The mass layoff shock is just the beginning for businesses

The mass layoff shock is just the beginning for businesses

“After almost 8.5 years at Google, I received the news this morning that I am affected by the downsizing and no longer have a role in the company. . . I envisioned spending my entire career at Google, so this news was particularly hard to digest.”

LinkedIn is full of posts like this one from Google employees who suddenly lost their jobs via email this month. Some had dedicated decades of their lives to the company. Google’s parent company Alphabet is among tech giants shedding thousands of its workforce. Overall, the industry cut around 200,000 jobs last year.

A fired Google employee told the Financial Times, “The company’s motto is ‘respect the user, respect the opportunity and respect each other’. Who are they kidding?” As stressful as it is to lay off entire teams – and as much as it is against corporate public image and management style – there are good reasons why mass layoffs need to happen quickly. The abruptness of the layoffs could be attributed to trying to protect intellectual property and customer relationships, preventing employees from transferring data, and other security reasons.

But after the initial shock, are employers aware of the long-term consequences of their actions? Sandra Sucher, co-author of The Power of Trust: How Companies Build It, Lose It, Regain It, points out that research shows that layoffs are detrimental to employees and company performance. “The reason mass layoffs don’t pay off in the end is because they destroy trust within an organization,” she says.

Companies that have invested years and vast sums of money to train employees let not only institutional knowledge but also their network of relationships out the door.

A friend at a large tech company was in a Slack chat with 15 colleagues, working to resolve a bug. Then 12 of the group were fired. The Slack chat died and the issue remained unresolved. “You’re not just replacing that story, that conversation, that expertise,” he says.

The so-called survivors, like my friend, are now probably less trusting of their employer and afraid of future layoffs. This remaining workforce may resent having to take on a heavier workload in more difficult circumstances – which in turn will lead to further attrition. According to researchers at the University of Wisconsin-Madison and the University of South Carolina, just a 1 percent reduction in staffing levels over the next year can result in a 31 percent increase in voluntary staff turnover.

Goodwill is fragile. Most people who are successful at work do more than what is asked of them. Mass layoffs send the message that they are just a cog in a machine, rather than hiring someone for everything they bring to work and their future potential.

Workers who choose to stay because they know that hard work and performance don’t guarantee employment may be more likely to do what’s needed or be less innovative when a company needs it most. All of this suggests profits in the long run.

Companies like Alphabet are doing the right thing in the short term: paying out severance pay, bonuses, and vacation days left over, as well as six months of health care, access to job placement services, and assistance with immigration. But those who are laid off can be impacted for life, as many were after the 2008 financial crisis. They can affect both their health and their finances. A new job with the same or better pay often does not come immediately.

Mass layoffs are a shock to leavers and those left behind – and that counts in the long run. Companies can learn from this: They need to grow more sustainably and hire in a more disciplined manner. As Sucher says, if leaders are serious about employee well-being, they must continually plan for future workforce changes and weather difficult times. Holiday pay, withholding bonuses, salary cuts and voluntary redundancies are options. If the pandemic has taught businesses anything, it’s that there are other ways to move forward in tough times.

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