The Hidden Costs of Mass Layoffs

Ron Lach, Pexels

When you are considering selling or restructuring your business, it can be tempting to first lay off workers to reduce your financial outlay, but have you examined the cost? Glassdoor’s recent study shows that companies that enact sweeping layoffs suffer in the long run.

After all, your employees keep your business running. Forcing the remaining workers to work harder for longer hours can cost your company in many ways

• Damage to company culture and reputation

Employee reviews on sites like Glassdoor drop dramatically, targeting not just the company but also individual managers.

• Demoralization of remaining workers

Even the employees who remain will submit negative reviews anonymously. Burnout will be high, leading to existing staff looking for other work and quitting.

• The cost of rehiring essential workers

As we’ve seen on the national stage, when you fire indiscriminately, you may need to rehire workers you let go or find replacements, and hiring new workers costs much more than keeping good employees. Add to that, job seekers are reading negative reviews and won’t want to join an unstable company. 

If you are restructuring, adding the cost of rehiring can destroy any short-term gains.

• Reduction in perceived company value

If you are looking to sell your business, potential buyers will see those negative reviews and may decide that they aren’t interested in taking a gamble on a business that they will need to rebuild.        

Employees know that they are at-will. When they find out that you are considering selling, they know that the new employers may want to bring in their own people. That’s just a fact of life, but selling a business takes time, and you need everyone on board until the deal is done. The buyer wants to know that they are buying a company that’s already working well.

Before you start laying workers off, take a good long look at what your company needs, not just in the short-term, but in the long-term.

…we estimate that increases in active disengagement costs employers 1.2% of post-layoff payroll. - Glassdoor