Over the course of 2022 and early 2023, some of the world’s best-known companies announced mass layoffs—defined as more than a third of the company or more than 500 employees being laid off in 30 days. Downsizing at this scale may be framed as “eliminating redundancies” or “a proactive stance toward an impending market decline,” and is often received favorably by the markets.
The impact on the former employees of Salesforce, Amazon, DoorDash, Zillow, Peleton, etc., is obvious and, unfortunately, familiar. During the Great Recession, the unemployment rate doubled in just two years to 10%, and by late 2009, more than 15 million people were unemployed. Barely 10 years later, unemployment spiked even higher due to COVID.
What is less discussed is the massive impact on the employees that remain. When a third of the workforce suddenly vanishes, where does their work go? Many times, it can get wrapped up in a mantra of “Do more with less,” i.e., shifts onto the desks of all who remain. Some leaders assume that the team will “figure it out” and for the most part, they are right. The remaining employees shoulder more and more tasks, accelerating their trajectory toward burnout.
The long-term impact on “surviving” employees has been well documented. One study found that post-layoff, remaining employees “experienced a 41% decline in job satisfaction, a 36% decline in organizational commitment, and a 20% decline in job performance.” Some of this could certainly be related to the grief and anxiety that accompanies the loss of so many colleagues all at once. But I would argue that the subsequent overload is a major factor as well.
Is there an alternative?
One desired outcome from a layoff is to operate more efficiently. But what if that efficiency could be gained without cutting the workforce? In knowledge work, there is often a collaboration tax imposed by ineffective meetings, haphazard communication practices, and competing expectations around the “right way to do things.” Put another way, about one-quarter of each employee’s workday may be spent coordinating and talking about work, rather than doing it.
If organizations spent time re-capturing that lost productivity, is it possible that their performance would improve enough to eliminate the need for cost-cutting? In a recent study, researchers estimated that companies could save $25,000 or more per employee per year by eliminating unnecessary meetings. For organizations with thousands of employees, this could mean millions in yearly estimated savings.
There are no quick fixes for addressing the cost of collaboration. Whereas a layoff seemingly provides immediate relief for the company (except for severance packages, ongoing benefits obligations, etc.), redesigning how knowledge work happens takes patience and practice. The habits companies have collectively developed for how to get things done are embedded in their operations. Rewiring can be painstaking, but can ultimately provide an incredible long-term benefit.
Once more effective and efficient practices become “how we do things around here,” the more they can be a sustainable competitive advantage. Imagine if you could make your employees 20% more productive while they work 10% less than today. That’s the supercharged organization you’re looking for. No layoffs required.