How You Downsize Is Who You Downsize

Abstract

Scholars and pundits argue that women and minorities are more likely to lose their jobs in downsizing because of segregation or outright discrimination. In contrast, this article explores how the formalization and legalization of downsizing affect inequalities. According to bureaucracy theory and management practitioners, formalization constrains decision-makers’ bias, but neo-structural and feminist theories of inequality argue that formalization can itself be gendered and racially biased. Accountability theory advances this debate, pointing to organizational and institutional processes that motivate executives to minimize inequality. Building on these theories, and drawing on unique data from a national sample of 327 downsized establishments between 1971 and 2002, I analyze how layoff formalization and actors’ antidiscrimination accountability affect women’s and minorities’ representation in management after downsizing. Results demonstrate that, first, downsizing significantly reduces managerial diversity. Second, formalization exacerbates these negative effects when layoff rules rely on positions or tenure, but not when layoff rules require an individualized evaluation. Finally, antidiscrimination accountability generated by internal legal counsels or compliance awareness prods executives to override formal rules and reduce inequalities. I conclude that although downsizing has been increasingly managed by formal rules and monitored by legal experts, this has often meant the institutionalization of unequal, rather than equal, opportunity.