The shock of mass layoffs is just the beginning for companies

“After almost 8.5 years at Google, I was notified this morning that I was going through a staff reduction and no longer have a position at the company. . . I had planned to spend my entire career at Google, so this news was extremely difficult to digest.”

LinkedIn is inundated with messages like this from Google employees who suddenly lost their jobs over email this month. Some had devoted decades of their lives to the business. Alphabet, Google’s parent company, is among the tech giants that are cutting their workforce by the thousands. In the entire sector, some 200,000 jobs have been cut in the past year.

A fired Google employee told the Financial Times: “The company motto is ‘respect the user, respect the opportunity and respect each other’. Who are they trying to fool?” As distressing as it is to lay off entire teams — and as contrary to corporate public image and management style — there are good reasons why mass layoffs need to be swift. The abruptness of the layoffs can be attributed to an effort to protect intellectual property and customer relationships, prevent staff from handing over data, and other security reasons.

But after the initial shock has passed, 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 and regain it, points out that research shows that layoffs have a detrimental effect on employees and company performance. “The reason mass layoffs don’t ultimately pay off is that they destroy trust within an organization,” she says.

Companies that have spent years and huge amounts of money on training staff are letting not only institutional knowledge, but also their networks of relationships walk out the door.

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

The so-called survivors, like my friend, now have less confidence in their employers and will worry about future layoffs. This remaining workforce may resent having to take on a heavier workload in more difficult circumstances, which in turn will lead to more staff departures. According to researchers at the University of Wisconsin-Madison and the University of South Carolina, cutting a workforce by just 1 percent can lead to a 31 percent increase in voluntary turnover the following year.

Goodwill is fragile. Most people who thrive at their jobs go above and beyond what is asked of them. Mass layoffs send the message that instead of hiring someone for everything they bring to work and their future potential, they are just a cog in a machine.

Employees who choose to stay, knowing that hard work and high performance do not guarantee employment, are more likely to do the bare minimum or be less innovative when a company needs it most. All this leads to long-term profit.

Companies like Alphabet are doing the right thing in the short term: paying severance pay, bonuses and remaining days off, as well as six months of health care, access to employment services and immigration support. But those who are laid off can be affected for life, as many were after the 2008 financial crisis. They could take a hit to both their health and finances. A new job for equal or higher pay often does not come immediately.

Mass layoffs are a shock to leavers and stragglers alike – and that’s important, in the long run. Companies can learn from what happened: they need to grow more sustainably and hire more disciplined. As Sucher says, if executives are serious about employee well-being, they must continually plan for future workforce changes and work through difficult periods. Leave payments, bonus withholding, pay cuts and voluntary redundancies are among the options. If the pandemic has taught businesses anything, it’s that there are other ways to move forward in difficult times.

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