Multi-round layoffs come at a high cost. Here’s what the survivors have to deal with

Some companies, like Amazon and Meta, are announcing these staff reductions in multiple rounds. And while layoffs are always difficult on organizations, doing them in multiple rounds has the risk of causing more damage to organizations than if they had made a singular massive sweep.

‘Cut once, cut deep‘

If you can’t avoid layoffs, the old adage is to “cut once; cut deep.” We know that one round of layoffs can lead to lower employee morale, damage to brand reputation, and reduced productivity. So, why are so many companies choosing to pick at the bandage rather than rip it off all at once?

Some argue that starting small and reassessing from there gives executives greater flexibility and cost control–and it does to a point. However, research suggests that multiple rounds of layoffs take an even higher toll than a single extensive sweep.

In his report, Employment Downsizing and Its Alternatives: Strategies for Long-Term Success, Prof. Wayne Cascio of the University of Colorado explains that with each round of layoffs, along with the company’s intended reduction in costs and inefficiencies, there are other challenging consequences, including an increase in the surviving employees’ job uncertainty and voluntary turnover, as well as a decrease in their engagement and innovation.

‘I might be next’

When Amazon announced in March that a second round of layoffs was on its way, they also sent a message to all their remaining employees: You could be next.

Now that they, along with other companies like Meta, FedEx, Twilio, and Salesforce, are entering multiple rounds of layoffs, they are seeing that there is an extensive emotional impact on the team who made the initial cut.

A study of over 4,000 employees who survived a round of corporate layoffs by Leadership IQ found that:

• 74% reported a decline in their productivity.
• 69% reported a decline in the quality of their company’s product or service.
• 81% say the service that customers receive has declined.
• 87% were less likely to recommend their organization as a great place to work.

Multiple rounds of layoffs create a culture of uncertainty among the people who are left standing, and while it may lead to some workers going into overdrive to try to keep their job, others will start looking for other opportunities and become less committed to the success of their current organization. And with each successive layoff, managers are often overwhelmed by having to do the same amount of work with fewer people, which can lead to burnout and poor decision-making.

I’ve been there

Despite all of these compelling reasons not to do layoffs, and especially not to do them in multiple rounds, sometimes they are necessary. When challenges like economic downturns or regulatory changes shake up the competitive landscape or force changes to business models, layoffs may be needed.

I’ve been there. At a previous company where I was COO, shifts in the competitive environment required us to make a business model change that led to layoffs. One of my biggest regrets was that I underestimated the cost of the transition between the two business models, and it meant that we needed to do a second round of layoffs to keep costs in check. This was incredibly painful for the company–and for all our employees.

It took significant time and a lot of concerted, thoughtful effort by many people across the organization to help the company recover from this experience.

A path to recovery

Sometimes layoffs are inevitable. And whether they come in one fell swoop or in multiple phases, there are ways to restore faith in your organization and empower the people who are staying on.

Here are seven best practices to help companies recover after one or more rounds of mass layoffs:

1. Treat outgoing employees with dignity. One of the factors that remaining employees care about most is how their colleagues were treated upon their departure. Most companies doing layoffs now are offering fair or generous severance packages, COBRA, etc. Additional ideas that can make a difference are tactics like creating official alumni communities and offering support in job searches by promoting lists of departed employees, as Airbnb did after their pandemic-related layoffs.

2. Share in the pain. One way to help employees see that leaders are taking accountability for their role in layoffs is for leaders to make some sacrifices as part of the process. Even though these are likely to be symbolic, rather than significant cost savings, the statement they make can be meaningful. For example, when Zoom laid off 15% of its employees in February, its CEO, Eric Yuan, took a 98% pay cut and said he’d forego his corporate bonus.

3. Be transparent to rebuild trust. The remaining employees want to understand answers to big questions: Why did this happen in the first place? How can I know whether it will happen again? How did you decide who was let go and who wasn’t? The more transparent a company can be about the principles involved in the decision-making process, the more it builds a sense of trust and lowers fear and suspicion. If employers aren’t sure that this is the last round of layoffs, they should be open about that as well. Even though it may not be the answer people want, honesty will increase trust rather than deplete it.

4. Create open, safe spaces to connect. People will want to ask questions and talk about how they are feeling, without fear of repercussions. You can open the lines of communication between employees and leadership, both one-on-one and with group events like virtual and in-person town hall meetings. You may also want to run an anonymous survey to get a read on the current sentiment and top needs of remaining employees.

5. Help managers support remaining employees. Much of the day-to-day work of picking up the pieces after a layoff will fall to individual managers and the work they do to support their teams. Managers can help their teams by being available, giving people space to vent, and understanding the specific reactions and needs of each individual on their team. Tools like Rising Team can help managers bring their teams together to connect, build trust and grow their resilience as a team.

6. Invest in employee development. After layoffs, employees may feel insecure about their own jobs. One way to show remaining employees that the company cares about them and help them feel more secure is to invest in their continued growth. This helps not only to reassure them of their future with the organization but also to improve their skills and capabilities for a stronger company moving forward.

7. Reinforce the mission. It’s likely that many employees joined the company because they believe in your mission. If you can remind people that, though difficult, the layoffs give you a better chance to achieve the mission, then you can refocus people on their original passion that brought them to you. Share regular updates about plans and performance milestones to build confidence in the organization’s future.

Overall, it’s best to avoid layoffs whenever possible. While companies save on operating costs, layoffs have a high cost on other factors, such as employee morale, engagement, productivity, and brand reputation. That said, if layoffs are necessary, compassion, transparency, open communication, and reinvesting in the remaining employees can help speed up the path to recovery.

Jennifer Dulski is the CEO and founder of Rising Team, a SaaS platform that helps companies increase engagement and scale talent development by equipping managers to lead deeply connecting, interactive team development sessions, remotely or in-person, without an outside facilitator. Prior to Rising Team, she held executive leadership positions at technology companies like Facebook, Google, Yahoo!, and Change.org. As a thought leader, Dulski writes about leadership and the future of work for LinkedIn Influencers and teaches management at the Stanford Graduate School of Business.

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