Although downsizing has become a nearly universal managerial practice, many downsizing initiatives fail. To explain this phenomenon, previous research has mainly investigated possible negative consequences for employees remaining in the firm while largely neglecting customer reactions to downsizing and the issues surrounding its implementation. The authors describe three studies analyzing how downsizing at a firm's point of customer contact affects customers and how managers can influence customer reactions through open communication. The first study, a manager study, is based on an executive survey of a sample of more than 100 downsizing projects. The other two studies are customer studies that use an experimental scenario method. Across the two methods, results show that the extent of downsizing is linked to customer uncertainty. In addition, both survey results and experimental results reveal that open downsizing communication carries substantial risks for downsizing firms. Although open communication reduces customer uncertainty if customers have strong informal ties with the firm's employees or perceive a firm's products as important, it may increase customer uncertainty in other situations.
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