Here’s how to avoid the large and damaging effects of layoffs

Layoffs are never easy. Aside from losing valuable employees who had given their time and effort to the company, it could also reflect poorly on the firm’s reputation.

Kirsten Lesage, a research project manager at talent analytics firm Veris Insights, called layoffs “bad medicine.” Additionally, based on industry data and the consensus of senior talent acquisition executives, she said that “laying off experienced employees is one of the most expensive things a company can do.”

For one, employers must pay more to compete for the best talent that would replace the newly-vacant positions. And not many candidates may even consider them as layoffs make companies look less stable or less competent. 

At the same time, Veris Insights reported that laying off as little as 0.5% of a company’s workforce can drive a 25% increase in quitting as staff reevaluate their relationship with their employer and rethink their long-term career expectations. This phenomenon is also called a “turnover contagion.”

However, with the possibility of rough times ahead, considering layoffs to protect the bottom line and streamline operations is always a temptation.

Avoiding the long-term damage of layoffs

Fortunately, Veris Insights Director of Experienced Talent Research Andre Monroe said that there is a way for employers to capture many of the short-term benefits of staffing cuts while avoiding the long-term damage.

According to Monrow, here’s how layoffs should be done:

• Slow backfill. Strategically allowing positions to remain open during the natural cycle of employee departures can enable companies to right-size teams without forcing the issue in a way that does lasting harm.
• Promote internal mobility. An economic downturn will not affect all business functions equally. Even within a single division, some departments may seek to reduce headcount while others are still hiring. Creating opportunities for staff to move within the company (even temporarily) not only preserves corporate knowledge and staff morale, but it can also be an investment in organizational agility that pays dividends in the future.
• Use the slowdown to catch up. Layoffs are not the only short-sighted tradeoff that businesses sometimes feel forced to make. The relentless push to accomplish more and more with the same staff often results in teams postponing or neglecting strategic process evaluation and reengineering. A dip in workload may not be a signal to cut headcount but rather an opportunity for a team to catch its breath and prepare for the challenges to come.

Of course, everybody hates making staffing cuts. They can often feel personal, especially if the company culture is inclusive and positive. However, every leader must make hard decisions to keep their company running in the economic climate that we have today.

As Monroe said, “great leaders can see past the current stormy weather to make decisions that – for their business and their people – are no harder than they have to be.”

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