Business Strategy and Planning

Reasons Why Copycat Layoffs Does Not Mean Business Efficiency

Copycat layoffs go with companies short-term solutions towards business efficiency. But does it?

With the on-going layoff trend that has been happening ever since the pandemic, it has sparked panic among employees working in tech. According to JobsPikr, the tech layoffs have been occurring since about the second half of 2022. The number of employees being laid off during November 2022 was a massive 50,000.

Based on the huge numbers, Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business, sees this as copycat behaviour. Using it as a justification for cuts due to challenging business conditions is copycat layoff behaviour, according to Annie Lowrey, writer of The Atlantic.

What are the effects of copycat layoffs?

What is worrying about layoffs is that they are contagious. Layoffs can have adverse effects, particularly for employees, and research suggests that involuntary job loss may increase vulnerability to the risk of suicide. Even if the risk lessens due to other factors, the possibility is still there. Quitting a job without one’s own intention can contribute to emotional distress and mental health challenges.

What about the organization? Many companies are copying others for the sake of business efficiency, but this cannot be achieved if they are not looking at the actual root of the problem. Jeffrey Pfeffer adds that layoffs do not do much for company performance.

Poor Business Strategy

What works on other people does not mean that it will work effectively on us. We have heard this sentence a couple of times in many aspects of life, be it personal, professional or even personal relationships. Having a clear understanding of the issue is crucial and must be done meticulously. When other competitors are having layoffs, companies rushing to do the same could lead to poor planning and business strategy. Rather than focusing on short-term gains, companies should set long-term strategic goals to avoid missed opportunities and growth.

Loss of Talent

When a company decides to lay off employees, it might lose experienced and skilled workers. Companies should think about how this could affect their abilities in the long run. Great talents could mean great ideas and unique perspectives. These people take their careers seriously and would want to put in the effort. Losing them could have companies having a harder time coming up with new innovative ideas. In other words, it can slow down the company’s progress.

Risk of Financial Problems

As mentioned with the loss of talent, this will lead to a ripple effect, which is financial problems. The costs associated with hiring and training new employees to replace those who were laid off, along with the disruption of workflow, can contribute to additional financial strain on the business. It may struggle to maintain its competitive edge and adapt to changing market demands.

Produce Fear and Low Morale Employees

If a company often lets go of employees or follows a pattern without explaining things clearly, it can make the people who stay at the company feel scared and unsure about what might happen to them. This fear and uncertainty can make employees feel less happy and more anxious. Lower engagement and morale could greatly reduce productivity. If they are employed in the future, the anxiety will still be there due to the uncertainties in tech companies.

Possible Reputation Damage

If companies are seen as copying each other and letting people go without a good reason, it can make people think poorly of them. Others in the industry and individuals who might want to work there could see the company negatively due to this bad reputation, potentially harming its image. People might not trust the company as much, and it could be harder for the company to hire talented employees in the future.

While some industries may experience social contagion in the form of copycat layoffs, it’s crucial for companies to approach workforce reductions with a clear understanding of their unique challenges to gain business efficiency.

It is now understandable why people are starting to look for side hustles ever since the Great Recession, a period of economic downturn from 2007 to 2009. For employees, a great strategy would be career cushioning. It helps prepare for the unexpected future and secure more stable jobs somewhere.

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