Why We Need to Foster Trust During Layoffs

For the last two months, I’ve been reflecting on how organizations implement layoffs. I’m so grateful for the collaboration with Josh Davis in June, Jamil Zaki in July, and Paul Zak this month. These great thinkers bring a research-based perspective to a challenging subject. The first two articles focused on autonomy and empathy. This article will focus on trust: the building of it and the breaking of it. Paul’s expertise on trust is an amazing addition to this series.

Think of any broken relationship in your life. Often there was a moment that was the tipping point, the proverbial “straw that broke the camel’s back” that pushed that relationship over the cliff. When trust is broken, the first reaction is often shock and disbelief, particularly in relationships that have a long history. We find ourselves struggling to make sense of what happened, many times without resolution. When trust is lost, it's like a cognitive lightning bolt. It causes us to question the messages, motivations and decisions of others — and can also cause us to question ourselves. It also leads us to project mistrust into the future, imagining what might happen next, now that trust has been fractured.

I’ve shared this same list below in each of my articles about layoffs. Read the list of descriptors below and ask yourself, “How much would you trust an organization that behaved like this?”

• Notifications were sudden and unexpected.
• Meaningful context was not shared to understand “why.”
• Decision processes lacked transparency.
• Colleagues were rapidly disconnected, both interpersonally and technologically.
• Little or no time was given to transition work responsibilities.
• Rumors accelerated in lieu of purposeful communications.
• Managers were given zero opportunity to brief their team of their own exit.
• Exiting colleagues were not encouraged to apply for existing, open roles.
• Leaders avoided direct conversations and seemingly disappeared.
• Peers attempted to fill the awkward gap by expressing sympathy.
• Remaining colleagues were left wondering “Am I next?”

One of the foundations of trust is the presence of certainty. As humans, certainty is one of the strongest motivational factors that allows our brains to operate in a positive, reward state. Think of certainty as the degree to which we can predict what will happen in the future. When we lose that clarity about what the future holds, that uncertainty pushes the brain into a threat state. When we feel threatened, we lose significant cognitive horsepower. Our ability to reason, to make decisions, to evaluate risk, to collaborate and to self-regulate our emotions declines. None of those conditions are good for individuals and are even worse when a threat state exists across a broader organization.

When layoffs happen in a way that undermines trust, it’s a double whammy to certainty. The actual layoff — losing employment and income — is a huge form of uncertainty for the individual. And it can be made even worse when the layoffs are implemented in a way that destroys trust. When I reflect on the list of descriptors above, they signal the organization either doesn’t care about their employees, or at minimum, is seeking to operate in a way that generates the fewest questions or reactions. Operating with a veil of secrecy leads to misinformation, rumors, and an overall sense distrust. That distrust is not limited to those laid off, but it also impacts those who remain behind. An employee’s experience is formed by what happens to them directly, plus what they have observed happening to others.

Here are three foundational principles that can foster trust during layoffs:

Additional Perspective

Paul J. Zak is the founder, Immersion Neuroscience, a professor at Claremont Graduate University and the author of "Immersion: The Science of the Extraordinary and the Source of Happiness."

It's 2008, the great recession. Bob Chapman, CEO of Barry-Wheymiller, had just instituted a "people first" program at the 60-odd manufacturing companies they owned. Peer training had been in place for a few years to ensure Barry-Wheymiller employees are respected at work and return home physically and emotional whole. And then, the bottom falls out of the market. In manufacturing, it is common to institute layoffs during recessions but as Chapman and his team began to evaluate where to cut, he realized that layoffs were at odds with his company's management philosophy and would undermine the trust that had been built between leadership and their colleagues.  

Speed forward to 2023 and over 3 million people have been let go from their jobs. Professional services, transportation and utilities are the hardest hit. These sectors may have over-hired during the COVID lockdown, but layoffs are also rampant in retail sales, hospitality and construction, industries that are only now bouncing back from the COVID-induced recession. How much trust will these employees have in management when they land their next position and why does it matter?

My research has shown that trust is a powerful lever to improved organizational performance. Employees at companies in the top quartile of organizational trust, compared to those in the bottom quartile, face 74% less chronic stress, have 106% more energy at work, enjoy 60% greater job satisfaction, take 13% fewer sick days and report 40% less burnout. Perhaps most importantly, the productivity of those working in high trust organizations is 50% higher than their colleagues in low-trust enterprises.

Bob Chapman intuitively understood the essential role of trust in sustaining high-performance workplaces. Rather than lay off employees, his team instituted a rolling set of furloughs and empowered employees to support each other by trading furlough time. Employees who wanted to take longer unpaid furloughs traded with those who could not afford to do so, providing a desired benefit for both side of the equation. The stress of the recession provided an opportunity build social connections between colleagues and thereby increased organizational trust. Barry-Wheymiller ended furloughs in less than a year and the company has since continued on its rapid growth path. Organizations should think carefully before making expedient decisions that undermine the power of trust.

1. Communicate the context — Without understanding why layoffs are happening, employees write (and share) their own stories. Rarely do those stories position the employer in a positive light, so leaders should be transparent with the narrative to fuel a consistent understanding.
2. Honor the relationships — Jack Zenger and Joseph Folkman wrote in Harvard Business Review that positive relationships were cited as the most important leadership attribute that enabled trust. Relationships with alumni matter — to the exited individual, to your remaining employees, to the labor market, to regulators and to your customers.
3. Lead with integrity — There’s a certain simplicity to trust that I just adore. Tell the truth, act in good faith, interact with compassion, treat others with respect and be consistent. Protecting the firm and behaving like a decent human being are not mutually exclusive actions.

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