After the initial shock has passed, 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, Regain It, points out that research shows lay-offs have a detrimental effect on employees and corporate performance. “The reason why mass lay-offs don’t end up paying off is that they destroy trust within an organisation,” she says.
A friend at a major tech company was on a Slack chat with 15 colleagues, working to solve a bug. Then 12 of the group were fired. The Slack chat died and the problem went unresolved. “You don’t just replace that history, that conversation, that expertise,” he says. Downsizing a workforce by just 1 per cent can lead to a 31 per cent increase in voluntary staff turnover the next year, according to researchers at the University of Wisconsin-Madison and the University of South Carolina.
Workers who choose to stay, knowing that hard work and good performance will not guarantee employment, might be more likely to do the bare minimum or be less innovative when a company needs it most. All of this hits profits in the long run.