Organizations that value employee engagement has much to gain by adopting a no-layoff policy. This game-changing, people policy assures employees that the organization will not issue pink slips when the economy goes south. A no-layoff policy provides one more competitive advantage for being a Best Places to Work business..

During the recession in 2008, a small business owner in the residential and commercial wood-flooring business considered options to keep his organization afloat. Wanting to avoid layoffs, he decided to involve employees in the decision-making process. The team identified cost-cutting measures and voluntarily reduced work hours to counteract the slowdown. Together they solved the organization’s financial shortfall and prevented layoffs. When sales rebounded, they were poised to immediately respond to demand. Below are some reasons to consider a no-layoff policy.

 1. Employee Trauma

Those who lose a job are hard hit, especially if they have families to support. They go from being gainfully employed one day to wondering how will they pay their mortgage or rent, utility bills, or car payments the next. Layoffs not only have residual effects on those let go but on staff that remain. It can erode trust in future job security, create a distrust for employers well into the future and cause anxiety and reduced performance for those that remain.

2. Survivor Mode

Some managers believe surviving employees should be happy to keep their jobs. Those surviving employees, however, have developed important bonds with coworkers. It is emotionally difficult for survivors to see laid-off workers go. Survivors may be relieved to have avoided a pink slip, yet are afraid they might be next. Similar to departing employees, surviving employees may begin networking too.

3. Leaders in Limbo

Layoffs are tough on leaders. Fielding questions from surviving employees and facing the predictable drop in post-layoff productivity, leaders must deal with the added stress of an already difficult time.

When leaders are required to lay off their employees, they may begin to question their organization’s core values; internalizing the conflict between treating people well and protecting the organization’s interests.

4. Customer Confusion

Customers like to establish working relationships with organization representatives over time. For that reason, turnover can damage customer service. When an employee knows your customer well, s/he delivers goods and services more effectively. It is difficult to assign a price to the loss of goodwill when familiar employees suddenly disappear.

5. Lost Cost Savings

Rarely does a layoff save an organization money. After paying severance, outplacement assistance, and retention bonuses for key survivors not to abandon ship, when will the organization begin experiencing cost savings? Add into the mix lost productivity, disengaged employees, employee relations issues, and the recession could be over before the cost savings start to kick in.

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