The shock of mass lay-offs is only the beginning for companies

“After almost 8.5 years working at Google, I received notice this morning that I was impacted by the workforce reduction and no longer have a role at the company . . . I envisioned spending my entire working career at Google, so this news has been particularly hard to absorb.”

LinkedIn is awash in posts like this from Google workers who suddenly lost their jobs this month via email. Some had devoted decades of their life to the company. Google’s parent, Alphabet, is among the tech giants slashing their workforce by thousands. The sector overall has shed about 200,000 jobs in the past year.

One 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 kid?” Distressing as it is to sack entire teams — and however counter it is to companies’ public image and management style — there are good reasons why mass lay-offs have to be swift. The abruptness of the firings might be attributed to an effort to protect intellectual property and client relationships, prevent staff from transferring data and other security reasons.

After the initial shock has passed, however, 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 lay-offs have a detrimental effect on employees and corporate performance. “The reason why mass lay-offs don’t end up paying off is that they destroy trust within an organisation,” she says.

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

A friend at a major tech company was on a Slack chat with 15 colleagues, working to solve a bug. Then 12 of the group were fired. The Slack chat died and the problem went unresolved. “You don’t just replace that history, that conversation, that expertise,” he says.

The so-called survivors, like my friend, are now less likely to trust their employer and will be anxious about future lay-offs. This remaining workforce may resent having to take on a heavier workload in more trying circumstances — which in turn will prompt further staff exits. Downsizing a workforce by just 1 per cent can lead to a 31 per cent increase in voluntary staff turnover the next year, according to researchers at the University of Wisconsin-Madison and the University of South Carolina.

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

The message that a mass lay-off sends is that rather than hiring someone for everything they bring to work, they are just a cog in a machine

Workers who choose to stay, knowing that hard work and good performance will not guarantee employment, might be more likely to do the bare minimum or be less innovative when a company needs it most. All of this hits profits in the long run.

Companies such as Alphabet are doing the right thing short-term: paying out redundancy, bonuses and remaining leave days as well as six months of healthcare, access to job placement services, plus immigration support. But those laid off may be impacted for life, as many were after the 2008 financial crisis. They may suffer a hit to their health as well as their finances. A new job at equal or higher pay often does not come immediately.

Mass lay-offs represent a shock for both leavers and those left behind — and that matters, long term. Companies can learn from what’s happened: they must grow more sustainably and hire in a more disciplined manner. As Sucher says, if executives are serious about employee welfare they need to plan for future workforce changes on an ongoing basis and ride out difficult periods. Furlough payments, withholding bonuses, pay cuts and voluntary redundancies are options. If the pandemic taught corporations anything, it was that there are other ways to move forward in tough times.

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