The economy is dynamic and constantly changing, sometimes faster than we expect it to. One year there is a huge downturn, leading to mass layoffs globally. A few years later, companies are desperate to find talent. Tech and financial services (particularly, mortgage) industries are experiencing the consequences of the pandemic. While changes in work behaviors in 2020 led to a tech boom, assisted by low interest rates and rising stocks, many tech companies hired too aggressively.
Now some of these organizations are facing adjustments to the very habits and economy that made them so successful a couple years ago, as both individual and corporate budgets are impacted by inflation. Tech startups, which rely heavily on investors for their capital, are now struggling to secure additional funding, whether from investors or bank loans. Organizations in the lending, insurance and banking arenas are now reacting to a rapid and extreme increase in interest rates, causing mortgage rates to rise along with them. Fewer home loans—and other associated services and products—are needed, and jobs associated with those needs are being cut.
What Can HR Learn from Economic Fluctuations?
Unless you’re carefully following and predicting the cause and effect of events like a pandemic, including changes to work and buying behaviors, the consequences a company faces as a result of economic changes may come as a surprise. Being prepared to face organizational change, including layoffs, means having processes and resources in place to protect your company and its employees in order to successfully manage.
Find an outplacement provider before you need one
Noom, the weight-loss startup, raised $540 million in the year before letting go of 495 employees. When a company must quickly react to unexpected economic changes, there may not be time to search for benefits providers. Plus, layoffs are stressful enough without the additional burden of having to quickly source outplacement for those impacted.
Having outplacement in place also allows you to provide the benefit whenever it’s needed, not just in the case of large reductions. Research vendors and understand what features will be most beneficial to those who will need to find new work. Remember that having an outplacement provider that your participants appreciate will benefit your employer brand. But they’ll only appreciate it if they find it helpful.
Cross-train, upskill, and reskill your workforce
Unforeseen layoffs can create pressure on your remaining workforce, with increased workloads and new responsibilities on top of the inevitable dip in morale. You can help alleviate some potential negative effects to your employees by being prepared before layoffs happen. One way to do this is by offering training to your employees so that they can more easily take over responsibilities when there are cuts.
Offering upskilling and reskilling courses and mentorship, and cross-training your employees can be methods of risk management. When your employees are equipped to step into new roles and assume new responsibilities, your company becomes more agile and adaptable, and can more easily recover from organizational change.
Be transparent with your employees
While some employers believe that employees that are made aware of business challenges may look for work elsewhere, the truth is that respecting your employees by being transparent can increase their loyalty and protect your brand. Overpromising security and overstating success, while dismissing questions about losses to your workforce can create distrust not only among employees, but also among the public and potential clients and customers. This is especially true when current and former employees have so many venues for expressing concerns and opinions publicly and anonymously.
When layoffs do occur, let your remaining employees know the reasons for the dismissals and how you plan to move forward. Also let them know how you are providing help to those who were let go. The knowledge that you took care of their colleagues by providing outplacement as part of a severance package will help mitigate any negative reactions to the losses.
Lessons from Tech and Financial Services Layoffs
While one wouldn’t expect layoffs to have a positive impact on employer brand, conducting them with little thought as to how they affect those let go as well as remaining employees can certainly have an even larger negative impact. Online mortgage company Better.com infamously let go of nearly 1,000 employees over Zoom, blamed the layoffs on employees, and even short-paid some on severance. In another example, buy now, pay later fintech company Klarna posted a list of the laid off employees on LinkedIn, making their layoffs public without employee permission, and offered U.S. employees double the severance pay offered to those in the UK and Europe. Both companies’ missteps have been covered in multiple widely-read news outlets, causing immeasurable brand damage.
Layoffs don’t have to be chaotic events resulting in negative publicity. The greater the disruption to business, the worse the impact on employee engagement and productivity, and both employer and consumer brands. Being prepared for reductions in force even when they aren’t anticipated—no matter your industry—is a sound and responsible business practice that can earn your employees’, clients’ and consumers’ respect.
INTOO’s outplacement program helps employees transition to new jobs through unlimited one-on-one, on-demand coaching from premier career counselors, resume reviews, and other career services. Learn more about how our outplacement program can benefit your company when you’re transitioning employees.