Mass Layoffs and the Stock of Honesty Many Companies Have Misplaced

Mass layoffs are terrible. For the people who get laid off, obviously. But also for those who stay. When companies wage what should be a respectful breakup with the employee factions they no longer need, they expose the entire organization to what psychologists call an “honesty deficit.”

Employees pay attention to how you treat your people. When they feel abused, disrespected, or mistreated, they lose trust in their employer and will take that erosion of trust with them whenever they leave, even if they voluntarily leave. Who wants to work for a company that treats people poorly when layoffs happen? Who wants to work for a company that treats its layoffs dishonestly?
Employees noticed how you treated their colleagues.

Large-scale workforce reductions began in late 2022 and continued into 2024 and beyond. Across sectors and companies of varying sizes, layoffs were notable for both their scope and the tenor of the accompanying organizational communications.

In many organizations that had made years of happy talk about how “employees are our most valuable asset,” workforce reductions were delivered with communications that were, to put it kindly, dishonest. Not dishonest in the sense of making knowingly false claims, though some of those occurred. Dishonest in the sense of creating a patently inaccurate picture of what was happening and why.

Organizations deceived employees about what was happening.
At the level of stated causes, layoffs attributed to macroeconomic factors were, in many reported cases, actually the corrective result of having overhired in prior years. Convenient external cause? Sure. But why would an organization describe internal hiring decisions as if they were caused by external forces? To avoid taking responsibility for those decisions. To present what was clearly an organizational choice as though it were a necessity. Some of these claims were technically true; those organizations truly did face a challenging macroeconomic environment. Most of these claims were not untrue; they were misleading.

Organizations deceived employees about the scope.
Layoffs described as affecting only a small percentage of the company, in practice, eliminated entire teams, functions, and levels of the organization. Again, if you look at the global workforce, that description may be technically accurate. But why would an organization that just fired its entire recruiting team, its entire internal communications team, and many people from its middle management layer describe that action as only impacting three percent of its employees? Because framing the layoffs in terms of percentages downplays the true scale of the action and makes it easier to claim that nothing “structural” happened. Employees saw through this.

Organizations deceived employees about the process.
Promises of generous treatment, competitive severance, and support were made at the same time as the structural/process inadequacies that prevented organizations from following through on those promises. Continuing benefits were accidentally interrupted. Severance packages included non-disparagement clauses that employees were given insufficient time to consider. Reference policies changed after employees were laid off. Many of these problems were caused by the speed and scale of the layoffs themselves. They did not reflect intentional bad faith. To the employees affected by them, they reeked of bad faith. Because organizational communication had set expectations that organizational action could not meet.
Employees noticed how you treated their friends and family.

Your employees are not the only ones who notice your layoffs. Everyone who has to stay does so. And research shows that layoffs have a bigger impact on the employees who remain than you might think. In fact, how those layoffs are perceived can do more long-term damage to your organization than the layoffs themselves.

Organizations accrue trust or goodwill with employees over years of honest communication. They can lose it in a matter of weeks by treating their employees poorly during a layoff. What is more, employees understand this. They know that layoffs are hard on everyone. They know that you have to do them sometimes. But they also know that how you do them matters. If you get laid off in an organization that you perceive to be dishonest, you learn something about how that organization views honesty. You learn something about whether the organization’s prior communications about its values actually meant anything. You adjust your trust in your employer accordingly.

Employees adjust their trust in their employer when layoffs aren’t handled with honesty.
The good news is that being honest about layoffs does not require you to share confidential information, make promises you can not keep, or put your organization at risk of litigation. Being honest means that the information you do share accurately reflects the situation. It means that you frame your communications in a way that helps, rather than obscures, your employees’ understanding of what’s going on. And it means that you only make commitments your operations team can actually deliver on.

At least one group of employees noticed your layoffs. They noticed how you treated their co-workers. They will remember.
Did you lie to your employees about your layoffs? Whether it’s during layoffs or otherwise, honesty is the best policy.
Excerpted from Noog’s Newsletter: Lessons in Leadership, Communication, and Talent Development (#EffectiveCollectiveIntelligence), the nature of the decisions being made, and that the commitments made be ones the organization has the operational capacity to honor. These are not demanding standards. They are the minimum conditions for organizational communication that employees can trust.

The organizations that met these standards during the reduction cycle of 2022 through 2025 are, in the current period, in a structurally advantaged position relative to those that did not. Their surviving employees have evidence that the organization behaves honestly when honesty is costly. That evidence is worth more, in terms of organizational commitment and trust, than any amount of culture investment made during periods when honesty carries no cost. The organizations that managed their communications carefully and dishonestly are now investing in re-engagement initiatives, culture-rebuilding programs, and employer-brand restoration campaigns, whose effectiveness is limited because the employees they target have accurate information about how the organization behaves when its stated values are tested. The cost of the dishonesty is not the communication itself. It is the organizational relationship that the communication damaged, and the investment is now required to partially restore it.