Decision-making on downsizing in an industry specific downturn: a qualitative study on the Norwegian petroleum sector’s decision-making on downsizing following the drop in the oil price
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This master thesis seeks to explore the decision-making processes in firms that follow a decrease in demand due to an external shock. Specifically, decision-making connected to human capital and downsizing in Norwegian firms in the petroleum industry after the drop in the oil price in 2014 is explored. The purpose is to understand how the need for downsizing is identified and the ensuing selection of whom to lay off, followed by examining the execution of the layoff process itself. Further, the thesis wishes to uncover how different implications of the oil crisis impact the amount of layoffs in a firm. The study is of an explorative nature and is based on qualitative data. The empirical findings in this study are based on 14 in-depth, semi-structured interviews with decisionmakers in the same amount of firms in the Norwegian oil and gas industry. In addition, the firms that were interviewed have previously answered an extensive survey on which measures they have taken as a result of the drop in the oil price and findings from this are also used. The conclusion from the research is that perceived negative impacts from the crisis combined with the expected length of the downturn for a firm seem to affect decisionmaking and the number of layoffs. The decision-making process is also affected by several other factors. The experiences of decision-makers are found to have a large impact on the decision-making process. Contagion effects through what competitors are doing and how the crisis is portrayed in the media is according to the firms not impact decisions, but this might be affected by self-serving bias of the interviewed decisionmakers. Prospects of loss and gains for the future are expected to influence the decisions made, and this is supported for some firms, but not for others. In addition, motivation of remaining employees is found to be of importance to the decision-makers. The thesis outlines how the decision-process unfolds in the companies interviewed. The decision-process is found to include the management team in most firms. Some small firms are highly influenced by the CEO, whereas other, more hierarchical firms involve middle managers to a large extent. Employees themselves are not involved in the process until at the very end.