ORGANIZATIONAL VIRTUES AND ORGANIZATIONAL PERFORMANCE: RELATIONSHIPS AFTER DOWNSIZING Kim Cameron University of Michigan A Presentation for the Conference on Positive Organizational Scholarship 5-7 December 2001 Ann Arbor, Michigan THE PREVALENCE OF DOWNSIZING BEFORE 911. Almost all medium and large firms downsized in the last five years. More than 90 percent of firms downsized in the last five years. A large majority downsized more than once in the last ten years… Downsizing is not a one-time action. Approximately 62 percent of firms that downsized two years ago downsized again last year…
Downsizing is not motivated solely by bad economic news. Only 37 percent of firms downsized last year because of economic difficulties compared to 71 percent at the beginning of the 1990 s. Only five percent downsized because of decreased market demand… In one third of all U. S.
households, a family member lost a job. Nearly three quarters of all U. S. households had a close encounter with layoffs in the last decade. AFTER 911.
The number of layoffs has equaled the total of all previously announced layoffs for the year. 416, 000 lost jobs in September alone. RESULTS OF DOWNSIZING IN AMERICA. Fewer than half the companies that downsized between 1990 and 2000 had short or long-term profit increases… Fewer than a quarter reported increases in employee productivity, product and service quality, and shareholder value…
Three years after downsizing, the market share prices of downsized companies were an average of 26 percent below the share prices of their competitors… Among companies that downsized, those that laid off the fewest workers exhibited the largest return on assets… Almost all organizations that downsized-in the public sector and the private sector-experienced an emergence of the “dirty dozen” as a result of downsizing. THE dirty dozen Universal Consequences of Downsizing, Trauma, Crisis. Centralization. The Threat-Rigidity Response.
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Loss of Innovative ness. Decreasing Morale. Politicized Environment. Loss of Trust. Increased Conflict. Restricted Communication.
Lack of Teamwork. Loss of Loyalty. Scapegoating Leaders – Leadership Anemia. Short-term Perspective – Resistance to Change THE ABUNDANCE HYPOTHESIS A decade of downsizing research led to the supposition that organizations characterized by virtuous behavior would predict superior performance after downsizing.
Impressionistic data led to the presumption that indicators of performance such as employee satisfaction, productivity, quality, organizational innovation, and shareholder value would increase over time-and the dirty dozen would decrease-in organizations that fostered and facilitated the demonstration of organizational virtues. In fact, a few firms were observed that displayed “positive deviance,” that is, an affirmative exception to usual organizational behavior. They possessed characteristics that seemed to foster extraordinary value, remarkable performance, and high levels of excellence. Especially on the human dimension, they engendered virtuousness in relationships and in treatment of people. When they downsized they did so with caring and compassion.
When they recovered from crises they did so with maturity and wisdom. When they set strategy they tended to do good as well as do well. They were unusual in demonstrating a capability that led to long term success, even in the face of difficulty. THE ROLE OF VIRTUOUS ORGANIZATIONAL BEHAVIOR Long-term + Effectiveness Organizational – Virtuous + Commitment, Trauma (e. g. , Organizational Loyalty, downsizing) Behavior Retention – Short-term Effectiveness WHAT DO WE MEAN BY “VIRTUES?” The Relationships Between Virtues and Extraordinary PerformancePERSONALPhysical Health Illness Health Fitness Mental Health Abnormal Normal Thriving | | |ORGANIZATIONAL VIRTUES Effectiveness Ineffective Effective Excellent Efficiency Inefficient/Faulty Efficient/Reliable Flawless/Perfect Crises Chaos Coping Flourishing Relationships Harmful Helpful Loving Communication Secretive Honest and Open Honoring Ethics Unethical Ethical Goodness Recovery Punishment Tolerance Renewal Injury and Harm Retribution Justice Forgiveness SOME FUNCTIONS OF ORGANIZATIONAL VIRTUES.
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Organizational virtues create meaning, vision, and human connection (e. g. , they create clarity amidst uncertainty)… Organizational virtues build the foundation upon which alliances and productive relationships are formed-both individual and organizational (e.
g. , they foster well-developed social capital)… Organizational virtues foster attachments to the organization (e. g. , they foster loyalty and trust)…
Organizational virtues promote improved psychological and physical performance (e. g. , they foster positive biological and mental responses)… Organizational virtues help organizations heal and move past trauma, such as downsizing (e. g.
, they foster improved organizational effectiveness over time).
SURVEY OF VIRTUES IN ORGANIZATIONS Companies included in the preliminary analyses: CH 2 MHillCooper Lighting Dana Corporation Dix and Eaton General Electric Power SystemsHeidrick and StrugglesInvacareJo-Ann Stores National City BankOfficeMaxOglebay Norton Thompson Hine University of MichiganYMCARoadwayFinistarData being gathered from addition firms: Approximately 50 firms, mainly manufacturing organizations, studied 10 years ago in a study of organizational downsizing. PRELIMINARY ANALYSES OF SURVEYS DISCRIMINANT ANALYSES Above Average Performance versus Below Average Performance (Correlations with discriminant function) 1 2 3 4 5 6 7 8 Compassion and Caring 781 673 668 723 909 671 835 934 Overall Virtuousness 683 568 620 563 780 810 746 944 1 = Overall Performance 2 = Productivity Hope and Optimism 708 529 545 603 758 873 666 920 3 = Quality 4 = Profitability Integrity 722 516 454 721 732 563 715 831 5 = Customer Retention 6 = Innovation Forgiveness 505 288 274 503 678 579 837 564 7 = Employee Turnover 8 = Employee Complaints Humility 436 259 300 363 551 683 771 444 Centroid – Below Average -382 -417 -421 -451 -417 -217 +517 +481 Centroid – Above Average 417 240 308 348 329 201 -287 -188 Classification 100% 100% 100% 100% 100% 100% 100% 100%CONCLUSION: Organizations performing above the average demonstrate significantly more virtuousness than organizations that perform below the average. PRELIMINARY ANALYSES OF SURVEYS MULTIPLE REGRESSION ANALYSES Major Predictors of Organizational Outcomes (Significant regression weights) 1 2 3 4 5 6 7 8 Compassion and Caring. 21 Overall Virtuousness. 18 .
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23 1 = Overall Performance 2 = Productivity Hope and Optimism. 35 . 18 . 20 . 17 3 = Quality 4 = Profitability Integrity.
23 . 21 . 32 (-. 18) (-. 18) 5 = Customer Retention 6 = Innovation Forgiveness -. 24 -.
19 7 = Employee Turnover 8 = Employee Complaints Humility. 25 . 27 ANOVA F 105. 8 18. 9 30. 4 9.
4 22. 7 25. 1 6. 5 8. 9 (all significant at.
10 CONCLUSION: Different virtues tend to predict different outcomes. Hope and optimism predicts 4 outcomes. Integrity predicts 3 outcomes. Forgiveness, humility, and virtuousness predict 2 outcomes.
Compassion and caring predicts 1 outcome. (VERY) PRELIMINARY FINDINGS. Certain organizational virtues are predictive of high levels of organizational effectiveness, especially after the organization has encountered a trauma such as downsizing… Organizational virtuousness and “the dirty dozen” are significantly and negatively related…
No virtues significantly predict employee turnover or employee grievances and complaints (although taken as a set of virtues, virtuousness is predictive of both factors)… Puzzle: General organizational forgiveness tends to be negatively associated with quality and with customer retention. SOME KEY RESEARCH ISSUES. Virtues are considered to be intra-psychic and relevant only to individuals, not organizations or collectivities…
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It is difficult to recognize virtues when they are demonstrated in organizations, consequently, it is difficult to measure them… Virtues, by definition, represent inherent goodness. Consequently, to assess virtues empirically and endeavor to establish their relevance in organizations by associating them with an instrumental outcome is self-contradictory. That is, if no evidence emerges that instrumental outcomes are enhanced, the desirability of organizational virtues remains..
