Article: How to keep employee morale high in the face of layoffs

Many companies are forced to consider layoffs as a way to cut costs and maintain profitability. However, while layoffs may be necessary in some situations, they often have unintended consequences, including a significant drop in employee morale, productivity, and engagement.

When layoffs are mishandled, companies risk losing the trust of their remaining employees, which can result in long-term damage to performance and profitability.

Layoffs, even when well-executed, tend to disrupt workplace dynamics. Research from Edelman’s 2022 Trust Barometer shows that job loss is the top concern for 85% of employees, and layoffs can severely undermine trust between employees and management. Once employees witness their coworkers being laid off, they often experience what experts call "survivor syndrome"—a mixture of anxiety, guilt, and fear over their job security. This emotional upheaval can decrease productivity, innovation, and morale, as employees focus more on self-preservation than on contributing to the organization.

Studies also show that layoffs can negatively impact companies in ways that are difficult to measure. For example, employees who survive the cuts may experience increased workloads, leading to burnout and reduced job performance. Moreover, the reputational damage from layoffs can make it harder for companies to attract and retain top talent in the future.

The Long-Term Impact of Layoffs

The psychological and financial toll of layoffs is severe for those who lose their jobs and those who remain. Studies have found that being laid off is one of the most stressful life events, ranking above divorce or the death of a close friend. The aftermath of a layoff can have serious health implications: displaced workers are more likely to develop stress-related illnesses like hypertension and heart disease. Financially, workers who lose their jobs during economic downturns may face years of reduced earnings, with some studies showing a 30% decline in earnings following a layoff.

For companies, layoffs can lead to immediate financial costs such as severance packages, but the hidden costs can last much longer. A study of Fortune 1000 companies between 2003 and 2007 found that companies conducting layoffs underperformed for up to three years, particularly in areas like return on assets and profit margin. This underperformance is often attributed to the loss of trust, increased workload for remaining employees, and the loss of institutional knowledge that comes with layoffs.

Building Trust Amid Layoffs

Layoffs destroy trust, but companies can mitigate this damage by adopting transparent and empathetic approaches. There are several strategies that companies can use to maintain productivity and employee engagement during layoffs:

Acknowledge Employee Anxiety: Employees are likely to feel scared and anxious during periods of layoffs. Companies should be patient and provide space for employees to express their concerns. Management can help channel this energy into constructive efforts, such as reskilling or focusing on high-priority tasks.
Be Transparent: Open communication about the criteria for layoffs can reduce rumors and help employees prepare for what might come. Employees who understand the reasoning behind layoffs are better able to focus on improving their performance or planning for their next steps, rather than succumbing to fear and uncertainty.
Don’t Make False Promises: It’s tempting to reassure employees by telling them they are safe, but unless management is 100% certain, this can backfire. If employees see colleagues getting laid off after being told they were secure, trust in leadership will erode, making future conversations more difficult.
Set Boundaries: To avoid overwhelming employees with constant check-ins and questions about the company’s status set clear boundaries. For instance, designate a specific time for employees to ask questions about layoffs, so they don’t feel the need to continually check in.
Offer Post-Layoff Support: Offering to provide references and assistance with job searches for those who are laid off can ease anxiety. This support shows that the company values its employees and can help preserve relationships, even after the layoff.

Read also: News: Australia’s largest employer to cut jobs by 60% (peoplemattersglobal.com)

Addressing Workload and Employee Well-Being

Layoffs inevitably lead to increased workloads for the employees who remain, which can create stress, burnout, and reduced productivity. Companies need to take proactive steps to manage these challenges and maintain a motivated workforce:

Redistribute Tasks Fairly: Instead of overburdening a few employees, ensure that the remaining workload is evenly distributed. Consider reorganizing teams to optimize efficiency and reduce stress.
Plan for the Long Term: If layoffs are staggered, use the time between rounds to plan how work will be managed. This reduces the chaos that often follows layoffs and helps employees feel more secure about their role in the company.
Focus on Employee Well-Being: Offer emotional support and wellness resources, such as counseling or employee assistance programs (EAPs). Many employees may be dealing with survivor syndrome, and providing mental health resources can help them cope with the added pressure.

The Role of Recognition and Professional Development

Layoffs can make employees feel undervalued and insecure. To counteract this, companies should recognize and reward employee efforts, as well as offer opportunities for professional growth.

Recognition Programs: Publicly recognizing employees for their hard work can improve morale and engagement. Financial rewards are one option, but non-monetary rewards, such as professional development opportunities or promotions, can also have a significant impact.
Invest in Training and Development: Companies should offer training programs that help employees develop new skills, particularly those that align with the company’s strategic goals. This not only boosts employee morale but also enhances their sense of job security, as they feel more equipped to handle future challenges.

Flexible Work Arrangements

Increased workloads and stress can quickly lead to burnout, but flexible work arrangements can help employees maintain a healthy work-life balance. Offering options like remote work or flexible hours can allow employees to manage their increased responsibilities without sacrificing their well-being.

Tips for Maintaining Productivity and Engagement During Layoffs

Transparent Communication: Keep employees informed about the reasons for layoffs and the company’s plans moving forward.
Emotional Support: Offer resources like counseling and stress management programs to help employees cope with anxiety and survivor guilt.
Fair Workload Distribution: Avoid overburdening remaining employees by redistributing tasks evenly.
Training and Development: Invest in professional development to boost employee confidence and engagement.
Flexible Work Options: Provide flexible working arrangements to help employees manage increased workloads and reduce stress.
Recognition and Rewards: Regularly acknowledge employee contributions to maintain morale and motivation.