Is layoff news like a Damocles’ sword to tame existing employees?

The news of impending layoffs is undoubtedly a source of stress, anxiety and uncertainty for employees. The psychological impact is akin to the sharp edge of a Damocles sword, cutting through their sense of job security and stability. Existing employees may experience insecurity about their own job, survivor guilt when colleagues are let go, and a decline in overall morale. This can lead to decreased productivity, increased absenteeism and a toxic work environment.

However, just as the Sword of Damocles was historically used as a strategic weapon to convey looming threat, layoffs too can be a calculated move by organisations to achieve specific goals. How? Let’s first look at the common reasons for layoffs —  cost-cutting, restructuring for increased efficiency, adapting to market changes and aligning the workforce with the company’s strategic direction. Layoffs can help organisations shed redundant roles, consolidate functions and streamline operations. These actions, while often painful in the short term, can position the company for long-term success.

According to Rameshwar Gupta, head – HR and admin, Gland Pharma, employees’ confidence is dwindling. Even though they put in diligent efforts, the lack of assurance from higher-ups prevents them from effectively showcasing their accomplishments. Consequently, their self-esteem plummets, making them hesitate to demonstrate their abilities, which, in turn, impairs performance.

Considering this, Gupta believes organisations and HR professionals should take steps to alleviate the situation and restore a sense of equilibrium.

“Companies should prioritise investing in the skill development of their employees. By enhancing their capabilities, employees can be prepared for both current and future challenges. This can uplift the spirits of the remaining staff, encourage open dialogue and address concerns to foster a sense of belonging and trust.”

Atul Mathur, executive vice president, Aditya Birla Capital

Layoffs, when not handled sensitively, can indeed ‘tame’ employees through fear. The prospect of losing one’s livelihood can push employees to work harder, keep their heads down and avoid questioning management decisions. This short-term strategy, however, risks damaging employee loyalty, creativity and innovation. It can create a culture of compliance rather than engagement, hindering the organisation’s ability to adapt to future challenges.

Ramesh Shankar S, chief joy officer, Hrishti.com, is of the opinion that empowering employees during such a delicate time is important. Allowing the existing employees to have a voice in their future roles and even the locations they may work from cannot only retain their valuable skills within the organisation, but also imbue in them a sense of control over their professional destiny. 

Organisations can opt for a more holistic approach that fosters employee resilience and engagement while achieving strategic goals. Instead of relying solely on the Damocles’ sword of layoffs, companies can invest in upskilling and reskilling programmes, provide transparent communication about organisational changes, and involve employees in decision-making processes. By showing a commitment to employee development and well-being, companies can create a workforce that is adaptable, motivated and loyal.

“Ensuring that affected employees receive fair compensation, along with adequate notice as per legal and ethical standards, is a fundamental aspect of maintaining their well-being and dignity during transitions”

Ramesh Shankar S, chief joy officer, Hrishti.com

It is natural for layoffs to impact the morale of existing employees. To counter this, Atul Mathur, executive vice president, Aditya Birla Capital, suggests maintaining transparency in communication. The organization must uphold a well-defined job description and adopt a strategic hiring approach aligned with its needs.

Moreover, his second suggestion is that companies should prioritise investing in the skill development of their employees. By enhancing their capabilities, employees can be prepared for both current and future challenges. This can uplift the spirits of the remaining staff, encourage open dialogue and address concerns to foster a sense of belonging and trust.

Instead of sudden layoffs, organisations can provide early communication about challenges and changes. This allows employees to prepare, seek alternatives and engage in open discussions with the management. 

“A two-pronged approach is needed. First, there should be a concerted effort to maintain a supportive environment within the organisation. This involves recognising the significance of retaining employees, as recruitment is no longer the primary concern. Organisations must invest in the well-being of their workforce, not just to prevent attrition but also to foster a positive consumer perception,” opines Gupta.

Implementing temporary measures such as reduced work hours, voluntary unpaid leave or sabbaticals is also helpful. These options can help mitigate financial strain on the organisation and maintain a sense of job security for employees.

Invest in training and development programmes to equip employees with new skills that align with the evolving needs of the organisation. This not only prepares them for future roles but also enhances their job satisfaction.

Offer flexible work arrangements, remote work options, or job-sharing opportunities to accommodate changing work dynamics while retaining talent.

“A two-pronged approach is needed. First, there should be a concerted effort to maintain a supportive environment within the organisation. This involves recognising the significance of retaining employees, as recruitment is no longer the primary concern”

Rameshwar Gupta, head – HR and admin, Gland Pharma

Talking about the laid-off employee, Shankar says that organisations can tap into the power of support networks and shared experiences. “Encouraging open dialogue among affected employees and providing platforms for them to connect with others who have faced similar situations can create a sense of community that is vital for weathering these challenges” feels Shankar. According to him, “Ensuring that affected employees receive fair compensation, along with adequate notice as per legal and ethical standards, is a fundamental aspect of maintaining their well-being and dignity during transitions.”

Layoff announcements are like a double-edged sword, capable of instilling fear as well as compliance in the short term. However, their lasting impact on morale and company culture is significant. It’s crucial to wield this tool carefully, opting for transparent communication, skill enhancement and employee welfare. By doing so, organisations can effectively manage their workforce, uphold their morale and meet strategic goals.