Positive Impacts of Layoffs
Let’s face it. A very long era of economy, which was characterized by high employment, is slowly coming to an end. For people managers, this means brushing up on a variety of skills in case the company needs to say goodbye to even experienced and beloved colleagues.
What this means in practical terms has already been discussed in several texts – it’s necessary to prepare agreements and all necessary documents, but also to plan the communication to the employees themselves so that the layoffs have the least possible impact on the company culture and team atmosphere.
Today, we will look at the so-called “layoffs” from another, less conventional perspective. Specifically, what can a people manager do to ensure that even this negative cut strengthens the company and its teams.
Not All Layoffs Are the Same
One of the mistakes companies make is that they don’t distinguish between different types of layoffs and apply the same formula to all of them. In fact, layoffs have very different impacts on company culture, require different types of communication, and leave varying degrees of marks on the teams.
The end of each year, for example, is always associated with layoffs due to redundancy and larger restructuring, which the company can prepare for well in advance, or which arise from the natural business cycle (for example, in manufacturing companies).
The first quarter of the year, on the other hand, is often a period when cuts in teams go beyond initial expectations, and the interventions are surprising and often significantly more impulsive.
Types of Layoffs
Strategic Layoffs
- Character: A planned and long-thought-out decision based on strategic changes – such as restructuring or significant changes in the business model.
- Impact on Culture: If strategic layoffs are well communicated, they can paradoxically strengthen trust in the company’s leadership and vision. If, on the other hand, transparency is lacking, it can cause uncertainty and a loss of employee loyalty, leading to a so-called “talent exit” period.
Crisis Layoffs
- Character: A response to unexpected economic or operational problems – such as the loss of a key customer or an economic downturn.
- Impact on Culture: Often causes stress, uncertainty, and demotivation. However, it can strengthen employee cohesion if the situation is properly explained and leadership demonstrates appropriate empathy. Crisis layoffs should have separate plans prepared in advance.
Mass Layoffs
- Character: Affects a large number of employees across departments, usually due to a major restructuring or cost-cutting measures. Typically followed by the paralyzing effect of the “new-old company.”
- Impact on Culture: Can lead to a significant decrease in morale and a loss of trust in the company’s stability and vision. If communicated properly and accompanied by support for departing employees (e.g., outplacement), it can help maintain loyalty among remaining employees and allow new talents to shine.
Managerial Layoffs Due to Company Performance
- Character: Focuses on executives and managers, often due to their alleged or legitimate ineffective leadership.
- Impact on Culture: Significantly affects the perception of leadership and the company’s stability. If leadership changes too frequently, it creates a sense of chaos and has a major impact on morale. On the other hand, the targeted removal of incompetent leadership can increase morale and efficiency.
Managerial Layoffs Due to Company Restructuring
- Character: Focuses on executives and managers, often as a result of reorganization.
- Impact on Culture: Similar to the previous case, changes in leadership tend to create confusion and uncertainty. In the case of restructuring, this is further amplified since the layoffs often affect popular and capable managers.
Impulsive Layoffs
- Character: Occurs randomly, without concentration in a single moment. Often creates the impression that it is not sufficiently well-thought-out.
- Impact on Culture: Often leads to uncertainty, lower morale, and a loss of trust in the leadership and direction of the company. It often also stirs emotions within teams because it does not follow a logical or well-communicated pattern.
Hidden Layoffs
- Character: Involves ways of reducing the number of employees without direct layoffs, such as through outsourcing, not renewing fixed-term contracts, or altering salary and benefit policies for employees who are not crucial to the company.
- Impact on Culture: Can be perceived as dishonest or unethical and often stirs emotions because many companies don’t communicate it internally. However, if the company chooses an open approach, it can reduce the negative impact on employee morale and clearly show where the boundary lies between employees who are long-term compatible with the company’s culture and those the company is willing to stand by.
Positive Opportunities of Layoffs
So is it possible to see anything positive in layoffs despite all the interventions in the culture? An old HR adage says that even when colleagues leave, you should view it as an opportunity, and then it will work out. And at the same time, it is precisely the HR department that can significantly shift the overall effect of layoffs – even in cases where (yes, it really happens) the decision to restructure and lay off employees is only learned in the last phase before management’s decision is put into practice.
Where, then, can we look for positive impacts?
Changes in Competency Models
I don’t know a single company that has found the right, and especially sustainable, balance between rigid job descriptions, a fixed organizational structure, and strict competency models, and on the other hand, excessive flexibility that leads to chaos, the emergence of gray areas, and an overestimation of independence and ownership over actual skillsets.
However, as the economy changes, so do the market needs and the skills of your people, and the competencies of individual teams and the competency sets for the positions they hold must be continuously adjusted. In such cases, you essentially have two options – become masters of continuous fine-tuning (which is difficult, demanding, and often misunderstood by leadership) or wait for a moment when the structure is changed for some reason.
Layoffs, therefore, can be a good opportunity to undertake a more significant review. Not only will you redefine the positions you will be hiring for, but you will also more radically revise the competency models of your current colleagues:
👉 You will strengthen the role of skills in which your employees are really good.
👉 You will give the work your people do context, and thus meaning. This is the foundation of motivation.
👉 You will separate competencies that no longer make sense or are complicating work.
👉 You will redefine existing positions so that they work in the 5+ year horizon.
👉 You will appropriately adjust to the newly set rewards.
Don’t be afraid to use AI tools to create or modify competencies – they will efficiently shorten your path to the goal. On recent competency projects, AI reduced preparation time by 80%. And that’s a lot.
If you combine all of this well with internal communication, you can turn a crisis layoff into an event that the existing teams will take as a “new opportunity.” And if someone leaves as a result, you will be sure that it’s likely a colleague with whom you would have struggled to find a shared future anyway.
Opportunities for New Types of Employment Contracts
Many companies, when restructuring teams, find themselves in a deadlock. Two often very different positions need to be merged into one, whose skillset and competency model are so broad that finding the right colleague for the position will be nearly impossible. And the reward is probably not going to be adequate, which is the final proof that the approach is going in the wrong direction.
So, what should you do? Test whether it is really necessary to go down the path of a “half-baked” position, or if it makes more sense to try a different type of contract. This way, you can tap into a completely new pool of applicants: mothers on maternity leave, experienced specialists over 55, or even part-time freelancers working remotely from another region or even abroad.
👉 You will often be able to find the right fit for both skills and reward.
👉 You won’t be faced with the dilemma of whether to part ways during the probation period with a colleague in a “half-baked” position who excels at half of the job but performs poorly on the other half.
👉 You will be more flexible in future decision-making. If you find that the new arrangement doesn’t make sense, you won’t have to cancel the “entire position.”
👉 It’s an ideal test for a new approach that could work for many other positions in the company.
The Only Key Advice at the End:
You cannot do without competency models and sophisticated skillset descriptions. What you can afford with a full-time colleague (i.e., working closely with them), you often cannot afford with part-timers. In this regard, fully respect the needs and possibilities of the managers who will be responsible for the model.
Streamlining Current Work Using AI
You’ve been talking about it for almost two years, but broader implementation of AI in teams is still nowhere to be seen? And when else should you step on the gas if not when there’s a (often unfortunately justified) fear in teams that job cuts will negatively impact the demands on existing colleagues?
It’s clear that you can’t pull out an AI strategy like a rabbit from a hat. But the time of layoffs and restructuring is a great opportunity to at least take some incremental steps. We’ve previously written about which processes AI can assist with.
👉 Identify repetitive tasks from job requirements that can be automated. Nobody wants to be stuck with “filling in the reporting for a colleague who left,” when AI could easily handle it.
👉 When collecting feedback from colleagues, don’t forget to monitor their approach to AI as well.
👉 Select the most promising teams and start testing which AI tools might be applicable to the company’s practice.
👉 Work with AI as a colleague within the regular contract. This mindset will help you justify the costs of implementation.
Sure, you can’t be naïve with AI. But at the same time, ask yourself – when else does it make sense to address the broader implementation issue if not during a time when the company is undergoing possibly the biggest changes of the year? What are you actually waiting for?
Strengthening Culture
Ask ten people managers about layoffs and their impact on company culture. Nine of them will tell you that it’s one of the riskiest moments. The tenth won’t say anything because unfortunately, they’re so overwhelmed with paperwork that even such a crucial context has long been out of their radar.
However, I recommend adopting a slightly different perspective. Change in itself is never negative or positive. Change is simply a neutral momentum, and it’s up to you what steps you take in response to it and what sentiment you allow it to acquire. Even if the change is unpleasant, you can declare the strengths of your culture – fairness, openness, and the fact that your business is well thought out and firmly in hand.
The layoff process itself can, by nature, be positive. It helps the company survive. Function better. Perhaps even more fairly. And with proper care, it can be reflected in the culture. And be careful – if the company has been functioning toxically for a long time, with managers who are unsympathetic jerks exploiting their people, then ignore this entire section. No matter how good your people manager is, they won’t be able to do anything with that.
👉 The foundation is maximum openness. People need to be explained why steps are being taken (or in the worst case, why they were taken without prior notice) and how they will proceed.
👉 Declare maximum openness for as long as necessary – for example, by establishing a trust hotline.
👉 Communicate with people not just in groups, but personally. Everything starts with well-briefed managers.
👉 Is another job cut coming? Then don’t lie and say that the layoffs are over and everything will be rosy. And, within possibilities (though it’s not always feasible), try to prepare the ground so that it’s defensible.
And most importantly – don’t forget about post-event feedback. Even the best-prepared layoffs will leave a number of negative emotions. You can only transform those into positive ones once you put in the effort to map and explain them.
A Boost for Existing Colleagues
Layoffs can be the culmination of a series of long-standing problems that have been draining the company’s drive and casting a heavy blanket of hopelessness over employees. In many cases, the rule applies – a change, even if radical, is better than none.
I like the analogy that every company, even one that’s grown well, occasionally needs a radical pruning. The tree or bush always looks worse after it, but only for a while, until it blooms again. And just like that, layoffs can give existing colleagues a boost. When you follow some important rules.
👉 Trust is key. If you break it even once, nothing will move forward.
👉 Feedback is important. Not only about how the changes impact people, but also about what opportunities they see in them.
👉 Ownership and the ability to give people new responsibilities is important. It should be clear that the company will let good ideas and talent shine.
Firing Doesn’t Mean Losing
And one final thought. Always stick to the ethics of layoffs. Part ways assertively, but fairly, even when there’s clear wrongdoing on the part of the former colleague. The Czech market is small, and it’s true that firing a colleague here doesn’t mean you’ll never see them again. You might meet them as a client or at a competitor.
And also – nobody says that if you fire a talented colleague today because they weren’t a good fit for the company, you won’t see them again in two years during an interview for a new position.
