Asia Pacific Journal of Management, 22, 23–39, 20052005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.

Organizational Restructuring: Impact on Trustand Work Satisfaction

GRACE LEE biztayg@nus.edu.sgALBERT TEO bizteocy@nus.edu.sgDepartment of Management and Organization, School of Business, National University of Singapore,1 Business Link, Singapore 117592

Abstract. After the Asian financial crisis, companies are now contending with the current global economicslowdown. Whether it is at the national, industry or organizational levels, restructuring has gained currency asa strategic decision to realign internal structure with changing macro environmental factors. Faced with morecompetitive markets and greater demands on costs controls, organizations and businesses are taking the fasttrack to cost-cutting by downsizing, reorganizing their divisions, streamlining their operations, and closing downunprofitable divisions.

Changes that are introduced in an organizational restructuring will affect the socio-psychological well-being oforganization members given the potential for uncertainty that may accompany such changes. There is a need tobetter understand the consequences of organizational restructuring and consider some of its potential side effectson the work environment. Employees in a post-restructuring context are understandably wary about the futuredirection of the organization and their roles within it.

This study is an attempt to examine the social-psychological impact of organizational restructuring on trustand work satisfaction. Additionally the inter-relationships between trust and work satisfaction, including theirantecedents in the work environment are examined.

Trust and work satisfaction levels were tracked before and three months after organizational restructuring forvarying types of changes that were initiated during the restructuring. Both trust and satisfaction with workingin the organization declined significantly when compared to pre-restructuring levels. Independent t-tests analysisindicated that there was a significant decline in trust for the work group which had a newly hired manager and achange in work processes. Results showed that there was a negative relationship between both work satisfactionand trust with the extent of change required of employees.

The findings also showed that there was a positive relationship between trust and work satisfaction and thattrust contributed to work satisfaction. Perception of colleagues’ willingness to help solve job-related problemscontributed significantly to strengthening of trust relations among colleagues. Additionally, colleagues and super-visor’s willingness to listen to employee problems contributed significantly to work satisfaction.

Results of the study highlighted the need for strategic decision-makers to consider the social impact of or-ganizational restructuring. Top managers must realize that both trust and work satisfaction are important ingre-dients for the effective functioning of an organization and to actively ensure that support systems or structuresare adequate and available to mitigate the negative impact, particularly if the changes to be implemented areextensive.

Keywords: organizational change, work satisfaction, trust

Organizational restructuring: Impact on trust and work satisfaction

The countries of east and south-east Asia started to experience an unprecedented financialcrisis after decades of dramatic economic growth in 1997. Countries like Thailand, Indonesia

24 LEE AND TEO

and Korea experienced an abrupt fall of real GNP from 7 percent or more annual growthdown to zero or negative in just a few months.1 Rapid devaluation of currencies, combinedwith falling property prices caused marked declines in production, consumption and averageincomes. The region’s economic growth plummeted.

The Asian financial crisis affected the profitability of many companies in the region. Orga-nizations and businesses had to contend with shrinking purchasing power, rising productioncosts and excessive staffing levels (Andrews, 2001). As the crisis deepened and corporateproductivity continued to decline, local subsidiaries of foreign multinational companiescame under pressure from their headquarters to restructure their business operations (Wah,1999). Many organizations started to restructure and downsize their internal operations asa strategic policy decision to cope with the intense competitive pressures (Andrews, 2001;Fisher, Lee and John, 2004).

While there have been encouraging signs that currency and financial markets have startedto stabilize, many organizations are still being restructured because it enables unproductiveunits to be culled and costs to be reduced. It has gained currency as a strategic managerialdecision to improve profitability and streamline operations in Asia (Yeung, 2001; Mitchelland Shaver, 2002; Fisher et al., 2004). McKinley and Scherer (2000) suggested that orga-nizational restructuring produced the unanticipated consequences of generating cognitiveorder for executives in turbulent environments and contributed to long-term environmentalturbulence at the environmental level. The cognitive order experienced by top executivesand the disruption of environmental conditions, provided the stimulus for further restructur-ing. Restructuring thus becomes a learned and self-perpetuating phenomenon (McKinleyand Scherer, 2000).

As in most strategic decisions, the common driver has been the assumption that or-ganizational restructuring will spur business performance. The prevailing belief is thatorganizational restructuring will provide a better alignment with the external competitiveenvironment, improve financial indicators, and ultimately improve stock price performance.Organizations in decline often attribute their performance to inefficient processes and ex-cessive bureaucracy (Cascio, 1993). To remedy these inefficiencies, organizations attemptto restructure to improve productivity and reduce costs. Better earnings and improved com-petitiveness should logically lead to better financial performance and drive the stock priceupward. However, the intended benefits of restructuring, such as productivity improvement,cost reduction, increased shareholder value, or a better alignment of the organization with achanging environment, are not always realized (Bowman and Singh, 1993; Bowman et al.,1999). This prompted Bowman and his colleagues (1999) to pose this question:

“After more than a decade of extensive restructuring of large companies, company exec-utives should now be able to address the more complex but pragmatically more importantquestion: When does restructuring improve economic performance?” (p. 33)

Cascio et al., (1997) examined the effectiveness of organizational restructuring in itsability to deliver the intended objectives of improved financial performance. In their study,Cascio and his colleagues noted that strategic policy decision-makers often neglect theimpact of organizational restructuring on employee morale and productivity. For example,employee motivation could be so negatively affected that it leads to employee behaviorsthat hinder rather than enhance productivity. Consequently, productivity decrements may

ORGANIZATIONAL RESTRUCTURING 25

offset labor cost savings, resulting in the basically flat relative financial and still deflatedshare price performance. Their study highlighted the potentially negative implications oforganizational restructuring on cooperation, trust, productivity and morale, which can affecteconomic and financial consequences.

Unfortunately, strategic policy decision makers are not paying heed to the potentiallynegative impact on employee morale and work satisfaction (Wah, 1999). The social impli-cations of economic decisions should be taken into account as they can impose a heavysocial cost that is not immediately visible (Lee, 1998).

This study aims to examine the social repercussions of an organizational restructuring.It seeks to firstly address the social impact of organizational restructuring by focusing onits impact on trust among employees and their work satisfaction and secondly, to examineantecedent factors in the work environment that contribute to work satisfaction and trust.

Research on strategic management and organizational behavior are often conducted in-dependent of each other. This is evident in the different research agendas of organizationalpsychologists, who take a micro-level view, and strategic management scholars, who takea macro-level view. Scholars of strategy are often not concerned with organizational dy-namics or micro-organizational variables. Thus, investigating the implications of a strategicdecision like organizational restructuring from a micro-organizational perspective shouldprovide a valued contribution to both strategic management literature and organizationalstudies.

In the last decade, there has been a great deal of empirical work on changes within organi-zations in crisis (Cascio, 1993; Buch and Aldridge, 1991; D’Aveni, 1989; Tombaugh et al.,1990; Dougherty and Bowman, 1995). In more recent years, many scholars have focused onworkforce reduction or downsizing (Koretz, 1998). This trend does not seem to be dissipat-ing, with a reported 60 percent of companies planning to continue downsizing over the nextfew years (Andrews, 2001). Organizations routinely displace and hire large segments oftheir workforces in a permanent restructuring process (Mckinley and Scherer, 2000). Facedwith more competitive markets and greater demands on costs controls, companies are takingthe fast track to cost-cutting by downsizing, reorganizing their divisions, streamlining theiroperations, and closing down unprofitable divisions (Bowman et al., 1999). Organizationalrestructuring has been, and will continue to be used as a turnaround strategy to control costsand to realign internal structure to meet changing environmental conditions. It is thereforeimportant to enhance our understanding of the socio-psychological outcomes of organi-zational restructuring, particularly when past studies have been predominantly focused onfinancial outcomes.

Both trust in colleagues and work satisfaction have yet been investigated in the orga-nizational restructuring literature, even though these are anticipated to have significantbearings on cooperation, morale and productivity. An understanding of the changes inthe work environment within the organization that have undergone restructuring is im-portant so that corrective measures can be taken promptly to address negative changesas a consequence of restructuring (Bowman and Singh, 1993). An understanding of whataffects trust among colleagues and work satisfaction will yield practical insights for man-agers who want to buffer the negative effects of change on trust and worksatisfaction.

26 LEE AND TEO

Hypotheses development

Changes in organizations are marked by high levels of uncertainty and chaos (Tombaughand White, 1990). There is often strong resistance to changes and a tendency towardsrigid behavior patterns (Cameron, Sutton and Whetton, 1988). Threat-rigidity theory (Staw,Sandelands and Dutton, 1981) offers a perspective on why changes in the work environmentmay occur. The theory explains that individuals, groups and organizations that perceive im-pending negative or harmful consequences for their vital interests will tend toward rigidity.Threat-rigidity theory implies that, under the types of radical changes that are likely toaccompany organizational restructuring, the resulting effects will be dysfunctional. Un-certainty is inherent in the restructuring process itself, particularly in its initial phases.Threat-rigidity theory has received considerable empirical support, primarily from studiesof organizational crisis and studies of resistance to change (Cameron, Whetten and Kim,1987; D’Aveni, 1989; Tjosvold, 1984; Whetten, 1981).

If the change required by employees is extensive and perceived to be negative, for instance,redesigned workflow and reorganization leading to expansion of duties and work overload,then employees will be less receptive to the changes (Mishra and Spreitzer, 1998). Even ifthe changes are perceived to be beneficial, it is envisaged that a transitional period of timefor adaptation is necessary. For changes of a greater magnitude, the consequent need foradjustment and change by the employee will be greater. In the direct aftermath of change,uncertainties and role confusion are likely to have an initial negative bearing on worksatisfaction levels.

Uncertainties will increase corresponding to the magnitude of the change required. Evenif employees are informed of the details of the changes, there will be a period of adjustmentwhere they will need to familiarize themselves with their new roles and how they would fitinto the company’s new strategy. The uncertainties may have a negative bearing on moraleand work satisfaction.

Hypothesis 1. There is likely to be a negative relationship between employee worksatisfaction and the extent of changes required in the organizational restructuring in theimmediate term (3 months) following organizational restructuring.

As Krackkardt and Hanson (1993) pointed out, what is neglected in organizational re-structuring is the informal organization, which they defined as the networks of relationshipsthat employees form across functions to accomplish tasks fast. These informal networkscut through formal reporting procedures. Many top managers do not realize that massivechanges in organizational relationships could result from reorganization. Restructuring in-advertently cause dramatic changes in the deep-seated, informal organization (Fisher andWhite, 2000). These informal networks can easily block communication and create oppo-sition to change. In creating changes to reporting and administrative structures, employeesmay find themselves working with entirely new colleagues and managers whom they arenot familiar with. A lack of familiarity in the new relationships will affect trust amongcolleagues. This is aggravated in a restructuring that includes downsizing. In general, trustallows individuals to cooperate with others because it minimizes the threat of malfea-sance (Mishra and Spreitzer, 1998). Conversely, a lack of it may result in the hoarding of

ORGANIZATIONAL RESTRUCTURING 27

information and resources from each other (Farjoun, 2000). This would affect the level ofhelp and support among colleagues and between employee and supervisor.

Studies have shown that organizations appear to suffer a deterioration of trust (Buch andAldridge, 1991; Cascio, 1993) and an increase in fear (Buch et al., 1991) during the processof change. Trust exists between two parties when one party believes that the other party istrustworthy and is willing to be vulnerable to the other (Granovetter, 1985). However, trustis easily lost when either party perceives the other as being self-interested or unreliable(Mayer et al., 1995).

Trust is defined as the willingness to take risks and to be vulnerable to the action of othersbased on the assumption that the other will act in a manner beneficial to the trustor (Gilbertand Tang, 1998). In a situation of change where there is great volatility in work groupmembership and a change in work group leadership, it is expected that trust levels will benegatively affected because the assumption that other members (particularly new ones) willact in a manner beneficial to oneself cannot be made. With work group attrition and newmembers added into the work group, there will be a transitional period of uncertainty. Anewly hired manager will also have implications on the trust levels in the work group. Workgroups facing a change in leadership involving an external hire as opposed to an internallyhired manager is likely to face greater stress on trust levels because of unfamiliarity inmanagement (Mishra and Spreitzer, 1998).

Additionally, if there is a restructuring of systems and procedures such as in a majorreorganization, it is not uncommon to have new workflows that are put in place. If the newworkflows cut across departmental boundaries, coordination between each department iscritical. In the short-term following the changes, there is likely to be a phase of uncertaintyand a lack of familiarity with the new workflow. Effectiveness of teamwork is tested espe-cially where there is mutual dependence on each other. If there is ambiguity and uncertaintyin the new workflows, relationships of individuals working together are subject to greaterstress on their relationships (Lazarus and Folkman, 1984).

Coordination problems and possibly greater conflict in the immediate term followingthe work flow changes between departments whose tasks are interdependent may have anegative impact on trust among colleagues. It is envisaged that employees facing a lack offamiliarity and greater uncertainties associated with a greater extent of changes required,for instance a change in work group leadership and work processes, will likely suffer agreater decline in trust with each other. Extensive changes in work systems and procedures,work roles and personnel will directly have an impact on organizational relationships withpossibly a greater stress on trust among colleagues. Following the above discussion, thefollowing hypothesis is proposed:

Hypothesis 2. There is likely to be a negative relationship between employee trust ineach other and the extent of changes required in the organizational restructuring in theimmediate term (3 months) following organizational restructuring.

Although both trust and work satisfaction are popular subjects of research in the literature,the interrelationship between these two have not been addressed properly. Both concepts aresimilar in the sense that they represent some overall evaluation, feeling, or attitude towardsa subject. According to Ravald and Gronroos (1996), trust is an aggregate evaluation at

28 LEE AND TEO

some higher level than satisfaction, and satisfaction is in fact an important source for trust.Satisfaction is achieved when expectations are fulfilled or confirmed. It is a manifestationof the other party’s ability to meet relational norms, and thus manifest trust (Ring and Vande Ven, 1994). It follows that both concepts should be closely connected, and a positiverelationship between trust and work satisfaction is expected.

Hypothesis 3. The higher the level of trust in colleagues, the higher the level of worksatisfaction.

Given that trust and satisfaction are core concepts in understanding the dynamics of howrelationships evolve, it is important to understand variables in the work environment thataffect them. Kanter (1994) maintained that work environments that provided access to in-formation, resources, support, and the opportunity to learn and develop were empoweringand enabled employees to accomplish their work. As a result, employees would be more sat-isfied with their work and would perceive that management could be trusted to do whateverwas necessary to ensure that high quality outcomes were achievable. According to Kanter(1994), employees in open environments characterized by easy access to information, re-sources and support would be more committed to the organization and more likely to engagein positive organizational activities. Kanter’s theory provides an explanatory framework forinvestigating the role of employee freedom to suggest changes and supervisory receptiv-ity to employees’ problems to work satisfaction in a restructured organizational setting. Ifpost-restructuring fluidity provides an opportunity to employees to develop more freedomto define their roles according to their own preferences, it may not necessarily cause dissat-isfaction after the initial period of transition and adjustment is over and work roles becomeclearer. According to Kanter (1994), the ability of management to ensure that employeeshave access to support, resources and feedback results in increased levels of organizationalcommitment, feelings of autonomy, and self-efficacy. Consequently, employees are moreproductive and satisfied. Given the above discussion, it is hypothesized that:

Hypothesis 4. Freedom to suggest changes positively impacts work satisfaction.

Hypothesis 5. Supervisory receptiveness to employee’s problems positively impactswork satisfaction.

Mishra and Morrissey (1990) proposed that open communication, sharing of criticalinformation, sharing of perceptions and feelings, facilitate trust in organizations. Gilbertand Tang (1998) had found a strong positive relationship between organizational trust andthe nature and extent of organizational communication. They suggested that formal, andmore importantly, informal access to organizational communication channels enhancesorganizational trust. It is therefore anticipated that strong workgroup support characterizedby an open exchange of information and advice for solving work-related problems willincrease trust in colleagues.

Hypothesis 6a. The exchange of information among colleagues increases the level oftrust in colleagues.

ORGANIZATIONAL RESTRUCTURING 29

Hypothesis 6b. Colleagues’ ability to offer ideas for work-related problems increasesthe level of trust in colleagues.

Hypothesis 6c. Colleagues’ willingness to listen to employees’ problems increases thelevel of trust in colleagues.

Research design

Employee responses were tracked at two points in time: baseline (pre-restructuring) and3 months after restructuring (post-restructuring). The work groups that were affected by therestructuring formed the baseline (n1 = 72, 92%) for comparison with post restructuringdata. The organizational restructuring initiatives included a change in work group leadershipand a change in workflow and work process.

Different work groups were affected in different ways. The first work group had a newlypromoted internal manager with no change in work processes. Because the newly promotedmanager was already the deputy manager before restructuring, they reportedly experiencedthe least adjustments. The second group had an externally hired manager with no changein work processes. The third group required the greatest extent of change from employeesbecause they had an externally hired manager and a change in work processes.

For the purpose of this study, only employees who have been directly affected by therestructuring and who have participated in the previous survey qualified for the post-restructuring survey. Newly recruited employees in the work groups who have not par-ticipated in the first employee opinion survey were excluded. A total of 71 (n2 = 71,97.2%) respondents out of 73 from the affected work groups were surveyed and individu-ally interviewed. The subjects were interviewed in 20–45 minute sessions in person. Thequestions focused on changes experienced during the restructuring, perceptions of variousaspects of the work environment, general motivational and social changes experienced orobserved, suggestions for management about the restructuring. Data from the 71 respon-dents after restructuring (n2 = 71) was compared with their responses (n1 = 72) in theearlier baseline survey that was conducted before organizational restructuring.

Measures

Respondents in the first phase of data collection completed an employee opinion survey thatcovered significant aspects of the organization. The survey was adapted from Van de Ven’s(1980) organizational assessment and change instrument. The 91-item inventory asks re-spondents to indicate the extent to which each statement describes their work environment,career development opportunities, job contents, organization loyalty, communications, or-ganizational image and quality. In the second phase of data collection, a pared down versionof the original survey with items pertaining to the criterion variables was used. The instru-ments were shown to have satisfactory psychometric properties in terms of reliability. Theitems pertaining to the baseline survey had a Cronbach’s alpha of a = .974 and a Cronbach’salpha of a = .848 in the post-restructuring survey. The work satisfaction scale comprisesfour items: (1) satisfaction with working in the organization; (2) satisfaction with job;

30 LEE AND TEO

(3) satisfaction with immediate boss and (4) satisfaction with colleagues. The reliabilityalpha for the work satisfaction scale is 0.80. The trust scale is measured by the extent ofagreement with the item: “I feel free to trust my colleagues with confidential informationor concerns about my work” on a scale ranging from 1, “to a very little extent” to 5 “to avery great extent”. The work group support scale comprising of three items2 has alpha of0.86. These variables were measured on a scale ranging from 1, “to a very little extent” to 5“to a very great extent” on the degree to which the variable exists in the work environment.

Findings

Results from the independent t-tests showed that trust in colleagues and satisfaction withworking in the organization declined significantly compared to pre-restructuring levels.(See Table 1). Results from independent t-tests for trust and work satisfaction by groupshowed that trust in colleagues declined significantly for the group with an externally hirednew manager and a change in work process. (See insert Table 2).

Significant negative relationships were found between both trust and work satisfaction andthe extent of change required from employees. (See insert Table 3). Hierarchical regressionanalysis was conducted to test whether the independent variable measuring the extent ofchange required from employees had a significant impact on the dependent variables of trustamong colleagues and work satisfaction respectively. All the control variables for individualattributes were entered into a regression equation (Step I). The question of interest, then,is whether the independent variable significantly increased variance above that alreadyexplained by the control variables. Adding the extent of change required from employees

Table 1. Independent T -tests—post restructuring versus pre restructuring.

Type of changes experienced N Mean t

Internally promoted Manager

Trust Before restructuring 72 3.81 −2.44∗

3 months after restructuring 71 3.45

Work Satisfaction Before restructuring 72 3.72 −0.50

3 months after restructuring 71 3.65

Satisfaction with working in the organization Before restructuring 72 3.65 −2.54∗

3 months after restructuring 71 3.23

Satisfaction with the Job Before restructuring 72 3.74 −0.08

3 months after restructuring 71 3.72

Satisfaction with immediate supervisors Before restructuring 72 3.78 −0.27

3 months after restructuring 71 3.73

Satisfaction with colleagues Before restructuring 72 3.92 −1.40

3 months after restructuring 71 3.69

∗ p < .05. ∗∗ p < .01.

ORGANIZATIONAL RESTRUCTURING 31

Table 2. Independent T -tests—post restructuring changes for trust in colleagues and work satisfaction by group.

Mean

Types of changes N Mean diff t

(1) Internally promoted Manager Trust in colleagues (Baseline and 3 monthspost restructuring)

14 −0.36 −1.28

Satisfaction Index 14 −0.07 −0.27

Satisfaction with working in the organization 14 −0.36 −0.98

Satisfaction with the job 14 0.00 0.00

Satisfaction with immediate supervisors 14 0.14 0.49

Satisfaction with colleagues 14 −0.07 −0.27

(2) Externally hired Manager Trust in Colleagues (Baseline and 3 monthspost restructuring)

12 −0.67 −1.68

Satisfaction Index 12 −0.05 −0.20

Satisfaction with working in the organization 12 −0.10 −0.37

Satisfaction with the job 12 0.24 0.80

Satisfaction with immediate supervisors 12 −0.17 −0.54

Satisfaction with colleagues 12 −0.17 −0.43

(3) Externally hired Manager andchange in work process

Trust in Colleagues (Baseline and 3 monthspost restructuring)

35 −0.37 −2.01∗

Satisfaction index 35 −0.16 −0.83

Satisfaction with working in the organization 35 −0.49 −1.90+

Satisfaction with the job 35 −0.09 −0.38

Satisfaction with immediate supervisors 35 −0.40 −1.66

Satisfaction with colleagues 35 −0.31 −1.45

+ p < 0.10. ∗ p < .05. ∗∗ p < .01.

into the equation in step II increased the total variance explained by 6 percent (F =2.648, p < 0.05) for the dependent variable of trust levels among colleagues. A negativelysignificant beta (p < 0.05) was observed for the extent of change required from employees,while controlling for the effects of the other personal attributes. This suggests that the morechanges required from employees, the lower the trust levels among colleagues.

Similarly, adding the extent of change required from employees into the equation instep II for the dependent variable of work satisfaction increased the total variance explainedby 3 percent (F = 2.393, p < 0.05). A marginally significant negative beta (p < 0.10)indicated that the extent of change had a negative impact on work satisfaction. This indicatesthat the greater the change required from employees, the lower the work satisfaction (seeinsert Table 4). This finding provides some evidence to confirm Hypotheses 1 and 2, whichpostulated that there would be a negative relationship between both work satisfaction andtrust with the extent of change required of employees.

Hierarchical regression analysis was also carried out with work environment variables asindependent variables and dependent variables of trust and work satisfaction, controlling for

32 LEE AND TEOTa

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ORGANIZATIONAL RESTRUCTURING 33

Table 4. Regression models for extent of change on trust and work satisfaction—step �R2.

Dependent variables

Trust Work satisfaction

Standardizedcoefficients (Beta) Step �R2

Standardizedcoefficients Step �R2

Control variables

Gender −.026 .057 −.172 .079

Tenure .063 −.066

Age −.131 −.056

Education .063 .036

Formal rank −.011 .043

Independent variables

Extent of change required −.290* .056 −.196+ 0.026

from employees

R2 statistics .113 .105

Adjusted R2 statistics .070 .061

F 2.648∗ 2.393∗

N = 143, + p < .10, ∗ p < 0.05, ∗∗ p < 0.01.

gender, tenure, age, education and rank (see insert Table 5). Findings indicated that trust andwork satisfaction contributed significantly to each other’s variance. Therefore, the findingsconfirmed Hypothesis 3, which suggested that the higher the level of trust, the higher is thelevel of work satisfaction. As for the variables within work group support, the findings revealthat colleagues who offer new ideas for solving job-related problems contributed signifi-cantly to the strengthening of trust among colleagues (i.e., Hypothesis 6b is supported). Forthe other dependent variable of work satisfaction, a significant, positive beta was observedfor immediate supervisor’s receptiveness to listen to employee’s problems (i.e., Hypothesis5 is supported). Contrary to the expectation of Hypothesis 4, freedom to suggest changesdid not have a significant impact on work satisfaction. Please see insert Table 5.

Changes in the work environment

The interviewees’ comments largely reinforce findings from the quantitative analysis thatlevels of work satisfaction and trust among colleagues had deteriorated after the restructur-ing. For example, several commented on supervisor support; one interviewee stated this:“Supervisory support? The managers are new and they are also learning on the job andare very busy. Most of the time, we check with one another if we do have any problems.”Another commented: “The new manager does not have a clinical background. I think it isimportant to recruit someone who has experience in a hospital or clinical setting. The new

34 LEE AND TEO

Table 5. Regression models for independent variables on work satisfaction and trust—step �R2.

Dependent variables

Trust Work satisfaction

Standardizedcoefficients (Beta)

Step�R2

Standardizedcoefficients

Step�R2

Control variables

Gender −.006 .057 −.070 .079

Tenure .137 −.019

Age −.142 .032

Education .097 .058

Formal Rank −.115 −.012

Independent variables

Work satisfaction index .383∗∗ .311 −Trust in colleagues in the organization − 0.280∗∗ 0.459

Colleagues exchange opinions and ideas .051 −0.134

Colleagues offer new ideas for solving .308∗ 0.041job-related problems

Colleagues are willing to listen to my problems −.005 0.284∗∗

Freedom to suggest changes to improve −.066 0.063job effectiveness

Immediate supervisor is willing to .006 0.362∗∗listen to employee’s problems

R2 statistics .368 .538

Adjusted R2 statistics .308 .494

F 6.132∗∗ 12.292∗∗

N = 143, ∗ p < 0.05, ∗∗ p < 0.01

workflows have many problems in implementation. Maybe it is because she does not havethe experience nor the clinical training.” Many of the interviewees’ comments focused onhow the restructuring affected their work environment; for example, one employee said thefollowing: “Changes are necessary and we accept them. But, the way some of the changeswere implemented . . . our previous managers were just asked to leave suddenly. After all,they have made their contributions. Before this, trust and cooperation were not promoted;now it’s promoted even less.” Another said, “How can we trust them (management) whenthey send spies to check on our performance and to report on what we are doing that isnot right.” How can you talk about trust when you don’t show it yourself.” Many describedstructural changes relating to uncertainty and chaos: “During and after the restructuring,there was frustration especially on the tracing of patients records. Before this, we are at leastnot dependent on customer service (department) to provide us with the patients’ records.Now we can’t find the records and we (nurses) are faced with angry and frustrated patientswho shout at us for being so slow when it is not our fault.” Another interviewee said this:“The quality of our customer service has dropped because patients’ records are missing.

ORGANIZATIONAL RESTRUCTURING 35

I think they (colleagues in the other department) are not familiar with the new workflow.Often times, I will have to go personally to find the records. The people in the sorting roomare stressed out because they can’t cope with the workload.”

On a more positive note, some felt that they were more informed about what was goingon in other departments. One employee commented: “At least now we get more informationthan in the past. I can get into my email to read what is going on.” Another one said: “Ihear what is going on in our departmental meetings, which is conducted quite regularly.But in the course of our work, we seldom have to communicate with other colleagues inother departments . . . only on a few occasions, when we need to check on details in pa-tients’ records.” A number of respondents mentioned social changes; often, these changesinterfered with departmental functioning: “The impact has been negative in some respects.Communication is not as open and honest. Keep this confidential, but I do not trust any-body in this organization. I don’t know what I say will be repeated to my boss. Trust andcooperation in this organization have gone down.”

Discussion

This study offers some insights on work environment changes in the immediate term follow-ing organizational restructuring. The study focused on trust and work satisfaction becauseboth variables play a significant role in the successful implementation of the changes. Theresults supported the propositions that both trust and work satisfaction will be negativelyaffected by the extent of change required from employees in the immediate term (threemonths) following organizational restructuring. Significant declines from pre-restructuringtrust levels are noted for the work group with changes in work group leadership and inworkflow. Both trust and work satisfaction levels were significantly lower for the workgroup with a new externally hired manager and change in work process compared to thework group with a change that solely involved a newly promoted manager.

The findings also provided some insights on how work satisfaction and trust amongcolleagues may be strengthened. Having colleagues and the immediate supervisor listen toproblems significantly enhanced work satisfaction. These findings highlight the need forsupportive environments that provide a listening ear to problems. This may mitigate theproblem of declining work satisfaction, particularly when extensive changes are requiredand confusion abound when changes are rapid and roles and expectations are less clear.

An examination of the relationships between the work group subscales and trust providesinsight into dynamics by which trust operates. A strong relationship is found between trustin colleagues and perceived willingness of colleagues to solve work related problems. Workgroup support, particularly in meeting task demands and solving work related problems,significantly contributed to the strengthening of trust among colleagues. Trusting anotherindividual is based on the assumption that the other will act in a manner that is beneficialto the truster, and this assumption is validated and confirmed when the other party offerstangible help that genuinely enables the trustor to better meet tasks and job demands (Gilbertand Tang, 1998).

The significant effect of supervisory willingness in listening to problems on work satisfac-tion are consistent with expectations of Kanter’s theory and the findings of other research

36 LEE AND TEO

linking trust to open communication and information sharing, increased employee de-cisional involvement, and supportive leadership practices (Mishra and Spreitzer, 1998).When employees feel they have leaders, managers and supervisors who are empatheticand understanding, they are more likely to be cooperative and constructive. Consequently,they will be satisfied with their work and more committed to achieving organizationalchange.

Limitations, implications and future research

Clearly, the conclusions that can be drawn from this study are limited. First, and perhaps mostimportantly, this is a case study of one organization and the findings are far from conclusive.Conceptual replications in other organizations will be required before firm conclusions canbe drawn. Significantly, the use of pre-restructuring (baseline) data and post-restructuringinformation within the organization could mitigate at least some of the retrospective biasesthat might have entered into many previous field studies of organization change. There areother limitations. The measures were based on self-reports, it would be desirable in futureresearch to have additional external measures of work satisfaction and measures of trust inthe work environment.

It is possible however to identify several implications for management practice. Sup-port for the model proposed in this study provides encouraging guidance for managersinterested in creating high trust work environments that benefit both employees and ulti-mately the customers they serve. The creation of work environments that encourage em-ployees to have peer mentors and mutually assist each other in work-related problems willgo a long way in helping to build trust among colleagues. Training employees to exer-cise the practice of empathetic listening and building this value in the culture and rewardsystems may be useful to arrest problems of declining work satisfaction within organiza-tions undergoing change. Moreover, the building of high trust environments will lead toincreased employee satisfaction; ultimately ensuring the desired results of organizationalrestructuring.

This approach will require a transformation in the role of management. Managers tradi-tionally have managed through control. Such an approach will require managers to focusless on control and more on the coordination, integration, and facilitation of employees workafter an organizational restructuring. As restructured work environments recover from theimpact of possibly downsizing and increased turnover, managers must seek ways to regainthe trust of employees by ensuring structures are in place to allow feedback and support.Employees must be willing to work together to develop a climate of mutual trust that fosterswork satisfaction and genuine commitment to organizational goals to achieve the intendedresults of organizational restructuring.

Are there ways to mitigate the negative impact of change? For employee buy-in, it isnecessary to actively involve employees in the planning phase of any restructuring effort.Additionally, it may be helpful to undertake team-building efforts as soon as new groups areformed—especially if these are groups from which high levels of productivity are desired.

A future line of research would be to conduct a longitudinal study in which trust andwork satisfaction are tracked for a longer period of time after organizational restructuring

ORGANIZATIONAL RESTRUCTURING 37

so that subsequent reactions are examined. One promising avenue of research could bethe investigation of the mechanisms by which change events in organizations, particularlyrestructuring, might lead to changes in the work environment. Threat-rigidity theory (Stawet al., 1981) is helpful in guiding such investigations, because it directly addresses pos-sible changes in organizational environments under negative circumstances such as thoseaccompanying restructuring. Another perspective is to understand changes in work envi-ronment in organizations undergoing restructuring through a social network lens. Fisherand White (2000) have asserted that downsizing—or any restructuring that involves broad-based personnel reduction or movement—may seriously damage the learning capacity oforganizations. Using the social network perspective, they have illuminated the magnitude ofpotential learning capacity loss resulting from the deletion of one individual from an organi-zational network and have demonstrated that, because it is a nonlinear function, this loss islikely to be far greater than that indicated by linear head-count ratios. They pointed out thatthe magnitude of the potential risk makes it critical for top managers to analyze the impactof downsizing and restructuring on learning networks—both formal and informal—beforeimplementing these strategies. Following their suggestion, a similar study may also beundertaken to examine how informal networks are affected by organizational restructuring.

In concluding, this study has shown that there are potentially negative consequences onthe work environment in the immediate term after organizational restructuring. If worksatisfaction and trust in the organization continued to be depressed well beyond the endof the restructuring, and well beyond an apparent improvement in some aspects of thework environment, the productivity of the organization could be in serious danger. A keyingredient that is necessary to sustain effective change is high morale. Employees must“buy in” to the management strategy of change. They must align their interests with thoseof management, and they must become involved and committed to bring about genuine,lasting improvements in the organization. Otherwise, this may set back the organization’sefforts to achieve the anticipated goals of restructuring.

Notes

1. The Asian financial crisis: Origins and social outlook. A perspective, in International Labour Review (Geneva),vol. 137, no. 1. pp. 81–93, 1998.

2. The three items for work group support are: (1) exchange of information among colleague; (2) colleagues’ability to offer ideas for work-related problems; (3) colleagues’ willingness to listen to employees’ problems.

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