October 31, 2011 Leave a comment
HBS Professor Teresa Amabile and psychologist Steve Kramer write on the HBR Blog Network how “knee-jerk downsizing” is a bad idea. The article responds to a recent WSJ article on how already lean companies are ready to cut even further to successfully ride out the hard economic times following the financial crisis. Based in established research, Amabile and Kramer point out that downsizing might not make the companies better off. For two reasons:
First, downsizing often leads to worse, not better, financial performance for firms […]
Second, downsizing can dramatically — and negatively — alter the work environment in the organization, diminishing the motivation and performance of remaining employees.
While these points are well taken, the more fundamental issue in business, as well as behind both these reasons, is mysteriously unnoticed. Granted, the article is about the psychological (negative) effects of downsizing rather than the phenomenon of downsizing per se. But it serves to illustrate a rather common oversight that is of more general interest to readers of this blog: the role of entrepreneurs and entrepreneurship within organizations. Read more of this post