Relationship between downsizing and organisational performance: serial mediation effect of employee morale and tolerance to ambiguity

Abstract

The purpose of the study is to examine the impact of downsizing on organisational performance. The study adopts serial mediation analysis through employee morale and tolerance to the ambiguity between downsizing and organisational performance. It uses organisational support theory to establish the relationship among study variables. The data are collected from employees in the manufacturing unit using a questionnaire and analysed using structural equation modelling. The analysis found that downsizing positively impacted organisational performance and provided evidence that downsizing action, when viewed as affirmative action by employees, brings positive outcomes. The results emphasised the importance of employee morale and the need to create a culture of tolerance to ambiguity for achieving sustainable organisational performance. The study results added to the downsizing literature by establishing both its direct effect and indirect effect on organisational performance.