Feature
Why Developing Your Leaders After a Layoff Makes Sense
By Onzelo Markum III
 There is no question that the recession and the resultant layoffs / downsizings have had devastating effects on the suddenly unemployed, but they also have a powerful impact on a less obvious population: the co-workers left behind, the layoff survivors.
Typically ignored in the planning for a layoff are support mechanisms for those employees who stay. The people still standing after a round of layoffs, both managers and front-line workers, are shouldering heavy, if less obvious, burdens of their own including an infectious sense of anxiety and the uncomfortable feeling that they ought to be grateful just to have a job.
Organizational psychologists call it “layoff survivor syndrome” due to the emotional, psychological and physical reactions long documented in workers who remain on the job. After the recession in the early 1990s organizational psychologists confirmed what managers always suspected—layoff survivors are less engaged, less productive, and absent more often post layoff.
Hidden Costs to the Organization
A December 2008 study of more than 4,000 layoff survivors by the research group Leadership IQ found that since watching their colleagues get laid off nearly 75% said their own productivity had declined, almost 70% said the quality of their company's product or service had dropped, and 81% said the service that customers receive had declined.
Right Associates did a study that revealed that 70% of managers who remained in downsized firms reported that layoffs were followed by lower employee morale and lower trust in management.
A five-year study of 300 firms by Cigna and the American Management Association showed that layoff survivors had a 100% to 900% increase in medical claims, especially for mental heath, substance abuse, and cardiovascular problems.
Economist Sylvia Ann Hewlett is the founder of the Hidden Brain Drain task force, a group of more than 50 companies--including GE, Johnson & Johnson, and Intel, that are exploring world-class employee engagement practices. Hewlett mentioned in a recent Time magazine article a Harvard Business Review survey of what happened in companies that went through layoffs of even 1% of the workforce: among the surviving workers, the companies typically
saw a 31% increase in turnover.
A recent Fortune magazine article names five hidden costs of layoffs:
- Brand equity costs: the damage a layoff may do to your company's reputation.
- Leadership costs: the loss of potential talent.
- Morale costs: the emotional drain on those who are left behind.
- Wall Street costs: the effect layoffs can have on stock price.
- Rehiring costs: the difficulty of hiring and training new employees when the economy improves.
We Need Stronger Leaders Now, More Than Ever
In a time when high performance is critical, organizations that conduct layoffs may find that the survivors are disenchanted, de-motivated and disengaged - characteristics that can drag down the fiscal health and the competitiveness of the entire company.
The employees who are left after a downsizing find themselves burdened with extra work, fewer resources, higher demands for productivity, an uncertain future, and survivors’ guilt.
At the same time organizations confront the unexpected costs of higher turnover, lower productivity, increased stress-related illness, and workplace hostility.
After the uncertainty of mergers, acquisitions, layoffs, or downsizings, it is imperative that firms invest the time and money to develop the new skills and deploy the new strategies required to lead effectively after layoffs.
The board of directors, executives, managers, and supervisors must learn or strengthen their capabilities to:
- rebuild employee confidence in the viability of the organization;
- reestablish trust in the organization’s management team and their business decisions;
- reengage the commitment, connection, and competence of the surviving workforce;
- overcome the unintended negative impacts of layoffs on employee morale, team productivity, and organizational effectiveness; and
- accelerate workplace recovery in order to move from organizational transition to organizational triumph.
Make no mistake about it; workplace recovery in the aftermath of layoffs is difficult, emotionfilled work; it’s even harder during a recession, but in these turbulent times mediocre leaders are a luxury that most organizations can ill afford.
This recession, like all recessions, will pass and the economy will recover. When the dust settles, the question that Wall Street and boards of directors will be asking senior business leaders is:
In terms of our leadership development investments—did you reduce our costs in the short term at the expense of our long-term human capital needs?
Or, put another way — did you follow the herd or did you lead?
To learn more about The Markum Group go to: http://www.markumgroup.com
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