The effects of job insecurity on satisfaction and perceived organizational performance.

This research examines the effects of job insecurity on job satisfaction and organizational performance. Performance was measured with perceptual data. A total of 320 employees from various organizations participated in the research. The hypothesized model was tested by means of structural equation modeling. The findings show that job insecurity has a significant negative impact on employee satisfaction and an indirect effect on perceived organizational performance.

Keywords: job insecurity; job performance; job satisfaction; organizational performance

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Job insecurity is an employee's perception that his or her job is uncertain and may come to an end sooner than expected. From what has been theorized and inferred, it is understandable that job insecurity is highly threatening to employees given the prospect of losing the positive material, social, and psychological benefits associated with employment (De Witte, 1999). The notion that job insecurity may produce negative individual-level effects is well established. In Korea, for example, a devastating financial crisis in the late 1990s brought about changed labor laws that permitted firms to fire or impose early retirements on many working heads of families. This is tantamount to complete loss of face and standing in Korean society (Kim & Park, 2006). Research into job insecurity has provided consistent evidence across firms, industries, and countries that job insecurity is associated with negative employee attitudes, behaviors, and health (see meta-analytic evidence, Sverke, Hellgren, & Naswall, 2002). For example, performance effects include reduced effort (Brockner, Grover, Reed, & DeWitt, 1992), poor safety compliance by employees (Probst & Brubaker, 2001), reduced organizational citizenship behavior (Feather & Rauter, 2004; King, 2000; Wong, Wong, Ngo, & Lui, 2005), and increased deviant behavior (Lim, 1996). Despite this growth of evidence in the job insecurity literature, no research has linked individual-level effects to organizational-level effects even though it is intuitive that employee outcomes should be associated with organizational performance.

This logical connection is not surprising considering that it is one of the earlier propositions of job insecurity theory (Greenhalgh, 1983, p. 433). This theory predicts that employees will demonstrate a decrement in their behavior and attitudes as their job insecurity increases. Specifically, they will be less productive, resist change, and begin to turn over. These intermediate outcomes are hypothesized to affect organizational performance. Importantly, this nexus of effects also predicts a reciprocal effect. Surviving employees infer, on the basis of ongoing organizational decline, that their own jobs are less secure. Research shows that job-insecure employees behave less effectively than their job-secure counterparts, but we don't know if this behavior is detrimental to firm performance. This is unfortunate from a pragmatic standpoint as we are not in a position to advise managers--other than for humanitarian reasons--why employee job insecurity should be minimized.

Any tacit acceptance of the notion that job insecurity can or should be avoided does not cohere with business reality. There are obvious trade-offs between human capital strategy and performance goals (Turnley & Feldman, 1998). Actions intended to strengthen corporate competitive positions may also act to reduce employee security (e.g., downsizing or restructuring). So although employees will take job threats in a decidedly negative light, senior managers may view structural changes that lead to job losses as a necessary albeit difficult part of their role as decision makers. Managers justify difficult human resource decisions in the name of organizational survival. The collateral effects of job insecurity on organizational performance are not clear enough to argue otherwise.

The present research provides a rationale to assist job insecurity research in explaining its effects on organizational performance. We reason that employee reactions (job satisfaction) will mediate effects on organizational performance. We base this on existing job insecurity theory to account for individual-level effects and integrate this with human resource management theory (HRM) to explain job insecurity's effect on organizational performance (Huselid, 1995). There are limitations to this approach, particularly in light of the complexity of explaining organizational performance and the difficulty of validating multilevel relationships (Kozlowski & Klein, 2000). We believe that it is important to identify relationships between job insecurity, its known effects, and subsequent organizational performance. As such, the two objectives of this research are to provide evidence for association between job insecurity and meaningful business outcomes in the form of perceptual measures of organizational performance, and to investigate how job satisfaction plays a mediating role in the relationship of job insecurity with organizational performance.

Theoretical Background

Job insecurity is defined as the perceived stability and continuance of one's employment with an organization (Probst, 2003). Job insecurity among today's employees is not surprising given the competition that businesses endure and the intense pressures to remain profitable. One of the common means of reducing variable costs for organizations is via layoffs (Nixon, Hitt, Lee, & Jeong, 2004). Each year millions of U.S. workers are terminated by their employers to reduce costs (Bureau of Labor Statistics, 2006). This would be of little concern to firms except that surviving employees usually react negatively to perceptions of job insecurity. This is particularly true in professional or managerial positions where strategic decision making has a great influence on organizational performance (Hitt, Bierman, Shimizu, & Kochhar, 2001).

Job insecurity has been defined differently in the literature by researchers, some of whom treat it as a global perceptual construct specific to the job (Caplan, Cobb, French, Van Harrison, & Pinneau, 1975), whereas others view it as a multidimensional construct composed of job threats and of threats to valued job features (Ashford, Lee, & Bobko, 1989; Blau, Tatum, McCoy, Dobria, & Ward-Cook, 2004; Lee, Bobko, & Chen, 2006; Sverke, Hellgren, & Naswall, 2006). Still others have described differential conceptions of job insecurity as general awareness of economic trends, company-level job insecurity, individual-level job insecurity, and anticipation of job loss (Mohr, 2000). Most researchers treat job insecurity as a perceptual variable based on environmental cues (De Witte, 1999). For the purpose of this research, we draw on the global meaning of job insecurity and regard it as an individual-level variable. We believe this definition of job insecurity is consistent with the fundamental psychic and material gratification that people derive from their jobs and cannot be readily abandoned. Job features may be an important source of insecurity, however, they differ from job insecurity because job features (e.g., autonomy, challenge, and the like) may be reduced or eliminated, posing no similar financial threat to that of job loss. Ransome (1998) argues this point by suggesting that job insecurity draws its meaning from the importance of work in contemporary society given that it is fundamentally linked to material and psychological satisfaction (p. 47).

We also reason that job insecurity, as a global perceptual construct, is best understood as a cognitive assessment related to a person's uncertainty about his or her general environment. This is different from being given formal notice by a manager, for example, that one's job is at risk for underperformance or too many late starts at the beginning of the workday. One can view such feedback as threatening but also clarifying of future requirements. Job insecurity is about not knowing what is necessary to keep one's job, whereas a supervisor's feedback is about knowing that one's job is at risk for specific reasons that may or may not be directly responded to by the employee. This distinction is important because job insecurity that stems from not knowing is likely to be endemic to an organization's HRM policy and is generalizable across areas of an organization. Thus, although job insecurity remains a unique intra-individual variable, the conditions of uncertainty that generate job insecurity (not knowing) are likely to be common to more than isolated individuals.

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