International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 Volume 1, No. 2, November 2012 i-Xplore International Research Journal Consortium www.irjcjournals.org 6 An Impact of Rightsizing on Existing Employees’ Commitment and Morale: Study of Indian IT Companies Prof. Pallavi Chopade, Assistant Professor , Bharati Vidyapeeth University, Institute of Management and Entrepreneurship Development, Pune, India ABSTRACT The present study has two objectives: Firstly, to examine existing employees’(survivors’) perception towards rightsizing and secondly, to study the perceived impact of it on their commitment and morale based on sample data collected from IT professionals for one year period 2008- 2009. Regression analyses have been carried out taking employees’ perception towards rightsizing as independent variable and affective commitment, continuance commitment and employee morale as dependent variables. On the basis of the signs of regression coefficients rightsizing has positive and significant impact on employees’, particularly survivors’ commitment whereas negative impact on employee morale. Keywords: Rightsizing, organizational commitment, affective commitment, continuance commitment and employee morale 1. INTRODUCTION In the year 2009, workforce reduction by organizations has become a big news story around the business world. In one week itself, almost one million employees were reduced. These included workforce reduction at NEC (20,000), Pfizer (19,500), Metro (15,000), Boeing (10,000) and Sprint Nextel (8,000). According to estimation by outplacement firm Challenger, Gray & Christmas, workforce reduction in January totaled 241,749, up 45% from December and the peak monthly number in seven years. (Knowledge at Wharton) Business Today- Teamlease Employment Outlook conducted a survey from April to June 2009 quarter through 493 companies. Survey was spread across eight cities- Mumbai, Delhi, Bangalore, Kolkata, Chennai, Pune, Hyderabad and Ahmedabad and covered following sectors- Manufacturing and Engineering, Financial services, IT, ITES, Infrastructure, Retail, Media, FMCG, Telecom, Healthcare and Pharma. Survey results revealed that the net employment index (the difference between the percentage of respondents reporting on increase in hiring and those expecting a decline) was at the lowest ever, 24%, a drop of 10 index points from the last quarter and IT, ITES (Information technology enabled services) was worst hit. Indian IT companies have started to take up strict performance appraisal practices, trimming costs and improving productivity as they can fight with the global economic slowdown. Now days, organizations use several techniques in rightsizing which includes providing incentives to get early retirement and transfer to subsidiary organizations, but the most common practice is to simply terminate a definite number of people.Downsizing is the ‘conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness’ (Budros, 1999). Rightsizing is just euphemism for downsizing and it sounds better than downsizing. 2. OBJECTIVES OF THE STUDY In view of the foregoing discussion the set forth the following twin objectives for the present study. • To examine existing employees’ (survivors') perception towards organizational rightsizing in the context of Indian IT industry. • To study the perceived impact of organizational rightsizing on survivors’ affective commitment, continuance commitment, and morale. 3. LITERATURE SURVEY Organizational downsizing, nowadays rightsizing as a change management strategy has been adopted for more than two decades (Gandolfi, 2007). In the 1980s and early 1990s, it was implemented primarily by firms experiencing difficult economic times (Gandolfi, 2006). The main motive behind rightsizing efforts is the desire for an immediate reduction of costs and increased level of efficiency, productivity, profitability and competitiveness (Farrell and Mavondo, 2004). Firms have implemented rightsizing as a reactive response to organizational bankruptcy or recession and proactively as a human resource strategy (Ryan and Macky, 2004). Brett Luthans and Steven Sommer (1999) conducted research in health care organization (HCO) and comprehensively defined organizational downsizing as a set of actions, adopted on the part of the management of an organization and intended to improve organizational efficiency, productivity, and competitiveness. It shows a strategy implemented by managers that affects (a) the size