INSIGHTS

"Do more with less": how the post-layoff period affects staff and management

Understanding the challenge

LEADERSHIP AND LEARNING SERIES | 5 MINUTE READ | 10 DECEMBER 2024

Summary

• Post-layoff workplaces face significant challenges as remaining employees grapple with increased workloads, diminished psychological safety, and heightened mental health risks.

• Managers and decision makers must balance operational demands with supporting teams through uncertainty, while organisational trust and innovation often suffer.

• The hidden costs of “doing more with less” include reduced productivity, knowledge loss, and disengagement, which can undermine long-term growth and resilience.

The weight of layoff: a new organisational reality

Layoffs are often implemented as a strategy to streamline operations and reduce costs, but their impact extends far beyond financial statements. For those who remain, the “do more with less” mandate becomes an everyday reality, fundamentally altering the workplace atmosphere. The emotional and operational repercussions are profound, affecting not only productivity but also the psychosocial safety and mental health of staff.

Survivor syndrome and the emotional fallout

Employees who survive layoffs frequently experience what is known as "workplace survivor syndrome." This includes a complex mix of grief for lost colleagues, guilt for remaining, and anxiety about their own job security. The sudden loss of trusted teammates can lead to feelings of betrayal, diminished self-confidence, and even anger, all of which can spill over into personal life and erode overall well-being.

Managers balancing empathy and output

Managers are uniquely burdened in the aftermath of layoffs. They are expected to deliver results with reduced resources, support team members through uncertainty, and maintain morale—all while grappling with their own fears and doubts. This dual responsibility can lead to heightened stress and emotional exhaustion, as managers shoulder the weight of both organisational expectations and the emotional needs of their teams.

Team dynamics and the erosion of trust

Layoffs disrupt established team dynamics, creating ambiguity around roles and responsibilities. As survivors are redeployed and job descriptions shift, role ambiguity becomes a significant stressor. Trust within teams can falter, as remaining employees may feel isolated, excluded from decision-making, or uncertain about the future. The resulting atmosphere of mistrust and fragmentation undermines collaboration and stifles innovation.

Speaking out and psychological safety

In environments marked by uncertainty and fear, employees are less likely to speak up or challenge the status quo. The erosion of psychological safety means that issues go unaddressed, feedback is withheld, and opportunities for learning and improvement are lost. This culture of silence can have lasting effects, stunting both individual growth and organisational progress.

Impacts on IP and organisation memory

The departure of experienced staff often results in the loss of critical institutional knowledge and intellectual property. Remaining employees, overwhelmed by new responsibilities and lacking adequate support, may struggle to maintain the same level of innovation and problem-solving. Over time, this knowledge drain can hinder organisational agility and competitiveness.

Hidden costs of productivity and growth

While “doing more with less” may seem efficient in the short term, the cumulative toll on mental health, engagement, and morale can lead to decreased productivity, higher absenteeism, and increased turnover. Studies have shown that disengagement and burnout rise sharply after layoffs, with employees reporting diminished motivation and a reluctance to invest in long-term projects. Ultimately, these hidden costs can impede growth and erode the very resilience organisations need to recover.

The decision-maker's perspective when navigating unintended consequences

For decision makers, the challenge lies in balancing immediate financial imperatives with the long-term health of the organisation. While layoffs may deliver short-term savings, the broader impact on culture, engagement, and innovation is significant and enduring. Recognising the psychosocial risks and understanding the true cost of workforce reductions are essential for informed, responsible leadership.

Authoritative sources: Harvard Business Review, Gallup, American Psychological Association, BBC Worklife, Stanford University, and peer-reviewed organisational psychology research.