The Less-Painful Way to Rebuild After Layoffs

Earlier this summer, Microsoft announced plans to lay off workers as part of a restructuring to focus on cloud services. A month later Nike made a second round of layoffs, which included hundreds of IT staff, with warnings of more cuts to come.

Big layoffs remain a painful part corporate culture despite being eight years past the Great Recession. It’s also a world where success is based on quarterly results and rapidly shifting markets can make products and people obsolete.

Layoffs may be inevitable, but how companies handle them can make or break their ability to rebuild, said Kevin Martin, chief research officer for the Institute for Corporate Productivity, or I4CP, a human capital research firm.

“Any time you introduce fear, uncertainty or doubt into an organization it kills performance,” Martin said.

Unless companies take measures to actively support those who remain, the losses can be devastating to more than just the people let go.

Managing morale in the wake of a layoff begins with good communication, said Larry Sternberg, president of Talent Plus, an HR consulting firm in Lincoln, Nebraska and co-author of “Managing to Make a Difference.” “Secrecy is one of the biggest mistakes companies make.”

Sternberg recalls being invited to give an inspirational speech to a group of employees at a high-end Miami resort several years ago. When he arrived, the leadership team told him that many of the group was about to be laid off, but no one knew.

“They were afraid they would start looking for new jobs before the end of the season,” Sternberg said.

Disagreeing with their approach, he kicked off his speech by announcing the layoff, then spent the next hour talking about what the company and its remaining employees could do to make sure that it never happened again.

It may seem like a smart move to keep layoff plans secret, but not being honest leads to morale-killing gossip, suspicion and fear. For companies hoping to rebuild with the talent they have left that’s a big problem. Instead, Martin encourages companies to be upfront about who is being laid off and why, then to provide them with support to find new jobs.

“It’s important to help people leave with dignity,” he said. “That speaks volumes to those who remain.”

Make Them Want to Stay

Once a layoff is done, executives need to find ways to empower and engage employees while shoring up the business.

Talent development is a good way to address both of these needs, Martin said. He points to Ally Financial, which was forced to lay off 7,000 of its 30,000 employees during the economic crisis. To engage its remaining staff, the company offered high performers a fast track to leadership roles and stretch assignments where they could develop new skills. “Ally gave them opportunities and responsibilities they couldn’t get anywhere else so early in their careers,” he said.

Giving employees authority to make decisions can also help, Sternberg said. He recalls working with hotelier Ritz-Carlton on how to reduce staff while maintaining excellent customer services. His solution: When departments lose an employee due to attrition, let them choose whether the fill that role or distribute the work — and half of that employee’s salary — among the remaining team.

“Several teams took the deal, and customer service never suffered,” he said. The deal motivated them to find their own ways to be more efficient.

Sarah Fister Gale is a writer based in the Chicago area. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.