Positive Impacts of Layoffs

Layoffs are a challenging and painful process for any company.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. However, when managers and HR handle them effectively, a crisis can also bring new opportunities. Are you dealing with layoffs? We have tips on how to make the most of the situation. But first, let’s look at the different types of layoffs.

Not all layoffs are the same

One of the mistakes that the 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 the company culture, require different type of communication and leave different kinds of marks on teams.

The end of each year is always associated with redundancies and larger restructurings, which the company can prepare for in advance or which result from natural business cycle (for example, in manufacturing companies).

The first quarter of the year, on the other hand, is the period when teams are often “cut” beyond the initial expectations and the interventions are surprising and often significantly more impulsive.

Types of layoffs

Strategic layoffs

• Character: Well-thought-out decision based on strategic changes – for example,    restructuring or significant changes in business model.
• Impact on culture: If strategic layoffs are well communicated, they can paradoxically strengthen trust in the company’s leadership and vision. However, if transparency is lacking, it can cause uncertainty and the loss of employee loyalty, leading to a so-called “brain drain” period.

Crisis layoffs

• Character: Reaction to unexpected economic or operational problems – for instance, the loss of a key customer, economic downturn.
• Impact on culture: It often causes stress, uncertainty and demotivation. However, it can strengthen employee cohesion if the situation is explained properly and the management shows appropriate empathy. In case of crisis layoffs, there should be separate plans prepared in advance.

Mass layoffs

• Character: It affects a large number of employees across departments, usually because of major restructuring or cost-cutting measures. It’s often followed by a paralysing “new-old-company” effect.
• Impact on company culture: It can lead to a significant decrease in morale and loss of trust in company’s stability and vision. If departing employees are communicated and supported properly (e.g. outplacement), it can help maintain loyalty of the remaining employees and allow new talents to shine.

Managerial layoffs due to company performance

• Character: It focuses on executives and managers, often because of their alleged or legitimate ineffective leadership.
• Impact on company culture: It considerably affects the perception of management and stability of the company. If management changes too often, a sense of chaos arises and morale is significantly affected. Conversely, targeted removal of incompetent management can boost morale and effectiveness.

Managerial layoffs due to company restructuring

• Character: It focuses on executives and managers, often as a result of reorganisation.
• Impact on company culture: As in the previous case, the change tends to create confusion and uncertainty. In case of restructuring, it’s amplified by the fact that layoffs often affect popular and capable managers.

Impulsive layoffs

• Character: It occurs randomly without concentration in a single moment. It often gives impression that it’s not sufficiently well-thought-out.
• Impact on company culture: It often leads to uncertainty, lower morale and loss of trust in management and direction of the company. In addition, it whips up emotions across teams because it doesn’t follow a logical or well-communicated pattern.

Hidden layoffs

• Character: It includes the ways of reducing the number of employees without direct layoffs, such as through outsourcing, not renewing fixed-term contracts or wage and benefit policies for the employees who aren’t crucial to the company.
• Impact on company culture: It can be perceived as dishonest and unethical and often whips up emotions because many companies don’t communicate it internally. However, if the company opts for an open approach, it can reduce the negative impact on people’s morale and make it clear where is the line between people who are compatible with the company’s culture in the long term and who the company is willing to stand up for.

Positive opportunities of layoffs

So, is it possible, despite all the interventions in the culture, to see anything positive about layoffs? As the old HR saying goes, even colleagues leaving should be seen as an opportunity and then it’ll work. What’s more, it’s the HR department that can significantly shift the overall layoff effect – even when (yes, it really happens) the decision to restructure and lay off is only learned in the last phase before the management’s decision is put into practice.

Where, then, can we look for positive impacts?

Changes in competency models

I don’t know the company that has found the right and mainly sustainable balance between rigid job descriptions, a fixed organigram and strict competency models, and on the other hand, too much flexibility leading to chaos, the emergence of grey areas and overestimation of independence and ownership over real skillset.

However, as the economy changes, so do the market needs and the skills of your people. The competencies of individual teams and, of course, the competency sets for the positions involved, must be adjusted continuously as well. In this case, you basically have two options – to be masters of continuous fine-tuning (which is difficult, challenging and often misunderstood by management) or to wait for the moment when the structure is changed for some reason.

So, layoffs may be a good opportunity to undertake more significant revision. Not only will you redefine the positions you’ll be hiring for but you’ll also more radically revise the competency models of your current colleagues:

👉 You’ll strengthen the role of skills in which your employees are really good at.

👉 You’ll give context and therefore meaning to work your people do. That’s basis of motivation.

👉 You’ll separate the competencies that no longer make sense or make their work complicated.

👉 You’ll redefine existing positions to work in 5+ year horizon.

👉 You’ll appropriately adjust to the newly set reward.

Don’t be afraid to use AI tools to create or modify competencies – they’ll effectively shorten the way to the goal. On recent competency projects, AI has 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 teams take as a “new chance”. If someone leaves as a result, you’ll be sure that it’s more likely to be a colleague with whom you would have struggled to find a shared future anyway.

Opportunities for new types of positions

Many companies reach a stalemate when restructuring teams. Two, often very different positions, need to be merged into one. The skillset and competency model are so broad that it’ll be almost impossible to find a suitable colleague for this position. The fact that the reward may not be adequate is just the final proof that this is the wrong way to go.

So, what should you do? Test whether it’s really necessary to go down the path of “half-baked” position or if it makes sense to try a different type of position. Thanks to it, you can tap into a completely new pool of candidates: mothers on maternity leave, experienced professionals 55+ or perhaps part-time freelancers working remotely from another region or even abroad.

👉 You can often find the appropriate fit for skills and rewards.

👉 You won’t face with the dilemma of whether to say goodbye to a colleague in a “half-baked” position during probation period who handles half the job perfectly and the other half poorly.

👉 You’ll be more flexible in future decision-making. If you find out 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 can work for many other positions in the company.

A piece of key advice to conclude: you cannot do without competency models and sophisticated skillset descriptions. What you can afford with a full-time colleague (i.e. fiddle with them), you usually cannot afford with part-timers. In this regard, fully respect the needs and possibilities of the managers who will be responsible for the model.

Make your current work more effective using AI

You’ve been talking about it for almost two years but wider AI implementation in teams is still nowhere to be seen? The time when the teams are afraid (unfortunately often justifiably) that the cut of positions will negatively impact the demands on existing colleagues, is ideal time to do it.

It’s clear that you cannot pull AI strategy out of a hat like a rabbit. However, time of layoffs and restructuring is a great opportunity to take at least partial steps. We’ve already written about what processes AI can help you with.

👉 Identify repetitive tasks from job requirements that can be automated. No one wants to be stuck with “filling out the reporting instead of the colleague who left” when AI can easily handle it.

👉 When collecting feedback from colleagues, be sure 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 in practice.

👉 Work with AI as a colleague. This mindset will help you justify the costs of implementation.

Of course, you cannot be naive with AI. But at the same time, ask yourself – when else does it make sense to address the issue of broader implementation if not during time when the company is going through maybe 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 this is 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 is out of their sight in the long term.

However, I recommend holding a slightly different opinion. Change is never negative or positive. Change is simply neutral momentum and it’s only up to you what steps you take in response to it and what sentiment you allow it to acquire. Even if the change is uncomfortable, you can use it to declare the strengths of your culture – fairness, openness and the fact that your business is well thought and you’re firmly in control of it.

The process of layoff could be actually positive. It helps the company survive, make it work better and maybe even more fairly. And with proper care, it can be reflected in the culture. Be careful – if the company has been operating toxically for a long time, senior managers are unsympathetic blockheads exploiting their own people, then ignore the whole section. No matter how good the people manager is, they won’t do anything about it.

👉 Maximum openness is the key. People need to be explained why the steps are being taken (or, in the worst case, why they were taken without notice) and how they’ll proceed.

👉 Declare maximum openness as long as necessary – e.g. by establishing a helpline.

👉 Communicate with people not only in groups, but also in person. It all starts with well-briefed managers.

👉 Is another job cut coming? Then don’t lie that the layoffs are over and everything will be rosy. And if possible (not always possible of course), try to prepare the ground to make it defensible.

Remember ex-post feedback in particular. Even well-prepared process of layoff will leave a number of negative emotions. You can only turn these into positive ones if you monitor and explain them.

Impulse for existing colleagues

Layoffs can be the culmination of long-lasting problems that have been taking the company’s drive and casting a thick blanket of despair over the employees. In many cases, the rule applies – some change, even radical one, is better than no change at all.

I like the analogy that every company, even a good one, just needs a radical pruning from time to time. It always makes a tree or bush look worse than before. But only for a while, until it blooms again. And just like that, layoffs can add drive to existing colleagues. If you follow the basic rules.

👉 Trust is key. If you let it down just once, nothing will move forward.

👉 Feedback is important. Not only about how the changes influence people, but also about what opportunities they see in them.

👉 Ownership and the ability to give people new responsibilities is crucial. Make it clear that the company will let good ideas and talent shine.

Layoff doesn’t mean to lose

A final thought. Always follow the ethics of layoffs. Say goodbye assertively but fairly, even if the former colleague is obviously in trouble. The Czech market is small and it’s true that firing a colleague here doesn’t mean you’ll never see them again. You could meet them as a client or competitor.

And at the same time – no one says that if you fire a talented colleague today because they weren’t a good fit for the company, you won’t see them in two years during an interview for a new position.