Layoff-based growth strategies create an odd paradox: The corporate and organizational layoffs almost always result in a decline in or disruption to employee morale, retention and productivity just when many organizations need remaining employees to stay motivated and gear up for a return to higher levels of productivity.

You might even be asking, "If layoffs help improve our short-term stock position, why do I need to worry about anything else?" Perhaps you've not noticed the rather large, dark-gray cloud attached to that seemingly silver lining? Yes, we know only too well that "that's just the way it is" in a market driven by Wall Street analysts and the push for maximized, short-term (and unsustainable, inflated) investor return.

So if layoffs are a standard reaction — and sometimes outright necessity — to the threat or reality of a bear market, and a routine part of the predominant corporate swell-and-cut cycles, the next best thing is to be very mindful of the shadow-side and skillful, effective ways of communicating in this reality, just is the case in communicating amidst any organizational change or cycle of transformation.

The shadow-side of using layoffs for a short-term stock-price boost or as a short-term reaction to apparent crisis.

Employee morale is important during a cost-cutting period because loyalty, motivation, and continued productivity are crucial. The expenses that proactive, preventive measures require—such as those associated with an effective leadership and communication program—can significantly offset the costs that a company incurs when employees get laid off and others leave because they expect to lose their own jobs. This results in lower morale and productivity, not to mention cynicism. For example, if orientation and retention issues have carried high financial and cultural costs for a company, inspired leadership and high-quality communication prove a nominal expense to help decrease layoff-related costs, which otherwise threaten to increase when the company moves into expense-reduction mode. In other words, inspired leadership and thoughtful communication are a good investment.

You can imagine what the swell-and-cut cycle does for morale and productivity, which research links to higher levels of performance and lower levels of turnover. Why is this a problem after layoffs? One survey of 1,468 restructured companies by the Society for Human Resource Management reported that employee productivity either stayed the same or worsened after layoffs. So after several years of steep turnover rates, shaky morale levels, unparalleled levels of uncertainty and collective anxiety, and reduced loyalty to the company, just imagine what this "same level or worse" productivity might look like. Not able to conjure this vision up?

Here's a little help making the connection. Most companies see layoff strategies playing out this way:

— Lay off employees to reduce payroll costs and, if applicable, achieve a short-term stock boost or cost-savings,
— Follow layoffs (and hoped-for stock-price boost or cost-savings) with a high level of productivity from a motivated group of employees for high sales leading to strong longer-term stock performance and/or financial gain.

The key to making this myopic, fragmented yet perpetual strategy work? Some seriously high morale and productivity from the remaining employees.

When a company halts leadership and communication initiatives at a time when they are most needed, as many studies reinforce, it fuels a less productive work environment and reduced employee loyalty. Similarly, when a company scales back marketing efforts to reduce expenses, it is actually reducing the number of opportunities it creates to reach out to potential customers, who bring in more revenue and decrease the need to slash areas of the business it once deemed important to develop. The grand irony? It’s a costly, vicious and unproductive cycle. Unfortunately, it has become the norm, but that doesn't mean it has to be your strategy. There is a wiser, more effective option.

Practices that shed light on right communication

There’s no "right" answer or quick fix for every organization going through belt-tightening or restructuring. However, here are some tips that any company, during any stage of a business, can use to truly enhance the quality of organizational culture, interactions, trust, morale, retention and productivity:

• Increase efforts for inspired leadership and respectful communication: As explained above, one of the worst actions a company can take is to strip away the lifeline that most employees and leaders identify as important to them and the company: Communication, collaboration, momentum, and vision, at the very time they're needed even more than usual. This is based on a very faulty, old-paradigm bias — one that has proven very costly in many ways — that such things are 'soft skills', extraneous, and thus first to get cut when times get tough. Data and anecdotal evidence shows that this bias is very costly, indeed, as would saying that our body's soft tissue was extraneous to our functioning. Contemporary leaders know that inspiration and communication are vital.

• Review and select resources smartly: Understanding that executives are pressured to cut costs, evaluate what’s most effective and which resources can suit the need. Did you know that consultants and advisors — mindfully and appropriately tapped — typically require less of an expense than hiring and training new employees, particularly for short-term, specialized needs? Despite the sometimes well-earned Dilbert-esque caricature of doltish corporate employees and consultants who loathe one another and get nothing done, savvy in-house employees can work very effectively when assisted by respectful, sensitive consultants who offer much-needed outside perspective.

• Reconnect and recommit to your vision, mission: No decision — especially as one as large as corporate layoffs—should be made devoid of the organization’s vision and mission. If you are able to make decisions without these guides, your company and/or its executive team are not committed to any vision or mission beyond short-term stock-price servitude. And you wonder why such a company has problems relying on solid retention, morale and productivity? This is not to say that companies with higher mission and visions don’t lay off employees. The measuring stick is whether they consult these values and beliefs when making and implementing decisions to reduce the size of the workforce. Executive teams planning layoffs, or implementing them if already announced, might do well to review their own public-relations literature to ensure that their actions are in sync with their hype.

• Assess what’s working, reject what’s not: Before taking action, be certain your company knows — and understands — what practices and approaches are working toward the desired success of the business. Assess communication, team effectiveness, employee satisfaction, etc. The alternative: The company concentrates layoffs in one band of management, only to learn that the people in this ‘strata’ were the primary and preferred source of knowledge, information and inspiration to most employees.

• Look to history — your company’s and other arenas — for guidance: Your company is, unfortunately, not the first to cut costs or to lay off employees, and, in the current culture and climate, it won’t be the last. Pause long enough to learn how such efforts affected companies in the past (after several decades of such cycles, there's no shortage of case studies). What worked well for others in terms of leadership and employee communication, retention and morale, and in generating new business? What didn't work well? Expand your thinking to include other historical events, such as effective leadership in ancient times, that can provide a broader perspective, a new way of seeing an issue and ways of presenting news that respects employees and the business’ integrity. Then pass this historical wisdom through a fresh, contemporary lens to suit the current time.

• Be honest: This might be the most often cited "qualification" listed in template leadership and communication programs: Be open and honest. However, the norm is to avoid straight-on truthfulness, whether out of an intention of 'softening the blow' or an attempt to distract attention from less desirable areas of focus. Take a moment to truly reflect on this advice, its intention, and the successful possibilities associated with it. Then consider the effects of being dishonest, even for seemingly good intentions. Honesty may seem difficult at first, yet it is often much more appreciated in the long-run, and can open up opportunities for employees to contribute ideas that help in the short-term.

• Involve employees as much as possible: If employees feel that a change or transition has been decided and "dictated down" by the executive team, they understandably resent it and feel a loss of control, and hence, greater degrees of fear and anger. These conditions make it incredibly difficult to create a productive, creative, innovative, efficient, and even remotely positive work environment during a transition. Some of the most effective case studies involve companies who presented the problem or need for cost-cutting to a team of "front-line" employees, who in turn came up with a solution that was superior to one that would have been made by executives alone. Which approach to problem-solving do you think remaining employees would feel the most loyalty toward?

• Communicate, don’t dictate: Effective communication and inspired leadership — and the choice to maintain them — are shown in study after study to be key to the success of an organization’s transition (and ongoing performance, for that matter). But remember, the leadership and communication strategies must be effective. That means using approaches, vehicles and language that match the company’s culture and preferred modes of learning and sharing information. It also requires that all levels of management and employees interact with each other on a human level. Don’t dictate bad news via reams of rational information and cold-facts in a memo. Recognize that the employees doing the work of a company are people, not automatons or "units" on a spreadsheet.

• Take the long view: After years of intense competition for potential employees, some employers are enjoying a return to an "employer's market." In a period of higher unemployment and an uncertain economy, many an employer holds an attitude of, "Let them leave; there are 50 other people who would love to fill that job." While it might feel righteous in the moment, that's a very short-sighted and potentially costly attitude. Remember the adage about burning bridges? You never know when you might need to cross back over it in a pinch. The same is the case with employees. An arrogant, abusive attitude in one market can too easily come back to haunt you when the competition for good employees resumes, and it can also lead to distrust, cynicism, unproductive fear, and sabotage amongst remaining employees. All in all, it's an expensive strategy. Gain a deserved reputation for treating people honorably and ethically regardless of the market, or your need to hire them, and the reputation will serve you when the job market opens back up æ an in the time between now and then.

Did you know?

• The Bureau of Labor Statistics and other reports confirmed that the general perception of record layoff announcements is indeed a reality. During 2002, a record two million job cuts were announced, leaving previous records in the dust. While the pace of job cuts slowed entering 2004, some 308,000 additional jobs were cut during the month of February alone during that year.

• The Sloan Management Review, found that ongoing changes in a company's structure and the stronger-than-ever trend of downsizing, restructuring, merging and acquiring, are directly linked to a decrease in loyalty. Various studies have linked decreased loyalty and commitment to higher rates of absenteeism, turnover and lowered productivity and organizational performance — all costly (and avoidable) trends for business. Many other studies have indicated that good communication, culture and leadership help create more positive, productive employees, and thus organizations.

For additional information about research and statistical data related to layoffs, mergers and other organizational-change initiatives, browse our public and VIP Premium-Content libraries here at Ivy Sea Online.

© 2006-2008, Jamie S. Walters, Author, Big Vision, Small Business and Leading at the Visionary Edge, and Founder, Ivy Sea, San Francisco, CA. Reprinted from Ivy Sea Online's VIP Library with the express permission of Jamie and Ivy Sea. Contact Jamie at 415 752 6317 or email her at info 'at' ivysea 'dot' com. Learn more about Jamie.

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