Layoff Aftermath

Last August, on the eve of a planned trip to cover the 2008 Olympic Games in China, Jeff Jacobs, sports columnist for The Hartford Courant, found himself with mixed feelings. Excitement about the plum assignment was tempered by nagging anxiety: In the past month, 25 percent of the news staff at Connecticut’s largest daily had been laid off or offered buyouts, a result of sagging ad sales.

“I’m so riddled with guilt and anxiety,” Jacobs wrote in his column before making the trip. “One-fourth of the friends, colleagues, journalists I have admired are gone.

“One-fourth of my soul is gone. In its place is survivor’s guilt. The trip of a lifetime suddenly feels like the regret of a lifetime.”

Amid today’s mounting economic pressures, such reflective feelings are occurring more frequently among employees who typically are considered the lucky ones—the ones spared the unfortunate, cost-driven ritual of layoffs.

Yet corporate executives and human resource professionals often underestimate the burden on those who remain, experts say. These leaders tend to initially focus more attention on those who are leaving.

Bottom line: When layoffs hit the workplace, the pink-slipped aren’t the only victims.

The Diagnosis

“Layoff-survivor sickness is alive and well,” says David Noer, professor of leadership and business administration at Elon University in Elon, N.C. He coined the term in his book Healing the Wounds: Overcoming the Trauma of Layoffs and Revitalizing Downsized Organizations (John Wiley & Sons, 1993), and he has extensively studied the affliction and its effects.

The underlying cause of layoff-survivor sickness is a pervasive sense of personal violation, says Noer, an honorary senior fellow at the Center for Creative Leadership in Greensboro, N.C., and head of Noer Consulting in the same city. He describes the malady as “a toxic set of feelings and emotions” that include:

• Fear, insecurity and uncertainty.
• Frustration, resentment and anger.
• Sadness, depression and guilt.
• Unfairness, betrayal and distrust.

Such “emotional blockage,” he says, can impact personal and organizational performance, crippling a company at precisely the time it needs to rely on its workforce to build new business and become more efficient. That’s why HR leaders must understand, openly address and proactively mend survivor malaise, he advises.

The Toll

“The people who stay behind become very risk-averse and self-absorbed,” says Wayne F. Cascio, professor of management at the University of Colorado-Denver Business School and author of numerous books on organizational restructuring and the economic impact of HR activities, including Responsible Restructuring: Creative and Profitable Alternatives to Layoffs (Berrett-Koehler Publishers and SHRM, 2002). “They’re very worried about their own future: ‘What is this going to mean for me?’ So, they don’t want to stick their necks out and take risks.” Yet companies need to engage in risk-taking to generate new products, markets and customers, he says.

Cascio adds, “Taking the same amount of work and just loading it onto fewer workers has long-term effects in terms of stress.” This stress, he says, often intensifies four to six months after the downsizing, resulting in increased absenteeism and higher turnover.

Recent research proves that downsizing can set off an exodus among survivors, in some instances creating losses much greater than the cuts achieved through the layoffs.

In “Keeping Your Headcount When All About You Are Losing Theirs: Downsizing, Voluntary Turnover Rates, and the Moderating Role of HR Practices,” University of Wisconsin-Madison Business School Associate Professor of Management and Human Resources Charlie O. Trevor and doctoral candidate Anthony J. Nyberg found that while bigger layoffs generally produce bigger spikes in turnover, even a small layoff sets off considerable staff flight.

For example, companies that laid off 0.5 percent of their workforces sustained, on average, an annual turnover rate of 13 percent—a rate 2.6 percentage points higher than the average annual turnover of companies that didn’t cut staff. In other words, an extra 2.6 percent of the workforce left of its own accord, more than five times more workers than were laid off. In addition, the more people companies laid off, the higher rates of quitting they sustained.

Trevor and Nyberg reached these conclusions after studying two years’ worth of data compiled by companies seeking to be included in Fortune magazine’s annual list of the “100 Best Companies to Work For.” The results appeared in the April/May 2008 issue of the Academy of Management Journal and were summarized in the May 2008 issue of the Harvard Business Review.

“The downsizing-turnover relationship suggests a sad irony in that employees are laid off by companies that may subsequently find themselves understaffed,” says Trevor. “Our findings ought to persuade them that this could very well result in the loss of even more employees whom they want to keep.”

The Treatment

There’s some good news, however. Certain HR practices can substantially buffer the downsizing effect on subsequent turnover, the study showed.

Practices that foster so-called “job embeddedness,” or attachment, serve as one kind of buffer, Trevor says. These include defined benefit plans, sabbaticals, on-site child care, hiring for organizational fit and flextime. Practices that convey a concern with “procedural justice”—in other words, practices that give employees a sense that the company is just and fair, such as an ombudsman, a confidential hotline or a formal grievance process—serve as another kind of buffer. Implementing or strengthening these types of practices before layoffs might help a company mitigate employee flight after a downsizing, the researchers say.

Ironically, another common practice—providing career development assistance—actually worked against employers, according to the study. Such programs may help prepare employees for other internal job opportunities or redeployment elsewhere in the organization, but they also raise employees’ awareness of outside opportunities and make them more desirable to other employers, Trevor says.

In addition to HR tactics that the study identified, experts interviewed for this article also call out the following strategies, action steps and methods to help lessen the negative impact of layoffs on survivors and to improve engagement in turbulent times:

Over-communicate, tell the truth and seek advice. Employees recognize when leaders try to sugarcoat bad business results or impending workforce reductions, Cascio says. Let them know specifically where the company is struggling and, with coaching from managers, ask them to help the company adapt to the shift in business conditions.

“The broader point,” he says, “is that you can’t just pretend the company’s the same. It’s not.”

When layoffs occur, keep lines of communication open using multiple channels—frequent informational meetings; informal “chats” by top managers via videoconference, e-mail or in person; HR hotlines; a targeted web page; a moderated chat room on the company intranet; and even blogs written by the chief executive officer. Many top executives are pursuing this last method. Some examples include “On the Move,” the blog of Bill Marriott, chairman and CEO of lodging giant Marriott International; “Open Mike,” the blog of Mike Critelli, executive chairman of mailing-technology company Pitney Bowes; and “Jonathan’s Blog,” from Jonathan Schwartz, CEO and president of networking-computing company Sun Microsystems.

Ensure a perception of fairness in restructuring decisions. “Make special efforts to retain your best performers and show your employees that you’re going to take a number of steps before you have to cut full-time staff,” says Cascio. And make sure survivors know that the dismissed employees are treated well.

He cites these examples: During the dot-com downturn of 2001, Internet-networking equipment company Cisco Systems Inc. took steps to ensure that it would continue to be seen as a good employer even though it had to reduce its workforce. The company offered sabbaticals to some employees and offered to pay partial salaries to laid-off workers who went to work for charities and community ventures. It helped subsidize continuing education for former employees who wanted to advance their skills or change careers.

Similarly, investment broker Charles Schwab & Co. offered a $7,500 hire-back bonus to laid-off staff members rehired within 18 months, and CEO Charles Schwab funded a $10 million tuition reimbursement account that offered each former employee up to $20,000 in tuition.

“These types of tangible steps can show everyone—survivors included—that people are important and that the company’s trying to do right by them,” Cascio says.

Adopt a “helping” relationship, rather than one of “command-and-control management,” Noer advises. “Learn how to listen and respond to employees in an empathetic, not a policy-justification, manner. Nonjudgmental, nondefensive communication often falls by the wayside when HR professionals are caught up in managing the layoff process,” he says.

Another common option: offering on-site counseling from an employee assistance program for two weeks after a layoff event, according to John Sullivan, professor of management at San Francisco State University’s College of Business and founder of HR consulting firm Dr. John Sullivan & Associates in Pacifica, Calif. “You want to make it easy for employees to talk it all out, air concerns, ask questions and get answers,” he says.

Facilitate “grieving” and “venting.” “The best way to help employees shed the shackles of layoff-survivor sickness is to find ways to facilitate emotional release,” agrees Noer. The problem: Doing so often “goes against the grain,” he says, simply because most managers are uneasy about airing feelings and emotions in the workplace. “To be effective, you’ve got to take the risk,” he says. Some companies hold group meetings that stimulate frank discussions of feelings and emotions, he says; others require supervisors to have one-on-one meetings with employees just to listen and answer questions.

“Managers need to be trained in basic listening, empathy and reflection skills,” Noer notes. This training has a dual effect, he says: It helps the boss deal with his issues and then equips him to help his employees. “Regardless of the technique, bosses need to find ways to help their employees externalize their survivor feelings and move forward into productivity,” he says.

Consider the family. “Families of survivors undergo trauma, too,” says Sullivan, who suggests sending personal letters to family members that “explain the current business situation and thank them for their support during this time.” It’s a newer trend that may not be right for every company, he notes, but “it can be a gesture of reassurance.”

Involve top managers. “HR professionals usually know what’s really going on in regard to survivor symptoms and are able to face reality much sooner than top management,” Noer says. “HR can really help the organization by finding ways to help top management quickly come to grips with it—making them understand that they really can’t compete with a workforce crippled with layoff-survivor symptoms.”

Do something very visible, suggests Christopher Rice, president and CEO of BlessingWhite Inc., a global consulting firm in Princeton, N.J., that advises employers on employee engagement, leadership development and performance management. He cites examples of corporate CEOs who announce they’re working for $1 in annual salary: Apple Inc. CEO Steve Jobs is one example; Whole Foods Markets CEO and Chairman John Mackey is another. It will get attention—but also will show employees that everyone’s sharing in the cutbacks and changes, he says.

Seattle-based coffee company Starbucks Corp., for example, confirmed in August that none of its U.S. workers at the vice presidential level or above—including members of the senior management team and the CEO—will get raises for the coming fiscal year. The company had announced store closings, layoffs, curbed expansion plans and a management reorganization earlier this year.

“Organizations with high employee engagement have the highest level of trust in leadership,” Rice says, “and the likelihood of employees being resilient to big changes has a lot to do with the culture of the company and its leaders.”

Give survivors a reason to stay. “People need to believe in the organization to make it work, but they need to see that it works to believe in it,” says Cascio. Lay out specific plans with timelines, he says, so that employees know what’s coming next and how they can track company resilience, progress and improvement. “If companies don’t have a clearly articulated plan to prove how they’re going to come back, what’s to prevent surviving employees from believing you can’t shrink your way to prosperity?”

The Prognosis

As for Jacobs, the Hartford Courant employee, he returned home at the end of August—after successfully cranking out daily columns during his Beijing assignment—with the same feelings he had before. A month’s time hadn’t eased the stress of layoff-survivor syndrome.

“I worry about the content of the paper. I worry about my family’s future,” says Jacobs, who has worked at the paper since 1984, and who wanted to be a sportswriter at age 13. “I worry that after three decades giving everything I have, I better find something in reserve to give even more. And what I feel for myself, I feel for everybody still giving it all at the Courant.”

Ultimately, layoff-survivor sickness is a complex experience that doesn’t always lend itself to simple solutions. For HR professionals, Jacobs and thousands of other employees from scores of companies, the questions remain: Does layoff-survivor sickness ever resolve completely? Do afflicted employees make full recoveries?

“Yes, there is hope,” says consultant Noer, a former HR professional. Workplace environments heal, “but it requires major adjustment in motivational assumptions and in HR strategies. This entire area is a great HR opportunity to lead the way toward productivity and quality of work life,” he says, “but it requires HR people with the courage to make it happen.”

The author, a business journalist in the Washington, D.C., area, is a contributing editor of HR Magazine.