Many companies have announced job cuts or hiring freezes in the last two weeks. They range from Tesla and JPMorgan Chase to Redfin and Coinbase. Seven-eleven laid off over 800 people who contributed to the company’s success because someone, somewhere, inflated sales projections after they bought two rivals. Facebook’s CEO has spent so much of the company’s money on the Meta transformation that he’s turning up the heat and telling managers to be more critical of employee deliverables and raise the bar on their work.
Employees are the greatest resource in a company, yet some employers seem to work against their employees. Why would they mistreat their most significant asset? Employers sometimes mistreat employees because they may consider them disposable assets, which can persist because employees sometimes reinforce lousy behavior by themselves. If the employers don’t value them, are overworked, and are underpaid, they may burn out and often choose to leave.
When managers mistreat employees, their employees will find ways to get back at them. They’ll get mad and treat their jobs as just tasks that need to be completed and the hell with helping customers.
Building a solid and healthy company culture will make your company’s destiny strong and healthy. While many attributes could define a company’s character, one of the most obvious would be how leadership treats employees. If you’ve read some of my work on the internal customer, you may remember something called the Employee Golden Rule, which is:
Treat employees the way you want the customer treated – maybe even better.
Unfortunately, Seven-Eleven and Facebook don’t quite get that concept. I’ve been reading about Seven-Eleven layoffs, and it was a pure cattle drive. Employees saw a meeting with HR and their managers appear on their calendars, and at that meeting, they were told they longer had jobs.
At Facebook, they’re facing a more significant problem: the downturn in tech. Rather than share the future vision for the company with employees to win them over, Mr. Zuckerberg has taken an approach that “you need to work harder.” It’s estimated that 10% of Facebook’s staff could be laid off, and people are scared. When that happens, people don’t do their best work; they do whatever is necessary to keep their jobs.
Laying off employees can have a significant adverse effect on customer retention. Every customer is an asset to any company, and the employer must find ways to retain each. When a company lays off its employees, it sends out a message to customers that it is undergoing some crisis.
Companies that conduct layoffs frequently see additional employees resign from their jobs. Layoffs can disillusion top-ranking employees who then opt to leave the company. Watching a colleague go involuntarily could cause an employee to consider job offers from other companies seriously or actively seek new job opportunities.
A 2002 study by Magnus Sverke and Johnny Hellgren of Stockholm University and Katharina Näswall of the University of Canterbury found that survivors experienced a 41% decline in job satisfaction after a layoff, 36% decline in organizational commitment and a 20% decline in job performance.
Contrary to popular belief, there’s not much evidence that layoffs are a cure for weak profits or, to use the current euphemism, that they reposition a firm for growth going forward. “It’s complicated to sort out the relationship because firms that are laying off are almost in trouble,” says Peter Cappelli, Wharton management professor and director of the school’s Center for Human Resources. “The research evidence has not found any support for the overall idea that layoffs help firm performance. There is more support for the idea that where there is overcapacity, such as a market downturn, layoffs help firms. No evidence cutting to improve profitability helps beyond the immediate, short-term accounting bump.”
Employers also often underestimate the cost of layoffs in immediate financial terms and the lingering burden it places on remaining resources — both financially and emotionally. There is a considerable problem in HR generally that the stuff that is easy to put on a spreadsheet outweighs the stuff that isn’t.
Today layoffs have become companies’ default response to the challenges created by technological advances and global competition. Yet research shows that job cuts rarely help senior leaders achieve their goals. Too often, they’re done for short-term gain. Still, the cost savings are overshadowed by bad publicity, loss of knowledge, weakened engagement, higher voluntary turnover, and lower innovation, which hurt profits in the long run.