Firms traditionally claim that they
downsize (i.e., make permanent
personnel cuts) for economic reasons,
Line laying off supposedly unnecessary staff
(5) in an attempt to become more efficient
and competitive. Organization theory
would explain this reasoning as an
example of the “economic rationality”
that it assumes underlies all organi-
(10) zational activities. There is evidence
that firms believe they are behaving
rationally whenever they downsize; yet
recent research has shown that the
actual economic effects of downsizing
(15) are often negative for firms. Thus,
organization theory cannot adequately
explain downsizing; non-economic
factors must also be considered.
One such factor is the evolution of
(20) downsizing into a powerful business
myth: managers simply believe that
downsizing is efficacious. Moreover,
downsizing nowadays is greeted
favorably by the business press; the
(25) press often refers to soaring stock
prices of downsizing firms (even though
research shows that stocks usually
rise only briefly after downsizing and
then suffer a prolonged decline).
(30)
Once viewed as a sign of desperation,
downsizing is now viewed as a signal
that firms are serious about competing
in the global marketplace; such signals
are received positively by key actors—
(35) financial analysts, consultants,
shareholders—who supply firms with
vital organizing resources. Thus, even
if downsizers do not become economi-
cally more efficient, downsizing’s mythic
(40) properties give them added prestige
in the business community, enhancing
their survival prospects.
Q34:
The primary purpose of the passage is to:
