‘Psst, We’re Losing our Jobs’

Employee downsizing has often been claimed as helping to improve firm performance and competitiveness. However, the results of many previous studies point to downsizing initiatives that have failed to achieve the expected results. Part of the explanation for such poor results relates to the formal and informal communication processes and the employee emotions that precipitate and accompany the change. For instance, downsizing might generate a range of negative employee social media responses that impact firm reputation. Unfortunately, prior research has largely neglected the often-encountered grapevine activity’s role during employee downsizing. Given rumor’s ability to impact negatively on firm downsizing, the paper’s aim is to theoretically emphasize the factors that precipitate employee attention to rumor before, during and after the downsizing process. In doing so, we develop a model of how individuals rely on rumor to appraise and make sense of their environment during layoffs. This paper extends and contributes insights into contingencies of employee downsizing, emotion, and informal communication. This knowledge will help organizational leaders in a more digital and hybrid world of work to respond better to salient employee issues during downsizing.