Mediating Model for Downsizing Strategy in the Korean Automobile Industries

Until now, many researches have focused on some patterns of downsizing performance and survivor's syndrome. An early stage of those researches tried to identify what is the downsizing syndrome. In the later stage, some researchers explored the relationship between downsizing practices and results. However, those researches have not sufficiently analyzed the integrated causality of downsizing. Academic sphere just only focused on the survivor's syndrome or empirical evidence such as financial performance. On the other hand, business societies recognized downsizing as an unavoidable decision, and tried to establish the strategic road-map for successful downsizing. Therefore, an integrated perspectives in the downsizing research is very important for business society to develop the practical road-map, to solve the related problems, and to secure the downsizing performance. This paper approaches the downsizing strategy as a mediating model in which DPM(Downsizing Process Management) mediates between PMD(Pre-stage Management of Downsizing) and PDR(Post-Downsizing Response). PMD is defined as a managerial effort and degree of the shared recognition to obtain internal agreement for downsizing necessity and introduction. DPM is defined as a degree of the managerial effort to secure fairness, objectivity, openness, managerial effort to adopt alternatives without layoff, and victim support program in downsizing process. Also, PDR is defined as a survivor's response on the realized downsizing. Previous research showed the issues that should be managed in the pre-stage of downsizing. those are pre-notice, communication and cooperation with employee, shared recognition on the downsizing. That means PMD. According to this framework, PDR can be affected by the survivor's recognition after observing and experiencing how downsizing was persuaded by management, how downsizing was discussed by labor and management(Flint, 2003), and how downsizing was decided in the organization. In summary, PMD can be related with PDR. Therefore, this paper predicts: Hypothesis 1 : PMD has a positive influence on PDR Also, DPM must try to arrive at an agreement with employee about layoff, redeployment, transfers, out-placement, buy-outs, attrition. Basically, downsizing management strategy based on those efforts should be applied in the downsizing process. In summary, consideration for employees in downsizing process is very useful to enhance the downsizing effect. A responsible manager in DPM must try to build trust between managers and employees by facilitating the communication with hot issues. Polite and truthful DPM positively influences employee's positive response. On this, a successful downsizing requires downsizing process strategy. According to this framework, this paper predicts: Hypothesis 2 : DPM has a positive influence on PDR And, when the plan is to occur, how the plan is to be discussed by labor and management, what Systematic management is to be prepared are directly associated with successful downsizing process. DPM should be introduced not only to diminish the negative effects but also to accomplish the goals of downsizing. Therefore, this paper predicts: Hypothesis 3 : PMD has a positive influence on DPM To investigate the mediating model of downsizing strategy, this paper selected the Korean automobile industry as research population. The automobile industry has been directly affected by the global economic downturn, and Korea is no exception. It is widely recognized that the automobile, semiconductor and petrochemical industries are expected to be the core targets for downsizing this year.