By: Chad Peddie and Jon Geier
This is part 7 of our 8-part blog series, Psychological Safety and Advancing Workforce Equity.
This blog series has focused on how an employer can create psychological safety for its workforce. In recent blogs, we discussed how psychological safety starts with the candidates’ experience during the selection process through their employment experience. However, there are organizational transformations that can also play a part in impacting employee experiences and, thus, psychological safety. This installment shifts focus to the challenges of maintaining psychological safety in the workplace when things are not going well; for example, in the event of a reduction in force (RIF). This is an increasingly important discussion given the current economic and labor environment and reports of RIF occurrences across industries (e.g., banking and technology).
Selection decisions for a RIF are subject to scrutiny under federal and state laws protecting against discrimination based on a protected characteristic, including but not limited to the ADEA (age), Title VII (gender, race, religion, national origin), and the ADAA (disability), as well as companion state employment laws. However, a RIF also implicates two other federal employment laws: the Older Workers Benefit Protection Act (OWBPA)1 (amending the ADEA in 1990), 29 U.S.C 626 et. seq., and the Worker Adjustment and Retraining Notification Act (WARN)2. 29 USC 2100 et. seq. Satisfying these requirements demonstrates an employer’s commitments to its legal obligations which should add to the psychological safety of the remaining employees.
Mitigating legal risks has a tremendous impact on employee separation decisions and the employee composition of the workforce remaining after the RIF. Additionally, RIF can be devasting to psychological safety and can produce a host of affective and motivational issues associated with “survivors syndrome” for those who continue employment (Mossholder et al., 2000). Given the necessity to reestablish the psychological safety of all parties involved in the RIF process, it is important to message and manage the RIF thoughtfully and with caution. Before considering how best to guard against the effects of RIFs, it’s critical to realize how far-reaching the effects can be, such as the following examples.
- Employees remaining with the organization are subject to decreased morale, lower productivity, and demotivation (Cascio, 1993).
- Managers informing the employees of their separation and managing the subsequent workforce (Luthans & Sommer, 1999).
- Communities in which organizations sit, families of separated employees, local economies, and even commuting patterns can all be impacted by RIF activity (Borla, 2019).
- The organization with the RIF activity resulting in elevated overhead costs, lower stock prices, and lower productivity levels (Cascio, 1993).
The RIF experience on displaced workers can be traumatic and those workers should be treated with all possible dignity and humanity. In addition to being conscious of the composition of those who are laid off because of reviewing adverse impact analyses, leadership must take action to ensure that those who are not released are handled appropriately. Managers should offer practical support such as assisting in managing increased workloads and demands; however, they must also focus attention on treating surviving employees in ways that rebuild perceptions of control (Brockner et al., 2004) and psychological safety.
The most critical aspects of communication during the downsizing process are transparent and accurate explanation for the decision-making process. Thoroughly explaining the process increases cooperation, raises perceptions of organizational justice (e.g., procedural and distributive), and corresponds to lower instances of retaliation (Shaw et al., 2003). These positive outcomes are, in turn, related to decreased negative reactions and withdrawal and positively related to job and situation satisfaction, trust, and organizational commitment (Colquitt et al., 2001). Additionally, providing employees with a voice is critical as many organizations fail to provide remaining employees with opportunities to participate in decision-making (Cascio & Wynn, 2004).
Several companies have opted to focus on scaling back DEIA investments during this business downturn disproportionately more than other organizational areas (Atkinson, 2023). However, this does not make good business sense for the following reasons.
- Working to retain progress and momentum made in DEIA organizational culture to improve interpersonal dynamics is critical given the tendency for people to regress to group differences in times of extreme stress.
- The evidence for the outcomes associated with organizational diversity and DEIA efforts (e.g., better customer interactions, higher quality solutions, more innovation) is pervasive.
- Accounts of companies engaging in this practice are being widely disseminated, which could do irreparable reputational damage to these companies as they will be seen as inauthentic.
- Enthusiasm continues to build around the expansion of accountability measures such as public reports (e.g., ESG reports, civil rights audits) in documenting genuine progress along DEIA metrics.
Instead of backsliding and losing DEIA progress, consider adopting one or all of the following action items.
- Conduct a review of the organization to learn the current and aspirational state of the organization regarding DEIA objectives.
- Leverage evidence-based best practices, some of which are cited in this series, to demonstrate the value of DEIA initiatives.
- Challenge organizations to demonstrate return on investment for DEIA initiatives.
- Make commitments to measuring and disclosing efforts and progress internally, on company websites, in Environmental Social, and Governance (ESG) reports, and annual public reports (e.g. SEC filings).
- Actively communicate progress to stakeholders, employees, and customers
There is a good amount of work that organizations must do in the unfortunate event of a RIF to assist employees both offboarding and remaining. Protecting psychological safety and ensuring dignity must be built into every aspect of RIF planning, even in the actual delivery of separation information. For example, recent practices by McDonald’s of encouraging telework during times of making separation announcement so exiting employees are not seen physically leaving the workplace as they are released from duty (Zilber, 2023).
Contact DCI for more information on strategic workforce planning to understand the impact pre- and post-transformational change to DEIA objectives. This series will conclude with guidance for the mitigation of risk associated with adopting social responsibility efforts.
Borla, O. J. (2019). The impact of corporate downsizing on the economy of the State of Delaware. University of Delaware, Center for Applied Demography & Survey Research. http://udspace.udel.edu/handle/19716/24906
Brockner, J., Spreitzer, G., Mishra, A., Hochwarter, W., Pepper, L., Weinberg, J. (2004). Perceived control as an antidote to the negative effects of layoffs on survivors’ organizational commitment and job performance. Administrative science quarterly, 49(1), 76–100. https://doi.org/10.2307/4131456
Cascio, W.F. (1993). Downsizing: What do we know? What have we learned? Academy of Management Executive, 7(1), 95–104.
Cascio, W. F. & Wynn, P. (2004). Managing a downsizing process. Human Resource Management, 43(4), 425–436. https://doi.org/10.1002/hrm.20034
Colquitt, J. A., Conlon, D. E., Wesson, M. J., Porter, C. O. L. H., Ng, K. Y. (2001). Justice at the millennium: A meta-analytic review of 25 years of organizational justice research. Journal of Applied Psychology, 86(3), 425–445. https://doi.org/10.1037/0021-9010.86.3.425
Luthans, F. & Sommer, S. (1999). The impact of downsizing on workplace attitudes. Group & Organization Management, 24(1), 46–70. https://doi.org/10.1177/1059601199241004
Mossholder, K. W., Settoon, R. P., Armenakis, A. A., & Harris, S. G. (2000). Emotion during organizational transformations. An interactive model of survivor reactions. Group and Organization Management, 25(3), 220–243. https://doi.org/10.1177/1059601100253002
Shaw, J. C., Wild, E., & Colquitt, J. A. (2003). To justify or excuse? A meta-analytic review of the effects of explanations. Journal of Applied Psychology, 88(3), 444–458. https://doi.org/10.1037/0021-9010.88.3.444
Zilber, A. (2023, April 8). McDonald's lays off hundreds, cuts pay for workers, closes field offices. New York Post. Retrieved April 13, 2023, https://nypost.com/2023/04/07/mcdonalds-lays-off-hundreds-cuts-pay-for-workers/