Layoffs cause ripple effects, leading to wanted departures, UBC says

Companies should be careful when they decide to cut staff

Author of the article:

VANCOUVER — Employers vastly underestimate the impact of workers leaving an organization on staff left behind with a different workplace dynamic, leading to even more turnover, a new report says.

University of British Columbia’s Sauder School of Business associate professor Sima Sajjadiani co-authored the study that found employee exits, through termination, layoffs or by voluntary quitting, change the operational and social fabric of workplaces, prompting more departures.

Subscribe now to read the latest news in your city and across Canada.

Create an account or sign in to continue with your reading experience.

Don't have an account? Create Account

“The research sends a clear message to organizations that they should be extremely careful when they make exit decisions, or they risk destabilizing the whole organization very quickly,” she said.

Sajjadiani, alongside two researchers from the University of Minnesota, analyzed data of about a million employees at 1,620 stores of a U.S.-based retail chain over a 22-month period.

They found that layoff announcements had a strong and immediate impact, increasing voluntary turnover among those who remained at the company.

Such events can enhance feelings of job insecurity among those who remain, leading to more employees quitting, the study says.

However, the researchers found voluntary departures resulted in fewer turnovers, and that it typically takes longer for the ripple effect of subsequent departures to happen.

“To high performers, voluntary exits are a positive signal that there are better opportunities elsewhere, so while employees might not leave immediately, they do begin to look for other opportunities,” Sajjadiani said.

“Usually, the subsequent voluntary turnovers after voluntary turnover takes like three months or so, but for layoffs, it’s really within the first month that a layoff is announced that a lot of employees leave the organization,” she said in an interview.

FP Work touches on HR strategy, labour economics, office culture, technology and more.

A welcome email is on its way. If you don't see it, please check your junk folder.

The next issue of Work will soon be in your inbox.

We encountered an issue signing you up. Please try again

The study also revealed that when workers are fired, their departures have a relatively small, fleeting effect, and can even reduce voluntary turnover afterwards.

“Usually these are people who are disruptive or abusive, or aren’t doing their fair share,” Sajjadiani said. “When they go, high performers tend to stay longer, and the risk of voluntary turnover actually goes down.”

But the study notes that if high performers are dismissed without clear justification and communication as to why, “employers not only open themselves to legal headaches, it also sends the wrong message to other high performers (and) they also start heading for the door.”

Sajjadiani said the study is the first of its kind and should signal to employers that they need to consider possible increased turnover rates when telling other workers about an employee exit.

“Not all turnover events are the same. It really depends on how disruptive, critical and novel the experience of these events are for the workers in the organization and, depending on these three factors, we are going to see various effects of these events over time.”

While the study’s data predates the COVID-19 pandemic, Sajjadiani said she believes the research remains relevant.

“It is very timely for organizations to pay attention to these results because the final message of our paper is that whenever you make exit decisions, especially when it’s involuntary, when there’s a layoff or you dismiss employees, those decisions don’t end there.”

This report by The Canadian Press was first published May07, 2023.

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

To contribute to the conversation, you need to be logged in. If you are not yet registered, create your account now - it's FREE.

included