I'll also be drawing on another recent study that appeared in the recent edition of the august Academy of Management Journal (not the kind of thing that many practitioners would read; nor, it seems, do many academics, but this article has caused some interest since it was reviewed in last week's Economist). In the article, by Geoffrey Love and Mathew Kraatz on '...how and why downsizing affected corporate reputations' (AMJ, 2009, Vol 52, No. 2, 314-335 for those interested), the authors draw on three sources of literature to explain why an audience attributes positive and negative reputations and why these attributions may change over time.
The first is the corporate character explanation that explains why people value organizational personality traits such as trustworthiness and reliability (my colleague Gary Davies has written extensively about this). These traits essentially explain how and why firms can create differentiation and novel EVPs. The second explanation begins from a different place in that it explains why firms tend to become similar (for the initiated, institutional isomorphism). Audiences tend to value actions that show conformity to cultural norms - of society, industries, professions etc. The third is more basic, at least in its simplest version, and is rooted in exchange theory - people assign reputations based on the answer to the question: what does it do for me in relation to my material and emotional needs (and, as we argue, valued expectations of psychological contracts)?
One of the novel aspects of their study is that is was carried out on financial analysts' assignment of reputations and those of peer firm executives to a sample of Fortune 500 companies that had downsized over the period 1985-94. The conclusions were complex but to summarise:
- Downsizing resulted in a signifcant negative effect on reputational change, even among financial analysts,
- But only early on in the study time frame, because planned downsizing fitted well with the analysts' and executives' perceptions of legitimate actions, especially if it led to valued results for them.
- Thus, the conclusions the authors draw, is that it seems that violating commitments to employees and the community is more permissable when there is a 'clear and present danger', but that reputational assignment changes over time
These are US studies, and I've made the point on CVs blog that the Employment Protection legislation introduced in the UK many years ago when I had to deal with layoffs for real, more or less instiutionalised the notion of firms seeking to avoid layoffs asa first port of call and widespread consultation over alternatives to redundancy with staff. Nowadays, there is certainly current evidence of firms embodying spirit not just the letter of this legislation in the UK, which is contained in a recent CIPD survey on talent management and in article in People Management. But is this the norm, or do firms still privilege analysts' attributions of reputations in the long run, regardless of the clear and present danger?
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