Earlier this year, companies were scrambling to hire enough employees to fill open positions. Now, with concerns that a recession may be near, many of these same organizations are considering staff layoffs.
Companies in the financial technology and cryptocurrency sectors are rescinding employment offers, and some organizations, including Tesla, JPMorgan Chase, Netflix, Peloton, Redfin, Re/Max, Shopify and Coinbase, have announced plans to reduce their workforces.
Experts are expecting layoffs to bleed into other industries. In fact, a PwC survey of 722 U.S. executives in August found that 50 percent of respondents were planning staff reductions.
“Headlines can cause anxiety in the workforce as people see, in real time, cost increases and layoffs,” says Bjorn Reynolds, CEO of Safeguard Global, a payroll platform based in Austin, Texas. Although companies are continuing to add talent each month, employees may become increasingly concerned if they keep hearing and reading about a possible recession, he notes.
Rumors of potential layoffs tend to rattle employees and can impact productivity, even if they aren’t true. Almost 80 percent of U.S. workers fear they will lose their jobs if there’s a recession, according to a June survey of more than 1,000 employees conducted by staffing firm Insight Global. A separate June survey of more than 1,000 employees conducted by software firm ResumeLab found that 58 percent of respondents believed they would lose their jobs this year.
“Rumors are often more damaging than layoffs themselves, and this is especially true in organizations where there have been layoffs in the past,” says Danielle Beauparlant Moser, an executive consultant with ManpowerGroup Talent Solutions in Raleigh, N.C.
Layoff rumors can impact workers’ ability to trust management, says Melanie Peacock, SHRM-SCP, associate professor of human resources at Mount Royal University’s Bissett School of Business in Calgary, Alberta, Canada. “Rumors signal that employees aren’t trusting their managers, so they create their own stories and truths.”
Here are six ways people managers can respond to employees’ layoff fears.
Acknowledge workers’ anxieties. A potential layoff is just one of many concerns employees have right now. Workers are worried about inflation; the increased cost of living; and illnesses such as COVID-19, monkeypox and even polio.
“It’s important to acknowledge their challenges and find ways to support staff,” Reynolds says.
Karla J. Shugart, SHRM-SCP, knows firsthand how failure to address workers’ concerns can have a negative impact on staff. Shugart worked in HR at two different universities during the 1990s. During her tenure at each school, concerns about staff downsizings surfaced. The universities handled these situations very differently, says Shugart, now senior director of associate experience for the Choctaw Nation of Oklahoma in Durant. One approach was better received than the other.
The Florida university where she worked held weekly meetings, during which staff could ask questions and HR openly shared information. “There were very few rumors or speculation, and employees appeared to be calm and not frightened,” she recalls.
In contrast, the HR director at the Washington state university where she worked didn’t want to hold staff meetings until HR had all the information about the pending staff reductions. This approach caused rampant rumors and distrust, Shugart says.
“The perception was that HR knew what was going on but wasn’t providing information, so everyone assumed that whatever was happening was bad,” she says.
Be transparent. Often, employees have no idea if their company is financially stable because leaders don’t share such information, according to Jill Santopietro Panall, SHRM-SCP, owner of 21Oak HR Consulting in Newburyport, Mass.
“Management doesn’t have to open the entire ledger to everyone, but they need to give employees a good sense of the overall financial picture so they know if their fears are accurate,” she says. Be honest and let staff know whether the company is expected to have a successful year or if difficult times are ahead, Panall advises.
If business returns are solid, Reynolds similarly recommends letting employees know about the company’s strong position in the marketplace.
When staff reduction rumors are unfounded, managers should ask senior leaders to send an e-mail letting workers know layoffs aren’t being planned, Peacock says.
However, leaders shouldn’t promise that there will never be layoffs.
“No one can ever promise that, and you could inadvertently create a legal obligation,” she says.
Further, managers should avoid telling staff that it’s “just a rumor” without first checking with senior leaders and HR because if the company does end up laying off staff, employees’ trust in the company and in management will erode even further, Peacock says.
Maintain composure. Remember that the manager sets the tone, so be careful not to show panic, Panall says.
“If you, as a manager, don’t know what’s going on with the bigger picture, you need to find out,” she notes.
If layoffs are, in fact, planned, Peacock recommends talking with senior leaders about acknowledging workers’ concerns in an e-mail that recognizes staff reductions are a likely outcome. The e-mail should provide a timeline as well as information about the assistance the company will provide, such as severance pay or career counseling services to those who lose their jobs, she says.
Promote cross-training opportunities. Despite fears of a recession and possible layoffs, some companies still say they can’t hire enough people or keep up with demand for certain goods. Managers can help shift employees into much-needed positions by advocating for cross-training, Moser says.
“It’s cheaper to redeploy existing staff than to find new talent,” she notes.
If senior leaders are open to it, let staff know of the plans, Moser says. Then find out what skills employees are interested in learning and give them stretch assignments that connect them with other departments.
Highlight what employees can control. Remind staff that it’s wise to always have an updated resume and LinkedIn profile and to maintain a professional network, says Nancy Halpern, leadership coach and founder of Political IQ, a New York City-based consulting firm that diagnoses political dysfunction in organizations. If staff reductions are planned, help workers see the possibility of a layoff as a bump in the road of a long career, remind them that there will be other opportunities and provide job-search help if possible.
“Be as honest as you can be, and let your staff know you care about them and their careers,” Moser says.
Acknowledge any layoffs. When a layoff occurs, managers often don’t address with their direct reports what happened. Even if only one person was let go, it’s important to acknowledge the individual’s contributions and that the team is smaller, Peacock says. Just be sure to consult senior leaders and HR first to understand what information you are allowed to share and to ensure your communications are aligned.
“The people left behind often have survivor syndrome,” Peacock says.
Do they seem depressed or worried? If so, consider meeting with staff individually to ask broad questions, such as whether they have any concerns about their workload or if they’re worried about what’s happening with the company, she advises.
“When staff is laid off,” Peacock says, “you can’t ignore it and think that people won’t notice.”
Lisa Rabasca Roepe is a freelance writer in the Washington, D.C., area.
Illustration by Marc Rosenthal for HR Magazine.