Mitigating the Invisible Damage Layoffs Have on Company Morale
Recent mass layoffs have reshaped entire industries, yet the most damaging effects often remain hidden: the decline in trust and morale among remaining employees.
Job security and perceptions of leadership are intricately linked to productivity, engagement, and overall company culture. When trust diminishes, productivity typically follows suit.
By leveraging Aniline's employee perspective-driven platform, organizations can gain deeper insights into the true impact of layoffs on their workforce, enabling them to navigate challenging decisions while preserving trust, morale, and employee well-being.
In this article, we examine Aniline scores for 20 companies that conducted significant layoffs in late 2023 and early 2024. The data reveals a clear trend: companies that downsized their workforce experienced pronounced declines in key metrics, particularly in leadership perception, compared to those that did not.
Eroding Leadership Trust Post-Layoffs
Across the 20 companies we studied, Aniline’s Leadership scores dropped by an average of nearly 6 points post-layoff, compared to a 2.3-point decline for all companies in the broader database.
The erosion of trust in leadership, communication, and vision is starkly evident. For example, Farmers Insurance Group saw significant declines in employee perceptions of leadership, with sentiments reflecting a profound loss of trust due to decisions made without employee consultation. Similarly, at LinkedIn, layoffs were seen as sudden and poorly communicated, leading to plummeting leadership scores and a perceived lack of vision.
Integrity and Career Perceptions: The Cost of Broken Trust
The impact extends beyond leadership. Employee perceptions of Integrity also saw sharp declines, with a 4.8-point drop among companies that laid off employees, compared to a decline of just 2 points across the broader database. At Qualtrics, employees expressed feeling betrayed by the lack of transparency, describing the layoffs as “brutal” and “inhuman”.
In addition, Career scores dropped by almost 3 points for layoff-affected companies, signaling reduced optimism about advancement opportunities. Employees at LinkedIn, for instance, cited stagnation and a bleak outlook on career progression. Similar sentiments were echoed at Spotify, where employees felt "stagnation and limited internal mobility" post-layoffs.
“On top of all of this [the layoffs], they removed any potential promotions or advancement for the year.” -Farmers Insurance Group Employee
DE&I: A Shifting Focus?
Interestingly, Diversity, Equity, and Inclusion (DE&I) scores fell for companies that enacted layoffs, but the broader database saw a slight increase in DE&I sentiment during the same period. The layoffs disrupted not only team dynamics but also trust in leadership’s commitment to DE&I initiatives.
At Qualtrics, employees felt that the once collaborative, inclusive culture had been lost following mass layoffs, and some expressed concerns about the erosion of diversity as layoffs seemed to disproportionately target certain groups. At Spotify, employees noted that layoffs disproportionately affected marginalized groups, stating that "women managers are not promoted and were worst hit during layoffs."
A Path Forward: Mitigating Layoff Impacts with Aniline
Layoffs may be an unfortunate reality, but how they are managed has lasting effects on employee sentiment and company culture. With the right tools and strategies, companies can rebuild trust and realign leadership to foster a more resilient workforce.
“The way they did the layoffs was critically defeating to the morale of those affected and employees still currently employed.” -Farmers Insurance Group employee
Using Aniline’s tools, we identified specific, actionable recommendations for the companies we analyzed:
Transparency and Communication: At LinkedIn, employees felt blindsided by the sudden layoffs, expressing a sense of betrayal. One employee stated, "leadership pushes a narrative about people first transparency...then completely broke all pretense of actually valuing any of it." A more transparent communication plan, including early warnings and clearer explanations of decisions, could have helped maintain trust and softened the impact of the layoffs.
Career Transition Services: At Qualtrics, employees recommended offering comprehensive career transition services as part of the layoff process. These services could include outplacement support, career coaching, and resources for affected employees to help them navigate their next steps.
Leadership Vision and Accountability: At Spotify, layoffs had a devastating effect on employee morale, with many feeling that leadership lacked vision and accountability. As one employee put it, "layoffs broke the company spirit." Spotify could have mitigated these impacts by developing a clear strategic vision and improving transparency.
Leadership Training and Development: The layoffs at Qualtrics highlighted a significant disconnect between leadership and employees. To rebuild trust, employees recommended leadership training focused on empathy, transparent communication, and ethical decision-making to improve leadership behavior and rebuild confidence within the workforce.
While layoffs are sometimes unavoidable, companies can take proactive steps to mitigate their long-term damage. With Aniline’s insights, organizations can navigate tough decisions while maintaining trust, morale, and employee well-being, ensuring they emerge stronger and more resilient, even in challenging times.
