Counteract the Negative Impact of Layoffs

After seeing the tremendous number of layoffs in January and February, I was struck by the many reports showing the negative impact layoffs have, not just on employees and morale, but on actual company financial performance. Just look at this one example cited recently in Bnet:

“One of the most documented issues is that mass layoffs often leave companies worse off financially than they were. For example, between the summers of 2000 and 2001, Bain & Company studied layoffs at S&P 500 companies. A bulk came from the tech sector, with telecom, computers, semiconductor equipment, office electronics, and electronics accounting for at least 44 percent of the layoffs. The findings ran counter to what many executives believe:

• Just over 25 percent of the companies announced layoffs — certainly a significant portion, but far from a universal reaction.
• The best performing stocks were for companies that did the fewest layoffs. Companies that laid off between 3 and 10 percent of employees had, on average, flat share prices. Those that laid off more than 10 percent saw shares drop by 38 percent.
• Adjusted for sales growth rates, companies that don’t downsize outperformed those that did.
• Unless positions can be eliminated for long enough — at least six to 12 months, and possibly as long as 18 months for knowledge-based businesses — there is no financial payback to the company because it typically has to hire replacement workers as conditions are getting better.

“[The Bain Report concluded]: ‘Big job cuts can also affect the employees who stay. Declining morale means lower productivity — many will spend time looking for new jobs. Employees will tend to be less innovative, and less willing to take bold steps to solve problems.’”

The Globe and Mail (access requires subscription) also wrote on “workers worrying about cuts…to almost everything that makes them feel valued and enables them to do their jobs with a degree of satisfaction and a measure of accomplishment.” This article made three excellent observations:

“You heighten stress and undermine performance when you tell people they are lucky to be employed.”

“You can’t get blood from a stone. And if you treat people like disposable units of productivity, you will generate even more cynicism and erode any existing shred of loyalty.”

“Understand worker psychology. In tough times, people want to be comforted, not terrified. They also want to feel part of something bigger than themselves.”

Reduce stress and increase performance by telling people you appreciate them and their efforts.

Reduce cynicism and increase loyalty by fostering a company culture employees want to be a part of, contribute to and help ensure stays around

Communicate clearly the needs of your company (your strategic objectives) and, more importantly, show employees how their individual, specific efforts and tasks help the company achieve those objectives. Do so in the most positive way possible – with strategic recognition. Let them be a visible, knowledgeable part of your efforts to retain your competitive advantage and market share.

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