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13Dec

“Survivors Guilt” and the Unexpected Costs of Downsizing

By Portage County Business Council

The Wall Street Journal reported the U.S. private-sector job total rose by only 50,000 in November and the unemployment rate rose to its highest level since April (9.8%). Layoff announcements in Portage County and the recent news that the NewPage Whiting mill will close raises a couple questions. How do layoffs and downsizing effect those that “survived” the unemployment line and what are the unexpected costs of downsizing?

Researchers at UW-Madison looked into the downsides of downsizing. Employers may see layoffs as a fast fix to their struggling budgets and provide cost savings, but the research done by Charlie Trevor and Anthony Nyberg of UW-Madison’s School of Business shows behavior among those still employed can change too. The result is considerable exodus.

Trevor and Nyberg studied the quitting rates in 200 companies. Those companies who laid off just .5% of their workforce had an average turnover rate of 13%. Those who had no layoffs sustained an average turnover rate of 10.4%. In other words, an extra 2.6% of the workforce left of its own accord, more than five times more workers than were laid off. To put it simply, companies sustain higher rates in quitting, the more layoffs they imposed.

What about those who survived a layoff? There may be feelings of guilt or uncertainty. Survivor’s guilt. Perhaps not as extreme as those who survived a disaster, but none the less. In the Communication World article, “Feeling guilty because you survived a layoff?…You’re not alone”, by Bill Spaniel,  Joel Brockher, Professor of Management at Columbia University’s graduate business school provides some insight. Brockher states, “When people react negatively to change like downsizing, it shows up in reduced productivity and reduced morale. The real cause is that people feel a threat to their self-esteem – to who they are as people and that drives the reduction in productivity and morale.” “Most people are going through a fair amount of turmoil, guilt, anger and anxiety. A lot are feeling pretty stressed out.”

David Noer, Vice president for training and education at the Center for Creative Leadership in Greensboro, N.C., adds employees who define themselves by their job and where they work are often more likely to react more severely. Those who define themselves within their community, family, or within their profession may handle “layoff survivor sickness” better.

Lisa Sobczak, CSP, Branch Manager at ABR Employment Services in Stevens Point, WI says, “Whether your company went through downsizing or you are feeling the indirect effects of what is happening around you, there are things you can do to help minimize the negative consequences on your organization. “

  • Communication has never been more important!  Leaders must be visible and accessible in order to keep the lines of communication open; employees need to feel their leaders are truly right there with them.
  • Listening.  Allow employees to express how they feel without judging them; give them the opportunity to ask questions and then answer them as honestly as possible.
  • Appreciation.  Say thank you.  We all want to feel our work is important to the overall goals of the company so, even on a tight budget, you can find ways to ensure employees feel valued and appreciated.
  • Optimism.  Employees are already worried about their job and the future of the company so you cannot have leaders who are constantly complaining or negative about the organization.  Leaders must show confidence and speak positively about the future so employees feel they can depend on them to take the company in a positive direction.