Impact of extent of reorganization on employee productivity and morale

Reorganization and downsizing of businesses and institutions have become a prominent and enduring feature of the American economy. The study of the impact of reorganizations on both those laid-off as well as the employees retained by the organization, i.e., survivors, is a relatively young but vigorous field of research in the academic literature. The majority of the research conducted into the impact of reorganization on employees has been conducted thus far in the for-profit private sector of the economy; relatively little has been conducted in the public sector, in particular with the federal government. One of the federal agencies most actively involved in reorganization recently has been the Veterans Health Administration (VHA). Responding in part to managed care, budgetary constraints, and changes in the veteran patient population (Kizer, Fonseca, & Long, 1997), the VHA has reorganized at national, regional, and local levels. Given the largely unknown nature of the affects of these changes on VHA employees and in recognition of the critical role that retained employees have in successful reorganizations (Brockner, 1992), the present study investigated the impacts of the reorganization of VHA medical facilities on retained employees.; Building on Lazarus and Folkman's relational model of stress (1984) and on existing reorganization literature, the following questions were examined: (a) what is the relationship of extent of reorganization with employee morale; (b) how do coping resources moderate the relationship of extent of reorganization with subjective interpretation of threat; and (c) how does subjective interpretation of threat mediate the relationship of extent of reorganization with morale? (Productivity was not assessed given a failure to validate the performance measure.) Using archival data from an existing March 1997 VA employee survey, alternative factors were proposed to explore the data from the stress and coping model perspective. Confirmatory factor analysis was used to establish the validity and reliability of the factors and structural equation modeling to test the proposed theoretical model and hypotheses. Support found for two of the study's five hypotheses suggests that coping resources are inversely related to subjective interpretation of threat, which in turn is inversely related to morale.