Opening up their values: how CEOs conservation and openness to change impact downsizing decisions

Abstract

PurposeBased on the theory of basic human values, this study aims to examine the impact of CEO conservation (i.e. security, conformity and tradition) and openness to change (i.e. self-direction, stimulation and hedonism) values on one of the most conflictual decisions inside a firm: workforce downsizing.Design/methodology/approachThe hypothesis testing was done in the context of all workforce downsizing decisions made by German companies (and their CEOs) listed on the German Prime-Index between 2005 and 2019. A software-based psycholinguistic assessment of various sources of CEO communications was conducted to tap into their underlying values.FindingsTobit regression analysis confirms that CEO conservation and openness-to-change values impact the severity of workforce downsizing. Namely, the higher the CEO conservation values, the lower the downsizing severity (i.e. employees dismissed in relation to overall workforce). In contrast, the higher the CEO openness to change values, the higher the downsizing severity.Originality/valueAgainst prior research that has centered around political ideology as a proxy to understand the mechanisms through which values impact strategic decisions, the present study employs advanced measurement approaches to assess the general impact of CEO values on critical firm decisions. As such, the study contributes to upper echelons research by offering a new perspective on how CEO values impact critical firms' decisions.