#InFocus is a new weekly column by People Matters that zooms in on areas of particular interest to the world of people and work. In this first edition, we look at how we might be able to preserve employee and organisation wellbeing in a landscape riddled with layoffs.

The work landscape is undergoing a major metamorphosis, driven by the forces of automation and cut-throat global competition. In order to keep pace with these shifts, numerous organisations have had to reconsider their approach to workforce strategies, resulting in tumultuous and distressing changes. While episodic restructuring and mundane layoffs have become a common recourse, such measures tend to erode both employee commitment and the company's profitability over time.

Layoffs also referred to as reduction-in-force, downsizing, rightsizing, termination, firing, reengineering, or restructuring, can be triggered by various factors. It's not always the employees' fault, but often a result of declining sales, cash flow, or resources. Economic downturns may lead companies to release non-essential staff to prevent financial collapse, and mergers can also result in layoffs as firms streamline their operations. Additionally, mismanagement or inadequate administration that fails to sustain the company can also be a cause for layoffs.

Unpacking the real impact of layoffs

Reduced morale and productivity

Although downsizing can provide short-term benefits for companies, such as boosting revenues, preventing bankruptcy, establishing partnerships, reorganising, and removing unproductive or unhappy employees, it is important to remember that the effects of layoffs on employees are not as beneficial as the financial gains for the organisation. According to Vivek Gulati, Co-Founder and COO at Grip, a digital investment platform, layoffs can trigger fear, uncertainty, and anxiety among employees, resulting in reduced morale and productivity.

"Layoffs can have a profound impact on employee engagement, and it is important to mitigate the negative effects on our workforce. During times of organisational change, such as layoffs, employees may experience fear, uncertainty, and anxiety, leading to decreased morale and productivity. As leaders, it is our responsibility to proactively address these concerns and support our employees through this challenging period,” stated Gulati. 

The psychological and lasting financial impact

Layoffs can wreak havoc on a person's psyche, inducing a sense of powerlessness, insecurity, and susceptibility. Unemployment can trigger a range of negative emotions, including depression, anxiety, and stress, while also spilling over into the lives of loved ones. Financial burdens, relationship strains, and health issues may arise as a result of joblessness. Moreover, layoffs can strip away a person's sense of self and value. “Many people's work is intertwined with their identity, and being laid off can create a sense of worthlessness and disgrace. This can have a lasting impact on a person's mental well-being and their ability to secure new job opportunities,” emphasised Mr Pratik Gauri, the Co-Founder and Chief Executive Officer of 5ire, a fifth-generation blockchain network. 

“Although layoffs are a necessary part of today’s business strategy, it has a deep psychological and lasting financial impact on the individual employee. It is critically important that the HR department plays a very prominent leadership and management role when it comes to the layoff process. It is necessary that HR remains heavily included in the strategic planning, implementation, and overall supervision of this process,” added Gauri. 

Coping with layoffs: How to limit adverse effects?

Let's just say that describing layoffs as challenging would be an understatement. Nevertheless, with careful execution, the organisation can mitigate the repercussions, preventing former employees from spreading negativity and ensuring that the remaining employees remain committed to the company's vision and future, rather than dwelling on the past.

Communication: Open and transparent communication about the reasons behind the layoffs and the future direction of the organisation “can help alleviate uncertainty and build trust. Opportunities for employees to ask questions can go a long way in maintaining engagement and reducing rumours and speculations,” suggested Vivek Gulati. 

Emotional support: Extending a helping hand of emotional support to employees during this tough time can be a game-changer. It can help them weather the emotional storm, sail through the transition more smoothly, and show that the organisation truly cares with a big heart. “This not only keeps the employer brand shining bright, but also safeguards against any dampening effects on morale, productivity, or reputation. After all, a little empathy can go a long way.

Workload management: Focusing on the remaining employees is equally important. “Acknowledging their concerns, providing opportunities for growth and development, and recognising their contributions can help boost their morale and motivation. Ensuring that workload is managed effectively, and employees are not overwhelmed with additional responsibilities post-layoffs is crucial to prevent burnout and disengagement,” advised Co-Founder and COO at Grip.   

HR in action: The HR team members have the responsibility of planning, executing, and managing the layoffs to align with the business needs and to avoid negative consequences. “Every step of the way, the HR team should ensure the pre-planning, initiations, announcement, implementation, supervision, and after-effects. One of the difficulties lies in the fact that when an employee is laid off, not only does the individual depart but also the investment in fostering a positive work culture and providing training for building effective teams seem to go to waste. This can have a detrimental impact on employee morale, dedication, and team trust, taking a significant toll on all fronts,” said the CEO of 5ire.

The upsides of layoffs in organisations

Despite the negative connotation associated with layoffs, they can actually have positive outcomes for organisations. For instance, layoffs can help companies reduce costs and streamline their operations by eliminating redundant roles or unproductive departments, making them more agile and efficient. Moreover, layoffs can offer remaining employees opportunities for career advancement, professional growth, and empowerment by taking on new responsibilities and contributing to the company in meaningful ways.

“Companies that handle layoffs with transparency and compassion can see an increase in engagement among their remaining employees. Studies have found that 72% of employees prefer transparency and in-person communication to help them understand the reason for the layoffs and how it impacts them directly. By communicating openly with employees, offering support and resources, and demonstrating a commitment to rebuilding the business, companies can show their employees that they value their contributions and are invested in their success,” said Kamalika Bhattacharya, the Co-Founder and CEO of QuoDeck, a B2B SaaS digital learning and engagement platform. 

She further added, “The aftermath of a layoff can be a critical moment for employee engagement, and companies that prioritise communication, transparency, and support during this time can emerge with a more engaged and committed workforce. Eventually, it is the companies that focus on employee well-being during and after a layoff that see an increase in employee engagement. Additionally, by providing resources for career development, offering opportunities for feedback and input, and demonstrating a commitment to retaining top talent, companies can build a culture of resilience and innovation that can weather even the toughest challenges.” 

Stay tuned to People Matters' new series, InFocus, for exclusive articles on employee well-being, layoffs, learning and skill development, employee engagement, and talent management.