Problems arose when new work groups were formed from what remained of old groups. The more unstable the work group, the more impediments to innovation. Second, open communication between decision-makers and staff allowed more creative work after layoffs. Finally, they found, the degree of downsizing that staff anticipate in the months before layoffs correlated with greater or lesser creativity in the months following. Those who expected more layoffs reported lower levels of risk-taking, less creativity, and lower morale.
Innovative work can survive when staff spend less time anticipating a downsizing.
What Downsizing Does to Creativity. Duke, Daniel L., and Timothy J. Carman. Noer, David M. Healing the Wounds. Oehm, J. Kent. No. OERI RR93002006.