Can Company Morale Ever Recover After Layoffs?

• Within the year following a mass layoff announcement, employees’ overall satisfaction not only fully recovers but also surpasses its initial level.

• Business Outlook and Diversity and Inclusion ratings start to recover five months after a layoff announcement and fully recover within the year following the layoff. Senior Leadership and Culture and Values rating reverse course also in the fifth month after the layoff announcement, but never fully recover.

• Employee sentiment ratings of Business Outlook and Senior leadership start to decline about 5 months before the announcement of a mass layoff, serving as early indicators of impending challenges in the company.

In an earlier newsletter, we highlighted that companies exposed to a wave of mass layoffs experience a large decline in employee sentiment. But sentiment cannot decline forever - at some point we expect a turning point and potential recovery. This week, we revisit our previous analysis using our workforce data to answer the question: How long does it take for employee sentiment to recover following a mass layoff?

We measure a company’s exposure to mass layoffs by the ratio of laid-off employees relative to its total headcount. When tracking the sentiment of surviving employees at companies with large layoffs, we find that employees’ overall sentiment ratings decline for roughly five months (20 weeks) following the layoff announcement, followed by a subsequent rebound. Within a year following the layoff, not only do employees’ overall ratings fully recover, but they also surpass their initial levels.

While the overall sentiment recovers, does the pattern extend to other categories of employee sentiment? On the one hand, both Diversity and Inclusion, and Business Outlook sentiment ratings decline notably after the announcement of a mass layoff, but reverse course after five months from the layoff announcement. Within the year following the announcement of layoffs, they both fully recuperate.

On the other hand, both Senior Leadership and Culture and Values sentiment ratings decline notably after the announcement of a mass layoff, but both reverse course after five months from the layoff announcement. However, these ratings fail to completely rebound within the year following the layoff announcement.

When examining the trends of employee sentiment across different categories, another interesting observation emerges from our data: Both employee sentiment around Business Outlook and Senior Leadership start to decline 20 weeks before the announcement of a mass layoff, serving as an early indicator of impending challenges.

Even though employee sentiment in companies that experience mass layoffs generally recovers, company culture never fully recovers. Mass layoffs seem to leave lasting scars on surviving employees, underscoring the complex and enduring repercussions of workforce reductions on the work environment. In Thursday's newsletter, Revelio Labs will delve further into our workforce data to see what surviving employees think about six months after the layoff event. Stay tuned!