We’re approaching the time of year when employee layoffs gain additional, typically outraged, media notoriety as the masses decry workers being let go just before the holidays. But the reality is that downsizing is a year-round phenomenon that affects every industry—even if some corporate layoffs tend to glean greater attention due to the high profile of the companies involved.  

WeWork, the co-working space provider and knowledge-economy darling, is a prime example. It has fallen on hard times of late, seeing the departure of rock star founder and CEO Adam Neumann and announcing layoffs of nearly a quarter of its global workforce as new leadership aims to steer the company towards profitability. 

Some Canadian companies have gained attention for the decision to shed talent of late, as well, namely in the cannabis sector—think Hexo and CannTrust Holdings. It seems investors are no longer quite as enthused about the potential of cannabis companies as distribution network buildout lags and supplies choke up warehouses across the country. Then there’s the manufacturing industry, in particular sectors in perpetual flux such as automotive, where plant slowdowns or shutdowns and the regular thinning of worker headcounts are commonplace. 

And for the past decade, the long, slow decline of the print media industry across North America has commanded the attention of industry watchers who wonder how long our once-mighty newspapers and magazines can survive with declining revenue and skeleton staffs. 

HR professionals, business owners and managers would all agree that at times, redundancies are both inevitable and essential to organizational advancement. In some cases, surgical layoffs can be a tool to introduce new talent, systems or processes that improve efficiency. But in the case of a mass downsizing (for a small to medium-sized organization, this could even amount to a handful of key people if the workforce is relatively small), the opposite can occur. A tactic designed to cull underperforming or redundant employees and benefit the business can easily backfire. 

Why? HR professionals understand that it’s not only terminated employees that require post-employment support. So-called layoff ‘survivors’ need as much—perhaps even more—help to navigate what can often be an entirely new, overwhelming and sometimes far less pleasant workplace experience. 

The truth is that growth-focused companies typically don’t lay off staff. If you’re not growing, as the entrepreneurial mantra goes, you’re dying. Employees are keen tea leaf readers who look for signs of confidence from leadership. A contraction is a surefire signal that a business is either in trouble or in danger of collapse. When the ship starts to list, many will begin exploring exit options, or will become disengaged as pink slips get distributed and they’re left to carry on. After all, some will reason, ‘If the boss doesn’t care about her employees, why should we care about the company?’  

A 2018 article:  in Harvard Business Review, citing several international studies, highlighted some of the most significant ramifications of corporate layoffs:

  • “Companies that shed workers lose the time invested in training them as well as their networks of relationships and knowledge about how to get work done
  • Charlie Trevor of University of Wisconsin–Madison and Anthony Nyberg of University of South Carolina found that downsizing a workforce by 1% leads to a 31% increase in voluntary turnover the next year.
  • A 2002 study by Magnus Sverke and Johnny Hellgren of Stockholm University and Katharina Näswall of University of Canterbury found that after a layoff, survivors experienced a 41% decline in job satisfaction, a 36% decline in organizational commitment, and a 20% decline in job performance.”

The ‘survivor’ phenomenon is one that’s often overlooked or downplayed by business leaders. It’s easy to assume that because these individuals have retained their employment, they’ll be relieved (even happy!) and will be eager to contribute more ideas, work harder and drive the success of the organization. But in the wake of a significant round of layoffs, survivors experience a range of emotions and adopt behaviours that may be uncharacteristic and not reflective of their true work ethic. They include:

Survivor guilt—Most of us spend more time with our work colleagues than our families, so, naturally, we tend to form strong bonds in the workplace. The harsh reality is those kinships can be torn apart with the stroke of a manager’s pen. Survivors will often feel guilt for retaining their position when a colleague has been let go, while questioning why they weren’t the ones getting the axe. Many employees also feel guilty or have loyalty split between the employer and former colleagues—if they want to spend time socially with a terminated ex-co-worker, for example, or to stay connected through social media. This conflict can also lead to disengaged employees.  Employers can set out expectations in workplace conduct policies, while leaders should be prepared to have candid conversations with survivors as to why they were kept on and what their ongoing employment means to the organization.

Bitterness and disengagement—Again, it’s very common for employees to become disillusioned and begin questioning the employer brand their organization has so carefully crafted and projected. ‘If our employee culture is so important,’ they might wonder, ‘why did they just upend it by laying off so many people?’ Fiscal realities often take a back seat to the sense of disappointment and eventual disengagement as employees feel abandoned by management. 

Negative brand association and impact on employer brand—For knowledge-economy businesses especially, their employees are their best brand advocates and recruiters. They’re the ones who spread the word through referrals to friends, to the masses via their preferred social channels or job-rating websites that an organization is a worthwhile place to work. Layoffs—and how they’re managed (more on that in our next blog)—typically have an immediate negative impact on an organization’s employer brand. 

Confusion and anxiety—There are extreme instances when employees are put on a target list of workers to be terminated, but told their jobs might be saved if enough of their colleagues take voluntary buyouts. In others, they see the writing on the wall and can predict they’ll be next in line to be made redundant. To say this causes widespread uncertainty and anxiety would be a gross understatement. Organizations often fail to clearly communicate why layoffs are happening, who’s being affected and why, and the business plan to move the company forward. In many cases, employees will fill an information vacuum with rumour and innuendo, further curtailing productivity and depressing morale. 

Overwhelm and burnout—Simply put, fewer employees means more work for survivors, who can become quickly overburdened by their increased task loads and responsibilities. Product or service quality are often compromised, not to mention safety in safety-sensitive work environments such as manufacturing facilities or construction sites. 

Decreased productivity—Last, but certainly not least, any short-term spike in survivor productivity is usually lost over time as those aforementioned emotions take their toll. Some employees will roll up their sleeves and give 110 per cent, but most won’t, unless the process is managed effectively. 

We simply can’t underestimate the impact that layoffs have on an organization’s employee culture. In the second part of this blog, we look at tactics to effectively manage the layoff process and mitigate many of the most common productivity- and engagement-compromising risk factors.