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Engaging Employees through Period of Layoffs

This article features in the Drake Business Review V2 - click to view magazine

Economic volatility is taking its toll on many organisations. Recent Watson Wyatt research shows that 39% of a sample of US companies have already undertaken some employee layoffs, and an additional 23% expect to do so during the next 12 months. Twenty-three percent have undergone an organisation-wide restructuring, and another 14% foresee the need for future downsizing and layoffs.

While perhaps necessary from a business perspective, cutting the workforce reduces the total value of a firm's human capital. Successfully navigating this period requires engaging - or re-engaging - your employees.

Engaged employees are highly committed to the company and understand how they can make a positive contribution. They tend to be more productive, less likely to leave the organisation, and more resilient in the face of major organisational change.

Findings of the 2008/2009 Watson Wyatt Work USA research survey suggests seven lessons for managing the human side of the restructuring process.

Keeping employee engagement levels high is difficult, but not impossible.

Restructuring is an "engageable moment" when employees are open to substantially revising their attitudes about the organisation. Employees at firms that restructure are 50% more likely than workers at other firms to have low engagement. However, if they believe the changes are handled well, they are 4.5 times as likely to be highly engaged.

Watson Wyatt research found that, compared with other employees, highly engaged employees:

  • Are three times as likely to be top-performing workers, receiving a performance rating placing them in the top 10% at their company
  • Are five times as likely to believe passionately in what their organisation stands for in the marketplace and twice as likely to believe what they do is critical to delivering on the brand promise
  • Miss 20% fewer days for unscheduled work absences

Restructuring affects top-performing employees more than other workers

Good organisations usually focus on eliminating poor performers and retaining top ones. These top performers are critical to the new organisation's future success. And yet we find that top-performing employees at restructuring firms are:

  • Fifty percent less likely to be highly engaged
  • Twice as likely to have low engagement
  • Twice as likely to be among employees most at risk for voluntary turnover

Engaging employees during a downsizing requires strong leadership

Employees become engaged when a company promotes confidence - specifically in the direction senior management is taking to compete effectively and grow the business.

Promoting confidence in the company's ability to control costs has much less impact on the level of employee engagement, perhaps because cost-cutting inevitably involves reducing the workforce.

Encouraging employees to speak up strengthens the organisation

Grumbling over company policies, practices, or performance can and should be discouraged through improved communication and management. Nevertheless, encouraging the open expression of ideas and brainstorming can improve the entire organisation.

Unfortunately, employees at restructuring organisations are significantly less likely than other employees to speak up or offer differing opinions and ideas - possibly because they are afraid to stand out or feel they have insufficient information about the direction the company is taking.

Highly engaged employees are more than three times as likely as their lower-performing peers to share ideas and opinions.

Keeping the focus on customer satisfaction helps ensure success

During a restructuring, senior managers tend to focus inward on the team or firm. After the first announcement, employees wait for the other shoe to drop, in the form of layoffs or other budget cuts.

This can have a paralysing effect on the business. Focusing everyone on one objective - satisfying the customer - provides a common organisational vision and improves value to the customer.

Highly engaged employees at restructuring organisations are more likely to say their organisation:

  • Ranks customer satisfaction as a top priority (by 54%)
  • Makes decisions based on what's best for the customer (by 63%)
  • Offers high-quality products or services (by 41%)

Continuing to invest in people and work processes communicates stability and value

Investing in people and work processes conveys the message that the company still has a long-term direction worth investing in. Compared with non-engaged employees, highly engaged employees at restructuring organisations are:

  • About 6.5 times as likely to say their company invests in continuously improving their work processes
  • About 2.5 times as likely to be satisfied with their employee benefits
  • Three times as likely to have received at least one week of training (while employees with low engagement are six times as likely to have received no training during the past year)

Engaging top performers calls for extra incentives

All employees, regardless of level of engagement, respond to actions the restructuring organisation takes to engage workers. But three additional factors are critical to engaging high-performing employees:

  • Seeking out and acting on employee suggestions,which can generate valuable ideas for organisational improvement
  • Considering employee well-being, which promotes employee buy-in during the implementation phase
  • Paying top performers well

Watson Wyatt's 2008/2009 Strategic Rewards study found that low-performing firms pay top performers more than they pay other employees.

However, their top performing employees earn half of the incentive payout (relative to target) of top performers at high-performing companies, as the organisation's poor financial performance limits incentive program funding.

Employees in restructuring organisations are 13% less likely to be satisfied with their pay than employees at other organisations. For top performers, the gap is 50% larger.

Even as they downsize, organisations must continue to deliver competitive reward packages for top-performing employees or face the possibility of losing them.

Top-performing employees at restructuring organisations who are satisfied with their pay are one-third less likely to be at risk for turnover and 75% less likely to be a high voluntary turnover risk.


Layoffs can affect an organisation's long-term prospects and have a negative impact on the remaining employees. The restructuring organisation needs to retain and motivate its best people to ensure that a smaller workforce continues to deliver high quality products and services to customers.

Organisations that fail to engage their employees during downsizing risk the loss of their best workers, as well as declining productivity and reduced customer service from those who remain. And they could forfeit market share.

On the other hand, organisations that handle the human capital loss well improve their chances of re-engaging their remaining employees, retaining their top performers, minimizing the short-term damage, and maximizing prospects for long-term growth as the economy recovers.

Reprinted with permission from Strategy@Work © 2009 Watson WyattWorldwide. For more information, visit watsonwyatt.com.

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