If your firm is like many, you’re now managing a bunch of survivors – the lucky ones who didn’t get downsized. Chances are good this means you’re presiding over a heightened level of costly employee dysfunction, even if you don’t see it yet.

Layoffs affect survivors in various ways. Here’s what you can do to limit the damage.

Creativity. Evidence from several researchers suggests that downsizing dampens survivors’ creativity – a potentially dangerous development for almost any company. Because this effect appears to be related to employees’ negative perceptions of their work environment, put renewed effort into team building to maintain or improve work-group stability and into providing challenging work, which stimulates creativity.

Communication. Downsizing tends to disrupt social networks and information exchange within companies, adding to employees’ negative feelings. Encourage increased contact among managers and employees, promote active listening, institute open-door policies, and get employee input into decision-making.

Perceptions. Downsizing tends to increase stress, burnout, insecurity, and mistrust of management and reduce morale, job satisfaction, and commitment. Such perceptual changes are linked to greater turnover, diminished helping behavior, and poorer job and company performance. Reduce layoffs’ fallout by helping employees to see the process as fair and showing that other options were considered first. Something else that might help: A moratorium on future layoffs, even if it has an explicit endpoint. One study found that the anticipation of downsizing can have an even stronger effect than layoffs themselves on employees’ negative perceptions of their work environment.

Turnover. Our own research shows a substantial increase in voluntary departures after layoffs, even if the downsizing was small. The costs of being understaffed, as well as of employee replacement and training, are unwelcome expenses when a company is attempting to save money. All of our recommendations above can help limit voluntary turnover. And for the future, institute HR policies promoting a sense of justice, such as confidential problem-solving avenues and an effective grievance or appeals process; companies with those practices had lower rates of post-downsizing increases in voluntary turnover.

Stars. Pay special attention to high performers. Research by one of us (Trevor) shows that employees who perform better and have more training, education, and ability are the most likely to quit if dissatisfied. Provide support and encouragement, and help them see that downsizing opens new opportunities and channels for promotion.

Source: Andrew O’Connell