When companies hit a financial brick wall, they often turn to layoffs as a means to cut costs and stay afloat. While sometimes unavoidable, the ripple effects of layoffs can be far-reaching, leaving a trail of diminished morale, stifled productivity, and disengaged employees in their wake.

The aftermath of poorly handled layoffs can erode the trust that remains among employees, like a slow leak draining a reservoir. This breach of trust can inflict lasting damage on performance and profitability, casting a long shadow over the organisation’s future. Even well-executed layoffs can shake the workplace’s foundations. According to Edelman’s 2022 Trust Barometer, 85% of employees rank job loss as their top concern, and the upheaval caused by layoffs can drastically undermine the fragile relationship between employees and management.

When the ax falls on colleagues, employees are often struck by what experts refer to as 'survivor syndrome'. This cocktail of anxiety, guilt, and fear over job security breeds a toxic atmosphere where employees shift their focus from contributing to the organisation’s success to self-preservation. In the end, innovation falters, morale plummets, and productivity grinds to a halt as everyone looks over their shoulder, wondering if they’ll be next.

The impact of layoffs goes beyond the obvious

While layoffs may seem like a quick fix, the consequences often linger like a bad hangover. Studies have shown that the aftermath is not only measurable in the form of stressed-out employees but also in hidden costs that can cripple an organisation for years. For example, survivors of layoffs may face an increased workload, which can fuel burnout and diminish job performance. Meanwhile, the reputational fallout can make it harder for the company to attract top talent, leaving a void where once there was a thriving workforce.

The psychological toll on the survivors of layoffs is profound. Research places job loss among the most stressful life events, surpassing even divorce or the death of a loved one. The long-term health implications are alarming, with displaced workers more prone to stress-related conditions such as hypertension and heart disease. Financially, the scars are just as deep: those laid off during economic downturns often see their earnings dip by as much as 30%, with the effects lingering long after the dust has settled.

For companies, the immediate financial burden is clear – severance packages and legal fees add up quickly. However, the hidden costs can be far more insidious, creeping in over the years. A study of Fortune 1000 companies from 2003 to 2007 found that businesses conducting layoffs underperformed for up to three years, particularly in areas like return on assets and profit margins. This slow bleed in performance is often attributed to the loss of trust, the added burden on remaining employees, and the erosion of institutional knowledge – things that simply can’t be replaced overnight.

Layoffs can sink trust faster than a ship in a storm, but companies can chart a course through the choppy waters by adopting transparent, empathetic approaches.

5 strategies to maintain productivity and morale during layoffs

1. Address the elephant in the room

Acknowledge the anxiety. Let employees air their concerns and turn that nervous energy into action – reskilling or tackling top priorities.

2. Speak the truth

Transparency is key. Communicate the ‘why’ behind layoffs to cut through the rumour mill and help employees focus on the next steps.

3. Don’t promise the moon

False reassurances are a trap. If you can’t guarantee safety, don’t make empty promises – broken trust is harder to rebuild than a shattered glass.

4. Set clear boundaries

Overwhelmed employees need direction, not more questions. Allocate specific times for layoffs-related queries so staff can focus without the constant dread of ‘what’s next?’

5. Extend a helping hand

Don’t cut ties after the layoff. Offering references or job search support shows you still value your people – and preserves goodwill for the future.

Addressing the ‘survivor syndrome’

In the wake of layoffs, it’s crucial for companies to recognise that surviving employees carry not only their own workload but also the emotional weight of an uncertain future. Addressing this ‘survivor syndrome’ isn’t just a nice-to-have – it’s essential for rebuilding trust, stabilising morale, and ensuring that the team is ready to move forward. By leading with empathy, clear communication, and practical support, leaders can transform a challenging situation into an opportunity to strengthen the workplace culture and build resilience.

While layoffs may be an unavoidable part of the business landscape, how companies handle their aftermath can make all the difference. Leaders who are transparent, set clear boundaries, and offer genuine support create a culture that values people, even in tough times. In the end, a thoughtful approach to navigating layoffs can transform a difficult chapter into a foundation for future growth and loyalty, keeping both the company and its people anchored through rough waters.