Life after layoffs: Navigating the common issues businesses face after headcount reductions

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Particular care must be taken with high-performing employees who, after surviving through layoffs or multiple rounds of layoffs, have concerns about their company’s stability, authors Tess Lumsdaine and Emily Rayner caution.

Authors:
Tess Lumsdaine, Partner and Head of Baker McKenzie's Employment & Compensation Practice in Hong Kong
Emily Rayner, Senior Associate in Baker McKenzie Wong & Leow's Employment & Compensation Practice in Singapore.

The past year has seen headlines dominated by large scale layoffs, globally and in the Asia Pacific region. While some layoffs have been driven by market headwinds and anticipated future challenges, for other businesses, we are seeing headcount reductions as a correction to hyper growth during the pandemic. A smaller number of businesses have also been using the more volatile conditions to re-prioritise their business or align to a strategic shift in focus. A few businesses are performing "copycat layoffs" – because everyone else is doing it.

There is a difficult balance to strike when reducing headcount whilst seeking to retain key talent and maintain productivity during the transitional period. To do so requires careful planning and messaging to ensure that the loss of institutional knowledge can be rebuilt, and business critical employees are confident in the current and future state of the business.

In this article, we discuss common issues that businesses face after layoffs, and our tips for how they can manage these.

Examining the options

Before diving headfirst into layoffs, businesses must consider the ripple effects that layoffs can cause within a workforce. Ultimately, the post-layoff workforce may look considerably different to what the modelling predicted. Layoffs inevitably affect those who remain and the impacts of this are seen in resignation numbers and productivity.

The failure to properly plan and take into account the broader effects of layoffs can impact a company’s ability to reach the efficiencies they were seeking in the first place. For example, we are seeing “boomerang employees” – employees who were laid off due, then re-hired very shortly after because their exit left an unanticipated knowledge and experience gap. Not only does this impact employee engagement and business continuity, these employees will generally be entitled to retain their severance package even upon re-hire. At the planning stage, the objectives of the Board for the layoff exercise also need to translate into well-thought-out retrenchment selection and re-hiring strategies at the local level.

Turnover contagion

The idea of “turnover contagion”- one employee leaving prompting others to do the same, has been around for some time. A report released earlier this year by Visier, a human-resources analytics company, found that the colleagues of workers who had been laid off, quit at much higher rates than those whose colleagues had not been laid off.

The report found:

• When a resignation occurs, employees on that team are 9.1% more likely to leave within the next 135 days than employees who are not on that team.
• Turnover contagion peaks around 70 days after the first resignation. Hence, mitigation strategies should aim at the 45 to 135 days’ "critical" time frame.

Other "layoff buzzwords" are also going viral. The phrase "rage applying" has recently emerged, this is where employees apply for other jobs as revenge or in response to feelings of frustration or loss of trust in their employer and demonstrates how widespread turnover contagion is in practice.

Particular care must be taken with high-performing employees who, after surviving through layoffs or multiple rounds of layoffs, have concerns about their company’s stability. Businesses must communicate in a compelling way to remaining employees as to why they should stay and how their roles fit within the future success of the company.

Decreased engagement

The trend of "quiet quitting" (another viral buzzword) has emerged through this period – the idea of employees putting in the minimum amount of effort to keep their jobs, but they won’t go the extra mile for their employers. This is a direct result of employees questioning their commitment to an organisation that they consider failed their colleagues.

This by-product is resulting in reduced productivity and ultimately, with an already reduced headcount, a much lower output than many businesses planned for post-layoffs.

Interest from competitors

While some companies conducting layoffs may be distracted, competitors are leveraging low employee engagement and fractured stability, to poach key talent and high performing teams. We are seeing businesses place more value on their measures to protect proprietary information. In particular, businesses are reviewing their employment terms to ensure there are comprehensive provisions setting out the employee's obligations, and the company's rights, in respect of confidential information, intellectual property and post-termination restrictions (such as non-compete and non-solicitation terms).

Also critical will be having a response plan in place to allow businesses to move quickly and effectively when there is a suspected breach, so they can mitigate damage to the business.

We have discussed this issue in more detail in our previous article on safeguarding a company's proprietary information amidst employee exits.

Manage the change and the risk

There are steps businesses can take to minimise this flow on effects during, and following, layoff exercises.

1. Consistency in strategy – there can be a disconnect between Group level decisions (sometimes solely aimed at reducing baseline costs) and local managers seeking to ensure the best fit for the role. To avoid a manpower crunch and drops in productivity, businesses need to be aligned on strategy from top to bottom.
2. Workforce planning – businesses must prepare contingencies for the unintended consequences of layoffs, such as loss of institutional knowledge, low employee morale and higher turnover.
3. Transparent and honest messaging is key – retained employees need to know the plan for the company and what the future of the organisation looks like.
4. Consider strategy towards retained employees – consider what steps businesses can take to demonstrate a commitment to its employees. Not only through compensation and benefits but also through upskilling and reskilling programmes and individualised working arrangements for high performers.
5. Protection measures – businesses should consider whether they are adequately protected from a contractual perspective, in terms of confidential information, IP and post-termination restrictions.

Authors' photos: Provided