The Role of Slack in Transforming Organizations

Abstract

We review the argument for and against keeping slack during the transformation of a plan-filling organization to a profit-seeking firm. Before the demise of the command economies, organizations in Central and Eastern European (CEE) countries were typified as being overstaffed, although the degree of overstaffing (slack) varied from country to country. This article reports on two small empirical studies in East Germany and Slovenia and examines the experiences of downsizing and its effects on the remaining staff. The findings, especially from East German companies, demonstrate the potentially corrosive effects of staff cutbacks on levels of information exchange and trust among surviving work-group members. Evidence from the Slovenian firms indicates that some degree of slack can have very positive consequences for information exchange and trust. In neither case did managers perceive and attempt to mobilize slack as a strategic resource.