Layoffs: When the Ax Falls

During the pandemic, companies experimented with options to ease the trauma. They quickly adapted to compromises such as no-layoff pledges, furloughs, grants of extra personal time off and trimming executives’ salaries first. Their pitch was that they cared sincerely about employees’ welfare. That said, more recent rounds of staff reductions may make that message ring hollow.

The pain of layoffs
On a personal level, being laid off can be as stressful as divorce or the death of a close friend. On average, it takes a couple of years to fully recover from the psychological blow. In the meantime, studies have documented an increase in depression, substance abuse and violent behavior, and even suicide risks mount, from 1.3 to three times normal rates.

Workers feel the sting of betrayal. Having so long heard the “Our people are our greatest assets” mantra, now they have become skeptical. In 2008 and 2009, after the Great Recession, 65% of U.S. companies laid off some employees. According to the Harvard Business Review, those firms witnessed declines of 20% in job performance, 41% in job satisfaction and 36% in organizational commitment; at the same time, voluntary turnover swelled by 31%.

Companies face negative publicity as competent talent heads for the door. They take with them a wealth of hard-won knowledge. Against a backdrop of insecurity, innovation is stifled as hanging onto a job becomes the foremost priority.

Recent trends in technology and social media are exacerbating the damage. Bad news spreads like wildfire, both inside and outside the firm. Channels like Slack, team messaging and other routes disseminate downsizing stories among employees, the press and trade media, feeding on enhanced scrutiny.

How managers can help mitigate low morale
While their workers face traumatic job losses, managers are in their own hot seats. It is their uncomfortable role to act as moderators between workers and the company, and in the eyes of employees, they represent the employer. They recognize their duty to try to prevent a mass exodus.

Even before the layoffs are officially announced, employees are likely picking up signals and growing skittish. Key talent may already be starting to depart. And it would help if you had a solid game plan to alleviate the pressure and boost morale.

Open communication is paramount to dispelling uncertainty and secrecy. It is essential for retaining or rebuilding trust. Be truthful and transparent about any restructuring. You may need to explain to workers how the business actually makes money. Many of them may not have fully thought it through in those terms.

Depending on your direct reporting responsibilities, you may want to kick off with a larger group meeting. Keep it real and to the point: state the facts, explain the rationale and answer questions. Acknowledge the hard work of those who are being cut back, and express sincere gratitude for all they have done. Acknowledge loss and regret. You should also come prepared with a plan, however rudimentary, for how you intend to fill in the gaps and establish new responsibilities. Your framework will also indicate how carefully you are thinking it through.

Consider additional steps:

• Promise to deliver progress reports — and do so regularly.
• Set up a rumor hotline to address gossip.
• Identify weak supervisors, measure performance and reward top performers.
• Offer counseling.
• Don’t drag out the process, which jeopardizes customer relationships.
• Make leaders more visible.
• Keep track of where departing employees go.
• Continue limited hiring, which tells the world you are still ticking.

Survivors’ guilt
You need to keep the remaining employees engaged, motivated and productive. Increase their tools and technology to help redistribute extra workload pressure. Reassure them that their jobs are secure, explaining why certain positions have become obsolete.

Build team cohesion through the following strategies:

• Express your gratitude through thank-you notes, awards and trophies.
• Bring the team together for lunches and after-work gatherings.
• Encourage surviving team members to support former colleagues with references and networking.

Above all, the remaining employees seek affirmation that they have a future role in the organization. Be compassionate, but don’t overpromise.

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