CEOs aren’t dealing with the toxic fallout of layoffs

LAYOFFS are poisonous to company culture.

At companies that have trimmed staff, remaining employees may be insecure about their career prospects, anxious about further cuts, and overwhelmed by the amount of work they now need to get done. Some damage to the organizational fabric is inevitable. But there is a lot more executives can do to mitigate the post-layoff gloom.

Even a relatively small staff reduction can dent remaining employees’ creativity or make them more risk-averse. Downsizing has been found to reduce commitment and trust among survivors, which makes people less likely to expend discretionary effort, such as by working longer hours or taking on extra projects.

Meanwhile, unhealthy conflict increases. Survivors may react to the layoff by defending their turf or hogging airtime to make themselves seem more knowledgeable.

“Any fissures that were already there are likely to be exacerbated,” says Amy Gallo, who runs workshops in companies on managing conflict and is the author of Getting Along: How to Work With Anyone (Even Difficult People).

At the same time, the layoff might make it seem riskier to bring up concerns, especially if the people who were laid off were seen as outspoken. That can drive honest debate underground. Most companies mistake a lack of open disagreement for a lack of conflict. “Artificial harmony can be incredibly corrosive,” says Gallo.

Bill George, former chairman and chief executive of medical technology company Medtronic, says those are among the reasons he has always been wary of mass layoffs. George, author of True North: Emerging Leader Edition, predicts that if 10% of an engineering group gets laid off, the remaining 90% will be sitting around in the cafeteria worrying and swapping rumors instead of inventing new products.

No surprise, then, that studies have linked layoffs to voluntary turnover. And with many companies still hiring, workers who want to rage-apply to other jobs will have plenty of opportunities.

So how can companies regain their equilibrium after jettisoning thousands of workers?

At the root of the challenge is that employees interpret layoffs to be what scholars call a “psychological contract violation,” which gives rise to resentment and fear. Senior executives need to lead the way in repairing the damage. 

“Leaders need to get their people together and rebuild the trust that was lost,” says George. “A lot of that’s got to be done in person.” Staffers would benefit from spending more time in the office, he says, but so would senior executives. “It’s hard to have empathy for your people if you’re in Hawaii and they’re being laid off in downtown San Francisco.”

People are less likely to quit if they think that HR decisions are fair and not arbitrary — something hard to convey when a CEO has announced a round-number layoff because of “the macro-economic environment.” Senior leaders should give a detailed and thoughtful explanation of why these layoffs were necessary — why these particular people or projects had become unaffordable.

Middle managers also play a key role. “You’ve got to have personal contact with people,” George tells me. “You’ve got to say, ‘Sarah, we value you really highly. I think you’re on a great track. I think there are bigger jobs ahead for you. And we really want to make sure you stay with us.’” (He says this with such conviction, I almost believe it — until I remember I don’t work for him.)

Managers also should emphasize that the team will thrive on open and honest debate to try to counteract a layoff’s tendency to drive conflict underground. Too many cultures rely on unwritten rules, which can contribute to employee paranoia. Don’t make stressed-out employees waste energy reading tea leaves. Want them to do something different? Just tell them.

For employees, Gallo suggests making a list of all the things you still enjoy about the job — not to put a happy gloss on a lousy situation, but to counteract human beings’ inherent negativity bias (a tendency to put undue weight on things we find aggravating or annoying). Do some serious reflection on why you were spared. Are you working on a critical project? Do you have specialized knowledge? Focusing on the value you bring can help defuse feelings of insecurity or anxiety.

If you’re overwhelmed by your new workload, don’t complain — your manager probably already knows they are asking for the moon — but do ask for help prioritizing. For example, she says, you might say something like: “Prior to the layoff, here are the things I was working on. Now, post-layoff, here is the greater basket of things I’m working on. I’m not sure how to fit this all into my limited time. I’d love your help prioritizing.” Your manager should be your partner in deciding where to focus.

And if it’s all too depressing? Remember: Talented people always have options. Your best move may be to start exercising yours.

BLOOMBERG OPINION