Workforce cuts cast pall on productivity

When layoffs hit, survivors lose interest in innovation

Engaging and motivating staff is a tough task in the best of times. If an organization has been hit by layoffs and gone through massive changes in the way it conducts business, the employees who survive the cuts might be behaving a lot differently than when things were going well, said Janet Mantler, a psychology professor at Carleton University in Ottawa, who has researched the effect layoffs have on organizations.

“People take a job with the idea that ‘As long as I’m working here and doing what I’m supposed to do, my job will remain,’” said Mantler. “A layoff breaks that psychological contract and the employee says, ‘No matter what I do, I can’t really control my job.’”

For “survivors” of downsizing, this loss of security has ramifications that can manifest themselves in a variety of ways. Staff will be unsure about the next round of layoffs and that can lead to a lot of gossip around the water cooler. Some may react by working harder in an effort to forestall the next layoff. Others will withdraw and lose interest in things like networking, innovation and creativity.

“It causes people to focus inward on what they can control and it’s not very good for the company and it’s also not very good for them,” she said.

At this point, employees will default to tried-and-true methods at work, something not practical in organizations that have gone through a restructuring.

“If you’re an organization that’s in a state where you’ve lost a lot of time and money, you know you have to do something different because obviously what you’ve been doing before has been costing money,” she said. “So you’re trying to get people to look at things differently and try something new, but people are unable to get out of what they’ve been doing before. They’re in a cognitive rut.”

A recent survey shows organizations are very concerned about getting employees out of that rut. According to Towers Perrin’s 2002 Talent Management Trends Survey, engaging and motivating employees to deliver required business results was ranked as the top people issue facing organizations in tough economic times.

Chris Hatch, Canadian practice leader for rewards and performance management at Towers Perrin, said some organizations believe that when tough times hit, staff can be taken for granted.

“Some people believe you don’t need to worry about that. You can take your eye off the ball and you don’t need to worry about current talent,” he said.

But according to the survey, quite a few organizations have apparently learned a lesson as retaining critical talent made the top five people issues, with 37 per cent of organizations identifying it as a key issue during tough economic times.

“It’s still important, it’s just being superseded by other things that are more critical to actual survival and organizational health in tough economic times,” said Hatch.

Hatch said the key challenge right now for organizations is hanging on to key talent, rather than recruiting new talent.

“We’ve been skipping along the bottom and now things seem to be rising,” he said. “But they’re rising slowly.”

Mantler said organizations that aren’t careful during a downturn may end up with the wrong staff when those fortunes do rise.

Loss of loyalty

After the psychological contract is broken by a layoff, the employees left at the organization exhibit a definite loss of loyalty, Mantler said.

“This is when you get a lot of people coming into work and the first thing they do is log on to the Internet and check out Workopolis and Monster,” she said.

Interestingly, this lack of loyalty usually doesn’t affect clients because while staff may no longer be loyal, they’re loathe to sacrifice their professional reputations.

“The majority of people will do nothing to harm a client,” she said. “But they will withdraw other forms of loyalty and other forms of effort to the company.”

Employees may choose not to go to meetings or to not participate actively in the meetings they do attend. They might see new ways of doing something that could help the company, but won’t share it.

“It’s sort of working so they won’t get fired but putting their efforts into things that are more of a priority for them,” she said. “They won’t do any of the above-and-beyond behaviours. All those little things that just smooth the way the organization works will just stop.”

What can an organization do?

Mantler said there are steps companies can take before, during and in the wake of layoffs, but not many organizations are handling it well — and that’s not surprising.

“The thing is, we actually haven’t seen a really good recovery (from a layoff),” she said. “I’ve not seen any organization that did good work after the layoffs, and so really, if there’s any way to avoid layoffs, anyway at all, that should be done.”

Once layoffs hit an organization, the trust employees have for the organization has been broken and it’s nearly impossible to win it back.

“It’s like a marriage. When a partner has cheated on a partner, they may have this uneasy alliance for a long time but the trust never really fully comes back,” she said. “It’s the same with an organization. Once you’ve laid off, the people who remain will never fully trust and never fully commit.”

Organizations facing layoffs need to think extensively about coming up with creative solutions to retain staff. Is there another sideline business that can be started up? Can the organization outsource its staff, send them somewhere else and then be able to recall them? Can employees be sent off for training while their labour isn’t needed? Companies may even want the staff themselves to brainstorm creative solutions to avoid layoffs. Anything that shows management is trying to look after people is important, because that’s the key to loyalty.

“Maybe the layoffs have to happen, but if you’re trying to look after them you will retain that loyalty,” she said.

Mantler gives the example of a hospital in Toronto faced with laying off nurses a few years ago as part of a large health-care restructuring.

“Most hospitals merged and just laid off nurses. Boom. Gone,” she said. “But one or two hospitals in Toronto had a no layoff policy. If you want to leave, great. We’ll give you a package. But otherwise we will try and fit you in somewhere. It may not be your first choice, but we’ll keep you somehow.”

Now that a nursing shortage has hit, that hospital is still short nurses, but it’s nowhere near the same as the other hospitals. They didn’t need to hire as many nurses and, more importantly, they kept the loyalty. Because even though every hospital going through a merger had the same problem, these organizations did everything they could and kept their reputation with the staff, she said.

Some layoffs are unavoidable. Still, there are some simple steps an organization can take to ensure the work environment doesn’t become poisoned.

“Senior management, the people who are doing this, are in the same state as the employees,” she said. “So they’re under probably more stress, under more uncertainty.”

Because of this, it’s tough for CEOs and senior executives to step back and look after themselves first so they can better look after the employees.

“What executives and leaders often do when they don’t know the answer and they don’t know what’s coming, is they retreat and say ‘We can’t give you any information at all until we know anything,’” she said.

That’s when employees, because of a lack of information, start making up stories about what’s going on in the office, and they’re often false, worst-case scenarios, which only add to the anxiety of the staff.

“Managers need to tell people exactly what is going on, even if they don’t know what is going on,” she said. “Say, ‘We’re having a meeting with the bank. We’re having a meeting with our investors; we don’t know what’s going to happen but that’s who the suits coming in are.’ Because I would rather know it’s an investor suit than the next outplacement officer suit.”

And sending one e-mail memo around isn’t enough. When people are under stress, they tend not to hear as well.

“You think one memo is fine,” said Mantler. “Well, no. It’s actually not. You have to communicate to the point of redundancy. When you’re so bored with the communication, that’s probably the point where it’s getting through.”

That’s because with the first communication, employees will say, “Yeah. Right. They’re not saying what they mean.” The more communication passed around in as many different channels and as many ways possible will lead to employees trusting that information, she said.

“Especially if it has been a layoff where there have been no clear decision rules about who has been laid off,” she said.

In a unionized environment, such as the automotive or aviation industries, layoffs impact staff much differently than in the high-tech sector, for example. Because there are very clear rules about who is going to be laid off in a union shop (the last person hired is the first person to go), there is certainty surrounding the layoffs and the knowledge that when things pick up — and they do because of the cyclical nature of automobiles and aviation — people will be hired back.

If you get laid off from Air Canada, you know that two years later your number will come up and you’ll go back,” she said. “But in high-tech, there are no recalls. Because there’s no seniority and there’s no union, you can’t count on going back to Nortel.”

Another step organizations can take is to get down into the trenches and help employees with day-to-day work. After a layoff, management expects people to do more with less and that can be very demoralizing, especially if an employee who was promoted then needs to step back down the ladder and take some of the responsibilities that were done by a subordinate.

“So don’t demote people completely,” she said. “Continue to give them something in which they have autonomy that still allows them to put their heart and soul into part of the project, because as soon as you take that away you’re taking away people’s reasons to go to work.”

By doing this, Mantler said, organizations can better engage and motivate employees when they need it most — during difficult economic times.

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