True Cost of Layoffs and Lost Productivity

In some cases, layoffs are a necessary evil of business. The overall real cost savings of such an action, however, are difficult to determine. Simplistically, the savings could be determined by netting the salaries and benefits, less severance and retention, of impacted employees. The problem with this simple approach is that it does not consider the impact to productivity of remaining employees. A recent article in the Dallas Morning News by Cheryl Hall cited a study by Leadership IQ which indicated that, “Leadership IQ recently surveyed more than 4,100 layoff survivors at 318 companies and found that nearly 75 percent felt their productivity had declined significantly. Nearly as many said that their cohorts' work had slacked off, too”. Respondents in the survey attributed these feelings to guilt, anxiety and anger. Ms. Hall refers to this as "post-traumatic layoff syndrome." Couple layoffs with a salary freeze or reduction, and the impact can be devastating. A company, therefore, should give significant thought to the total impact of a right sizing action. If a layoff is inevitable, a company should be very vocal about providing both tangible and intangible resources and support for the remaining staff.