Exacerbating the Fear of Layoffs

Employees' fears of layoffs and downsizing, which can induce anxiety even in the best of times, have been aggravated by the stormy economic climate of the past two and a half years. Those fears can be exacerbated when employees work in an environment characterized by low trust, poor communication, or lack of clarity about expectations.

When layoffs or downsizing occur, engagement levels may drop as employees mourn the loss of friends and wonder if they might be next. To test that assumption, Gallup interviewed more than 6,900 adults who were employed full time or part time in July 2008, then interviewed the same respondents again in March 2009 as part of its research into the State of the American Workforce: 2008-2010. Overall, employee engagement levels among this group changed little between the two surveys. In July 2008, 31% were engaged and 17% were actively disengaged. Eight months later, the numbers were similar: 30% were engaged and 18% were actively disengaged.

In the March 2009 interview, Gallup asked respondents whether their organization had experienced layoffs or had downsized. About half (46%) said their organizations had gone through layoffs or downsizing since they were interviewed eight months earlier. The analysis compared changes in engagement scores among these employees with changes among the remaining respondents -- those whose organizations had not experienced layoffs or downsizing.

In both 2008 and 2009, respondents who worked in organizations that experienced layoffs or downsizing were less likely to be engaged in their jobs than those who worked in organizations where no layoffs or downsizing occurred. That would seem obvious; it's likely that the work environments in downsizing companies were more stressful. But this finding may also reflect that organizations with more engaged employees tend to perform better financially than their competitors, so they were less likely to lay people off in the eight months between surveys.

However, the purpose of the analysis was to compare the changes in engagement levels among workers whose organizations had been through layoffs and those whose organizations had not. Here there was less difference: The ratio of engaged to actively disengaged workers worsened marginally between 2008 and 2009 among workers whose organizations had laid people off as well as among those whose organizations had not.

• In organizations that experienced layoffs or downsizing, employees reported a significantly greater decline in the perception that they have the materials and equipment they need to do their jobs and that they have the opportunity to do what they do best every day. In downsized workplaces, employees may be asked to increase their productivity and take on additional -- and perhaps unwelcome -- tasks and responsibilities. For example, in a department with fewer workers, the "survivors" may be getting stuck with a greater workload.
• Scores on a third item also declined significantly among workers in organizations that had been through layoffs: "The mission or purpose of my organization makes me feel my job is important." This may reflect disillusionment among employees who have seen their coworkers let go.

What can managers do?

In workplaces where layoffs or downsizing has occurred, managers shouldn't allow turmoil in the external economic environment to distract them from their employees' needs. Focusing on these workplace dynamics may help put employees' minds at ease in the wake of downsizing:

• Manage human resource challenges with employees' talents clearly in mind. After a round of layoffs, managers may transfer work and responsibilities to their remaining employees without considering whether that additional work plays to those employees' talents and strengths. Doing so may compound the anxiety that the layoffs generate. Worse, employees may get "locked in" to roles that they aren't particularly suited for, reducing their long-term engagement and the overall efficiency of their workplaces.
• Communicate the organization's mission and strategy clearly and often. Reassuring workers about the organization's commitment to its long-term goals and principles can help them focus on stability rather than the changes taking place around them.

The stress that accompanies layoffs can cause managers to adopt a command-and-control mentality -- a mindset that sets aside the needs and opinions of employees to focus on short-term productivity. This tendency may be particularly strong among middle managers, who may be asked to accomplish more with fewer people and who may simultaneously be worried about keeping their own jobs.

It's important to avoid such a reaction for two reasons. First, by heightening stress and negativity among team members, managers in "survival mode" may risk lowering rather than increasing productivity. Second, input from all employees is particularly important in lean times as organizations seek creative solutions to the challenges they face.