Several large companies have announced mass layoffs in recent months, but these cost-cutting measures have lasting effects that might outweigh the cost savings.
- Layoffs are often enacted to cut back on expenses, but studies have found that employees who aren’t released may drop off in productivity after a mass layoff.
- Following layoffs, companies may also see increased turnover as employees look to flee what they see as a sinking ship. To make matters worse for companies, these often are top performers.
- Company culture can also be strongly affected by layoffs as anxious employees fight among themselves to look better than their colleagues in the eyes of a manager.
- While layoffs may sometimes be unavoidable, companies should also be aware of the downsides.
Why it’s news
Nearly 435 tech companies laid off 121,000 employees during the first two months of 2022, Axios reports. While layoffs are slowing down, levels are still at the highest since 2020. Already the number of people laid off this year is 75% of the total in 2022.
Layoffs may be necessary for companies struggling to cover expenses but for profitable companies, layoffs may not be necessary—in fact, they could hurt.
Some companies are looking for new roles in other divisions of the company rather than laying off employees. Software company Zapier is one such company.
“Sometimes, layoffs are truly the only option. But at Zapier, we made a different choice,” Zapier recruiting manager Bonnie Dilber says. “We built what we call our secondment program, a temporary reassignment program, where Zapier teammates move to a role or work on a project outside the job they were hired to do.”
Dilber explains that the company worked hard to build a talented team and was not prepared to let any team members go, especially as Zapier considers the economic downturn temporary. Finding and hiring appropriate talent in the future may be more difficult than temporarily reassigning current employees.
“Did we really want to lose all of that recruiting talent only to spend all of those resources again hiring new people down the road?” Dilber says.
Unlike other tech giants, Apple has avoided mass layoffs because of CEO Tim Cook’s strategy during the pandemic. Other companies hired at a rapid pace while the industry boomed. Cook did not. Now those companies are letting staff go while Apple is able to retain its workforce.
For some companies, layoffs may be unavoidable, but for others, the costs may outweigh the benefits.