Don’t expect loyalty from workers who avoid layoff, study warns

If your company is undertaking a layoff, be forewarned: Your surviving employees are not going to work harder out of gratitude. According to a new study by Leadership IQ, 74 per cent of employees who kept their job amidst a corporate layoff say their own productivity has declined since the layoff. And 69 per cent say the quality of their company's product or service has declined since the layoffs.

Leadership IQ, a leadership research and training company, compiled these results after surveying 4,172 workers who remain employed following a corporate layoff. These subjects were drawn from 318 companies that have undertaken layoffs in the past six months. Employees were asked questions about productivity, product quality, workforce issues, and management effectiveness.

Other key study findings about the state of the workplace following the layoffs include:
  • 87 per cent of surviving workers say they are less likely to recommend their organization as a good place to work
  • 64 per cent of surviving workers say the productivity of their colleagues has also declined.
  • 81 per cent of surviving workers say the service that customers receive has declined.
  • 77 per cent of surviving workers say they see more errors and mistakes being made.
  • 61 per cent of surviving workers say they believe their company's future prospects are worse.

What causes this precipitous decline in quality and productivity?  Through an open-ended question, surviving workers were asked to describe their personal feelings following the layoffs. The three most commonly used words (representing 62 per cent of respondents) were guilt, anxiety, and anger.

Mark Murphy, Chairman of Leadership IQ, has a name for this phenomenon. "We call this Layoff Survivor Stress," he says. "There is a great myth that, following a layoff, the surviving employees will be so grateful that they still have a job that they'll work harder and be more productive. But as this study shows, the opposite is usually true."

The study did identify a bright spot when workers were asked questions about their manager. Workers that gave their managers high scores for visibility, approachability and candour were 72 per cent less likely to report a decrease in their productivity and 65 per cent less likely to report a decline in the quality of their company's product or service.

What can companies do to prevent these problems following a layoff? "Managers not only need to know how to conduct a layoff with candour and compassion, but it's also vital that they know how to manage their workforce following a layoff," notes Murphy. "Managers need to be highly visible to their staff, approachable even when they don't have anything new to say, and candid about the state of things in order to build their trust and credibility. If your company has to conduct a layoff, it is imperative that you train your managers how to both manage that process and deal with the highly debilitating aftermath. Otherwise you will waste any potential cost savings from the layoff on lost productivity, quality problems and service breakdowns."

Murphy offers a final thought for companies: "Layoffs won't deliver real cost savings if you mismanage the layoff process. Offering terminated employees severance packages and outplacement assistance is wonderful, but it completely misses the most important group of employees; the survivors. You have to keep the surviving employees engaged and productive, or your company won't ever recover."