We are in the final two months of 2022 and the layoff wave is only intensifying.
On November 15th, Reuters reported that Amazon has plans to lay off 10,000 employees who hold roles in corporate and technology.
Earlier this month, Twitter laid off 3,700 employees which included more than ninety per cent of its Indian staff.
In October, Meta cut off jobs for roughly 13 per cent of its workers – that is, 11,000 employees of the tech giant.
The Indian edtech giant Byjus laid off 2,500 employees in an effort to cut costs and become profitable by 2023. Other companies that have joined the firing rampage include Netflix, Shopify, Microsoft, Coinbase and Snap.
Most of them have cited losses, increasing costs and rightsizing plans as reasons for laying off thousands of workers.
Amidst this chaos, the question is, are layoffs the best way to cut costs?
First, let us dive into the long-term effects of layoffs on employees and companies.
1- Lower productivity and morale:
Employees that survive the layoff in their company remain anxious about their job security. Research conducted by the University of Canterbury has shown that surviving employees experience major drops in three key areas – 41 per cent lower job satisfaction, 36 per cent decrease in commitment to the company and 20 per cent lower productivity levels.
2- Negatively impacted trust:
Surviving employees lose faith in the organization. If they feel that their coworkers weren’t eliminated on fair or clear grounds, some sort of resentment towards the company may also build up. Laid-off employees that are rehired are not able to trust the company again.
3- Increase in direct costs:
When conducting layoffs, companies have to incur additional costs to issue severance pay and future fixed salaries, for instance, pay of six weeks to employees who are being laid off. On top of that, costs must be incurred on onboarding and training new workers, whenever the company decides to hire again.
4- Change in company image:
When firms and companies undertake mass layoffs, their public image is hampered. People may perceive them as companies that are insufficient, weak and insecure to work at.
The alternative
If (like most companies today) companies are downsizing because they are looking to minimize costs, a better way to do so would be switching to a hybrid work model. A risk managed hybrid work model that will sustain and boost it.
First, let us define what that means.
The hybrid work system is a concoction of remote and in-office work. Under it, companies either give their employees flexibility, within boundaries, that work for both parties.
While finding out what works for employees is easy (just ask them), finding out what works for organizations, and how, requires a high-level risk management exercise.
Now, hybrid work can act as a brilliant cost-saving exercise for companies that are laying off their employees because of increased costs. In this way, the work model acts as a much better approach than layoffs.
Very recently, in research conducted by Global Workplace Analytics, it was found that companies can make significant savings on costs by adopting a hybrid work mode – every firm can save up to $11,000 for each employee who works remotely two or three days a week and comes to the office the rest of the week.
When companies shift to a hybrid work model, they contract their workplace and office space to accommodate the now reduced number of employees that will be in the office at any given time.
This minimizes their real-estate costs like leases and rents drastically as well as spending on electricity, computer systems, telephones and other facilities.
Tech-giant Cisco shifted to hybrid work over five years ago. Since then, it has reported savings of $500 million owing to a reduced real-estate footprint.
Mark Dixon, the founder and CEO of International Workplace Group told Fortune that companies can save 50 per cent of their real estate costs through hybrid work.
Apart from the cost-saving approach, hybrid work also offers employees and employers a middle ground that addresses expectations from both sides.
Layoffs are easy. And like all easy answers, they are usually wrong. Hybrid work is hard to risk manage, but like all such things, far more worthwhile in the long run.
