Why Many Companies Get Layoffs Wrong

HBR IdeaCast

Harvard Business Review

Leadership, Entrepreneurship, Communication, Marketing, Business, Business/management, Management, Business/marketing, Business/entrepreneurship, Innovation, Hbr, Strategy, Economics, Finance, Teams, Harvard

4.4 • 1.9K Ratings

🗓️ 7 February 2023

⏱️ 30 minutes

🔗️ Recording | iTunes | RSS

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Summary

From Microsoft to Google to Meta, many of the world's biggest tech companies have been announcing layoffs recently. Their explanation is usually that they overhired and need to cut costs. But Harvard Business School professor Sandra Sucher, who has been studying layoffs for years, says companies often underestimate the downsides. Layoffs don’t just come with bad publicity, she explains. They also lead to loss of institutional knowledge, weakened engagement, higher turnover, and lower innovation as remaining employees fear risk-taking. And she says it can take years for companies to catch up. Sucher is a coauthor of the HBR article "What Companies Still Get Wrong About Layoffs."

Transcript

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0:30.0	Welcome to the HBR IDA cast from Harvard Business Review.
0:41.0	I'm Kurt Nickish.
0:49.0	Lately, it's a regular occurrence to hear about a big company,
0:53.0	usually a tech firm making sizable layoffs.
0:56.0	Microsoft laid off 10,000 workers.
0:59.0	That's less than 5% of its workforce.
1:01.0	Snap is laying off 20%, meta 13%, sales force 10%, and the list goes on.
1:09.0	The usual explanation is we hired too many people,
1:12.0	and the current economic climate can't sustain the growth path we thought we were on.
1:17.0	However, this wave of layoffs is somewhat unusual compared to how companies usually cut their workforces,
1:23.0	and it may well be counterproductive, according to our guests today.
1:27.0	Sandra Sutcher is a professor of Harvard Business School,
1:30.0	and has been studying layoffs for 15 years.
1:33.0	She says they often don't prove to be the savings that companies imagine.
1:37.0	The short-term cost cut is often overshadowed by loss of knowledge,
1:41.0	weaker engagement, higher turnover, and lower innovation.
	...

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