Information technology personnel layoffs in US organizations: An exploratory investigation

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Abstract

The new century has been marked by an unprecedented number of layoffs of IT personnel. But despite the increasing industry concerns over IT worker downsizing, the knowledge base and scholarly literature on IT personnel layoffs has been sparse. This paper suggests some exploratory, descriptive insights into such downsizing efforts. Data on 569 layoff events in the US for years 2000 and 2001 were gathered and analyzed to help gain an understanding of the phenomenon. We examined the trends in IT personnel layoffs over time, across different industries, their nature and extent, the stated reasons given for downsizing and the financial environment of firms laying off IT workers. The findings and their implications are discussed.

Introduction

“Disney to cut 1000 IT jobs” (Orlando Sentinel, 13 May 2005)

“Nasdaq announces layoffs, restructures IT.” (Computerworld, Jul 2, 2001)

“Layoffs crank up again, chip away at economic growth” (USA Today, 18 Sep 2003)

Such announcements have been and continue to be routine in the US business press. Facing competitive pressures, a slowed down economy and dwindling business performance, many firms downsized their personnel in an attempt to reduce costs and improve profitability. Though these efforts are prevalent across all industries, layoffs involving IT personnel are particularly interesting. Only a few years ago, IT employees enjoyed higher salaries, had multiple job opportunities and enjoyed attractive perquisites such as stock options. In fact, the demand for IT personnel also increased so rapidly that high turnover became a major concern. However, the year 2000 heralded a downturn in US labor force needs, especially of IT workers. Traditional brick-and-mortar firms as well as dot-com firms resorted to downsizing IT personnel in an effort to ensure their survival.

The statistics on IT personnel layoffs have shown increased downsizing [15], [36]. According to a study by AEA (formerly the American Electronics Association), technology firms shed 437,000 jobs in US between March 2001 and June 2002. Moreover, technology jobs declined every month during that period, falling from 5.72 to 5.27 million [40]. Another study by the Information Technology Association of America estimated that IT personnel layoffs were about 2.6 million in 2001 [25]. An international outplacement firm, Challenger, Gray and Christmas Inc. estimated that the total number of IT-related job cuts were about 696,000 in 2001, though this number fell to 468,000 in 2002 [18], [38]. In the dot-com sector alone, there were about 101,000 layoffs in 2001, which was two and half times that in 2000 [6].

While much has been written on IT personnel layoffs in the business press, academic literature has been sparse. Researchers have examined issues concerning turnover and retention of IT workers [10], [21], [37], their motivation and nurturing [12], [13], [16], their work attitudes and stress [4], [26], human resource management issues [1], [5], [17], the value of their skills [8], job satisfaction and career orientation [29] and their compensation plans and productivity [34]. However, little effort has been made to explain IT personnel layoffs [24]. This is surprising given the increasing industry concern. It is important to understand IT worker layoffs as these decisions can affect and influence the attitudes of IT work force. Calls have been made for a better understanding of issues pertaining to IT personnel, their work context and the forces that affect the growth and decline of IT human capital [33].

This paper is an exploratory, descriptive study that attempted to understand IT worker layoffs. There were three distinct motives, to:

  • 1.

    Document the IT personnel downsizing practices in the industry.

  • 2.

    Consider and extend the multiple perspectives that have been used to understand organizational downsizing.

  • 3.

    Examine IT related human resource practices, specifically documenting the trends and organizational experiences in order to provide some guidelines on IT human resource management.

Section snippets

Organizational downsizing

Budros [7] defined downsizing as “an organization's conscious use of permanent personnel reductions in an attempt to improve its efficiency and/or effectiveness”. McKinely et al. [28] viewed downsizing as “intended reductions of personnel”. From these definitions, it is clear that layoffs or downsizing do not happen to a firm by chance. Layoffs reflect an intentional effort, involving reduction in the number of personnel in order to achieve greater of organizational efficiency or effectiveness.

Objectives of the study

Our goal was to explore the basic issues in IT personnel layoffs that could lead to a better understanding and pave the way for rigorous research. To this end, we gathered and analyzed data on IT personnel layoffs in the years 2000 and 2001. Specifically, we intended to answer the following questions:

  • (i)

    What was the extent of downsizing of IT personnel in US organizations? What kinds of firms and what industries downsized IT workers?

  • (ii)

    Were there any differences in the IT personnel layoffs across

Data collection

Our data collection strategy involved a search of public announcements made by firms on layoffs involving IT personnel. We used two sources for the data: the layoffs database complied by HRLIVE (www.hrlive.com), which compiles and provides weekly reports on the layoffs announced through different news media, as a starting point, followed by a search of the Lexis–Nexis academic universe database for announcements on IT personnel layoffs. We particularly focused on wired reports, such as PR

Discussion and conclusions

Despite an increasing trend in IT personnel downsizing, knowledge base and scholarly literature on this topic has been sparse. We have offered some exploratory, descriptive insights into downsizing efforts involving IT personnel. Data on 569 layoff events in years 2000 and 2001 were analyzed to gain a preliminary understanding of the IT layoff phenomenon.

Our analysis indicated that the overall number of layoff events increased between 2000 and 2001, and peaked in the second quarter of 2001.

C. Ranganathan is an assistant professor in the Department of Information & Decision Sciences at the University of Illinois at Chicago. His current research interests include e-business, information systems strategies, IT outsourcing and managing IT human resources. His academic recognitions include the best doctoral dissertation award and the best teaching case award at the International Conference on Information Systems and best paper awards given by the Society for Information Management.

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  • Cited by (0)

    C. Ranganathan is an assistant professor in the Department of Information & Decision Sciences at the University of Illinois at Chicago. His current research interests include e-business, information systems strategies, IT outsourcing and managing IT human resources. His academic recognitions include the best doctoral dissertation award and the best teaching case award at the International Conference on Information Systems and best paper awards given by the Society for Information Management. His work has been published or forthcoming in Communications of the ACM, Decision Sciences Journal, Information & Management, Information Systems Management, MIS Quarterly Executive, International Journal of Electronic Commerce, Journal of Information Technology, among others. He holds a doctorate from the Indian Institute of Management, Ahmedabad and Masters degree from BITS, Pilani (India).

    Kedar Samant is a doctoral student in the Department of Information & Decision Sciences at the University of Illinois at Chicago. His research interests include managing IT human capital, peer-to-peer networking and IT management. His research work has been published in proceedings of International Conference on Information Systems and Annual Conference of the Decisions Sciences Institute. He holds a Masters degree in MIS from University of Illinois at Chicago.

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