The Impact of Downsizing to PR1MA Operation during Malaysia Government Changes

by Nurul Afifah Binti Nik Mahamood

February 2022

Abstract

This study broadly assesses the association of organizational downsizing to work conditions and employee outcomes, and the extent to which work conditions mediate the association of downsizing to employee outcomes, thereby serving as targets for workplace intervention to reduce the harmful effects of downsizing on surviving workers at PR1MA Corporation Malaysia. As workforce downsizing has grown more common in recent years, research on the topic has become more important.

After downsizing and organisational change, survivors and victims of downsizing and organisational change are enduring mental health concerns. Downsizing exposure was a predictor. Although downsizing is common in the United States and other countries, little research has been done on the relationship between downsizing and performance in these countries and others.

The issue of downsizing continues to be a source of discussion across the country and in the business community. The downsizing of businesses has become a widely accepted requirement for achieving a competitive advantage in the marketplace; yet, it has not been proven that downsizing actually increases profitability.

This study examines the relationship between downsizing and performance using comprehensive multi-year, multi-industry data, and it serves as a first step in understanding the phenomena of downsizing, which is increasing in both frequency and importance. The study makes use of multivariate analysis in order to include a large number of specific variables that have an impact on the economic performance of an organisation in the analysis. The influence of downsizing (as defined by a reduction in the number of employees) on both corporate and strategic business unit (SBU) performance is investigated while accounting for market conditions. Not only is the influence of downsizing on organisational profitability investigated, but also the impact of downsizing on market perceptions is investigated in this study, which employs both an accounting measure and a hybrid market/ accounting measure of performance.

The findings of the study reveal that, after accounting for other factors that influence organisational performance, downsizing has some detrimental and some good effects on SBU and corporate performance, and that these effects last only for a short period of time after being implemented. The anecdotal literature suggests that downsizing has some positive impacts; but there appear to be significant negative consequences to downsizing as well, as evidenced by the findings of this study.

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