The Ripple Effect of Layoffs: If not managed properly, the costs may outweigh cost savings

by Ed Albertson, Vice President of national Accounts, Carew International

Today’s economic atmosphere has its share of uncertainty for workers, but who would have expected the marked extent of its impact on businesses and its potential lethality on a company’s market share and survival? Layoffs are an ugly reality of the current economy. But in terms of their deep and far reaching impact on the organization, layoffs can be virtual land mines in today’s turbulent business world.

A recent article in the Washington Business Journal outlined results of a survey by Washington, D.C. based Leadership IQ. The data reveals some startling findings that should not only capture the attention of business leaders, but demand immediate, preventative action. Participants in the survey included 4,000 workers, representing over 300 companies, who were still employed after a corporate layoff in the past six months. Among the findings:

· 74% of employees who survived a corporate layoff say their own productivity has dipped since the cuts occurred.

· 69% say the quality of their company’s product or service has dropped since the layoffs.

· 81% say the service that customers receive has dropped, and

· 77% see more errors and mistakes being made.

So much for the myth that employees who survive a layoff work harder because they are so grateful to have a job! The extensive data suggests just the opposite: an environment wherein customers are bound to become less satisfied with a company’s products or services while those who handle the subsequent and inevitable customer complaints are significantly less likely to effectively take care of those customers. Any business leader can see the natural progression of this downward spiral which will result in lost customers, reduced revenues and potentially a damaged reputation from which recovery will be difficult, even in the most robust economy.

Rather than blandly accept this fate, business leaders need to recognize a perfect opportunity to invest in developing the workforce complaint-handling skills that will be called upon in potentially unprecedented levels during the coming months. Such a preventative measure serves two purposes for forward-looking leaders: 1) Employees are better prepared to handle dissatisfied customers with confidence and competence, and 2) Employees surviving layoffs experience a renewed sense of value and security as a result of that investment in their capabilities. It’s a powerful message reinforcing employees’ worth in uncertain times.

Skills development won’t cure all economic ills, but done correctly, investing in employees can greatly diminish the negative impact of layoffs while preserving or even improving a company’s position with its customers.