ABSTRACT

This project was carried out in partial fulfilment of the requirements for the award of the Higher National Diploma in Accountancy. It investigates the effect of retrenchment on the morale of workers who remain in employment after the exercise, that is, the survivors. The study covers selected ministries and extra-ministerial departments of the Nigerian civil service and selected private businesses, including banks and media organisations. It examines the reasons given for retrenchment, workers' perceptions of it, its effect on their sense of job security and morale, and the alternatives that could be used. The work is divided into five chapters, each of which gives the details needed to understand the study and its topic.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

This study examines the effect of retrenchment on the morale of workers who remain in employment after the exercise. It was prompted by the retrenchment of workers in public and private organisations in Nigeria in recent decades. The study asks whether surviving workers still have low morale, whether they feel threatened, and whether they have become more productive. It also asks whether the reasons that are commonly given for retrenchment, such as low productivity, inefficiency and poor attitude to work, are the real reasons for it. Behind these reasons lies the long-standing view of workers expressed in McGregor's Theory X (McGregor, 1960). That theory assumes that the average person dislikes work and avoids it where possible, and therefore has to be controlled and threatened with punishment before putting in effort toward organisational goals, while also wanting security above all.

The premise of retrenchment is, in part, to reduce the number of workers an organisation employs. It raises issues beyond cost savings. It affects employees at every level, and one employee is often expected to produce what several employees once did. Organisations typically turn to retrenchment when they find themselves overstaffed, when demand falls, or when the market changes, and they regard it as a means of survival. Retrenchment is often reactive and driven by crisis, and alternatives exist, including induced retirement, separation with benefits, retraining and attrition. Apart from the reduction in expenses and the resulting increase in profit, retrenchment has important effects on the morale of employees who remain, and these effects are often called survivor syndrome.

Evidence from Nigeria and elsewhere shows that these effects are real. In a meta-analysis of 535 independent samples, Jiang and Lavaysse (2018) found that job insecurity was significantly related to 51 of 56 outcomes and correlates, and that affective job insecurity, meaning the worry and anxiety that accompany the perceived threat of job loss, had stronger relationships with most outcomes than cognitive job insecurity did. Van Dick et al. (2016) argue that downsizing lowers the identification of survivors with their employer, which helps to explain detrimental patterns of behaviour among them. Omoruyi et al. (2011), in a study of survivors at a consolidated bank in Lagos, found that the downsizing was perceived as unfair, which resulted in low morale among survivors and an unwillingness to engage in extra-role behaviours. They recommended a participative approach to downsizing. Adeoye and Lawrence (2021), studying a bank in Lagos, found that career advancement opportunities and the economic cost of downsizing were associated with survivor performance, and recommended that managers should be truthful, open and unbiased towards both survivors and those disengaged. Inyang and Williams (2019), in a mixed-method evaluation of the criteria used for retrenchment in selected banks in south-west Nigeria, examined how fair survivors considered the process to be. In the public sector, Pepple et al. (2023) found that Nigerian public sector employees often lack a sense of ownership of their organisations and attach meaning to commitment through the personal benefits they derive from them.

The terminology used for job losses of this kind is not uniform. Terms such as retrenchment, redundancy, disengagement, downsizing and lay-off are used. Retrenchment covers dismissals that are not related to the conduct or capability of the worker. They include job losses that arise from a reduction in staffing requirements, owing to efficiency gains or reduced demand, and job losses that arise from downsizing or restructuring the workforce, for example following privatisation. In the public sector, retrenchment is a government-initiated policy that reduces the number of employees in ministries and departments in order to cut costs. A change in government, reform, technological change or privatisation can also give rise to restructuring and job loss in the public and private sectors. Reform exercises of this kind have been carried out in the Nigerian civil service before. Their stated objectives were to improve service delivery, strengthen financial viability and capacity, and raise the efficiency and effectiveness of the public service, with the further intention that reducing the size of the workforce would allow salaries and allowances to be improved and so raise the motivation and morale of those who remained. Whether these intentions were achieved is the question this study investigates. In the private sector, the consolidation of Nigerian banks, which reduced about 89 operating banks to 25 by the end of 2006, led to widespread restructuring and downsizing (Omoruyi et al., 2011).

1.2 Statement of the Problem

Persistent economic difficulty in Nigeria has pushed governments, industries, banks and other businesses, large and small, to adopt far-reaching measures to cut costs. The civil service forms the machinery through which the government carries out its objectives. It is expected to serve continuity, permanence, professionalism and impartiality, and society regards it as an indispensable instrument of government. Successive retrenchment exercises, especially in the public service and the banking industry, therefore pose economic and social threats.

Retrenchment means the act of reducing expenses, and it can also be seen as the termination of workers' services when jobs cease to exist because of technological, political or economic change. In Nigeria, it has often been carried out in a way that removed active and inactive workers alike, and the reasons given for it have commonly included:

1. low productivity;
2. due years of service (retirement at 60 years of age or 35 years of service);
3. inefficiency;
4. redundancy;
5. gross misconduct (fraud, disloyalty, dishonesty and similar offences);
6. corruption and embezzlement;
7. poor health;
8. overstaffing and absenteeism;
9. misappropriation; and
10. ethnicity and bureaucratic red tape.

The study sets out to establish whether these reasons were the genuine reasons for the exercises, or whether a combination of reasons applied. It also examines the effects of retrenchment on the morale and perceptions of workers, both those retrenched and those retained, and it considers the alternatives to the exercise. The literature suggests that unfair or poorly communicated retrenchment lowers the morale of survivors (Adeoye & Lawrence, 2021; Omoruyi et al., 2011), but evidence for the Nigerian civil service and for non-bank private businesses is limited, and this study addresses that gap.

1.3 Research Questions

The following questions guide the study of the effects of retrenchment on the morale of workers in the Nigerian civil service and private businesses:

1. What are the effects of retrenchment on the morale of workers?
2. What alternative actions could have been preferred to retrenchment?
3. What are the major reasons for the retrenchment exercise?
4. What is the perception of workers regarding retrenchment?
5. Does retrenchment create a feeling of job insecurity among employees?

1.4 Objectives of the Study

Retrenchment affects national economic progress because it raises the rate of unemployment. The objectives of this study are to:

1. assess the effects of retrenchment on the morale of workers;
2. identify alternatives to retrenchment;
3. find out the reasons for the retrenchment of workers;
4. ascertain ways in which retrenchment can be implemented; and
5. identify the advantages and disadvantages of retrenchment.

1.5 Research Hypotheses

H₀₁: Retrenchment does not create feelings of job insecurity among employees.

H₁₁: Retrenchment creates feelings of job insecurity among employees.

H₀₂: Workers do not have a negative perception of retrenchment.

H₁₂: Workers have a negative perception of retrenchment.

1.6 Significance of the Study

Government policies on retrenchment have important social consequences, because they add to unemployment. The study provides a basis on which the Nigeria Labour Congress (NLC) can challenge unnecessary retrenchment, and it encourages federal, state and local governments to consider creating employment through recruitment rather than reducing the workforce, since retrenchment can make life difficult for those affected and for their dependants. A well-run recruitment exercise, by contrast, supports productivity and helps to reduce labour turnover and employee dissatisfaction.

The findings and recommendations will help the government, the Federal Civil Service Commission, banks and other agencies, especially in developing countries, to understand the effects of retrenchment on workers' morale, in line with evidence that unfair downsizing lowers survivors' morale and commitment (Omoruyi et al., 2011; van Dick et al., 2016). The study will also benefit society, human resource managers and business practitioners in the management of the workforce, and it will serve as a source of information for academics and students of public and human resource management.

1.7 Scope and Limitations of the Study

Scope

The study covers the effects of retrenchment on the morale of workers in the Nigerian civil service and in private businesses. Selected ministries and extra-ministerial departments, and private businesses that were among those most affected by the exercise, were chosen for the study. They are:

• the Federal Ministry of Works and Transport;
• the Ministry of Agriculture and Natural Resources;
• the Federal Ministry of Commerce, Industry and Technology;
• the Federal Ministry of Lands and Housing;
• the Federal Civil Service Commission;
• media organisations; and
• banks.

The selected ministries and departments are taken to be representative of the Nigerian civil service. The study uses descriptive analysis and relies on two sources of data. Primary data come from questionnaires and interviews administered to workers, and secondary data come from libraries, the internet, textbooks, magazines, newspapers, official documents, office and ministry libraries and archives, and reference works.

Limitations

The study is limited to a few ministries and extra-ministerial departments in the federal civil service and to selected private businesses. The main constraints were as follows:

1. Availability of materials. Textbooks, journals, magazines and other relevant materials were not readily available.
2. Finance. Limited funds, owing to the prevailing economic difficulty, were a major setback.
3. Time. The time available was short and did not allow a thorough treatment of the subject.
4. Respondents' attitude. Some workers, especially those retrenched in 1999 and later recalled by the new government, feared that the study was a prelude to another exercise. Others regarded it as a waste of time because they believed its findings would not be implemented.

1.8 Definition of Terms

Attrition: A reduction in the workforce that occurs when employees leave the organisation through retirement, death or resignation.

Civil service: A body or organ of government that enjoys continuity of existence.

Downsizing: A deliberate reduction in the size of an organisation's workforce, usually intended to cut costs or improve efficiency.

Inefficiency: The state of being wasteful, for example of time or energy, in the performance of duties and failing to produce adequate results.

Individual performance: Employees' own ratings of indicators of their individual performance.

Job insecurity: An employee's perceived threat of losing their job, and the worry and anxiety that accompany that perception (Jiang & Lavaysse, 2018).

Layoff: The termination of employees, with or without advance notice, for reasons other than performance.

Morale: The mental and emotional condition of an individual or group with regard to their work, related to enthusiasm and team spirit.

Organisational performance: Ratings of indicators of organisational performance and of the attainment of organisational goals.

Private businesses: Businesses that are owned by private individuals or groups, and not by government.

Quality of life (at work): A multifaceted concept that includes satisfaction with salary and the ability to meet financial obligations, job security, participation in decision-making, overall job satisfaction, job motivation and organisational commitment.

Retrenchment: The reduction of the number of employees by an organisation, or a government ministry or department, in order to reduce costs, for reasons that are not related to workers' conduct or capability, and usually intended to improve the quality of services delivered in the long run.

Survivor syndrome: The set of negative emotional and behavioural reactions, such as fear, anxiety and reduced commitment, that employees who remain in an organisation show after a retrenchment.

References

Adeoye, A. O., & Lawrence, E. M. (2021). Organizational downsizing and survivors' performance: A study of First Bank Plc. The International Journal of Management, 5(9).

Inyang, E. B., & Williams, O. W. (2019). Mixed-method evaluation perceived approach and criteria of employee's retrenchment in selected commercial banks in South-West, Nigeria. South Asian Journal of Social Studies and Economics, 4(4), 1–13.

Jiang, L., & Lavaysse, L. M. (2018). Cognitive and affective job insecurity: A meta-analysis and a primary study. Journal of Management, 44(6), 2307–2342. https://doi.org/10.1177/0149206318773853

McGregor, D. (1960). The human side of enterprise. McGraw-Hill.

Omoruyi, Q., Chipunza, C., & Samuel, M. O. (2011). Perceptions of justice and extra-role behaviours of survivors after organisational restructuring at a consolidated bank in Nigeria. SA Journal of Human Resource Management, 9(1), Article a344. https://doi.org/10.4102/sajhrm.v9i1.344

Pepple, D. G., Akinsowon, P., & Oyelere, M. (2023). Employee commitment and turnover intention: Perspectives from the Nigerian public sector. Public Organization Review, 23(2), 739–757. https://doi.org/10.1007/s11115-021-00577-7

Van Dick, R., Drzensky, F., & Heinz, M. (2016). Goodbye or identify: Detrimental effects of downsizing on identification and survivor performance. Frontiers in Psychology, 7, Article 771. https://doi.org/10.3389/fpsyg.2016.00771