The Risks of Poorly Executed Workforce Layoffs

Well Known Media Company Sacks Employees Leading to More Resignations

Earlier this week well-known media company in Hong Kong fired 40 members of staff in their editorial team, citing the economic impacts of the Covid-19 pandemic as the reason. Turmoil ensued when other members of staff resigned in protest of the handling of the situation. The entire award-winning China news resigned along with at least half of the editorial department’s middle management according to SCMP.

Video emerged of staff demanding an explanation from executives on the decision. A top executive even described some staff demanding an answer as “thugs” as things got heated. In a statement by the staff, they stated that they felt disrespected, disappointed, and angry by the lack of communication with department heads and it showed management’s disregard for its staff. This comes after other high-profile layoffs in Hong Kong, where HSBC and Cathay Pacific cut staff earlier in the year.

Valid Reason, Poor Execution

It is understandable for companies to make structural changes and cut-operating costs during a period where the Covid-19 pandemic has hit many businesses hard financially. However, this media company is a perfect example of how a poorly handled termination process can impact the company’s image and risk domino-effect consequences.   

Industry observers believe that this move will hurt the city’s entire media sector, damage company morale, and hurt the quality of production. This move will cause current employees to lose faith in management and the company, causing irreparable damages.

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Risks of Poor Restructuring Planning

There are many potential impacts of a poorly planned termination process and your company can be at risk from the following impacts if you don’t have a good strategy:

Lower Employee Engagement

When employees start losing confidence in the management their engagement in the company’s goals and values begin to diminish. This can easily happen if during restructuring the procedure becomes messy and morale drops.  

A study from Gallup showed that enterprises with highly engaged employees correlated with 26% higher revenue per employee and also outperformed companies with low employee engagement by 22% in terms of profitability. Productivity was also shown to be 21% higher in businesses with highly engaged employees, showing the importance of not neglecting keeping employees happy and engaged.

Staff Retention Difficulty   

Retaining employees is one of the most important aspects of running a successful company. The costs of hiring and training new employees can be a real financial burden. Forbes reported that 96% of employees believe showing empathy is an important way to advance employee retention. If the layoff process causes anger and disappointment with everyone involved and signs of empathy are not shown by business decision-makers, it could make retaining talent in the future more difficult. Feeling valued is the most important thing when it comes to preventing staff turnover.

Weakens Employer Brand

When your company comes on the news for all the wrong reasons, like in the case with the media company, candidates will remember how you treated your previous staff. Bad publicity will damage your employer brand and give your business a bad reputation.

Employer branding is vital for attracting the best talent with a study from Glassdoor backing this up by stating that 84% of job seekers said that a company’s reputation plays an important role when applying for jobs. The hard times will pass and there will be a period where your company will look to expand again. If you have damaged your company’s reputation from previous decisions then it will make the expansion of the business much harder.

Vengeful Retaliation

In situations where emotions are high, animosity between two parties can also be elevated. Employees can be especially bitter if they feel like they have been unfairly treated during their removal. Companies can potentially receive lawsuits for unfair dismissal which will be incredibly damaging for the business financially and its reputation.

Reducing the Risks & Planning a Strategy

The risks of not planning the layoff cannot be understated if you want long-term business success. Not every company has gone through large-scale restructuring, so it is crucial to seek professional consultants who specialise in the termination process to help!

To learn more about using outplacement read our blog: Why You Should Use Outplacement to Handle Employee Terminations

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