Beyond the pink slip. This is how to deal with layoffs and build back teams

The tech layoff wave of 2023 continues to gain momentum in 2024, with other industries like media, finance, and retail adding to its strength. Estee Lauder, UPS, Dow, and Citigroup are the latest companies to announce layoffs in a tenuous economy that’s being taunted by the impact of AI.

The repercussions of mass layoffs extend far beyond those receiving a pink slip (or, these days, an email, call in Zoomland, or login lockout), and the effects ripple throughout the organization, leaving those remaining with feelings of uncertainty, overwhelm, and discontentment, which often results in “layoff contagion.”

The impact of layoffs is felt far before announcements are made that impair people’s ability to show up fully. We all still have scars that haven’t healed from getting 2020’d and beyond. Our nerves are frayed, emotions are high, and we still can’t predict the next big change we can’t control (hello, enduring wars and elections), so working through mass layoffs can push some employees to the mental, emotional, and physiological edge.

Research shows employees who stay on after layoffs grapple with anxiety, insecurity, low morale, and sadness—aka survivor guilt. This leads to the exact thing we didn’t want for people in the first place: disengagement, bad job performance, reduced innovation, and a decline in the quality of output.

A psychological component of workforce downsizing can harm the remaining employees’ well-being, commitment, and mindset. Many organizations overlook the struggle of employees who “survive” the layoffs. These employees often grapple with balancing the “guilt” of surviving the layoffs, the loss of their coworkers, and a sense of despair and fear they might be next. The challenge is recovering from these feelings deeply embedded within the culture.

The root causes of layoff contagion can be linked to a lack of psychological safety, transparency, and trust, impacting the individual (ME) and the collective (WE) well-being of everyone within the organizational ecosystem. By fostering resilience on both personal and team levels, organizations can mitigate the negative effects of layoffs and contribute to a healthier, more invested corporate culture. By fostering a community that cares about us (by being intentional about the people we spend our time with), people we trust can bolster us even when the resilience wears off.

Getting laid off has an extreme impact; it’s “one of the most traumatic events you can experience in life,” according to the Department of Labor. The immediate concerns about financial stability and well-being are only the tip of the iceberg. The aftermath can trigger a cascade of self-doubt, eroding confidence, and even a reevaluation of one’s identity. The harsh reality is that no one is immune to the possibility of being laid off—it can affect our whole ecosystem: our partners, children, extended family, friends, neighbors, and coworkers. So we must reflect on how we can give meaningful support to those facing this difficult situation, whether they’re colleagues or loved ones.

Three ways to foster resilience and provide meaningful support

Psychological safety: Several years ago, Google launched Project Aristotle in an attempt to discover what makes its teams so effective. They studied hundreds of teams, gathered loads of data, and conducted many surveys. What they found was that it wasn’t the best managers or most qualified employees but those with the greatest sense of psychological safety who were most effective. These were teams that were free to show up authentically and take risks without fear of judgment.

To create more psychological safety within your teams, encourage and model open communication, active listening, and empathy. Check in often with employees to see how they are doing, not just around their work but also how they feel emotionally, mentally, financially, and spiritually. Two of the most powerful yet simple things we can do is ask with sincerity, “Are you okay?” and then listen deeply to the point you really understand. Establishing this type of safety in the work environment enables teams to support each other during difficult times and promotes a sense of belonging and cohesion.

Clarity and transparency: Communicate with both clarity and transparency, explaining the reasons behind the decision without sugar-coating the reality. People value honesty and transparency; it shows them respect as individuals rather than mere statistics or casualties of corporate maneuvers. Transparency builds credibility and cultivates a culture of accountability and mutual respect. Be honest and forthcoming in your communication, even when delivering challenging news.

Trust through autonomy and agency: Empower individuals with a sense of control over their work and encourage them to proactively seek solutions to challenges. Give people autonomy and agency over their work, and trust them to make their own decisions because they know their roles and responsibilities best. This can come in schedule flexibility (when and where work gets done), creating their job title, or deciding on the functions they’ll fill within the team. This instills confidence in their choices, skills, and capabilities, fostering a climate of trust so that teams can adapt to adversity with resilience and agility.

While leaders default to layoffs being necessary to ensure the company’s survival, thoughtful considerations of its repercussions should be made before walking that path. To prepare and recover from the aftermath of mass layoffs, leaders should embrace a more complete approach that addresses both the individual and collective well-being by thinking beyond short-term “gains” and building a culture of transparency, with psychological safety built in to support individuals and teams as they navigate the aftermath of layoffs.

Even though layoffs can be a traumatic life event, the difference of whether it creates post-traumatic stress or post-traumatic growth is if we ask the question, “What can I learn?” This can start building the bridge to emerge stronger, more united, and more resilient—not just at work but in life, too.