From downsizing to strain: how transformational leadership and job demands shape employee well-being in SMEs

Purpose This paper examines the role of organizational downsizing on employee stress among small and medium-sized enterprises (SMEs) by incorporating the Job Demands Resource (JD-R) theory. It analyses the relationship between job demands as a mediator of the relationship and transformational leadership (TL) as a moderating resource likely to alleviate the negative effects of downsizing. Design/methodology/approach The structured questionnaires were used to gather data on 282 employees employed in 50 SMEs in Sargodha, Pakistan. The study has employed partial least squares structural equation modelling (PLS-SEM) to test the direct, indirect, and conditional relationship between downsizing and employee strain via job demands and TL. Findings The findings indicate that downsizing does not have a direct impact on employee strain. Rather, it raises job demands, which in turn raise strain, confirming the mediation process suggested by the JD-R framework. Moreover, transformational leadership has a significant effect in lessening perceived job demands, which is important in undermining the indirect relationship between downsizing and strain. These outcomes demonstrate the critical importance of leadership as a job resource that can buffer stressors caused by change in different organizations. Practical implications The management of the SMEs should focus on providing clear role definition, equal redistribution of tasks, and facilitative leadership behaviours in the restructuring. Transformational qualities can be developed through leadership development programs to maintain the well-being of employees during downsizing. Originality/value The study contributes to the JD-R theory in that it establishes job demands as an important mechanism that connects downsizing with strain and illustrates that TL is a protective boundary condition. It presents new evidence by the SMEs in an emerging-economy situation where the pressure of downsizing and the scarcity of resources are best felt.