Redundancies risk damaging morale of remaining employees, but there are practical steps that you can take to help repair levels of employee engagement after such a decision, writes Culture Amp’s Arne Sjöström.
As the economy hovers on the edge of recession, job losses from companies large and small seem to follow inexorably week by week. Other organisations determine workforce changes over time, announcing global or national-level job losses and then deciding which locations or business functions will see job roles closed, after employee and departmental consultations.
The assumption that such redundancies will help consolidate corporate finances and employee morale and productivity will bounce back, is questionable: for example on savings, technology analyst Gartner estimated in 2022 that fewer than half (43%) of leaders actually achieve their objectives from cost-cutting programmes in the first year.
And the impact of job losses on employee engagement is equally problematic and longer-lasting. In our analysis, making redundancies will have more severe and long-term impacts for the organisation, in terms of employee morale and how to restore it, whether the company has effective staff engagement or not.
Learning from job losses
At Culture Amp, we have put the effects of job losses on organisations by investigating employees’ engagement levels, before and after cuts are made. Using technology industry job losses monitor layoffs.fyi, our people science team identified 432 organisations that went through layoffs between March 2020 and 30 November, 2022. Of those, 146 had engagement surveys preceding (survey 1) and subsequent (survey 2) to the layoffs that could be matched to understand the change in employee experience over time.
It’s a myth that well-managed companies – where employee commitment levels to their organisation are high pre-layoffs – somehow escape the blow to morale.”
Our first main finding was that companies can only expect to see a rebound in pre-layoff levels of engagement after 12-18 months if they carry out a rehiring programme at some point afterwards. And where there is an upsurge in engagement, it is largely because improved workforce sentiment in these surveys is boosted by new hires experiencing their new job honeymoon period. Given the lasting slump in engagement seen in so many of the organisations surveyed, we challenge company leaders’ assumptions that morale will simply rebound back to pre-layoff levels.
Second, the longer-term impacts on those employees who remain are particularly harmful. Our data show that the engagement of tenured employees that survive job losses never returns to pre-layoff levels – while pride, commitment, and motivation generally fall off around six months after redundancies take place, commitment continues to decline as employees become more tenured. Research has regularly documented the problem of survivor syndrome, where employees that survive redundancies develop feelings of isolation and alienation from their role and low morale after colleagues depart.
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Third, it’s a myth that well-managed companies – where employee commitment levels to their organisation are high pre-layoffs – somehow escape the blow to morale. Our data found that where employees’ loyalty and commitment was highest prior to job losses, layoffs undermined employees’ commitment to the company by a remarkable 10 percentage points.
In addition, when we identified the companies that had smaller declines in employees’ commitment to their organisation following layoffs, we found they were scoring below the benchmark prior to the layoffs. The likelihood is that in organisations with highly committed and engaged employees, such cuts will be even more shocking to a highly-motivated workforce that previously assumed its hard work might insulate their company from workforce reduction, so such actions could generate feelings of mistrust, even betrayal.
Fourth, we found that CEOs who have to (or chose to) stand on the “burning platform” can engage and lead their employees more effectively even in the toughest situations – as long as they are open and transparent. This is because in our data, the only question that attracted higher approval ratings as the size of layoffs increased was the statement: “My manager is a great role model for employees.” This demonstrates that during the most difficult of times, managers can certainly rise to the occasion and inspire their team.
Four steps leaders can take to help repair engagement
Cultures are made during times of uncertainty. This suggests that being intentional about your culture now – as UK organisations face tough economic headwinds and budget pressure – is critical. The good news is that there are practical steps that you can take to help repair levels of employee engagement after such a decision:
First, organisations need to be realistic in their expectations. Expect engagement to take a long-term hit. Recognise too that others that didn’t lose their job may be struggling. This includes the colleagues that led redundancy meetings or employee representatives involved in the discussions who may need extra support or counselling.
Confidence in leaders is often most severely affected by job losses but this can be repaired.”
Second, try to focus on how the change is communicated from the outset. In our research, we found how employees feel prior to a change being implemented is the same as how they feel afterwards. Companies that are transparent and open throughout the process will tend to fare better.
Third, give leaders the chance to step up and inspire their people. Confidence in leaders is often most severely affected by job losses but this can be repaired if leaders are willing to listen to employee frustrations and feedback and be open about their own struggles.
Fourth, don’t try to do more with less. After difficult changes, it’s very unlikely a smaller workforce will be able to increase its output. Instead, carefully prioritise what work can be dropped so that everyone on the team can focus on the things that need to get done going forward.
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Layoffs may be necessary but we believe leaders should only make them because they have no other choice – not because they believe this near-recession is the time to be tough as a leader and that somehow the team will thank you for it in the end.
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