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Organizational Restructuring: Impact on Trust and Work Satisfaction

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  • Grace Lee
  • Albert Teo

Abstract

After the Asian financial crisis, companies are now contending with the current global economic slowdown. Whether it is at the national, industry or organizational levels, restructuring has gained currency as a strategic decision to realign internal structure with changing macro environmental factors. Faced with more competitive markets and greater demands on costs controls, organizations and businesses are taking the fast track to cost-cutting by downsizing, reorganizing their divisions, streamlining their operations, and closing down unprofitable divisions. Changes that are introduced in an organizational restructuring will affect the socio-psychological well-being of organization members given the potential for uncertainty that may accompany such changes. There is a need to better understand the consequences of organizational restructuring and consider some of its potential side effects on the work environment. Employees in a post-restructuring context are understandably wary about the future direction of the organization and their roles within it. This study is an attempt to examine the social-psychological impact of organizational restructuring on trust and work satisfaction. Additionally the inter-relationships between trust and work satisfaction, including their antecedents in the work environment are examined. Trust and work satisfaction levels were tracked before and three months after organizational restructuring for varying types of changes that were initiated during the restructuring. Both trust and satisfaction with working in the organization declined significantly when compared to pre-restructuring levels. Independent t-tests analysis indicated that there was a significant decline in trust for the work group which had a newly hired manager and a change in work processes. Results showed that there was a negative relationship between both work satisfaction and trust with the extent of change required of employees. The findings also showed that there was a positive relationship between trust and work satisfaction and that trust contributed to work satisfaction. Perception of colleagues’ willingness to help solve job-related problems contributed significantly to strengthening of trust relations among colleagues. Additionally, colleagues and supervisor’s willingness to listen to employee problems contributed significantly to work satisfaction. Results of the study highlighted the need for strategic decision-makers to consider the social impact of organizational restructuring. Top managers must realize that both trust and work satisfaction are important ingredients for the effective functioning of an organization and to actively ensure that support systems or structures are adequate and available to mitigate the negative impact, particularly if the changes to be implemented are extensive. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Grace Lee & Albert Teo, 2005. "Organizational Restructuring: Impact on Trust and Work Satisfaction," Asia Pacific Journal of Management, Springer, vol. 22(1), pages 23-39, January.
    • Handle: RePEc:kap:asiapa:v:22:y:2005:i:1:p:23-39
    DOI: 10.1007/s10490-005-6416-6
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    References listed on IDEAS

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    1. Paul Hart & Carol Saunders, 1997. "Power and Trust: Critical Factors in the Adoption and Use of Electronic Data Interchange," Organization Science, INFORMS, vol. 8(1), pages 23-42, February.
    2. Tim G. Andrews, 2001. "Downsizing the Thai Subsidiary Corporation: A Case Analysis," Asia Pacific Business Review, Taylor & Francis Journals, vol. 8(2), pages 149-170, December.
    3. Carolyne Smart & Ilan Vertinsky, 1984. "Strategy and the environment: A study of corporate responses to crises," Strategic Management Journal, Wiley Blackwell, vol. 5(3), pages 199-213, July.
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    Cited by:

    1. Keishi Fujiyama & Makoto Kuroki, 2017. "Strategic Management Forecasts and Accounting Choices: A Case of Employee Downsizing in Japan," Discussion Paper Series DP2017-06, Research Institute for Economics & Business Administration, Kobe University, revised Sep 2017.
    2. Kłosowski Sławomir, 2012. "The application of organizational restructuring in enterprise strategic management process," Management, Sciendo, vol. 16(2), pages 54-62, December.
    3. Sovanjeet Mishra & Pavan Kumar, 2017. "Exploring The Nexus Between Psychological Contract And Turnover Intention: Conceptual Framework," Romanian Economic Business Review, Romanian-American University, vol. 12(1), pages 68-81, March.

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