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The shock of mass redundancies is only the beginning for companies




“After almost 8.5 years at Google, I was notified this morning that I was affected by the downsizing and no longer have a role with the company. . . I envisioned spending my entire working career at Google, so this news has been especially hard to take in.”

LinkedIn is flooded with posts like this from Googlers who suddenly lost their jobs this month via email. Some had devoted decades of their lives to the company. Google’s parent, Alphabet, is among the tech giants cutting their workforce by the thousands. The sector as a whole has lost around 200,000 jobs in the past year.

A sacked Google employee told the Financial Times: “The company̵[ads1]7;s motto is ‘respect the user, respect the opportunity and respect each other’. Who are they kidding?” While it’s troubling to fire entire teams—and regardless of how it’s against companies’ public image and management style—there are good reasons why mass layoffs must happen quickly. The abruptness of firings can be attributed to an attempt to protect intellectual property rights and client relationships, preventing employees from transferring data and other security reasons.

After the initial shock wears off, however, are employers aware of the long-term consequences of their actions? Sandra Sucher, co-author of The Power of Trust: How Companies Build It, Lose It, Get It Back, points out that research shows that layoffs have a detrimental effect on employees and company performance. – The reason why mass redundancies do not end up paying off is that they destroy trust in an organisation, she says.

Companies that have spent years and huge amounts of money training employees are letting not only institutional knowledge but also their network of relationships walk out the door.

A friend at a large tech company was on a Slack chat with 15 colleagues working on a bug. Then 12 of the group were fired. The Slack chat died and the problem went unresolved. “You’re not just replacing that story, that conversation, that expertise,” he says.

The so-called survivors, like my friend, are now less likely to trust their employer and will be anxious about future layoffs. This remaining workforce may resent having to take on a heavier workload under more trying circumstances – which in turn will lead to more employees quitting. Downsizing a workforce by just 1 percent can lead to a 31 percent increase in voluntary employee turnover next year, according to researchers at the University of Wisconsin-Madison and the University of South Carolina.

Goodwill is fragile. Most individuals who thrive at work do more than is asked of them. Mass layoffs send the message that instead of hiring someone for all they bring to work and their future potential, they are just a cog in a machine.

Employees who choose to stay, knowing that hard work and good performance will not guarantee employment, may be more likely to do the bare minimum or be less innovative when a business needs it most. All this affects profits in the long run.

Companies like Alphabet are doing the right thing in the short term: paying layoffs, bonuses and remaining vacation days as well as six months of health care, access to job placement services, plus immigration support. But those laid off can be affected for life, as many were after the financial crisis of 2008. They can suffer a blow to their health as well as their finances. A new job at the same or higher salary often does not come immediately.

Mass redundancies represent a shock for both those left behind and those who remain – and that is important in the long term. Companies can learn from what has happened: they need to grow more sustainably and hire in a more disciplined way. As Sucher says, if managers are serious about employee welfare, they need to plan for future changes in the workforce on an ongoing basis and ride out difficult periods. Leave payments, withholding of bonuses, wage cuts and voluntary redundancies are options. If the pandemic taught businesses anything, it was that there are other ways to get ahead in tough times.

anjli.raval@ft.com



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