Psychological Spillover of Layoffs for Workers and Implications of Layoffs for Employers

Psychological Spillover of Layoffs for Workers and Implications of Layoffs for Employers

SPEAKER 1: The following is
a presentation of the ILR School at Cornell University. ILR, advancing
the world of work. MARY CATT: Good afternoon. Thank you for joining
us today at ILR School. We are here to talk about
the psychological impact of layoffs on workers
and also the implications for organizations. And with us today is assistant
Professor Paul Davis, who’s done some deep
research on this issue and has a lot to share with us. And some of you, our
viewers, have also sent in your questions,
and we’ll continue to receive your questions. We may not be able to
get to all of them today. But Professor Davis
has been kind enough to offer to email
people individually. So please know that if we
don’t address your questions directly, that you will receive
some kind of message that will let you know what’s going
on here with Professor Davis and his research
involving your question. So let’s get started now. Some of the questions
that came in overnight have been incorporated
into your talk today, Paul, so please get us started. PAUL DAVIS: Well, thank you, and
thank you for having me here. I’m very excited to be
talking about what is often a somber and emotional topic. But this is certainly
a deep topic. There’s a lot that we
can talk about here. And initially, you know, I think
the intent for this webcast was to have me go deep
into some of the research that I’ve been
involved in recently. I’ve been working
with colleagues– I should say right
up at the front– working with colleagues at
the University of Madison in Wisconsin and– University of Wisconsin
at Madison, excuse me– and at Rutgers
University in New Jersey to try and understand what
the impacts of layoffs are on important work behaviors
and on voluntary turnover or quitting specifically. And I do want to talk
about this research and go into some depth
on this research. But you know, as we
received questions over the last couple of weeks
and I’ve been looking at them, I’ve seen an interest
more generally in layoffs. Quite a few questions
surrounding my research, but also quite a few
interested in the sort of broader impacts of layoffs
on not only individuals but organizations. And so I think it’s
worthwhile to spend some time and broaden this
discussion a little bit. Hopefully it will make for
a more engaging discussion. I want to begin today
first by just clarifying something, what exactly I mean
when I’m talking about layoffs. In casual conversation,
many of us, myself included, I think, are guilty of
sometimes conflating layoffs with dismissals for cause,
what we might call termination or firings. I think it’s important just
to be clear about what it is we mean when we say layoffs. So in this case, in
the academic sense, when we say layoffs,
when we use this term, we’re talking about a
reduction in headcount. And this is an action
where, you know, typically we’re not looking
to replace these employees, at least not in the short term. So we have this planned
workforce reduction or reduction in jobs. And what’s really the
distinguishing factor here is that layoffs are
motivated by a business level concern, right. We’re concerned about some
aspect of the business. And typically we’re talking
about costs here, right. Layoffs, whether
or not we believe they do this effectively,
are meant to– often initiated to
curtail costs, right. Increasingly in
this economy, we can look at service firms,
knowledge-base firms, us workers, we represent
the largest fixed cost, and so we’ve become
something of a target. With that out of
the way, what I want to do is actually set a little
context before we move into– first, I want to talk
about sort of broadly the consequences of layoffs. And then I’ll talk a little
bit about my research specifically and
what I’ve been up to. But before we do
that, I think it’s helpful to have a
little context and just talk about what it
is organizations are doing, what layoffs
look like currently, and how that’s
changed over time. So very briefly,
I’ve somewhat crudely split up the last 70 years
or so into these two periods, post-World War II to the 1980s,
roughly the 1980s, and then the 1980s to present. And we can really
make a distinction between how layoffs looked
between these two periods. So in the earlier period,
what we’re seeing is– I defined layoffs
earlier as a response to a business level concern,
a concern about the business. Layoffs are being initiated in
this earlier period for reasons of survival, most often, right. Firms are financially
distressed. They are concerned
about solvency. Layoffs are a
reactionary measure here, and typically they’re
affecting production workers, manufacturing industry. Layoffs are done on
the basis of seniority. And often workers are
being recalled, right. These are not
permanent separations. Things start to
change when we move into roughly around the
’80s, and certainly coming to a head when we
get to the 1990s. This is an era of delayering,
the lean and mean organization, right, many euphemisms
being thrown around. And we see layoffs expand
from the production floors into the office buildings,
affecting the professionals, the white collar workers. And a labor historian, of
which we have many here at ILR, they could wax much more
poetically and eloquently than I could about the rationale
or the reasons for this, but we can point to a few. We know that industries are
being deregulated, airline industry, banking industry. Competition is increasing. We know that we’re
gaining access to lower cost labor markets. Technology is
displacing employees. And compensation, which is
another area of interest of mine, we have
executives, their pay is starting to be
more closely tied to the financials
of the firm, right. At one point, our top executives
are paid these set salaries, whereas today the majority
of this compensation is in the form of stock
options and stock awards. So all of these factors
are contributing to what I would call
a move not fully away from this reactionary
take on layoffs, but it is becoming
more proactive. Organizations that are
otherwise seemingly healthy are starting to see layoffs
as a viable strategy to maintain their position,
to maintain profitability and growth. So we see layoffs expand
to really affect all of us. I mean, there’s very
few jobs these days where we are not
vulnerable to this threat. One of the questions
that I received, I think, fits in nicely here. It was asking about
who’s most vulnerable. And this question
was specifically wondering about older workers. Might older workers be
more vulnerable to layoffs than others? And referencing
issues, such as they may have a higher salary if
they’ve been longer tenured. They may have health issues
that make them a target. We can acknowledge the fact that
there are protections, right, not just for older workers,
but for many worker groups. We have protections based on
race, sex, religion, disability status. But the unfortunate reality is
that we do find some support for this idea that these groups
are more vulnerable to layoffs whenever an organization has
decided to take that action. And it’s not any
health issue per se, and I don’t think that it’s
necessarily a higher cost issue. What academics typically point
to is the fact that minority groups within organizations–
and whether that minority status is based on age or race
or disability status or what have you– these individuals tend to have
the deck stacked against them in a way. There’s often
negative stereotypes projected onto minority groups. And often they have lower
power within organizations. And so these factors
can make them more vulnerable and vulnerable
to discrimination in this case. What we do find is
that this is not the primary determining
factor for layoffs, right. It is there, but
more often than not, organizations are looking to
past performance, seniority, skill set, attitudes, such
as organizational commitment. These tend to be better
predictors of who is most vulnerable to layoffs. What I want to talk
about now is what do we know about the consequences of
layoffs both at the firm level and for survivors and victims? And you know, layoffs
are, have been, and continue to be such a
traumatic experience that even in the academic literature,
we’ve adopted this terminology to describe the people affected
as survivors and victims, right. Survivors are the people who
remain with the organization, and the victims are those
who ultimately are separated. What is interesting, if we take
a look at firm performance, and here we’re talking
firm financial performance, we might expect layoffs to
have a beneficial influence on firm financial
performance in part because they’re so prevalent. Tens of millions of layoffs
occur in the United States over a period of about 10 years. We’re counting in the tens of
millions over that time period. If we look at just the
most recent recession, upwards of 15 million
jobs lost through layoffs. So these are very common. And there’s this
intuitive argument that if layoffs were
detrimental to performance, the powerbrokers
within organizations, the executives,
the owners who have a financial stake
in the continued health of the
organization, well, they would have abandoned
layoffs if they were not effective, right, because
their fortunes are tied up in the fortunes of the company. So the fact that we see
layoffs continue to proliferate suggests that, hey,
maybe these are beneficial to the organization. What is interesting is that
the academic research does not bear that out. At best, we’re finding
inconclusive results. And I would characterize
the literature as swinging more
in the direction that layoffs have detrimental
effects, null to detrimental effects. And so we should be asking
ourselves what’s going on here. Why is there this
disconnect between practice and what academics know
or what we think we know? I think we can point to
a few different factors. I would talk to the
conception of layoffs, how layoffs are conceived, and
also how layoffs are executed. And that can sort of help
us move through this slide into talking about
outcomes for employees. When I talk about the
conception of layoffs, what I’m thinking about
here is the degree to which they’re tied to
the organizational strategy. I think it’s actually
somewhat rare that organizations, when they
pursue layoff action, that they are taking due diligence
to think about what it is the organization is
trying to accomplish in the short-term,
near-term, long-term, and how the workforce
will play into that. If a layoff is to
be successful– and, again, I’m talking
from a financial performance standpoint here– we really do need to be thinking
about what the workforce needs to look like, again, in the
short, near, and long-term. And I think too often there’s
a focus on economics and costs and this sort of
short-term where can we try and cut costs and bolster
performance immediately. So that’s one part
of the problem. The second issue
that may explain some of these
negative findings is that layoffs are
tricky to carry out, extremely tricky, and
extremely emotionally charged. There’s a well-documented
phenomenon known as Survivor
Syndrome, so we’re talking about the level
of implementation here. We know that individuals
who they’re not targeted for layoff,
but they witness it. They go through it. Their colleagues and
friends are the ones who are subjected to it. They’re typically not better
off, right, for the experience. They can harbor ill will
towards the organization if they perceive that
their colleagues have been mistreated. They worry that it’s going
to happen to them next. Frequently, they’re saddled
with additional workload. We’ve lost people, but we still
have the same amount of work that we did yesterday,
so burnout is an issue. The best people– the people
we’d like to stick around, they actually have
options, right. Even in a down economy,
the highest performers, the ones with the most
valuable skill sets, they still have mobility. And we do see, after a layoff,
a bit of an exodus of the people that organizations actually
wanted to keep around. Voluntary turnover increases. Quits increase. So this is a process that’s
really fraught with danger, again, coming from that sort
of organizational performance perspective. So I think for
those reasons, this is why we’re seeing
these mixed effects. And I think there is
a very real argument that layoffs are, well, let’s
just say, difficult at best in terms of achieving
these financial outcomes that we may be after. The last group that I
want to talk about here is victims because this really
leads us into the research that I’ve been conducting. So in the existing
literature, what we know about those individuals
who are targeted for layoff– layoff victims, we
really know little about what happens to them when
they become re-employed. But we do know that, you know,
as I’ve mentioned before, this is a very traumatic experience. Psychological effects,
it’s emotionally difficult. There’s financial distress. There’s shame that
comes along with this. Attitudes towards
work become negative. It is very much a
traumatic experience. And so not a very rosy
picture overall, I would say. And that is not to argue that
there is no place for layoffs. I think certainly,
again, thinking about the long-term solvency
of the firm, the accomplishment of strategic objectives,
layoffs can play a part in that. But increasingly,
I think we need to recognize that this is
perhaps not the first strategy we want to be pursuing. Actually before we
move into my work, there was one other question
I wanted to address. And it asked about,
when an employer is considering layoffs,
what exactly should they be looking at when deciding
who actually will be staying and who will be going? So this question
asked, should we be thinking about whether an
individual has been laid off before, whether he or she– what their family
situation is like, or are we only thinking about
performance and economics? And I think this is a
good spot to address this question because
it really ties into what I’ve been talking about. I wouldn’t go so far as to
select one specific factor and say, this is
the best practice. I think we have to speak more
generally about this issue and recognize,
again, that we want to be thinking about the
organizational strategy. What is it that we are trying
to accomplish with this layoff? And the criteria
that we are going to make those
decisions based upon, that should emanate from sort
of this broader initiative that we’re trying to
achieve– these broader goals. What I will say,
if we, again, talk about at the implementation
level is what we want to do is choose criteria that are
as objective as possible, and that are as
relevant as possible. If the layoff has been
motivated by we’re looking to move
into a new business, or we’re looking to
create new technology or make use of new technology,
and we need a new skill set, then skills might be
the deciding factor that we want to
base that layoff on. Seniority may be
perceived by the employees as really an unfair
way to decide that layoff in this case. So we want to be
cognizant that we’re doing things in a very objective
and as fair as possible in order to minimize the
distress that layoffs can often cause. So I want to pivot
now to my research. So I mentioned
earlier that we really don’t have much in the
way of academic research– quantitative research
that investigates how layoffs are affecting
the types of employees that we become. And this is important
research because, again, it is affecting so many of us. And so this research was
intended to address that. It’s an initial step, and we
chose here to focus on quits. We know quits are expensive. We know organizations pay
close attention to this issue. So we thought this was
a good starting point. What we did here, the
data that we ended up utilizing for this study,
we went for career data. We wanted to know everything
about the individuals that we were studying from
a work history standpoint. And we wanted to do this
so that we could isolate exactly when layoffs occur. We didn’t want to miss any
layoffs because we think a layoff is probably powerfully
related to this outcome that we’re interested in. So we wanted to be
able to identify all the quits, all the layoffs. And not only because we
didn’t want to miss anything, because we wanted to
capture this effect, but also because it turns out
that a very powerful approach for answering this question is
to be able to compare someone’s quits before having been
laid off to their quits after having been laid off. So that’s how we
actually estimated the magnitude of the
impact of layoffs on quits, comparing quits
before to quits after. And this turns out
to be a very powerful statistical,
methodological approach. But it’s actually very difficult
to find this type of data because we’re talking about
decades and decades of work history. We sort of were very fortunate
to find that the US government, through the Bureau
of Labor Statistics, has been collecting
this type of data. Since 1978, they’ve been
following this cohort of around 13,000 people. They came of age in
the early ’80s, right when the use of layoffs
started to change. And they’ve been following
them every year since. I guess, most recently they’ve
been surveyed every other year. But we have this
longitudinal account of these people’s work history. And it really is
ideal for answering this type of question. So we, from this initial
sample of 13,000, we pulled out around
2,500 individuals who had experienced a layoff. And here, I’m talking
about a reduction in force layoff, where some
individuals at their work site were affected but
others were not. Roughly 14,000 jobs, a
little more than that, that we were able to study here. And this sample was
ideal in a lot of ways because it is so broad. When it was
constructed initially, it was meant to provide us
with a snapshot of individuals about this age. So it was supposed to represent
the broader country, right. We have representation
from all over the country sort of geography-wise. We have representation from
all industries, occupations, socioeconomic status, so we
can say with some confidence that what we find here is
what’s going on in the broader American population. MARY CATT: Paul,
could I intersect with a couple of questions. PAUL DAVIS: Oh, yeah, sure. MARY CATT: We’re getting
some excellent questions. And I’d like to remind everyone
to please include your email, if you would. That way we can get
back to you with those that we won’t have
time to address. But one here, I think,
is applicable to some of what you’ve just shared. And that is, this is
from Jeff, does the type of industry or public-private
sector impact workers behaviors? PAUL DAVIS: Following a layoff? MARY CATT: Mm-hmm. PAUL DAVIS: It’s
a great question. And it’s actually where I
was headed with before you stopped me, which is great. I think you should do
otherwise I will drone on. A drawback of the data
that we examined here was that because it was so broad
and because we were pulling out only those individuals
who had been laid off, we were left with numbers that
were a little small to dive deep into specific industries–
specific occupations. And so we weren’t
able and we’re not able to speak with
much specificity about particular groups that
we might be interested in. And that’s kind of
the trade-off that we made to be able to talk
about some of the generalizes to our country. At the same time, we’re missing
the trees, for some extent, for the forest. The public versus
private issue, so that’s a question that I’ve seen
from a few people regarding– well, actually, no. That’s separate,
and let me think. This is something
that we haven’t– we haven’t examined either. Hm. I think we could. I think we could in this
data, but it’s not something that we did with this study. We had, unfortunately,
only so much space. And what’s being
reported here, we’ve actually eliminated
public sector jobs, and we focused on
private sector jobs. And without getting sort
of too deep in the weeds, the rationale there
was that we wanted to focus on a subset of
the broader labor market that we thought would– where the psychological
explanation– this idea of psychological
spillover, where we thought that would be most
likely to manifest. Because we were really
interested in whether or not that existed. And so that’s why we
chose to focus here on the private sector. But you know, I’d like
to talk a little bit about this idea of
psychological spillover because I think that if we
understand that, then we can start to apply it to some
of these more specific employee groups that we might
be interested in. MARY CATT: And if we could
possibly start that segment with a question, which I
think is really interesting, which might fit into
what you’ve done. It might not, but it’s a
very interesting question. And it’s, how can management
get in front of the message to prepare its
workforce for or do damage control after a layoff? How should that
message be delivered? PAUL DAVIS: Yes, so I think
you want to get in front of it, right. You want to be
proactive with this. And this is not easy, right. This is not an easy issue. And so I don’t want to sit here
and sort of wax on about here’s exactly what you should do, and
you should be doing this when the realities of
the business world make some of this very
difficult. That being said, I think we do need
to think about layoffs more as a last resort. And I think that anything
we can do along the way– if we are hurling toward
that outcome, anything we can do along the way to
prepare employees for that, to discuss with them what’s
going on in the broader economy and how our organization fits
into it, how we’re doing. I would encourage leadership
within organizations to consider alternatives. And there are many,
and they are not easy. But we have programs– we have work sharing. We have furloughs. We have pay cuts. We have buyouts. Some of these are in
use, and some of them are much less common. And that’s a way
to, as we’re talking about the direction
of the economy and the company’s going, we can
be pursuing these alternatives to try and stave
off that layoff. Another thing that I
think is really helpful is to engage employees
in this process of what are we
going to do to avoid the possibility of layoffs. Our employees are
incredibly smart. They know the business. They know the industry, and
they’re incredibly creative. I think that
organizations that have put the challenge
to their employees to bring them on
as partners, they do have some success
in avoiding a layoff. Or when it ultimately
comes down to it and that action is decided
that it must be taken, it does reduce some of
the damage that it can do. MARY CATT: And worst
case scenario– and this comes in from Amy– what is key for
survivors to hear? PAUL DAVIS: Well
worst case scenario, what is key for
survivors to hear? I think it’s– I don’t think it’s any
one specific thing. I think it’s being open
and honest with them. I think it’s explaining to
them why the action was taken, explaining to them why
they have been retained within the organization,
what their place is in the organization,
and why they are going to be critical for
the success of the organization, right. They’re the ones who are
going to help pull us through. I think that’s what
they need to hear. I think that– I mean, you can imagine,
and I’m sure many of you have witnessed this. I mean, there’s a lot of fear,
a lot of suspicion, a lot of, am I next, following a layoff. And so I think you want to make
very clear what the plan is and how they fit into it. MARY CATT: OK, OK. Next steps in your research,
any thoughts there. PAUL DAVIS: Well,
let me– if you don’t mind, let me talk a little
bit more about what we did, describe the results, and talk
about this issue of spillover. Because I do think– you know, it is getting a
little into the academia, the academese, I guess,
by talking about this idea of psychological spillover. But I think it does help us. If we understand why we’re
seeing this effect of layoffs on quits, like I said,
we can start to apply it to groups we’re interested in. We can start to
think with more depth about the implications of this. So what we did find when we
studied this group was that, yes, layoffs make us
more likely to quit. Excuse me. And the effect is
actually relatively large. In that next job after
a layoff, individuals are 65% more likely
to quit that job, relative to how likely
they were to quit in that pre-layoff period. And when we collapse all the
post-layoff jobs together, we’re finding that it seems
like the effect may persist. This consequence may
persist into the second and third and fourth job
because we’re still seeing this 56% greater likelihood. And to some extent,
that is buoyed by individuals who are hit
again and again by layoffs. But still there is some argument
for this persistence effect. So what we wanted
to do in this study is not just document
this, but to understand why it’s happening. Why is it that a layoff that
happens to me in one context– one employer has
initiated this action– why does that affect how I
relate to another employer? And this is where this
idea of spillover comes in. We theorize that layoffs have
psychological consequences. I don’t think that
would surprise anyone– that they have psychological
consequences for their victims. What we theorize is that these
consequences follow us from job to job. They spill over. And so I have two
consequences here that roll up into this
idea of spillover. And the first is we see
a reduction in terms of– really commitment is how
we can think about it. This idea of weaker ties
to subsequent employers. And so what’s going on here? Well, we see after a layoff,
individuals– workers, we come to actually expect
less from subsequent employers, right. And actually what we’re
talking about here is that they come to expect
less in terms of job security, which may sound– some of you may be skeptical
to hear this, right, because the message that
we’re often hearing these days is, well, there is no such
thing as job security. Job security is dead. And how can something
that doesn’t exist, how can it be negatively
affected by a layoff? But what these data indicate–
and I’ve actually been able to replicate these findings
with a younger cohort, with a cohort that began work
right around the year 2000– what we’re finding is
that layoffs very much do affect them and are affecting
their perceptions of job security. If they are hearing this
message and taking it in, I think that we believe
it might apply to others. You know, most of us, we show
up for our jobs every day. We put in our time, our
eight, nine, 10 hours. You know, we work hard. We do the job that we were
hired to do and paid to do. And when, despite that, we’re on
the receiving end of a layoff, it’s shocking, and
it’s jarring, and it’s traumatic– to come back to
that word– for a lot of people. We know that the
highest-performing employee, a model employee, if she
doesn’t have the skill set that the organization is
looking for moving forward, is vulnerable to layoffs. And so I think we do expect
still, despite this messaging, that if we show
up and do our job and put in effort that we
might be protected from this, and that that’s simply
not the case very often. And so that’s what
we’re seeing here. And what happens in response to
this new understanding of job security is that we,
as workers, well, we’re going to return
the favor, right. We’re going to provide
our employers with less. What is less in this case? It’s loyalty and
it’s commitment. And so this is part of
what’s driving that effect. The other issue–
the other consequence here is an increased
vigilance, you know, after having been
through this experience. Layoffs and the
associated unemployment, this is not pleasant. It makes sense that we want
to avoid this in the future. So now we’re attuned to
the external environment. We’re looking for maybe a
plan B. Plan B’s can quickly become plan A’s, especially if
we’re not feeling that loyalty. So this is what we’re
pointing to as the mechanism through which layoffs
are influencing quits. And what I want to do– I’ll try to do this
very briefly because I want to address a
couple more questions that came in that I think
this discussion will really allow us to leap into. With those initial findings,
the 65% more likely or 56% more likely, this doesn’t
tell us whether or not this psychological spillover
theory is valid, whether it’s actually what’s going on. So we went back to the data. We wanted to test this,
and we set up three tests. The first thing we
did was we ruled out alternative explanations. After a layoff, victims often
move into under-employment. The jobs aren’t quite as good. They pay less. We’re working
part-time maybe when we want to be working full-time. When we accounted
for these factors, we found that the
effect still persisted. Layoff victims were still
much more likely to quit. So spillover passed this
test, then we moved on. We thought, well, if layoffs
are eroding our loyalty, and if layoffs are
increasing this vigilance, there’s a ceiling and
a floor there, right. At some point, loyalty
has to be zero. At some point, there’s
only 24 hours in a day. We can’t be on constant
watch for alternative job opportunities. So we thought that
with multiple layoffs, if spillover is
correct, eventually an additional layoff should
have no effect, right. It should plateau. And that’s what we found. We found that the second
layoff was less powerful than the first, and the third
layoff was even less powerful. And if you can believe it,
it took the sixth layoff before subsequent
layoffs had no effect. We had individuals in this
data set with double digits layoffs in their history. But, again, spillover
passed this test. And the final thing
that we did was look at different types of quits. And we found that
layoffs really predispose people to take an unsolicited
job offer while they were employed and predispose
people to seek out and take a job offer
while they were employed. And both of these, we would
predict from the spillover perspective, right,
because the decreasing loyalty, the
increased vigilance, that’s bringing
down the barriers that would have
otherwise kept employees from taking these paths. On the flip side, we didn’t
find much of an effect at all when we looked at
whether or not individuals were quitting to search for jobs. In fact, layoffs had no
effect on this behavior. And to some extent,
it makes sense. I mean, vigilance isn’t an
issue here so spillover’s not– from that perspective–
not acting on this path. But what we thought
was probably going on here was that
having just been through a period of unemployment
the financial distress the kind of negative connotations that
we associate with unemployment we thought layoff victims
would probably not be interested in this
path, that that would be something they’d want to avoid. And that seems to
have bared itself out. So we do think that there
is some good evidence for this theory of spillover. So why is this important? What can we do with this? I received a couple of
questions actually asking about unionized settings
versus non-unionized settings. Does that matter? And this isn’t something
that we looked at, but we can apply spillover to
think through this problem. You know, if I’m
laid off, and I’m covered under a collective
bargaining agreement, what’s spillover
going to look like? Is it going to look the same as
if I’m working and not covered under a CBA and laid off? And what I would
argue is that layoffs from these unionized jobs–
unionized facilities, spillover is likely less. Maybe vigilance– maybe
we’re a little more vigilant. We’ve still gone through the
pain and the unpleasantness of the layoff, and so
we’re a little more likely to look around and
see what else is out there. But on the loyalty side, I
think there’s a good argument that within that
unionized setting, we really know what our
job security is, right. It’s often spelled out in
the collective bargaining agreement. Layoffs are often
conducted by seniority. We know that if we
were the last in, we’re most likely going
to be the first out. So there really isn’t
the same opportunity to erode loyalty in
the way that that would occur absent that
collective bargaining agreement. And because this was a question
that we received in advance, I was able to take
a look at this. The last couple of days,
I went into the data and looked at the difference
between being laid off from a unionized setting
versus a non-unionized setting, and sure enough,
when we are laid off from a unionized setting, we’re
still more likely to quit, but less so than
had we been laid off from a non-unionized job–
non-union organization. So, again we see
evidence for spillover. So I think that’s
really interesting, and I’m glad someone asked that. I think that’s a really
important question. Another question that
came in that I was not able to take a look
at in the data, but I think it is a great
one to think about– and we can probably
apply spillover again to this question– is
workers with disabilities. Does this effect show
up there as well? And I’m not a
disability researcher. That’s not an area
of expertise so I’m somewhat hesitant to
apply the spillover logic and make a prediction here. But what I will say is that
I have had conversations around the ILR School
with our experts in this field, the Yang Tan
Institute, our Institute for Disability Studies. And actually, you know,
much before we had even scheduled this webcast,
we’ve been talking about looking at this issue. But we’ve actually been
somewhat less interested in voluntary turnover. I mean, I would love
to study that again for this very
specific population. But I think, in
our conversations, what struck me was
what we were worried about was whether there
might be a discouraged worker effect here. That workers with
disabilities, if they’ve been through this
layoff experience, are they more likely to withdraw
completely from the labor force and give up on employment? And I think that’s an extremely
important question and one that I’m hopeful
that we can address. MARY CATT: Here’s
one just in, Paul, that is applicable to many of
the items you’ve discussed. And this is from Vlad. Were there any differences
in the probability of quit based on level
of education, age, or any other characteristics? PAUL DAVIS: Most likely, yes. So this was a study that was
published a couple of years ago now, and there was a
great table in that article with estimates for many
of the characteristics that you’re asking
about here, age, education level, marital
status, number of children. Do I have them off
the top of my head? Unfortunately, no. I’m sorry. MARY CATT: No problem. Another sort of general question
is from an anonymous viewer– and I would encourage people to
use their emails when you send to us so we can
follow up with you– it says, you mentioned
loyalty, but why is that important to the company? What does loyalty look
like, feel like, sound like? PAUL DAVIS: That is
a great question. And I think that loyalty– different companies will value
loyalty at different levels. There are a number of very
successful organizations out there that their
approach to their employees– their approach to labor is
it’s more of a commodity. And they are not so interested
in treating employees as partners and thinking
about creating a partnership and fostering some
of these attitudes that we like to talk about
as being very beneficial. So this isn’t perhaps universal. What I will say
is that the reason we chose to start
here, to the extent that loyalty translates to
voluntary turnover, this is a potentially very expensive
problem for organizations, right. When we do value tenure within
the organization, we want to– you know, if we’re going to
spend a lot of money training people, the longer– if
there is a correlation between their time in the
organization and the value that they can provide to it,
it’s something that we really do want to be thinking about. Even in organizations
where it is that sort of more transactional
approach to the employment relationship– even in those cases,
voluntary turnover is an extremely– can be an
extremely expensive outcome, anywhere from 50% of the annual
salary up to two times or more. So this is– I think it really
is an issue that organizations are concerned with. MARY CATT: Mm-hmm. Back to layoff consequences
and implications, this is a question from
one of our ILR alums, Stephen Birkenfeld. He says, do the reasons
for the layoffs matter? More specifically, are
the consequences worse when it is, what I
call, a productivity layoff or a company can just
do more with fewer people, mostly from the
adoption of technology, as opposed to layoffs
based on some stress or distress at a company or a
restructuring of the company’s business? PAUL DAVIS: So are
the outcomes worse in terms of
financial performance or in terms of
voluntary turnover? I guess the answer
could change depending on which direction we go there. I think that it’s possible– I’m not aware of research
that investigates that, although I think there
should be because it’s a really great question. What exactly the
business level concern was, whether or not that
sort of manifests in terms of these people-level outcomes. What I will say is that, I
can imagine that, yes, there would be differences there. Unfortunately, I
can’t point to them. But I think that, regardless
of the reason for the layoff, the implementation is still
critically important, right. We still want to be
thinking about how to do this in an
objective and just way, objectively and
fairly as possible. MARY CATT: Mm-hmm. OK. This one is kind of a disturbing
question, but one that I think is certainly worth airing. What have you found regarding
the attitudes of giving up seeking future employment
and hopelessness in pursuing career goals among varied ages
and stages of the career cycle? PAUL DAVIS: Right, yeah,
that’s a great question. And I think I might
move ahead one slide as I try to answer that
and unpack that somewhat. So what I will say, with
regards to the research that I just presented here–
the research that I’ve done, is that we completely missed
out on those individuals who may have gone through a layoff
and withdrawn from the labor force, right. If they have decided, that’s it. The system is rigged against me. This isn’t for me. I’m done. We actually lose that effect. And so the sort of
negative implications– if we want to think
of it that way– of layoffs here, we’re
actually missing potentially an important piece of this. And I think it is a
real concern, right. You can imagine someone who’s
just been repeatedly hit with a layoff just
eventually, yeah, yeah, throwing in the towel. The reason I wanted to advance
the slides a little more was because I wanted
to talk about– well, I had a
couple implications that I wanted to discuss,
but your question feeds into that really well. So one of the
concerns that I hear from organizational
leaders, you know, when they get a hold of this
research, is they’ll say, well, I guess this
means that we don’t want to hire layoff victims if
they’re more likely to quit, you know, given that I’ve just
discussed how expensive it is. And I think that is a little
short-sighted in terms of, A, feasibility
but, B, effectiveness. And so you’re asking
about career objectives and motivation. I think I was hearing
motivation to perform. Some research that I’m
actually currently engaged in, we are looking at job
performance following a layoff, you know. So we want to explore
other important behaviors. And I think job
performance is arguably the more important when we pair
it against voluntary turnover. And interestingly,
what we’re finding is that job performance actually
increases following a layoff. It seems that
people are actually more motivated to perform. And if we wanted to roll that
up under the psychological spillover banner,
I think what we’re looking at is a
third mechanism here, where we realize that, yes, we
are all at risk for layoffs. But you know, all
else being equal, very often layoffs
are decided, you know, at the individual
level, they’re decided upon looking at performance
data or looking at skill data. So individuals, I
think, are being motivated to put more in, right,
and to develop their skills. And so I think when we think
about what these findings mean for us as organizations, we need
to look at the broader picture and consider certainly other
behaviors, such as performance. On the feasibility
side, the reason I would question the
feasibility of really trying to avoid hiring layoff victims
into the organization is, A, it’s going to be very
difficult to ascertain that. We’re talking about all
of our job applicants, trying to find out who has a
layoff in their history and who doesn’t. But perhaps more
importantly, to do so would be to exclude an
increasingly large proportion of the broader
labor pool, right, especially in certain
industries where layoffs have been more common. We’d be excluding people with
really good experience, really valuable experience,
that we may otherwise want to bring in to
the organization, especially if they’re going to
be motivated to perform when they get there, and I
would add, especially if we can do something to
reestablish that trust, to rebuild those
relationships, in organizations where we are trying to
partner with our employees. You know, we
weren’t able to look at what levers are available
to organizational leadership to try and change this effect. But they’re absolutely– I’m
certain that they’re there, and we need future
study to look at this. But, you know, it’s
going to come down to practices that establish
openness of communication. We’re being honest with people. We are helping to develop them. We’re showing them that they’re
valued in the organization. I think there’s a real
opportunity for organizations that are willing to pursue these
avenues to really turn this around. MARY CATT: And, you know,
some of these industries are going away, and that’s why
people get laid off, right. PAUL DAVIS: Mm-hmm. MARY CATT: So maybe
government and others can be thinking ahead
as to where to siphon those laid-off workers. Brian writes in, have
you found differences in the psychological spillover
when the laid-off workers don’t have an expectation of
returning to the industry they were laid off from,
which begs the question. PAUL DAVIS: Yeah, I haven’t
been able to look at that, but that is a great
question, right. So this is somewhat anecdotally,
right, but I have heard from– very anecdotally,
very much an anecdote. But I have heard
from some people who have been through a
layoff, who said, you know, actually this was
really good for me because it really
shifted the way that I think about my work life. Before I was pursuing,
you know, this career and some of these very
tangible rewards, you know, what are our compensation
is, pursuing the promotions, that sort of thing,
that it turned out that that wasn’t actually
all that important to me. And this layoff has
kind of shifted me out of that mentality to
pursue something that I’m a little more passionate about. And so you can
imagine someone who is making that shift
actually being much more committed to what
they’re doing now and much more committed to
that industry, that occupation, absolutely. MARY CATT: OK. Is there a slide you’d
like to close us out with? PAUL DAVIS: Well, this is
my last slide so we made it. MARY CATT: Great, fantastic. Well, thank you so
much, and thank you so much to our viewers. You’ve been a
wonderful audience. We’ve received
terrific questions. And please use the
question feature to give us some feedback. Let us know what we did well. Let us know what
we need to work on. Please join us in the future. This link, by the way,
is good to go right now. You can share it with your
friends and use it yourselves. And thank you. Take care. PAUL DAVIS: Thank you. SPEAKER 1: This has been a
production of the ILR School at Cornell University.


One thought on “Psychological Spillover of Layoffs for Workers and Implications of Layoffs for Employers”

  • I was laid off from a job which I held in healthcare for 30 years.  I was 61 and was within 8 months of being able to get my pension.  I was in a group of "lucky" older workers who were targeted for layoff from this hospital and I think the first wave was 145 of us in November 2010.  One day I had a job and the next day I was cleaning out my office.  I was cherry picked from my department and the other 4 staff members were in their 30's.  And this was just the beginning of the layoffs.  Then they proceeded to layoff younger people from cleaning department, LPN's and unit secretaries.  Many of these people were at least 10 years younger than me and the impact on them was tremendous.  One such LPN was laid off in 2013 and the poor thing never worked again.  She dropped dead in July, 2017 and I know for certain that the layoff killed her.  She was only 56.  What makes this tragic situation worse the hospital pretended that they had lost $90 million dollars in 2010.  But now they mysteriously recovered and tore down the hospital and they are building a new $175 million dollar new hospital.  We were all sacrificed so the hospital could shed themselves of expenses and get their Moody Credit Rating up so they could borrow this $175 million dollars – that's what I think.  And because I had to retire at 62 and take my pension and SS I am losing $300.00 per month for the rest of my life.  Thanks Community Hospital Network, Indianapolis, Indiana for destroying lives!!!!!

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