The Real Cost of Layoffs

Research suggests that the more engaged your employees, the bigger the long-term price you’ll pay for letting them go.

Good Morning!

Here are today’s highlights:    

• Mortgage rates have risen since the Fed cut interest rates.

• A lot of business leaders think flipping burgers builds careers.

• Jason Fried warns against having a customer you can’t afford to lose.

• A prominent restaurateur once considered one of the world’s most influential people has called it a career.

HUMAN RESOURCES

There are times when layoffs are necessary, but the Harvard Business Review says they can exact a long-term cost: “Layoffs might sound like a shortcut to a more agile, lean, and responsive operation, but proceed with caution. While they can lead to short-term financial benefits — and even rightsize burn to ensure the continued economic stability of a company in uncertain economic times — our research shows just how much of an impact they can have on employee engagement, morale, and loyalty, and how long that negative impact can last.”

• “After layoffs, companies see a significant drop in employee experience in many key areas. We found that company confidence dropped 16.9 percentage points. Belief in career opportunities dropped 12.1 percentage points. And confidence in leadership dropped 10.5 percentage points.”

• “High employee engagement prior to layoffs won’t protect you from the negative impact of doing layoffs. In fact, the higher your employee engagement is to start, the more likely it is to plummet after layoffs, and the less committed your employees will be to staying with the business. The largest declines were from companies scoring in the top 10 percent prior to the layoffs.”

• “Our 2020–2022 research found it took 12–18 months for engagement to rebound after layoffs. And for 2023 layoffs, the recovery is looking even longer, at 18–24 months, and that’s only if you hire new employees to backfill essential roles. For employees who make it through a time of layoffs, their commitment to staying with the company continues to drop over time, and this sentiment is a strong predictor of actual turnover.” READ MORE