Organizational Change: the Effect on Employee Morale and Motivation

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Abstract
News of job losses (whether we label them as downsizing, layoffs, or restructuring) reaches us daily. And sometimes the reality hits close to home – loss of a job of a family member, a close friend, a valued coworker or someone you supervise. According to McKinley, Sanchez and Schick (1995), “This process of deliberate personnel reduction has been justified as a cost-cutting measure and as an incentive to increase productivity. However, evidence has shown that downsizing negatively affects employee morale and productivity.”

While people who lose their jobs can be strongly impacted by loss of financial security, fear for the future, and even decreased self-esteem, it’s important to recognize that people who survive job cuts face their own set of negative consequences. This group of “survivors” may experience stress as well as feelings of anxiety or depression.

This paper examines these issues by reviewing the numerous organizational and leadership changes that have taken place at WellPoint, Inc. within the last two years. In addition, a small sample of WellPoint associates was surveyed to assess the effects that the organizational restructuring and leadership changes have had on employee morale over the last two years. The results of that survey are presented in this paper. Introduction

What single change causes the most consternation in the work place? The announcement of job cutbacks. With all the recent staff reduction announcements, this news is all too familiar. With it comes the immediate negative effect on employee morale, both for the laid-off employees and the remaining staff. Emotional turmoil resulting from an event such as organizational change can leave lasting scars on individuals and organizations. Disruption of normal operation can be short-lived if normal feelings of grief, loss, fear, and even guilt and anger are allowed to be expressed when the organizational change is being announced and/or is occurring. However, if these feelings are not allowed expression, they may be manifested later in more serious and damaging forms such as increased illness; absenteeism and turnover; decreased productivity and morale; and disruption in communication among employees and between employees and managers (Abbasi and Hollman, 1998). This can lead to massive chaos and interruption in the smooth flow of work activities? Abbasi and Hollman. (1998) emphasize the following, “There has been a clear change in corporate philosophy among American firms in the past two decades. Firms which once perceived employees as long-term assets to be nurtured, developed, engaged, and empowered by management, now see them as commodities. Workers are short-term expendable costs to be jettisoned at a moment’s notice when downsizing. The steady drumbeat of layoffs in recent years has made many workers feel that the days of career security are gone for good, no matter how dedicated they may be.” K. Mishra, Spreitzer and A. MIshra (1998) support this idea with the following, “Downsizing has become almost a way of life for U.S. companies. In fact, a first round of downsizing is generally followed by a second round a short time later. Sixty-seven percent of firms that cut jobs in a given year do so again the following year.”

The outcome of these changes and the resulting impact on employees’ morale is discussed. This paper reviews literature that addresses corporate downsizing, what it is and why it is important. The literature review includes books and various articles.

To assess the effect that these changes have had on employee morale, a 15-question survey was given to a small sample of WellPoint associates to measure their current feelings that impact their self-confidence. The results of the survey are offered, along with an analysis of the data, including conclusions.

Literature Review
Current business literature supports the idea that although managers implement downsizing to enhance...
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