Maintaining a Healthy Corporate Culture During Layoffs

Nicholas J Price
6 min read
Tough times in the corporate world call for tough decisions by boards and managers. When sales and earnings forecasts are missed and the outlook is poor, it's time for boards to re-strategize and to come up with a plan to save the company by restructuring it and moving it into a new direction. Restructuring is a last resort after trying other means for keeping a company profitable and sustainable. It's a complicated process that corporate leaders don't enter into lightly. When restructuring becomes necessary, it can be difficult for employees to see the reasons for it. Unwelcome layoffs are sometimes unavoidable during the restructuring process, and they can sorely impact your corporate culture.

By training managers in resiliency and good communication, corporations will be able to weather the storm of layoffs while keeping the corporate culture healthy.

The Perfect Storm Signals Layoffs at 3M

3M's mission states, '3M is committed to actively contributing to sustainable development through environmental protection, social responsibility, and economic progress.' It's an admirable mission and one that's been increasingly difficult to uphold due to recent global economic and societal changes.

The board and executives at 3M have faced one challenge after another. Despite their efforts to maintain a positive outlook, they experienced the worst stock price fall in decades in April 2019, when their shares plunged 13% in one day. 3M has been dubbed one of the worst-performing stocks on the Dow exchange. In worse news, sales fell in Europe and Asia in the fourth quarter of 2019.

Several incidents occurred in close succession, which created the perfect storm for a corporate restructuring. Weaknesses in China, along with a strong U.S. dollar, contributed to the low earnings reports. The trade disputes between China and the U.S. since 2018 have only exacerbated the issue, even as the two countries have signed a phase-one trade deal. The coronavirus outbreak added to the problem pile-up, as Chinese businesses have been shutting down in an attempt to control the deadly illness and prevent it from spreading. The outbreak could be a contributing factor to sluggish sales in early 2020.

On a positive note, 3M also makes protective face masks, and they're currently ramping up production to keep pace with the increased demand.

The restructuring plan includes laying off 1,500 workers, which equates to 1.5% of their total employees, which is about 96,000. 3M shares dropped almost 6% after the layoff announcement, although the restructuring could save the company between $40 million and $50 million in 2020.

Maintaining a Healthy Morale After a Layoff

The setbacks at 3M highlight the importance of maintaining a healthy morale in the wake of a layoff announcement. How a company approaches the layoff will determine whether employees will weather the storm along with the leaders or whether it will add to their list of growing problems.

The employees' state of mind has a major impact on their productivity. External factors, including worry, stress and a lack of quality sleep, contribute to a culture of unrest and uncertainty. These issues may be preventable to some degree when the tone at the top communicates the right messages before, during and after a layoff. It's a mistake to wait until the day of a layoff announcement for corporate leaders to communicate financial difficulties and major upcoming changes.

Top company values should drive the board's decisions and play a strategic role in how they should approach communications with the remaining employees. In all statements and at all times, it's crucial for boards to act with honesty, transparency, integrity and openness.

Because of the sensitive nature of the issue, it will take continual communication and diligence to keep employees properly focused before, during and after a layoff. After a drop in productivity, a company may not rebound for a full year, which could exacerbate the restructuring challenges even further.

Bear in mind that your employees are aware that layoff decisions aren't made overnight. They shouldn't be made in a vacuum either, so don't ignore the importance of communicating what is already obvious.

Consider that your employees may have some thoughtful ideas on how to curb costs, cut spending or operate more efficiently. By communicating the company's financial hardship to your employees early on in the process, before a layoff becomes inevitable, you're giving them the chance to do their part to reduce expenses. Departmental savings add up across the enterprise. Overall productivity is bound to improve when employees are focused on how their role could save their jobs or the jobs of their coworkers rather than wasting time worrying about future events that may not even come to fruition. When employees aren't getting the right information from the company, they tend to make up their own reality. In not having the facts, the rumor mill can take over and drain productivity.

Resiliency Training Is a Key Factor in Maintaining a Healthy Culture

It's worthwhile to train your managers on how to take a resilient approach in their interactions with employees. Such training will teach managers how to listen to their employees and learn how they can best support them. A straightforward and compassionate approach offers opportunities for leaders to acknowledge the necessity for the change, provide relevant information and hopefully reduce their anxiety. This is an approach that keeps them focused on the things that are within their ability to control while increasing trust in the current leadership.

As employees leave the workplace, the remaining employees will likely need to work together to identify ways to redistribute the workload and adapt to changes. Managers may be tempted to hide away rather than having to answer unsettling questions. A better approach is to be visible and to express a genuine interest in how the remaining employees are doing. Being present also presents opportunities to note changes in the employees' emotions or productivity and to address them early on. Silence doesn't mean they're okay. Be reassuring while being careful not to make promises you can't keep. Be available to meet with them individually and offer EAP services where available.

Don't drop the ball over time. Revisit employee concerns in about three months. It may be a good idea to set up department meetings to point out how their efforts are making a positive contribution to the new plan. Collaborate with other managers to gauge the temperature of the corporate culture. This may also be a good time to schedule a town hall-type meeting to discuss the state of the company and to answer employees' questions.

In conclusion, layoff periods are an emotionally challenging time for everyone. Despite the hardships and uncertainty, the right approach to maintaining a healthy corporate culture is to address the situation with open, honest communication. The net result will instill trust, provide transparency into the business climate, foster a positive environment and demonstrate appreciation for employees' work. It's the best approach for a win/win result through a challenging time.