Comparing The Effect Of Downsizing And Reducing Pay On Collective Organizational Commitment And Firm Financial Performance And The Role Of Investment In Training

Abstract

This study compares the impact of downsizing and reducing pay on collective organizational commitment and firm financial performance. An examination of organizations operating under a salary schedule system in Korea shows that there is no significant difference between the effect of downsizing and reducing pay on collective organizational commitment and firm financial performance. However, compared to downsizing, reducing pay yields better financial performance for organizations that invest relatively highly in training of their employees through maintaining higher levels of organizational commitment. Keywords: Reducing pay, downsizing, pay reduction, investment in training, labor cost reduction strategy, organizational strategy, psychological contract, configurational approach