Layoffs & Downsizing: How Startups Should Help Teams Navigate The Impact

A 27-year-old was laid off and returned home to prepare for UPSC, giving it his best shot. He’d always wanted to do it. 

A 32-year-old woman tells herself that she will now have more time with her toddler. 

A 40-year-old single man decides to take his Royal Enfield out for a cross-country trip. 

Another single mother in her late thirties relocates closer to her parents and accepts a lower-paying job with night shifts. 

A 49-year-old man with college-age children breaks down because he knows his chances of finding another job are slim. His expenses are high. So is his BP. 

While layoffs have been occurring steadily since the first wave of COVID in 2020, causing immense anxiety and uncertainty among employees, the mass layoffs this year were far more devastating than previous ones. 

This was caused by a variety of factors, including a volatile international environment caused by war, a lack of funding, restructuring and modernisation of companies that are also attempting to cut costs in order to stay afloat, and an overall slow economy. This has had a global impact on the mental health and well-being of a large number of people!

According to a survey conducted by The7thFold, 36% of Indian employees are suffering from mental health issues, and 50% are concerned about an uncertain future due to the pandemic. Furthermore, according to Assocham, nearly 43% of employees in India’s private sector suffer from mental health issues at work. Up to 57 Mn people in India, about 18% of the world population, are affected by depression, necessitating an urgent re-examination of the mental health crisis. 

The first step in dealing with the crisis is understanding the process and the immediate impact of the trauma on a diverse set of employees: 

The Shock

When the news breaks, it usually comes in torrents. The organisation is in a state of shock. Both those who are retained and those who are fired feel betrayed and angry. The narrative of this being a community, aligning with the values and purpose, and the informal connections, especially in smaller organisations and startups, amplifies this sense of shock and betrayal. 

Beyond the initial shock of being laid off, depending on age, gender, liabilities, and financial situation, a sense of resilience and ‘hustle quotient’ gradually sets in.

Search For A Silver Lining

After the initial shock, the younger among those laid off appear to bounce back and feel more hopeful.  They emphasise upskilling and changing career paths, among other things. Older people look for more self-sustaining or consulting opportunities in the hopes of leveraging their experience.  

They do, however, feel the financial strain, frequently having to seek support from parents, and returning to their hometown often causes shame or discomfort. Life and relationship disruptions cause stress and uncertainty. 

Feeling hopeful may be more difficult for older professionals who have a larger number of dependents. For those who are already suffering from anxiety or another mental health issue, this can exacerbate their situation.

People in their thirties are the hardest hit, with low savings and growing liabilities. They must pay EMIs, school fees, and other expenses. The impact of job loss affects the entire family, including the children, causing a great deal of anxiety, uncertainty, guilt, desperation, and frustration. 

Eventually, Lost Hope

When there are layoffs among people in their late 40s or 50s, they are left in despair. It affects not only their immediate financial situation, but also their retirement plans and children’s higher education. 

Given the economic downturn and hiring trends, they have almost no chance of being re-employed.  It can affect their happiness, health, sleep, and mood.  While those who have been retained continue to live in fear and uncertainty.

How Startups Should Handle Layoffs 

Downsizing by recent unicorns and well-funded startups has resulted in organisational distrust and disengagement. Furthermore, some of the retained employees seek solace in the increased workload, which helps to sublimate the uncertainty and fear into higher productivity. While others may become disengaged and their productivity will decline over time. 

What can organisations do to help both groups of people, those laid off and those retained?

• Provide the necessary professional help and support to people. Communicate the duration for which the help will be available, especially to people laid off.
• Allow people who have been laid off to express their anger and process the change through authentic conversations facilitated by experts. 
• Encourage them by providing referrals, a severance package, extended insurance, and other possible benefits.
• Leaders and management must show up and take responsibility for their decisions.  Demonstrate genuine empathy. Clear your calendars, be approachable and willing to listen.
• Examine the impact of the change and the risk that individuals who were retained may face. Individuals with low to medium risk respond well to and benefit from group interventions such as support groups.  Individual interventions, such as counselling, are required for those who are at a higher risk.
• Provide ongoing support to employees through support groups, assisting them in regaining purpose and meaning in their work. 
• To cope with the change, provide professional assistance, days off, and additional flexibility to HR and other frontline employees executing the layoff.

Organisational layoffs can be a major life event for employees, and it is frequently perceived as a psychological threat to social status and economic survival. This affects everyone, and processing this change, whether alone or with professional assistance, is recommended as a preventive measure.  

Adopting a structured, empathetic, and sensitive approach not only helps to ease the process for both outgoing and retained employees, but also helps to build trust in the brand when hiring new talent and, ultimately, helps to maintain a more humane environment for work.

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