LAYOFFS AND RETENTION STRATEGIES IN THE IT INDUSTRY: A MODERATED MEDIATION MODEL OF JOB SATISFACTION AND EMPLOYEE TRUST USING PLS-SEM

Abstract

This research queries the combined effect of layoffs and retention policies on employee behaviour in Information Technology (IT) sector. The study builds upon the Social Exchange Theory and Psychological Contract Theory and develops a mediated mediation model to investigate how job satisfaction would serve as a psychological bridge and how employee trust would serve as a boundary condition during organizational restructuring. A cross sectional, quantitative survey was performed on 290 IT professionals in Chennai, India. Analysis was done by Partial Least Squares Structural Equation Modeling (PLS-SEM). Measurement model was tested to detect reliability and convergent validity, and structural model was tested to determine the presence of direct, mediating, and also moderating effects. These findings indicate that there is no significant direct influence of layoffs on employee behavior; rather the influence is completely mediated by job satisfaction. On the other hand, the retention strategies have both direct and indirect positive effects on behavior. Moreover, these relationships are heavily moderated by employee trust: high employee trust damps negative effects of layoffs on job satisfaction and right-hand side influences the marginal utility of retention practices. The restructuring organizations need to focus on establishing clear communication channels and building trust to reduce the negative implications of layoffs in the organization. Emphasis on retention programs, including work life balance and career development is critical to high levels of job satisfaction and positive major behavioral outcomes in the volatile information technology industry.