Why do layoffs happen in the first place?
They are a corporate reality that can be caused by many things.
It could be an under-performing product line, a department that does not hit sales targets, the impact from a merger, a company that falls behind the technology curve or did not anticipate market events or it could even result from large-scale economic downturn.
So many reasons.
These things happen… a lot. They just do.
A staff reduction is something that a firm does with extreme reluctance – a sacrifice made to head off a major problem at the firm – a last resort… a failure of the firm’s leadership to anticipate something important.
Damage from Layoffs:
Layoffs may address a potential problem, but they also damage the Fabric of an Organization:
- The flow of information is interrupted, impacting productivity
- Projects are impacted and so is quality
- Customer service may suffer
- It breaks the unspoken trust that employees have with their employer (I will trade you my best work and my time for employment and support for me and my family)
- People lose friends and colleagues
Just the rumor of a layoff creates fear, which can drive survivalist behavior and impact teamwork.
“Benefits” of Layoffs:
What!? Benefits?
Layoffs can quickly help address pressing financial problems by closing expense gaps. They are a tactic to drop the bottom line to meet or exceed the margin expectations of shareholders, investors or analysts. They can also help expedite an organizational transition like a large relocation or outsourcing plan which can improve financial targets. In times of stress, a layoff can take some pressure off senior executives by tactically addressing the financial picture. In extreme and rare situations, they may save a troubled company.
Here’s where it can get ugly:
In some larger firms, there is immense pressure on executives and boards of directors to meet company performance expectations. Due to large company complexity, these execs may not directly ‘feel’ the employee culture in global or even regional locations. In the executive suite of a large company, they may be closer to the tactical benefits of layoffs than are with the cultural damage that is caused by them. In some of these firms, they can be tempted by the annual boost they can get to their financials – and layoffs can become annual events.
Reflection Questions:
- When a layoff is the only option, what are some ways for firms to mitigate the cultural damage?
- Once a layoff is over, what are some steps for firms to take to ensure that an event like this is not repeated?