How Do We Remedy Sinking Morale After Layoffs?

The lessons to learn pertaining to layoffs: 1) employee fear lowers morale and 2) employees hate “surprises.” Following are some steps to keep in mind to limit morale-crippling surprise announcements of layoffs:

Be transparent. The first thing you need to do is to be more open with your employees (the technical term is transparency). Start by exposing your employees to all of your major business and financial metrics, because laying everything out on the table builds employee trust. Not only will exposing employees to this information give them some warning about downturns, but it might also spur them to come up with some approaches to solve your business problems. 

Over-communicate. Not knowing what’s happening always breeds fear. Factor in the housing crisis, and you can see how the fears of layoffs only multiply for employees. The best approach to minimise fear and speculation is to over-communicate - saturating people with information. Start by sending weekly e-mails from the CEO’s office. Use these communications to demonstrate that you have an effective plan to stabilise the business. Knowing that layoff-inducing problems are being resolved will eliminate a large amount of fear. You also must address immediately and counter any rumours as soon as you hear them. Supplement written communications with periodic face-to-face meetings with senior executives to answer questions and to involve employees in the solution. 

Be specific and businesslike. Management should conduct a “mock” layoff for the best- and worst-case scenarios, to identify what would probably happen if you had to implement future layoffs. Then, rather than saying nothing or making general statements, it’s better to be specific and let employees know approximately when the decision is likely to be made, the probability of another layoff, and which jobs or performance levels are most likely to be targeted. These details, while they may be difficult for some people to accept, should alleviate the ambiguity that could distract them - thus further negatively affecting business results. 

Focus your retention efforts. Generally, rather than low morale, the biggest negative business impact comes from increased turnover. The best retention approach begins by identifying and prioritising the most critical segments of your employee population that are at risk of leaving (i.e. top performers and individuals in revenue-producing and mission-critical positions). I recommend that you meet individually with this 25 percent of the workforce to identify their concerns and to let them know how important they are to the organisation. Then, as resources permit, do the same with your remaining employees. 

Educate them about the consequences. Educate your current employees so that they realise that losing a job isn’t the end of the world. Start by letting all employees know what help they will receive from the firm if they are laid off. In addition, if a significant percentage of your previously laid-off employees have successfully found jobs, make your employees aware of it.

Lessons related to layoffs
Now turning to the layoff process itself. First, it’s important to realise that having no layoffs can actually backfire, because it can cause employees to develop the expectation of permanent job security. This isn’t a good result, because a reasonable fear of business downturns actually tends to keep your employees from becoming complacent.

A second lesson is that back-to-back multiple layoffs of a large number of employees are always morale killers. Superior options include periodically laying off a small number of individuals each time there is a downturn or conducting a single comprehensive layoff, which might hurt the employees more initially, but knowing that it is a one-time occurrence can help ease their fears of frequent upcoming layoffs.

SOURCE: Dr. John Sullivan, San Francisco State University, November 26, 2007.