How mass layoffs impact existing employees

Seeing co-workers being rendered jobless takes a toll on the employees who manage to escape the axe


The year 2022 saw several major companies, such as Microsoft, Tesla, Ford and Wayfair, implement mass layoffs. During these emotionally-charged times of workforce reduction, what goes on in the minds of the existing employees? What do they feel?

“A sense of insecurity will always be there,” confirms Praveen Purohit, deputy CHRO, Vedanta Resources. People tend to overthink and create a fear about the uncertainty of their future in the organisation going through a mass layoff. They remain constantly insecure that they may lose their jobs as well in the future.

“A sense of insecurity will always be there.People tend to overthink and create a fear about the uncertainty of their future in the organisation going through a mass layoff. They remain constantly insecure that they may lose their jobs as well in the future.”

 Praveen Purohit, deputy CHRO, Vedanta Resources

When something happens at a macro-economic level, or is beyond the control of the employees, it is natural for them to feel anxious and insecure. Purohit adds, “Performance-based events can be controlled.” Such situations do not generally bother the high performers, as they’re always confident and believe in their capabilities.

“Such layoffs also create a sense of fear and anxiety not only within the teams where the layoffs have happened but also amongst people from other teams and functions,” says Ravi Kumar, senior president & CPO, Page Industries. The fear spreads across the organisation. Not just the affected individual but the whole environment takes a hit. This makes the existing employees anxious about their own fate.

“The loss of colleagues and friends can be devastating and can lead to a decrease in morale and job satisfaction among the remaining employees as well,” adds Kumar.

“More than low productivity, it leads to a low overall output as well,” opines Kumar. People spend more time discussing the ongoing downsizing, and are worried about their future. Most would be preoccupied thinking about who the axe will fall on next, and moreover, speculations will be rife about the company’s future course of action.

“Such layoffs also create a sense of fear and anxiety not only within the teams where the layoffs have happened but also amongst people from other teams and functions.”

Ravi Kumar, senior president & CPO, Page Industries

For instance, when something out of the ordinary or untoward happens in a neighbourhood, all residents tend to be restless and concerned till they know what has actually happened and obtain the details. The event remains a topic of discussion for days and causes fear and anxiety about the future. It is difficult for people to focus on their regular activities for some time. The scenario with layoffs is no different within the organisation, and productivity is bound to suffer.

However, Purohit feels that this may be the time for the existing employees to rise to the occasion and do their bit. “During such times, people with a stronger sense of ownership always step up and take more accountability and responsibility,” which is a very positive trait points out Purohit. It works as an opportunity for them (existing employees) to learn new things. Some may also be elevated, making them more occupied and involved within the organisation, while others may get a chance to try their hands at a new function. Therefore, not everything about a layoff is negative. So, they should not be all that disturbing after all.

Layoffs are a signal for larger organisations to pull up their socks and let their employees know that they are struggling because of the ecosystem or the macro-economic conditions. The message that should and does go across is that a lot more requires to be done.

“Layoffs cause employees to lose trust in the management and strains their relationship with them,” admits Kumar.” Employees join an organisation with the intention of enjoying their time there. They believe they’ll learn more, grow and spend a considerable amount of time at the organisation. Therefore, when the organisation tells them they are not needed anymore, disregarding their tenure, it does hurt. It is natural then for the employees to feel that the company does not value their contributions.

The employees who manage to escape the axe also tend to worry about their roles and stability. They hold themselves back, unwilling to give their best, as their trust in the organisation is broken. Seeing the tenured and even good performers being laid off makes them feel that the organisation doesn’t value their achievements or contributions.

When experienced employees are laid off, valuable knowledge and skills may be lost, leading to difficulties in performing tasks and making decisions as well. “More than the knowledge, it’s the loss of talent, which could have contributed to the organisation in other ways and not just in a specific role,” points out Kumar.

When role holders are laid off, it means that those particular roles are not required, and that is why, the company may have asked them to leave. However, this is a major loss of talent, as these individuals could have been retained and their skills could have been utilised elsewhere in other functions as well.

To mitigate these effects, organisations must be aware of the impact on the remaining employees and take steps to provide strong leadership and support. People managers play a crucial role in helping employees navigate these changes and maintain a positive work environment.

“It’s all about how the senior leadership steps up and communicates with the larger organisation, conveying their visions and future course of action to handle the situation,” points out Purohit. The insecurity will be there, but it’s the responsibility of the higher-ups to support the employees and the organisation with a progressive approach to handle things further.

“The company needs to be upfront in communicating as to why some people had to be laid off, to control and manage the anxiety of the existing employees,” opines Kumar. Clear communication plays a vital role here as it helps the existing employees to reduce the impact on the existing employees who are not meant to be disturbed by it.

“Connect with them and communicate clearly where the Company stands and why the decisions have been taken,” advises Purohit.

“Companies should always try to retain their top talent, and layoffs should be the last resort,” suggests Kumar.

However, “only when the circumstances are not in the control of a company is a layoff decision taken, ” feels Purohit.  For instance, information technology (IT) is a very people’s cost-centric industry and has a huge workforce. Hence, IT the cost-cutting measures they adopt includes layoffs. Other sectors, such as  manufacturing, processes, pharma, and natural resources are growing and progressing. In fact, some of them are thriving. Additionally, he also believes that sooner or later things will fall into place for affected sectors (IT) as well.

“A company will never ask employees to leave if the business is running smooth,” says Purohit. Hence, layoffs always happen in the divisions of a company that doesn’t affect the overall functioning of the organisation.

Mass layoffs can have a profound impact on the mindset of existing employees. The sudden loss of co-workers, friends, and sometimes mentors, can lead to feelings of fear, uncertainty and insecurity. The remaining employees may feel overworked, stressed and undervalued, which can result in decreased morale, motivation and productivity. The changes brought about by mass layoffs can also disrupt the company culture, causing employees to question the stability of their jobs and the company’s future. It is important for companies to understand and address the impact of mass layoffs on their employees in order to maintain a positive and productive work environment.

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