices to employees. Mandated by the Worker Adjustment and Retraining Notification Act of 1988 (Addison, 1994), warn notices give targeted employees 60 days advance notice that they probably will be laid off. According to managers we interviewed, this is the most uncomfortable step in the layoff process. We therefore treat this event as a proxy for several difficult decisions and steps managers must take over the course of several months. In actuality, nearly all managers (94%) in the sample who handed out warn notices also delivered termination notices to the targeted employees. The Layoff Process The process of implementing layoffs is multifaceted and extends over a period of months in the company we studied. Senior management makes strategic decisions about the size and timing of the layoffs. Specific percentage targets for cuts in the salaried labor force are provided to various committees that correspond to particular functional areas in the organization. Managers in these committees debate and negotiate the relative importance of particular skill sets the company needs to retain. Assessments of the skills of particular individuals are made primarily by front-line supervisors, who after extensive discussion with other managers in these committee meetings, give each nonhourly employee a grade of A, B, or C. Following these committee meetings, each front-line supervisor informs his or her employees of the resulting grade in a face-toface meeting. Employees receiving a C grade are designated surplus and are the ones most likely to be laid off in a downsizing. Those receiving a B grade may also be vulnerable to layoffs depending on the level of workforce reduction stipulated by upper management. Through this process, frontline managers ultimately select those who will be targeted for layoffs. Hourly production workers, on the other hand, are covered by a union contract that requires layoffs to be conducted according to seniority, with more junior employees being the first to be let go. This hierarchy holds Layoffs tend to even if, as some managers we interviewed claimed, the junior em- result in deleterious ployees were more competent or psychological and skilled than workers with more seniority. Workers with high seniority in positions targeted for physical health outcomes for elimination can transfer to other positions in the organization and employees who lose bump others out of those positions. Nevertheless, while supervisors of hourly production em- their jobs and for ployees are not personally the survivors who responsible for selecting persons remain employed for layoffs, they, like supervisors of salaried personnel, are the ones after downsizing. who distribute warn notices to those targeted for layoffs. 1 Our interviews indicate that warn notices and the follow-up termination notices are delivered in face-to-face meetings between front-line supervisors and their staff, although the nature and length of these meetings can vary substantially as determined by individual managers. Interviews with managers who supervised salaried or hourly workers revealed that they found the entire layoff process to be drawn out and stressful. The Effects of Implementing Layoffs on Well-Being Layoffs tend to result in deleterious psychological and physical health outcomes for employees who lose their jobs (Ferrie, 1997; Iversen & Sabroe, 1988) and for the survivors who remain employed after downsizing (Ferrie, Shipley, Marmot, Stansfeld, & Smith, 1998a, 1998b; Vahtera, Kivimaki, &

4 162 HUMAN RESOURCE MANAGEMENT, Summer 2006 Pentti, 1997). Research has consistently identified job insecurity that is the feeling that one s job is at risk or that one is likely to face job loss as a key pathway between layoffs and various well-being outcomes among layoff survivors (Wilkinson, 1996). Witnessing the layoffs of coworkers and work friends is likely to increase feelings of uncertainty and insecurity regarding one s own employment status. This job insecurity has been linked to increases in self-reported psychological and physical health problems, as well as to reports of disturbed sleep and a deterioration in some physiological indices of health (Ferrie Our contention in et al., 1998a, 1998b; Grunberg, this article is that Moore, & Greenberg, 2001). Increasingly, managers, along with managers who other white-collar workers, are implement layoffs subject to layoffs and are therefore likely to experience heightened feelings of uncertainty and are more likely to feel job insecurity insecurity (King, 2000). Although the pathways that link feelings of because they have job insecurity to health are not fully understood, recent research direct, firsthand indicates that this relationship may be mediated by decreased familiarity with the feelings of optimism and job satisfaction, heightened states of process. vigilance, and increased anxiety over future financial security (Ferrie, Shipley, Newman, Stansfeld, & Marmot, 2005). Our contention in this article is that managers who implement layoffs are more likely to feel job insecurity because they have direct, firsthand familiarity with the process. We base this view on the availability hypothesis, which contends that the ease of calling to mind critical events increases the likelihood of believing such events are more probable (Tversky & Kahneman, 1982). Thus we believe that implementing layoffs, because these are highly salient events and salience is a condition that increases availability could increase managerial belief in the likelihood of their own layoff. In organizations where managers are also potential layoff targets, as was the case in the company under study, being so close to the process is likely to generate additional feelings of uncertainty and insecurity. Following this line of thought, we expect to find that job insecurity will mediate the relationship between implementing layoffs (as measured by our proxy variable of handing out warn notices) and personal well-being. Mass layoffs do more than heighten feelings of insecurity and uncertainty. They also seem to disturb and disrupt existing workbased social relationships (Shah, 2000). Employees who see coworkers and friends laid off may experience symptoms of psychological distress such as guilt or depression (Grunberg et al., 2001; Noer, 1993). Managers who implement layoff decisions are essentially the agents who create these interpersonal and social disruptions, and we thus expect to find heightened levels of psychological distress among them. Symptoms of such distress may be manifested in several ways, including reports of greater levels of role conflict and burnout (Kets de Vries & Balazs, 1997). Burnout is particularly salient in this context, as the concept was developed specifically to address the stress that results from doing the people work that inevitably accompanies intensive interactions with others (Maslach, 2001; Maslach & Jackson, 1981). It is thus seen as an outcome produced by social interactions that tax the emotional resources of the employee (Grandey, 2000), rather than an outcome produced by organizational or task characteristics (Dormann & Zapf, 2004). Implementing layoffs often requires repeated interactions with employees in highly charged emotional circumstances and is likely to place significant emotional demands on managers as they navigate through the long, step-by-step layoff process. These emotional pressures may become particularly acute if they have to lay off individuals they have nurtured or with whom they have worked closely. Moreover, one would expect emotional demands to increase when managers are required to engage in multiple or repeated layoff events; that is, we assume there will be a cumulative effect from multiple exposures to this

5 Managers Reactions to Implementing Layoffs 163 acutely stressful event (Kalimo, Taris, & Schaufeli, 2003; van der Ploeg, Dorresteijn, & Kleber, 2003). Coping with such stressful events and their attendant emotional demands (especially if they are chronic) can lead to emotional exhaustion, the central dimension of the burnout construct (Maslach, 2001). Some suggestive evidence indicates that emotional exhaustion may be related to adverse health outcomes such as cardiovascular risk factors (Melamed, Kushnir, & Shirom, 1992), elevated levels of cholesterol and triglycerides (Shirom, Westman, Shamai, & Carel, 1997), and a variety of health-related problems such as headaches, gastrointestinal disturbances, and chest pains (Cordes & Dougherty, 1993). Based on the above discussion we propose the following hypotheses: Hypothesis 1a: Increased involvement in handing out warn notices will be associated with a greater number of symptoms of poor health, more visits to seek treatment for these symptoms, and more sleep problems. Hypothesis 1b: Job security will mediate the relationship between handing out warns and the number of symptoms of poor health, visits to seek treatment for those symptoms, and sleep problems. Hypothesis 1c: Emotional exhaustion will mediate the relationship between handing out warns and the number of symptoms of poor health, visits to seek treatment for those symptoms, and sleep problems. The Effect on Withdrawal Behaviors In addition to possible associations with the personal well-being of managers, implementing layoffs also may be associated with changes in managerial attitudes in ways that negatively impact postlayoff organizational performance. We will explore the effects on two important work-related outcomes: intention to leave the organization and the development of cynicism or depersonalization toward coworkers. Ideally, what organizations need during and after the disruption caused by downsizing is a workforce that is dedicated, committed, and willing to go the extra mile to achieve company goals. Managers, because of their linchpin role in the organization, In addition to can set an example and a tone to their subordinates by how supportive they are of the organiza- possible tion s policies and by the kind of associations with organizational attitudes and behavior they model. Managers the personal wellbeing of managers, who develop attitudes that reflect various forms of emotional and cognitive distancing or implementing layoffs withdrawal by, for example, expressing a desire to leave the or- also may be ganization or by increased cynicism toward others, send a associated with powerful set of negative signals changes in to subordinates that may damage company morale and per- managerial attitudes formance. in ways that Some evidence shows that large-scale layoffs affect several negatively impact organizational attitudes of managerial and nonmanagerial survivors such as commitment, postlayoff organizational trust, job satisfaction, and morale (Grunberg, Anderson- performance. Connolly, & Greenberg, 2000; Sadri, 1996; Tombaugh & White, 1990). However, we know very little about whether implementing layoffs produces any additional negative effects on managers attitudes toward the organization and their coworkers. There are a number of reasons to anticipate an increase in intent to quit and higher levels of cynicism or depersonalization among managers who distribute warn notices to employees. In the present study, we focus on only two such reasons namely, the potential mediating roles of job security and emotional exhaustion. First, as we have argued above, distributing warn notices should decrease a manager s own sense of job security. Job insecurity has generally been found to increase withdrawal intentions (Barling & Kelloway, 1996), as well as actual withdrawal behaviors such as employee turnover (Ashford,

6 164 HUMAN RESOURCE MANAGEMENT, Summer 2006 Lee, & Bobko, 1989; Davy, Kinicki, & Scheck, 1991). We therefore can expect managers with heightened levels of job insecurity to express greater turnover intentions, and for some to begin searching for new positions with other companies; they may feel a sense of urgency to get out while they can. Furthermore, increased uncertainty and anxiety about one s own position and prospects may result in a greater preoccupation with oneself and a more detached attitude toward the needs and concern of their coworkers. Managers may no longer wish to invest cognitive and emotional energy into an organization where they Our contribution is perceive comparatively little future benefit from doing so. to focus on a A second possible reason is potentially important based on the extreme distress and emotional exhaustion that occupational implementing layoffs may produce. Researchers have noted stressor that has that one kind of response to such job-related psychological distress hitherto received is to engage in withdrawal behaviors (Leiter & Maslach, 1988). little attention in the One manifestation of such withdrawal behavior is to distance scholarly literature. oneself psychologically from the source of the distress. The research on burnout has established a clear sequential link from exhaustion to emotional and cognitive distancing, often referred to as depersonalization or cynicism (Maslach, 2001). In the case of managers who implement layoffs, associated behaviors may involve becoming more callous toward and more detached from those targeted for layoffs, perhaps as a way to cope with the stress and minimize the emotional impact (Cordes & Dougherty, 1993). A recent study based on interviews with 40 downsizing agents finds that carrying out a downsizing produces cognitive, emotional, and physical distancing responses among these agents. By becoming dispassionate actors, downsizing agents are better able to deal with the emotionally charged situations in which they find themselves (Clair & Dufresne, 2004). Another manifestation of withdrawal in such circumstances is for managers to distance themselves psychologically from the organization that is ultimately responsible for putting them in this stressful situation. Evidence of such feelings would include a greater desire to leave the organization. Research has found indications that burnout negatively influences employee job performance and encourages various forms of job withdrawal such as absenteeism, turnover intentions, and actual turnover (Lee & Ashforth, 1996; Maslach, 2001). Our research will examine whether similar outcomes, including evidence of emotional distancing and depersonalization, are found in the managerial ranks. Hypothesis 2a. Handing out warns will be associated with a greater intention to quit the organization and with higher levels of depersonalization/cynicism toward coworkers. Hypothesis 2b. Job security will mediate the relationship between handing out warn notices and intent to quit and depersonalization/ cynicism. Hypothesis 2c. Emotional exhaustion will mediate the relationship between handing out warn notices and intent to quit and depersonalization/cynicism. In summary, we propose a model wherein a potentially acute occupational stressor (i.e., implementing layoffs) is associated with unhealthy or aversive psychological states (e.g., emotional exhaustion), which are, in turn, linked to poor well-being (e.g. symptoms of health problems) and organizational outcomes (e.g., intent to quit). This conceptualization of the layoff process is in the tradition of many studies that link occupational stressors to strains by examining the impact of work stressors on the psychological and physical health of employees as well as on their attitudes toward the organization (Cooper & Payne, 1988). Our contribution is to focus on a potentially important occupational stressor that has hitherto received little attention in the scholarly literature.

7 Managers Reactions to Implementing Layoffs 165 Method Background This study forms part of a larger, long-term research project designed to study the effects of corporate restructuring, including layoffs and reengineering. The sample used in the larger study includes a wide variety of individuals employed by a division of a large manufacturing company located in the western United States. The division, and the company of which it is part, produce high-technology products that require sophisticated design, engineering, and manufacturing processes. The company s employment has fluctuated between 150,000 to 200,000 employees over the past decade, with the division s employment ranging from around 60,000 to 120,000. The industry in which the division operates is marked by sizeable fluctuations in demand and by intense competitive rivalry. Employees in the division have experienced two major episodes of layoffs and rehiring in the period 1995 to 2000, with workforce contractions of 25 to 30% soon followed by similar-sized expansions. The most recent episode of layoffs occurred in 2002 and 2003 and affected 35% of the workforce (close to 35,000 persons). This latest downsizing is considered to be more permanent, as the division and the company adjust to market realities and the introduction of significant new labor-saving processes. Data for the larger study were collected by individual interviews, focus groups, and mailed questionnaires. The data reported in this article include comments made by managers in interviews conducted during early 2003 plus comments provided in response to a Wave 3 questionnaire mailed out in late spring (Previous waves occurred in 1997 and in late , but managers were not asked whether they had personally implemented layoffs in the first two waves, so data from these surveys are not analyzed in this study.) The analyses, therefore, are based on cross-sectional data. Participants Participants in this study were a selected subgroup of 520 of 1,119 managers who responded to the Wave 3 survey (46% response rate). 2 From the 520 managers who responded at Time 3, we excluded 78 seniorlevel managers in order to eliminate some potential sources of variation that might have affected the outcome variables. For example, senior managers, because they supervise large numbers of employees (on average, over 100 employees), are less likely to develop close relationships with their more numerous subordinates than do lowerlevel managers. To eliminate another possible confounding factor, we excluded 32 managers who themselves had received a warn notice in the period. The final sample of 410 managers was thus quite homogeneous, 3 consisting of front-line supervisors who had not themselves received a warn notice in this four-year period. The mean age of these supervisors was 48 years (SD = 6.78), 39% of them were women, 4 82% were married, and the average length of service at the company was 22 years (with none having served less than five years). Procedure Employees in the division have experienced two major episodes of layoffs and rehiring in the period 1995 to 2000, with workforce contractions of 25 to 30% soon followed by similar-sized expansions. In preparation for the Wave 3 survey, we conducted two focus groups and 20 in-depth interviews (15 of which were with managers). The focus groups lasted about two hours and were primarily designed to ensure that our survey instrument was comprehensible and did not exclude issues that were important to employees. Interviews explored the feelings managers and other employees had about the downsizing and restructuring, focusing particularly on how respondents coped with the workplace changes. Prior to mailing the questionnaire, we informed potential respondents by letter that

8 166 HUMAN RESOURCE MANAGEMENT, Summer 2006 we were academic researchers studying the effects of corporate restructuring on employee attitudes and well-being. We made it quite clear that although the company had provided us with their names and addresses, we were completely independent of the company both in terms of our funding and as regards the design, content, and analysis of the study. We also explained that results of the study would be made available to them, the company, and to the general public in aggregate form or with no individual identifiers. Employees were promised $35 for returned completed questionnaires. Two postcard reminders and an additional mailed questionnaire were sent to nonrespondents in an effort to increase the response rate. Measures Three questions In addition to a number of demographic questions, measures used assessed the degree in this study include scales to which employees adapted from those found in the literature along with items developed especially for this study. The were worried about variables analyzed in this article their job security for are described in the paragraphs three different time that follow, and scale and itemlevel descriptive statistics as well frames: over the past as the intercorrelations among the variables are reported on the diagonal in Table I. As can be seen two years, currently, and in the future. from the table, the alphas for the scales are adequate, ranging from.75 to.88. The two measures of health are in the mid-.60 range, probably due to the heterogeneous item content of the two indices. Unless otherwise noted, responses were made using a fivepoint Likert format, with higher scores reflecting greater levels of the named construct. Handing Out Warn Notices Managers were asked whether they had handed out a warn notice in each of the four years from 2000 to From these responses, we created a warn-experience variable measuring the number of years a manager had issued such notices (possible range: 0 4). This variable is distributed thus: 24% of managers never issued a warn notice, 26% issued notices in one year, 24% issued them in two years, 15% had done so in three years, and only 12% in all four years. Job Security Three questions assessed the degree to which employees were worried about their job security for three different time frames: over the past two years, currently, and in the future (Armstrong-Stassen, 1993). Participants indicated their response using a four-point scale anchored from extremely worried to not worried at all (possible range: 3 12), with higher values reflecting more job security. Burnout Using two dimensions of Maslach, Jackson, and Leiter s (1997) burnout scale, we assessed emotional exhaustion by asking respondents to indicate their level of agreement with three statements, such as I feel emotionally drained from my work and I feel burned out from my work. Depersonalization/cynicism, a form of withdrawal from coworkers, was measured by asking respondents whether they agreed or disagreed with three statements, such as I feel like I treat some people at work as if they were impersonal objects and I ve become more callous toward people at work. The possible range for both dimensions is Health Problems Two indicators were used to measure health problems. Using a yes or no response format, participants indicated whether in the past year they had experienced each of the following ten physical symptoms: (1) back pain, (2) headaches, (3) heart problems, (4) high blood pressure, (5) ulcers, (6) indigestion, (7) trouble sleeping, (8) heart pounding, (9) dizziness, and (10) tiredness and fatigue (modified from Moos, Cronkite, Finney, & Billings, 1986, and from Quinn & Staines, 1977). The yes responses were summed to arrive at a total score (possible range: 0 10).

9 Managers Reactions to Implementing Layoffs 167 Treatment for Health Problems Using a yes or no format, respondents were asked whether in the past year they had sought any form of treatment for each of the ten health conditions mentioned above (possible range: 0 10). Sleep Problems Respondents were asked how often, using a five-point format from never to every day, they experienced problems such as waking up repeatedly or prematurely or having difficulty falling asleep (Akerstedt et al., 2002; possible range: 4 20). Intent to Quit Three items measured the degree to which employees thought about quitting their job or looking for a new job in the next year (Cammann, Fichman, Jenkins, & Klesh, 1983; possible range: 3 15). Data Analysis and Results We controlled for age, gender, and whether the manager was married or living with a partner because previous research (Maslach, 2001) and our data showed them to be correlated with the outcome variables (see Table I). To test for direct and indirect effects (i.e., mediation) among the variables, we employed hierarchical multiple regression. First, we entered the demographic variables, followed by the proxy variable indicating managerial involvement in implementing layoffs. Any significant effects from handing out warn notices to the well-being (i.e., health problems, seeking treatment, and sleep problems) and to the withdrawal variables (i.e., intent to quit and depersonalization) were interpreted as evidence for the existence of direct effects (i.e., Hypotheses 1a and 2a). To test the four mediation hypotheses (1b and 1c and 2b and 2c), we followed the additional steps recommended by Baron and Kenny (1986). This involved first regressing TABLE I Means, Standard Deviations, and Intercorrelations Between Variables Mean SD Age na 2. Married/Partner 86% = yes.01 na (0 = no, 1 = yes) 3. Gender 61%= male.20*.17 na (1= male, 2= female) 4. Number Yrs Gave na Warn in Job Security * (.83) 6. Burnout *.38* (.88) Emotional Ex. 7. Health Problems *.15*.25*.50* (.68) 8. Seek Treatment * *.12*.27*.55* (.66) 9. Sleep Problems *.11*.07.17*.27*.49*.57*.43* (.88) 10. Intent to Quit * *.40*.24*.18*.19* (.81) 11. Depersonalization/ *.07.12*.28*.44*.25*.13*.26*.29* (.84) Cynicism Note. Internal consistency reliability estimates are in parentheses along the main diagonal. * p <.05

10 168 HUMAN RESOURCE MANAGEMENT, Summer 2006 the mediating variables on giving warn notices to ensure there was a significant linkage between the predictor and mediating variable(s). Second, we examined whether the mediators, when added to handing out warn notices, had significant effects on the outcome variables. If the direct effects between handing out warn notices and the outcome variables were reduced or eliminated with the addition of the mediating variables, we interpreted this as an indication of the existence of partial or complete mediation, respectively. Following recommendations by Shrout and Bolger In the case of sleep (2002), we also tested for the significance and relative strength of problems, job indirect effects after establishing that there was no evidence of security and suppression (i.e., that none of the emotional signs for the unmediated direct effects were opposite those of the exhaustion each indirect paths via the mediators). Evidence for Hypotheses 1a reduce the beta and 2a is found in the first column of each dependent measure in estimates for Table II, where we see that giving handing out warn warn notices predicted modest but significant increases in health notices but do not problems (beta =.135, p <.05), in seeking treatment for these health eliminate its problems (beta =.184, p <.05), significance. and in reported sleeping problems (beta =.164, p <.05). Handing out warn notices also predicted small and significant increases on managers intent to quit (beta =.099, p <.05) and in increased feelings of depersonalization/ cynicism (beta =.125, p <.05). Thus, the hypotheses linking warning activity to individual health and withdrawal behaviors were supported. To establish the mediating roles of job security and emotional exhaustion, we first regressed these two variables on handing out warn notices. Each was independently predicted by warnings: beta =.195, (p <.05) and.137 (p <.05) for job security and emotional exhaustion, respectively. These results suggest that giving warns is associated with increased self-reports of emotional exhaustion and decreased reports of job security. Next, we established that the relationships between mediators and outcomes are significant over and above the outcome s relationship with warns. See the second and third columns in Table II for each dependent variable. The results show the beta estimates and variance explained when adding emotional exhaustion and job security (in separate regression equations) after the demographic controls and the warn experience variable. Examining the beta weights, we find evidence of quite strong independent effects for emotional exhaustion on the three health-related outcomes and on the two withdrawal behaviors. Substituting the job security measure for emotional exhaustion, we find evidence of smaller independent effects on health and sleep problems, depersonalization/cynicism, and intent to quit, but not on seeking treatment for health problems. Turning to the mediation hypotheses for the three health outcomes (Hypothesis 1b and 1c), we see that job security and emotional exhaustion fully mediate the warn experience-to-health problems relationship, as indicated by the fact that the betas become statistically nonsignificant when controlling for the mediator. In the case of sleep problems, job security and emotional exhaustion each reduce the beta estimates for handing out warn notices but do not eliminate its significance, indicating partial mediation for both variables. For seeking treatment, emotional exhaustion partially mediates the relationship between handing out warn notices and this outcome variable. However, mediation for security is not supported because of a lack of a relationship between job security and seeking treatment. The total variance explained in health problems (26.6%), seeking treatment (10.8%), and sleep problems (26.2%) was greater when emotional exhaustion was used to mediate the relationship than when job security was entered into the equation (9.2%, 5.4% and 10.7% for health problems, seeking treatment, and sleep problems, respectively). We next examined the possible mediating role of emotional exhaustion and job security in the relationship between handing

11 Managers Reactions to Implementing Layoffs 169 TABLE II Beta Weights, Standard Errors, and Adjusted R2 for Health and Work Outcomes Health Problems Seek Treatment w/o w/ Both w/o w/ Both Mediators w/ EE w/ Security Mediators Mediators w/ EE w/ Security Mediators Block 1 Age.072 (.02).069 (.01).088 (.01).073 (.01).139 (.01)*.137 (.01)*. 145 (.01)*.137 (.01)* Married/Partner.023 (.31).008 (.27).013 (.30).009 (.27).051 (.22).035 (.21).047 (.22).035 (.21) (0 = no, 1 = yes) Gender (1 = male,.166 (.22)*.139 (.20)*.164 (.22)*.140 (.20)*.004 (.16).019 (.15).005 (.16).019 (.16) 2 = female) Adjusted R Block 2 Gave Warn in.135 (.08)*.078 (.07).092 (.08).070 (.07).184 (.06)*.151 (.06)*.166 (.06)*.151 (.06)* Adjusted R Block 3 Emotional Exhaustion.476 (.03) *.457 (.03)*.253 (.02)*.253 (.03) * Job Security.231 (.05)*.054 (.04).094 (.03).002 (.04) Adjusted R Sleep Problems Depersonalization/Cynicism w/o w/ Both w/o w/ Both Mediators w/ EE w/ Security Mediators Mediators w/ EE w/ Security Mediators Block 1 Age.130 (.03)*.124 (.03)*.148 (.03)*.131 (.03)*.013 (.02).008 (.02).031 (.02).017 (.02) Married/Partner.091 (.57).065 (.50).083 (.55).064 (.50).147 (.39)*.121 (.35)*.136 (.38)*.119 (.35)* (0 = no, 1 = yes) Gender (1 = male,.065 (.41).038 (.37).065 (.40).040 (.36).102 (.28)*.129 (.26)*.105 (.27)*.127 (.25)* 2 = female) Adjusted R Block 2 Gave Warn in.164 (.15)*.107 (.13)*.113 (.15)*.093 (.13)*.125 (.10)*.071 (.09).072 (.10).052 (.09) Adjusted R Block 3 Emotional Exhaustion.466 (.06)*.435 (.06)*.428 (.04)*.384 (.04)* Job Security.252 (.08) *.087 (.08).269 (.06)*.122 (.06)* Adjusted R Intent to Quit w/o w/ Both Mediators w/ EE w/ Security Mediators Block 1 Age.138 (.02)*.139 (.02)*.109 (.02)*.117 (.02)* Married/Partner.082 (.47)*.057 (.44)*.066 (.43)*.051 (.42)* (0 = no, 1 = yes) Gender (1 = male,.119 (.35)*.144 (.32)*.120 (.32)*.139 (.30)* 2 = female) Adjusted R Block 2 Gave Warn in.099 (.12)*.045 (.12).020 (.12).001 (.11) Adjusted R Block 3 Emotional Exhaustion.403 (.05)*.297 (.05) * Job Security.404 (.07) *.299 (.07) * Adjusted R Note: EE = emotional exhaustion. * p <.05.

12 170 HUMAN RESOURCE MANAGEMENT, Summer 2006 out and each of intent to quit and depersonalization/cynicism (Hypotheses 2b and 2c). We note that both variables each fully mediate these relationships, as the beta estimates for warn experience become nonsignificant when adding either emotional exhaustion or job security to the third block. Variance explained by intent to quit and depersonalization/cynicism was slightly higher when emotional exhaustion, rather than job security, was entered in Block 3 (18.6% versus 18.4% for intent to quit and 21.1% versus 10% for depersonalization/cynicism). As already noted, to assess the relative size of the direct and indirect effects, we followed the recommendations of Shrout and Bolger (2002) and calculated the proportion of effect mediated by each indirect effect in each of the ten warn-outcome relationships. Table III summarizes the indirect effects (unstandardized coefficients), results of Sobel significance tests (Preacher & Leonardelli, 2001), and proportion of effect mediated per mediator (P m ). 5 Consistent with the above results, we see evidence of modest to strong mediation for all outcome variables except seeking treatment for health problems. In the latter case, partial mediation for emotional exhaustion is evidenced by the modest P m of 19% and the nonsignificant Sobel results. The very low P m of 10% for job security corroborates our initial findings of no job security mediation for the warn-seek treatment relationship. We also note that indirect effects for both mediators are relatively modest for the sleep problems outcome (39% for emotional exhaustion and 30% for job security), suggesting that the direct effects of warns account for a substantial amount of these relationships. The large proportion mediated by job security for the warn-intent to quit relationship (80%) indicates that this is the primary pathway by which giving warns affects turnover intention. Although not part of our mediating hypotheses, Table II also shows the results from adding emotional exhaustion and job security entered together in Block 3 (see last columns for each outcome variable). For the three health-related variables, there is evidence that giving warn notices has an indirect effect only through emotional exhaustion. Further, we note that there is little change in the amount of variance explained when the two mediators are added together, in comparison to just entering the emotional exhaustion measure alone. The pattern for intent to quit and depersonalization/cynicism is somewhat different. Entering the two mediators together increased the variance explained to 25.9% from 18.6% and to TABLE III Unstandardized Indirect Effects ( B), Sobel Test Results, and Proportion Mediated B Sobel -z p P M Emotional Exhaustion (EE) as Mediator Health Problems % Seek Treatment % Sleep Problems % Depersonalization/Cynicism % Intent to Quit % Job Security (Sec) as Mediator Health Problems % Seek Treatment % Sleep Problems % Depersonalization/Cynicism % Intent to Quit % Note: P M = proportion effect mediated; = unstandardized regression weights

13 Managers Reactions to Implementing Layoffs % from 21.1% for intent to quit and depersonalization/cynicism, respectively. Discussion Adding to the body of research that has demonstrated the deleterious effects of downsizing on victims and survivors, our findings illustrate that managers who implement the decision to lay off employees also experience modest increases in health problems. In the years we studied, none of these managers were targeted directly for layoffs. However, we found that the more managers were personally responsible for handing out warn notices to employees, regardless of their age, gender, and marital status, the more likely they were to report physical health problems, to seek treatment for these problems, and to complain of disturbed sleep than were managers who also worked in this downsizing organization but who did not give warn notices. These associations with reported health problems seem to work through increased feelings of emotional exhaustion and, to a lesser extent, through the increased insecurity these managers feel as a result of witnessing firsthand the fragility of their subordinates job security. These results provide some mixed and tentative support for the role that job insecurity plays in determining a variety of detrimental health consequences (Ferrie et al., 1998a, 1998b). They also support the insights generated by qualitative studies about the psychological distress and associated negative health effects that can result from implementing layoffs (Clair & Dufresne, 2004; Kets de Vries & Balazs, 1997). Managers who implemented layoffs told us in interviews about the experience being traumatic and the most difficult thing they ve ever done, and citing as examples of their distress a range of negative reactions such as sleepless nights, horrible sleep habits, stomach pains, getting shingles, feeling like an absolute wreck, and being constantly tired. Our data do not allow us to assess the precise contribution of different aspects of managers participation in the layoff process to their felt distress and reported poorer health. Specifically, whether the psychological and physical distress is associated mainly with managers feeling personally responsible for selecting particular employees for layoffs or whether it is primarily the consequence of delivering the bad news in face-to-face meetings is something we cannot disentangle at the present time. As noted earlier, our data unfortunately do not permit us to identify whether managers supervise salaried or These associations hourly employees. This limitation might have attenuated our findings, contributing to the small R 2 values for the warn experience variable because there is some with reported health problems seem to work through basis for expecting that the more personally responsible a manager is for selecting who is to be laid off, the worse the psychological effects will be (Wiesenfeld et al., 2000). Although Folger and Skarlicki (1998) failed to find support for this relationship in a role-playing experiment, it is clear that the company we studied has gone to great lengths to shield individual managers of salaried personnel from taking full responsibility for selecting employees for layoffs. They have instituted formal rules increased feelings of emotional exhaustion and, to a lesser extent, through the increased insecurity these managers feel as a result of witnessing firsthand and procedures in meetings the fragility of their where managers must negotiate and collectively agree on those who will be designated surplus and targeted for possible layoffs. subordinates job security. Such policies are likely to reduce the psychological burden on managers and their felt level of distress. Collectivizing the decision is one important way to diminish individual feelings of responsibility for the painful decisions taken. Making the layoff process as procedurally fair as possible is another potentially effective way to deflect some of the hostile or blaming attitudes that might emanate from subordinates and be directed at lower-level managers. Nevertheless, neither of these contextual factors is likely to completely insulate managers

14 172 HUMAN RESOURCE MANAGEMENT, Summer 2006 from the emotionally difficult consequences of implementing layoffs. As expected, we do find greater levels of withdrawal among managers who have delivered warn notices in the four-year period, as manifested by a greater desire to quit the organization. Moreover, this relationship is fully mediated by both feelings of job insecurity and emotional exhaustion. The strong mediating role of job insecurity in this relationship As expected, we do suggests that being involved in warning activity, even when it is find greater levels not directly targeted at oneself, of withdrawal heightens feelings of threat and uncertainty. In addition, such among managers feelings contribute to a desire to leave the organization and perhaps to search for a more secure who have delivered work environment. Operating in warn notices in the a downsizing environment, and four-year period, as more important, having firsthand familiarity with cases of layoffs manifested by a and their attendant emotional trauma, may magnify the perceived risk or threat of a similar greater desire to quit the occurrence happening to the managers who must implement organization. layoffs. Therefore, in addition to the health-related reactions, this insecurity might trigger a more considered response that contemplates leaving the company and looking for a new job. A similar kind of motivation might explain the mediating role of emotional exhaustion. Handing out warns, as we have stressed, is in reality a proxy for the sequence of difficult and potentially distressing events in the layoff process that often span several months. It is therefore entirely plausible that managers directly involved in this process are more likely to express a desire to leave the organization precisely so that they might escape from the intense emotional discomfort associated with implementing layoffs. These findings add supportive evidence to the role that emotional exhaustion seems to play in turnover intentions (Lee & Ashforth, 1996). Of course, whether managers act on their intentions and actually leave the company depends on several contextual factors, including the level of demand for their particular set of skills in the labor market. We also find evidence that implementing layoffs heightens feelings of depersonalization toward coworkers. These feelings are manifest through increased job insecurity and emotional exhaustion. In our interviews, several managers reported that they had become calloused or numb, that they did not want to get close to people until things stabilize, and that they wanted to tune out and shut down. These are classic manifestations of the depersonalization/cynicism component of burnout, and while it might help managers cope with the interpersonal strains produced by having to lay people off, it also may make it more difficult to engage fully with employees in work-related activities. In addition to investigating the full and partial mediating roles of emotional exhaustion and job security separately, we explored the combined effects of these variables in an effort to examine the pathways between warn experience and the outcome measures. When entered into the regression equation on the same step as emotional exhaustion, job security became nonsignificant for all three health-related outcomes. This is not the case for the two withdrawal outcomes, suggesting that the pathways leading from warning to health outcomes differ from those linking warning to withdrawal. One possible explanation for these differences may be found by considering the varied reactions to increased job insecurity. Job insecurity as a job stressor triggers psychological distress that leads to increased burnout. It also may lead to withdrawal behaviors by encouraging a cognitive reappraisal of job and career prospects along with a reassessment of the manager s relationship to the organization and to his or her work colleagues. On the other hand, job burnout is the depletion of emotional and physical resources, a state of psychological strain that

15 Managers Reactions to Implementing Layoffs 173 develops from stressors that exceed coping abilities (Cooper, Dewe, & O Driscoll, 2001). As noted, emotional exhaustion is linked to health-related outcomes (Cordes & Dougherty, 1993; Maslach, 2001). It is likely exacerbated by workplace stressors such as having to implement layoffs and feelings of job insecurity. Thus, its mediating role between both warning and health (as seen when entered individually in Block 3) and job insecurity and health (as seen when entered along with job security in Block 3) makes intuitive sense. Study Limitations Our study is subject to several limitations. First we acknowledge that we have not conducted a comprehensive examination of the many possible factors or conditions that might affect the relationship between implementing layoffs and health problems or withdrawal behavior. This is an important next step for research. Several potential moderating factors suggest themselves. Plausible arguments can be made that social support and procedural fairness act as buffers in the relationships between implementing layoffs and health and withdrawal outcomes. Leadership style might also moderate these relationships, although whether a more interactive and collaborative style, by increasing the closeness between manager and victim, might exacerbate or ease the pain (in the latter case by increasing the acceptance of the necessity of the decision among subordinates) is more difficult to establish a priori. Additionally, factors such as how personally responsible managers feel for the decision and how family or community members react to their role as executioners may also affect the severity of the effects. For example, family and friends who do not provide social support during this time of stress, and who perhaps even perceive these managers as hard-hearted and ruthless, may exacerbate any deleterious consequences. Alternatively, supportive reactions from superiors who see these managers as tough enough to carry out difficult but necessary policies, and thus worthy of increased status and perhaps future promotion, might ameliorate any negative outcomes of implementing layoffs. Thus, although we have not examined possible moderators nor all the possible health or attitudinal effects that might ensue from implementing layoffs in this article, Plausible arguments we believe we have identified can be made that several important mediating and social support and dependent variables that are likely to be incorporated into procedural fairness any future comprehensive modeling of the effects of implementing layoffs on managers. 6 relationships act as buffers in the Second, we acknowledge several methodological limitations between due to the fact that our study is cross-sectional and uses selfreport data from managers at implementing layoffs and health and only one company. For example, it is possible that some of the relationships between variables withdrawal may be due to response bias outcomes. caused by some characteristic of the individuals (e.g., negative affectivity) rather than by whether managers had laid off employees, though we also note that such self-report bias may not be as severe a problem as critics of self-report studies contend (Crampton & Wagner, 1994). 7 It is also possible that managers who had to hand out warn notices were working in departments that experienced more severe business conditions before the decision to reduce the workforce was taken. These conditions would create additional stressors for these managers, over and above those produced by having to implement layoffs. Another possible problem in interpreting the results is that asking managers to recall unpleasant layoff events may magnify the extent of psychological distress felt by raising the saliency of the event. In other words, it may be the case that respondents exaggerate the degree of emotional exhaustion they actually felt because they have been asked to recall painful lay-

16 174 HUMAN RESOURCE MANAGEMENT, Summer 2006 off events. Although this explanation is plausible, our questionnaire included over 200 questions, with items on layoffs placed at the beginning of the questionnaire and others that explored a wide array of events and conditions, including burnout and symptoms of poor health, placed toward the latter part of the questionnaire. This question As we show, implementing layoffs order should have helped to diminish any effect of priming. Finally, we acknowledge that can be personally caution must be used when generalizing the results of a study distressful, often resulting in increased reports of various health and based on only one company. We note, however, that the company faced many of the same external pressures that most large companies have recently faced and that it responded with restructuring policies (including sleep problems, even to the point of seeking treatment layoffs) widely pursued across American industry (Cappelli et al., 1997). Moreover, the company is a member of a large consortium comprising the leading for these problems. industrial companies in the United States that share information and advice on a wide array of human resource policies. These interchanges seem to produce similar policies and practices as the companies converge toward best practices. We therefore believe that our results may be cautiously generalized to other large companies, though only additional research on a larger sample of companies can determine the generalizability of our results. Conclusion This study is one of the few to examine empirically the effects of downsizing on those who must carry out the universally acknowledged unpleasant task of telling, and in many cases selecting, employees who are about to be laid off. As we show, implementing layoffs can be personally distressful, often resulting in increased reports of various health and sleep problems, even to the point of seeking treatment for these problems. It also seems to increase the desire among these managers to remove themselves from the distressful and uncertain situation, as indicated by the higher levels of intent to quit and depersonalization/cynicism that we find. Although issuing warn notices explained a small amount of variance in each of our outcome measures, we note that the effect may have been attenuated, given that all managers were part of this downsizing culture. All managers both those who did and those who did not issue warn notices were working in a downsizing environment where nearly all indices of health had declined during the course of this longitudinal study. Further, given the importance, frequency, and saliency of issuing warn notices to both managers and targeted workers, we believe that it is important to understand its contribution to the stress associated with the many changes and impacts associated with downsizing more generally. An important implication of our results is for organizations to consider providing assistance for the managers who implement layoff decisions. This support could include collectivizing the selection process (as did the company in this study) as much as possible, both to ensure due process and fairness and to attenuate the burden of such responsibility. Organizations could also provide suggestions on the most humane ways to deliver the bad news. It may even be wise for downsizing organizations to facilitate managerial support groups to enable managers to learn from the experiences of others and to express their distress to sympathetic others rather than to engage in various forms of distancing behaviors. 8 Acknowledgment This research was supported by Grant No. AA from the National Institute of Alcohol Abuse and Alcoholism of the National Institutes of Health. We thank Pat Sikora for her statistical help and two anonymous reviewers and the editor for their helpful comments.

17 Managers Reactions to Implementing Layoffs 175 LEON GRUNBERG teaches in the comparative sociology department and the international political economy program at the University of Puget Sound. His current research focuses on the political economy of corporate downsizing and restructuring as well as on the effects of these developments on the job attitudes, job performance, and wellbeing of employees. His recent publications, written with Sarah Moore and Edward Greenberg, include Surviving Layoffs: The Effects on Organizational Commitment and Job Performance in Work and Occupations (2000) and Differences in Psychological and Physical Health Among Layoff Survivors in the Journal of Occupational Health Psychology (2001). Grunberg has been Co-PI on three National Institute on Alcohol Abuse and Alcoholism-funded research projects. SARAH MOORE is an associate professor in the department of psychology at the University of Puget Sound, where she teaches statistics, research methods, psychological measurement, and industrial-organizational psychology. In the past five years, her research, in conjunction with Leon Grunberg and Ed Greenberg, has focused primarily on the effects of work-related stressors, such as layoffs, reengineering, and various job characteristics on employee health, work attitudes, and work performance. Recent coauthored articles include A Longitudinal Exploration of Alcohol Use and Problems Comparing Managerial and Nonmanagerial Men and Women (Addictive Behaviors, 2003) and Repeated Downsizing Contact: The Effects of Similar and Dissimilar Layoff Experiences on Work and Well- Being Outcomes (Journal of Occupational Health Psychology, 2004). EDWARD S. GREENBERG is a professor of political science and director of the Program on Political and Economic Change at the Institute of Behavioral Science at the University of Colorado at Boulder. He specializes in research on the state and the relationship between the workplace and political participation, job attitudes, job performance, and wellbeing. Among his recent publications are Industrial Work and Political Participation: Beyond Simple Spillover in Political Research Quarterly and The Struggle for Democracy. Notes 1. Unfortunately, we did not ask managers which type of employee, salaried or union, they supervised. 2. The 1,119 managers who were invited to participate included 138 who had participated in Waves 1 and 2 and 981 who were added at Wave 3 to increase the number of managers in the sample. Although we do not have the data to compare the full range of respondents (i.e., continuing respondents and those added at Wave 3) to nonrespondents, we can compare those in the sample who responded at Waves 2 and 3 to those who responded at Wave 2 but did not respond at Wave 3. There were no significant differences between the two groups on mean age (47 vs. 46), mean income (both in the $80 95,000 range), mean education (bachelor s degree), or mean tenure at the company (19 years). 3. Although narrowing the sample in this way does help increase our confidence that the associations we find are due to the warn variable, it also tends to restrict the variance and possibly attenuate the correlations that are found. 4. Women are overrepresented in the managerial group because we explicitly oversampled them in order to test gender-specific hypotheses in forthcoming articles. In actuality, women comprise approximately 22% of the overall workforce. 5. P m, or proportion of total effect accounted for by the indirect relationship, is calculated as (a * b)/c, where a is the direct path between the independent variable and mediator, b is the direct path between the mediator and outcome or dependent variable, and c is the direct path between the independent and outcome variable. Unstandardized path coefficients are used in the calculation.

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