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Making redundancies without damaging your company culture

If ignored, company culture can take a battering in the wake of redundancies — here's how to maintain it and keep your remaining team motivated

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What is the impact of redundancies?How do redundancies affect company culture? 8 ways to motivate and maintain employee morale during (and after) downsizing

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  • When making redundancies it can be easy to focus on the individuals being let go, but don't underestimate the impact layoffs have on your remaining team.
  • Survivor syndrome often affects remaining employees and is an emotional reaction encompassing feelings of guilt about being 'saved', sadness at the loss of friendships, and anxiety about a bigger workload and company uncertainty.
  • Redundancies have both an organisational and psychological impact on the remaining company culture.
  • Motivate and maintain employee morale during (and after) layoffs: be honest, acknowledge difficult emotions, ask for feedback, run exit interviews, and consider introducing workplace mental health support.

We’ve all heard about, if not been part of, the mass layoffs caused by a craggy financial downturn in 2022 (which continued in 2023 and beyond). Despite its necessity, no manager looks forward to making someone redundant. It’s not nice to do, and it doesn’t come naturally. 

Alongside the impact redundancy has on those being let go, it’s important to support your remaining team — particularly if you’re making redundancies as a small business. Responsibly preparing for and communicating these structural changes is just one part of the process. In the weeks that follow, you’ll need to motivate and maintain your team’s morale during downsizing to protect not only your employees’ emotional wellbeing at work, but your own as well. 

Before we talk about the things you can do to preserve your company culture after layoffs, let’s first  look at the impact redundancies can have on a personal and organisational level.

What is the impact of redundancy?

How redundancy affects the employee being let go

Redundancies by definition aren’t personal – though it can be hard to remember that when you’re sitting with your desk plant on the 6.14 train home. Work plays a big part in our identity and without it, self-esteem can take a knock.

Any time our future gets a bit unpredictable, we’re more susceptible to feelings of stress or anxiety – and when you add in the logistics of financial uncertainty, being made redundant can have a significant impact on our mental health and wellbeing overall.

We’re not telling you this to make you feel worse about making redundancies in your business. But anticipating feelings of shock, sadness or anger from your employees — especially if you’re a small team — might help you to offer the right kind of support during the redundancy process. It can also help you to feel more prepared to manage difficult and emotionally-raw conversations as a manager. More on those later.

How redundancy affects the remaining team

When making redundancies, it can be easy to focus on the individuals being let go - after all, they’re the ones out of a job. But it’s important not to underestimate the impact layoffs have on your remaining team. 

Survivor syndrome, also known as survivor’s guilt, is an emotional reaction to redundancies often experienced by those who remain in the organisation. As well as feeling guilty about not being let go, survivor syndrome is also caused by the loss of friendships, working outside of a comfort zone, a bigger workload and ongoing uncertainty about the company’s future. Characterised by low morale, reduced loyalty and decreased motivation (to name a few), survivor syndrome is a powerful reaction. It’s worth noting that being a manager, leader or supervisor doesn’t make you immune to these feelings; anyone across all levels of the company can experience them.

The good news is that with the right support and forward planning, you can help your team navigate these feelings and adapt to the new company dynamic.

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How do redundancies affect company culture?

When Elon Musk bought Twitter, fired half of its employees and then threatened to sack anyone else who wasn’t up for sleeping at their desks and working “long hours at high intensity,” he might have been surprised that no-one seemed as keen to work at Twitter as he was.

The way you handle necessary redundancies affects your brand and your reputation in the wider industry, as well as the morale of your remaining employees. Knock-on effects can be broad and brutal, and affect both the organisational and psychological culture of your team. 

The organisational impact of redundancies on company culture

People quitting

You may have spent hours responsibly working out who to let go (based on fair selection criteria) but the employees you were banking on staying might have different ideas if they’re left uncertain about the future of the business, disgruntled by the way redundancies were handled, or picking up the slack indefinitely as part of a leaner team. Research has shown that downsizing a company by just 1% leads to a 31% increase in voluntary turnover the next year.

Damaged customer relationships

If your business model relies on close relationships between sales, client or service teams and your customers, then it’s reasonable to expect a dropoff in loyalty and engagement once some of those familiar faces have gone. 

Difficulty hiring in the future

After a negative layoff experience, 70% of companies notice a negative impact on talent acquisition, and 81% report a negative impact on brand perception, according to a 2018 study by Randstad. If your remaining workers have always taken pride in working with the best people for a renowned company, then this might be enough to shake their commitment, too.

The psychological impact of redundancies on company culture

Lower employee productivity

A study by Stockholm university and the University of Canterbury found that after redundancies, the rest of a workforce experiences a 41% drop in job satisfaction and a 20% decline in performance – caused by a combination of increased workload, loss of social structures and a muggy air of uncertainty.  

Less innovation and collaboration

A bunker-down mentality can mean that more of your team focus on objective performance metrics to prove their value – rather than investing any energy in problem solving or new ideas. People may be less keen to poke their head above the parapet to voice their true opinions. And when key members of the team have gone, it’ll take a bit of time for people to recalibrate their working relationships and work out new ways to collaborate between departments, teams and individuals. 

Distrust and stress 

A job’s psychological contract is an implicit agreement between your workers and your company. It’s an understanding that if you turn up on time, get your work done and make an effort on behalf of the company, then you’ll be rewarded fairly. Your job is safe, your salary is guaranteed, and maybe there will be opportunities for growth along the way.

This belief drives our sense of motivation at work. Which is why an unexpected company downsizing can feel like a personal breach of trust. Your company isn’t a meritocracy, and even the ‘best’ workers are vulnerable to company restructures. This sense of uncertainty leads to a distrust of leadership, and usually a fair amount of stress, which is a significant precursor to poor mental health.

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8 ways to motivate and maintain employee morale during (and after) downsizing

1. Be honest

Hopefully, your company will have been transparent about the redundancy process from the very beginning. If you’re making less than 20 people redundant, you don’t legally need a full-blown redundancy consultation process, but letting key remaining employees know about layoffs before they happen is an important way to dampen shockwaves and keep everyone in the loop.

The need for honesty doesn’t stop once layoffs have been finalised, either. An all-company meeting to reassure remaining staff, talk about why redundancies were necessary, and recommit to a plan for the future is a difficult thing to host but a really necessary step to maintain trust in the leadership team. 

If your team thinks it was simple luck that saved their particular job, a sense of imposter syndrome can creep in and undermine employee confidence overall. If your remaining employees were chosen carefully, let them know!

To quash any lingering sense of uncertainty in the months that follow, make sure to keep proactively talking about business decisions, your financial situation and the (hopefully low) likelihood of a similar event in the future.

2. Acknowledge difficult emotions

We’re not going to sugarcoat it : restructuring your remaining team and helping them adapt to their new ‘workplace normal’ isn’t going to be a walk in the park. As we mentioned earlier, the employees you’ve kept on may experience survivor syndrome, and with that come challenges such as disengagement, lack of motivation, low productivity, higher stress levels, absences and an unwillingness to learn new skills. It’s a natural part of the downsizing process and something you should be prepared to face. Acknowledging your team’s emotional response to the redundancy period will help form an important foundation for open, non-judgemental communication during this time.

3. Help people find new jobs

Take a leaf out of Pleo or Monzo’s book and set up a talent directory to make recent leavers more visible to headhunting companies in a similar industry. Not only will this help your ex-employees to find new roles more quickly, but it’ll reassure your remaining team that support from your company doesn’t drop off immediately after being let go. A separate workspace on Slack for alumni to stay in contact is always a nice touch, too.

4. Ask for feedback

Set up an anonymous way for your surviving team to voice any concerns, and then make sure you have a robust and regular wellbeing survey in place. This will help to track the mood in camp and spot any early signs of employee burnout. Once you’ve gathered feedback, make sure to address areas for improvement and (you guessed it) tell the rest of your team what you’re working on, and why. This will help to orientate your team’s thoughts towards the future and show your commitment to them moving forwards.

5. Host exit interviews

Exit interviews are valuable when anybody leaves; – they can offer closure for an employee who’s moving on, and they give you an opportunity to learn a lot about your company culture and employee experience. These might be even more valuable when someone has been made redundant, because you can bet they’ll be completely honest. Make sure to keep an anonymous record of exit interviews and look for themes that keep cropping up. This should give you a better idea about where to focus your attention to improve morale for a slimmed-down workforce.

6. Keep pointing enthusiastically towards your mental health resources

If you have an Employee Assistance Programme (EAP) that offers medical advice, or a specialist mental health support system like Spill in place, then keep cheerleading those services. If you can, offer your wellbeing benefits to ex-employees too, for a reasonable period of time. (At Spill, we suggest a period of three months after a person has been let go, as that’s more than long enough to have a full course of six therapy sessions if they’d like to.) Access to therapy can help people to handle stress and process the complicated emotions that can be stirred up by job losses. In fact, a course of therapy by Spill is shown to reduce anxiety by 74% in just 6 weeks.

7. Make your leadership visible

News about any redundancies will likely have come from the top. So showing up in company meetings and being willing to listen to people’s fears for the future is an important part of taking responsibility for big business decisions that have affected the whole team. Clear and empathetic written communications (like this open letter by AirBnb CEO Brian Cheskey) are another good way to stop the rumour mill, reorientate your team around your mission, and show that making redundancies is an emotionally challenging time, even for big boss types.

8. Think about training

Budgets might be looking tight for a while, but showing intent to invest in your downsized team is a reassuring signal that these are the people you see moving your business forward. This might be on-the-job training to fill any knowledge gaps that have been left open, or you might consider upskilling your whole team in something more abstract (but no less useful), like emotional resilience.

Redundancies aren’t nice. But they are a good pause point. 

Being thoughtful about your redundancy process is worth it for everyone involved. As a manager, setting new targets with fewer workers can also be a good opportunity to reflect on your working practices and recommit to a healthy work-life balance in your team overall.

That might mean refocusing on the basics or dropping a few meeting invites, but nobody liked that Friday lunchtime catch up, anyway. If you’re looking for ways to help your new team feel better at work, we’ve got a great big list of employee wellbeing initiatives that might spark some new ideas.

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Tips on how to host a useful exit interview, and a template questionnaire sheet covering key topics from onboarding, in-role experience, company culture and the future of the company

Use Spill's spot-and-treat system to proactively measure your team's mood and act on early signs of burnout.

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