Cost-Cutting Lessons learned through downturns.

Pre-pandemic, our risk manager had us rehearse a global health crisis. When COVID struck a year later, we were prepared, not panicked. For us, it wasn’t a black-swan event. Prudent steps, opting for salary cuts over layoffs, etc., boosted morale and saved our company. The double-digit jump up in morale at the end of the year where we cut everyone’s salary was the highest in a 15-year history. The executive also concluded it was the most productive year ever. Cost-cutting can be a survivable rite-of-passage. Here we’ll delve into how that’s possible. The paradigm-shift brought on by generative-AI seems again like a black-swan event that has disrupted the tech world leading to many layoffs.

I’ve been involved in cost-cutting/layoff decision making at four companies in four different times. As described below, I’ve learned that it can be done in ways that the company comes out stronger and morale can go up. In challenging times of change, layoffs and cost-cutting may be unavoidable. Employee morale, engagement and trust in leadership takes a big hit with a layoff. How do we turn that into a win? Below I provide 9 Cost-Cutting Choices to Maintain Motivation and Impact. There are also lots of references to related articles.

Cost-Cutting

When it comes to cutting costs, especially when teams are already lean and down to critical mass, there are alternatives, including cutting pay, to layoffs that we employed at Prosper Marketplace and Hum Capital that I describe below as well. In both cases, the productivity and motivation of employees went up after pay-cuts. However, this required the right context and leadership.

When is comes to layoffs, especially multiple rounds, leadership is under stress to make significant changes quickly. Without prior experience of doing so successfully, or some guidance, the odds of success are slim. Having enacted layoffs in the past, I’ve seen it can be done to ultimately lift employee engagement and business impact. Below are some tips and considerations

Letting people you’ve worked with for years go, especially when times are tough, is never an easy task. I have led engineering teams at four startups through cost-cutting and layoffs. In two of these, we also reduced salaries. All four companies survived. Two that experienced both layoffs and salary cuts saw notable improvements in employee morale, engagement, and business impact.

Weathering Storms as a Rite-of-Passage

“Bad companies are destroyed by crises. Good companies survive them. Great companies are improved by them.” – Andy Grove

Weathering Storms is a critical ingredient to a startup’s success. Every startup I’ve worked at and most of the famously successful ones came close to failing at least at once. Getting to a place where cost-cutting is unavoidable is just one example of such a storm. In fact, it seems that it’s almost a necessary ingredient for a company to learn the lessons of surviving a storm in order for it to truly succeed.

Fear is Healthy, Panic is Deadly

In the movie Chasing Mavericks, the young surfer returns to the boat after a bad spill. His mentor asks, Why did you panic? The young surfer embarrassingly admits that he was afraid. His mentor comments: “Fear is healthy, panic is deadly.“

When a startup is going through challenging times where staying the course can lead to failure, it is healthy to recognize the risk and consciously course correct – fear is healthy. On the other hand, over-reacting and looking for the first thing or person to point a finger at may cause you to swerve back-and-fourth on your path and also crash – panic is deadly. Or, it could cause you to overlook a more fundamental issue or root cause and you continue on your path towards failure. Quite often, it can cause you to do unrecoverable damage to employee trust and morale. Not every survivable rite-of-passage is survived.

Some insightful quotes about Cost-Cutting

Ben Horowitz: “The way you handle layoffs can have a profound impact on the morale and productivity of your remaining employees.”

• “Layoffs break trust, especially with the people who survive the layoff. They interacted and had relationships with people who you’re going to have to let go. They care about how you treat them.” – Ben Horowitz, The Hard Thing About Hard Things.
• “When you lay people off, you’re not just firing employees. You’re also firing their friends, their families, and their dreams.” – Ben Horowitz
• “The way you handle layoffs can have a profound impact on the morale and productivity of your remaining employees.” – Ben Horowitz
• “If you don’t handle layoffs well, you can create a culture of fear and distrust that will make it difficult to move forward as a company.” – Ben Horowitz
• “The best way to handle layoffs is to be honest, transparent, and respectful. Be clear about the reasons for the layoffs, and be as generous as possible with severance packages and outplacement services.” – Ben Horowitz

Ed Catmull: Creativity Inc, Overcoming the Inevitable to Succeed in Business and Life. Random House Business Books, 2014.

• “When done right, layoffs can be a catalyst for innovation and creativity.”
• “The way you handle layoffs is a reflection of your company’s values.”
• “Layoffs should be a last resort, but if they are necessary, they should be done with care and thoughtfulness.”
• “If you handle layoffs well, you can come out of the experience stronger than ever before.” – Ed
• Amy Edmondson: The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth. Wiley, 2019.
  • “If you handle layoffs in a way that preserves psychological safety, you can actually emerge from the experience stronger than before.”
  • “The key is to be open, honest, and transparent about the reasons for the layoffs, and to treat affected employees with respect and compassion.”
  • “When employees feel that they have been treated fairly and with respect, they are more likely to remain loyal to the company and to be supportive of future initiatives.”

“The ultimate measure of a man (leader) is not where (s)he stands in moments of comfort and convenience, but where (s)he stands at times of challenge and controversy.” – Martin Luther King Jr.

“Tough times never last, but tough people do.” – Robert H. Schuller

“Adversity causes some men to break; others to break records.” – William Arthur Ward

9 Cost-Cutting Rituals to Maintain Motivation and Impact

Below are 9 cost-cutting atomic rituals that I’ve employed at various companies facing the challenge of needing to do major cost-cutting. These rituals have repeatedly lead the companies to not only survive, but thrive and come out stronger as a result of having gone through this rite-of-passage.

1. Fairness in the Cost-Cutting Ritual

At a time where you’re impacting the lives and livelihoods of people that have worked closely together for years, it’s very important to be fair.

Don’t keep under-performers: It’s very important that you have addressed any dead weight or low performers before a layoff or in a layoff. If you keep poor performers, there will be resentment – especially if you cut pay or stop raises and promotions. Also, be careful about keeping folks that aren’t willing to do whatever it takes. After the layoff, that will matter, and people know who will be willing to roll up their sleeves.

Graduated Impact: If employees with higher salaries and bonuses are impacted more than those worried about paying their rent, there is a greater sense of fairness. This can mean (bigger) pay cuts for executives, or a moratorium on bonuses. In a recent layoff at LinkedIn, the percentage of managers let go was notably higher than that of individual contributors. Other companies had very little impact to management, and resentment was evident among the employees.

Consider perspectives of those remaining: How will the remaining team feel about the decisions? Will they think it was fair who was let go and who was kept? Do you expect them to agree it was best to keep more people at reduced pay both because we are a team and because it leaves us with more people to turn things around? Will leadership have adequately with the right balance of humility and confidence have communicated the rationale for the decisions in a manner the engenders buy-in and support? Ask them in 1-on1s; this can be a good litmus test.

2. Communication and Transparency Rituals: How it came to Cost-Cutting, etc

Be open and honest about the reasons for layoffs, avoiding sugar-coating or vagueness. Clear communication helps in maintaining trust.

Avoid the beginning of the end

A layoff, or a second or third layoff, is an opportunity to lose the hearts, minds, souls and engagement of employees. It can also be a time to bond with common goals in service of the greater good. Being transparent that the company is at a cross-roads that we’re all in together.

Why did the layoff happen? How did we get here?

If employees don’t know the reasons for the layoffs and don’t have transparency to company financials going forward, they will be wary if there’s anything they can do to avoid being impacted. It important for leadership to own up to some mistakes even if it’s simply not foreseeing market shifts or having prepared enough.

How will we get to a better place? How can I help?

Without transparency, they won’t know how the company is doing. They won’t understand if it will happen again and if it might impact them. They may feel helpless without seeing a plan for to get to a better place that they are a part of making happen. It won’t feel like we’re all in this together.

Be clear and honest about the market

If there are challenging times outside the company wall in the market, be honest that it will be tough to succeed. Also, be honest about it being hard to find jobs for those laid off. Layoffs impacting only one company are different than layoffs of greater impact. If it only impacts your company, how you do the layoff will also impact employee retention of those that can easily find other jobs in a good market.

Be transparent in AMA’s, but …

A culture of AMA (Ask me Anything) is very healthy in terms of transparency. However, it can lead to hasty responses. This could result in less than ideal solutions, or discovering the off-the-cuff answer wasn’t the best and needing to make changes. This can erode trust. It’s often advisable to take questions and respond with “Great question! We will get back to you on that. However, you should follow the meeting up with the list of questions and respond quickly. Otherwise, you also erode trust. That being said, sometimes the best answer is better-done-than perfect. So, delaying a decision may be the wrong choice as well. Here a strong leadership can have one leader challenge the other if they see a downside to a quick response. This can more quickly get to a more optimal solution. It also models good collaboration.

3. Empathy and Respect Rituals

Handle layoffs with empathy, respecting the dignity of departing employees. This demonstrates your company’s values and commitment to fair treatment. If you don’t show empathy towards those that you let go, those that remain may question how leadership feels about them. It won’t feel like we’re all in this together.

Support for Departing Employees: This includes offering support like severance packages, job placement services, or counseling. This shows care for employees’ well-being beyond their tenure at the company.

Taking ownership: If, as a leader, you don’t genuinely feel bad about needing to let people go that were performing well, people will know. If, as a leader, you don’t demonstrate some ownership for being in a tough situation requiring a layoff, it will be hard for employees to feel empathy for you. While needing to speak with confidence about the path forward, it is also good to call out risks and past mistakes. Speaking with conviction and clarity while also being humble and fallible as a leader makes you more human and believable.

4. Involvement Rituals

Involve remaining employees in decision-making processes where appropriate, to increase their sense of control and ownership. One suggestion that gas resonated well is having a clear change in how company meetings will be run. If you consider the “hands” in an “All Hands Meeting,” there is an implication that the participants.employees are “hands.” In other words, they are doers. Changing the name of the meeting to the “All Minds Meeting” and announcing the change that is a shift to wanting more participation with everyone’s hearts and minds can help shift from a perception of an us versus them culture. One could also call it an “All Hearts and Minds Meeting.” Of course the change needs to be one that genuinely resonates with the leadership team to avoid seeming disingenuous.

Transparency: There needs to be transparency on the state of the company and where the challenges are.

Empowerment: Without empowerment, the employees will feel like they are not in control of their own destiny.

Focus on the Future: Shift the focus towards future goals and visions, helping employees to see a path forward and a purpose in their work.

5. Recognition and Appreciation Rituals

Acknowledge the hard work and contributions of the remaining employees. Recognizing their efforts can boost morale.

The impact of their work: Showing a direct connection between what one or more employees has done to help get the company to a better place will create a virtuous cycle.

Growth without raises of promotions: A clear careen ladder with rubrics for each level allows employees to progress on their career. This gives them opportunity for personal growth by finding opportunities do meaningful things to improve their skills at times when they know there is little hope of promotion or raise. See also: WorkInstitute: Lack of Career Development is the Top Reason for Leaving a Job

Professional Development Opportunities: Offer training and development opportunities to the remaining employees where fiscally possible. If you can’t do this, help by mentoring them or allowing for cross-training. This can help them feel valued and invested in their growth.

Small financial recognition: If you cut pay and benefits and are able to give some back when the company starts doing better, employees get to experience what happens along a path of improvement. If you didn’t cut pay, a spot bonus can also serve this purpose. Reason for hope feeds the conviction that there is a way to a better place that they are a part of.

In the eyes of the beholder: Think about each individual carefully and find opportunities and ways to frame the changes as an “opportunity” for either their career growth, position within the company, or both. Convince yourself that the opportunity is real before attempting to describe it to the team member. If you’re not convinced, it will be hard for you to convince others. If it doesn’t feel real, what can you do to make it a real opportunity?

6. Regular Check-in Rituals

Keep communication channels open. Regular check-ins with employees can help identify concerns and address them promptly.

Updates on Finances: Knowing if the company is doing better or even appreciating it isn’t there yet lets everyone feel they aren’t in the dark waiting for another surprise.

Win/loss updates: Knowing what’s working and what isn’t with some root cause analysis help course correct towards the most impactful path.

7. Reassurance & Encouragement Rituals

Offer realistic reassurance about job security for the remaining employees, if possible. Uncertainty is a major demotivator. If you say everything’s great and then do another layoff, the trust will be lost. Being confident in a better future as a leader is important, but it’s also to be honest that there will be challenges in getting there.

Strengthen team dynamics through team-building activities or informal get-togethers. A strong team can better cope with changes.

Be budget Conscious. Much as a bonding event can help, extravagant, expensive events can back-fire, especially when you’ve been transparent about finances.

Bond in 1-on1s: Be sure to ask people how they’re doing in private so you understand the stress they may be under. To help with motivation and engagement, it can also talk to them how their personal priorities and purpose (or ikigai) might align with company objectives. Helping them evolve their career in alignment with a levels and skills rubric/matrix can help even in ties where raises and promotions are unlikely. There will likely be overlap in them advancing their skills and career with business needs. With a reduced work force, this could very well create opportunities to take on new challenges and learn new skills.

8. Servant Leadership Rituals in Tough Times

Having empathy and solving for employees is important in tough times; however, being a decisive and confident leader solving for all is also vital.

Rebuild Trust

Employees need to trust you have their best interest at heart, that starts with you actually having their best interest at heart. Ensure your team that you still very much have their best interest at heart. We’re all in this together. Making it win-win in everyone’s experience is vital to turning things around. Find a way to communicate you have their best interest at heart in whichever ways resonate most given the circumstances and individual. Trust is going to be lost regardless, so finding ways to immediately start building it back is important. It’s important to underscore that as a leader you have the struggle of solving for each person individually as well as solving for all. If you claim to have their best interest as your #1 priority, they might ask if you didn’t also say that to someone you ended up letting go.

Don’t be a servant

True leaders are simply not the servants of those they lead, nor should employees feel like servants to the leaders. Leaders should do things in service of the employees in a symbiotic relationship while solving for all employees. This also means keeping the business that pays their salaries moving in the right direction. Hence, you need to be in service of their collective good (which is fostered by the health of the company, but/and the health of the company will not be served well if you are not acting in service of the employees).

Doing what you love vs loving what you do

Tough times leave little room for accommodations that aren’t solving for employees. At a recent engineering conference, I heard a CTO say: “they should be happy they have a job“. I approached her after the talk and suggested the difference between allowing people to do whatever they love and enabling them to love what they do by showing a clear vision to where the company needs to go and clearing the path the enables them to help get there. Being in service of your engineers can mean enabling them to find love in what they do.

Love is a verb

The story: A man goes to an elder and expresses that he no longer loves his wife. He is contemplating ending the marriage. The elder responds: “Love her.” The man is confused and reiterates that he no longer loves his wife, to which the elder explains that he should see love as a verb. It is something we do. He further explains that love as a noun is the feeling that can come as the result of acting out the verb.

Likewise, if you love your job and want to be the best at it, then you will want to master your craft. You will find beauty in simple, elegant solutions that will stand the tests of time in terms of changing conditions, changing usages, changes in scale, etc. while still serving its purpose. Finding solutions for customers in tough and changing times can be seen as a challenge that demotivates you or as one that inspires you to find solutions others have missed. There is the potential for both a death-spiral and a virtuous-cycle. As an effective leader in tough times, you will inspire and enable your team to love what they do and find joy in the impact they were enabled and empowered to have.

However, an occasional win is needed for any employee. Expecting people to find joy in work when they haven’t any rewarding/enjoyable moment can also drain their moral. If a rescue dog finds several dead people in a row, workers will sometimes bury a volunteer to allow the dog to find a survivor. Otherwise, dogs will disengage and not search. Note, this is in part because it’s sad for them; however, as pack animals, they will also pick up on the sadness in the humans around them.

9. Building Wisely Rituals

Beyond team morale, though it also ultimately also impacts team morale, lie the questions of how you build and organize. As a smaller team with a tight budget, focus is key and rework and shoddy work is killer. By helping the team with transparency and a voice, they can be led and empowered to build things that not only address the current challenges, but are extensible enough to what we can expect to be a fast follow. The work should also be reliable so as not to bog the team done with debugging and addressing issues. This may seem obvious in good times and bad, but the benefits become existentially deterministic in tough times.

If you start with a focus on building a limited scope online bookstore but build it in a way that it could also sell CD’s, then it might lay the foundations for what might grow to an everything store that could even sell web services. Hiring or keeping the right team to do this, empowering and enabling them to do so, is also critical. Much can be said and written about the fundamentals of doing this, but times of prosperity can lead us to lose sight of the importance. In tough times, you need small teams to turn things around quickly, but if they do things sloppily in haste, then recovery will stall out.

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Returning to Work After Cost-Cutting

There is evidence suggesting that the concerns associated with returning to work, particularly after a layoff or reduction in force, can indeed be amplified, affecting employee morale and overall workplace dynamics. See also “Returning-to-Office” below.

Long-Lasting Impact of Cost-Cutting on Morale

Research indicates that mass layoffs can have a lasting negative impact on the morale of the remaining employees. For instance, the Glassdoor 2024 Workplace Trends report noted sharp drops in employee satisfaction among companies that experienced significant layoffs in 2023. This suggests that the effects of layoffs on the morale of existing employees are profound and persistent​

• Benefits Pro: Layoffs carry long-lasting impact on workplace morale, study finds

Decreased Job Satisfaction and Loyalty after Cost-Cutting

A study reviewed by Washington State University, which analyzed 137 previous studies, found that layoffs, offshoring, and other cost-cutting measures affected employee morale longer than most companies realized. For at least two years after such events, workers reported reduced job satisfaction and less loyalty toward the organization. This had implications for the firms’ productivity and employee turnover​.

• WSU Insider: Preserving employee morale during cost-cutting

Impact on Survivors of Layoffs

Employees who survive a layoff, often termed ‘Survivors’, exhibit negative post-layoff behaviors and feelings like stress and declining morale. The extent of these behaviors depends on various factors, including how management communicates and implements the downsizing process. Clear, honest communication can mitigate these negative reactions to some extent​

• Human Capital Hub: Employee layoffs and its impact on employees
• Inc: Remote Workers Are Getting Laid Off and Passed Over – Recent data shows that fully remote workers could face some key disadvantages. This can cause increased concern for remote employees after one or more rounds of layoffs.

Management Strategies During Cost-Cutting

Effective management strategies during layoffs can play a significant role in mitigating negative impacts. It’s important for managers to prioritize tasks, re-engineer processes, and focus on essential work. Providing counseling and support for surviving employees, including addressing survivor’s guilt and stress, is also crucial​.

• Dr John Sullivan: Maintaining Morale and Productivity During Layoffs

These findings underscore the importance of thoughtful and transparent management practices during layoffs and the return to work process. They highlight the need for companies to consider the psychological and emotional impact of such events on their employees and to take proactive steps to support and re-engage their workforce during these challenging times.

Benefits of Working Together / In-Person

Working together in the same space, even part of the time, can have significant positive effects on teamwork and productivity. Key benefits include:

Team Synergy

Synergy in teams is fostered by diverse skills and perspectives, clear goals and objectives, effective communication, strong leadership, and a supportive culture. This synergy enhances the team’s effectiveness and performance, leading to better problem-solving and innovation​.

Culture Monkey: Why building team synergy is important: Examples & questions

Enhanced Collaboration

Teams can be more collaborative when they are in the same space. Creating a culture that values collaboration, establishing communication conventions, and inviting co-creation can significantly boost team collaboration. These strategies help build a collaborative company culture, leading to improved project outcomes​.

• Asana: Collaboration in the workplace: 11 ways to boost your team’s performance

Cross-Functional Collaboration Benefits

Cross-team collaboration, or cross-functional collaboration, involves different departments working together towards a common goal. This collaboration can create synergy and efficiency in projects, ensuring faster progress and better outcomes. Communication is key in these setups to make sure all team members are aligned and working towards the same objectives​.

• Project Manager: Cross-Team Collaboration: Best Practices, Challenges and Benefits

Effective Collaboration Approaches

Effective collaboration in the workplace involves setting collaborative goals, promoting open communication, and inviting co-creation among team members. Solving problems as a group and being flexible are also crucial aspects. These approaches can help teams synergize more effectively, leading to improved project outcomes and team satisfaction​.

• Adobe: Collaboration in the workplace — benefits, tips, and tools

Benefits of Collaboration Workspaces

Collaboration workspaces, like huddle rooms and executive conference spaces, are designed to strengthen team engagement, improve meeting efficiency, and increase collaborative productivity. They provide the necessary technological support for effective and efficient collaboration, both in-person and remotely​.

• Tech Journal: The Top 4 Benefits of Collaboration Workspaces

In conclusion, the collectiveness, contentedness, collaboration, synergy, and bonding that result from employees working together in the same space, even if only for part of the time, are substantial. These benefits contribute to a more engaged, productive, and innovative workforce.

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Cost-Cutting Lessons Learned from my Experiences

Cooperative Solutions, Inc. – Closing down California Operations

Cooperative Solutions was the most funded startup in Silicon Valley at its time. A competitor investing more in marketing and sales creating a significant challenge. We were acquired by Bachman Information Systems.

During the acquisition, an exec from the parent came out, interviewed all 60 employees and had them rank all the employees. He then decided to put me in charge. I was left with five months of work that had been planned for 60, but was told I needed to complete it with 16. I needed to decide who to cut, who to keep and then drive the remaining people to complete the work. At the end of that, they’d have the option to move east or be out of a job.

I decided the best way to decide was to pull everyone together and ask if we could and should attempt this. The immediate question was “Why would we even consider?” My response was “exactly, lets figure out what would make this reasonable for us. That included treating the people that weren’t staying well, and ensuring the remaining 16 we in it to the end with also something at the end. There was some negotiation until I’d closed all the loopholes. We completed the work of 60 with 16 in less time than planned. No bugs were found, and everyone walked away happy.

Involving the team in key decisions impacting them was key to making the right decisions and being able to deliver. Ultimately, the parent company was holding me responsible and that was the right thing to do.

BroadVision, Inc. – Lessons from the Dot Com Crash

Early on, BroadVision stumbled with the initial product offering of personalized video on demand (like an early Netflix). Dot com and the world went through a paradigm shift. We could have folded; however, how we built the product and the organization allowed us to pivot without having to cut costs or heads.

BroadVision became the fastest growing software company on Nasdaq during dot com achieving a $25B valuation. We had made major investments for growth, including building a new office complex just as everything crashed. We had to go through several rounds of layoffs.

BroadVision is a great example of what to do when times are good. While other companies were hiring and spending like crazy, BroadVision drove for profitability early. And we achieved it. We were also prudent in our hiring practices. The teams were five to ten engineers building applications that competed with companies that had hundreds of engineers. We built things on a scalable and extensible platform that we did rewrite once early one as we saw better ways to be extensible and scalable.

The company did crash as the market crashed. Business dropped drastically and we had four rounds of layoffs in field engineering teams before we looked a reducing core engineering. This was feasible as the business was shrinking, but I also remember at the fourth round, the head of field engineering suggesting that some of the engineers left might be stronger than some of the core engineers. After some interviews, we determined that wasn’t the case. By growing slowing and methodically, we didn’t over extend ourselves. This really helped when times suddenly became tough. The company did take a big hit, but still lives on today.

Prosper Marketplace, Inc. – Surviving the Impacts of Covid

One year before Covid hit, our risk manager, Julie Marpert Januik, decided we should emulate a global pandemic to see if and how we could sustain it – including having everyone work from home one day to the next. So, when it hit, we knew it would be really bad for the company. However, thanks to Julie, Covid did not hit us as a “Black Swan” event.

The Prosper cost-cutting experience certainly includes one of laying a solid foundation in good times. The team responsible for “keeping the lights on” had been pretty much 100% occupied by doing so. However, with a shift in focus and some root cause analysis was greatly able to reduce recurring issues. This created bandwidth that allowed for flexibility. We had also hired a few solid players and let go some of the weak links.

When Covid Hit

When Covid hit, the original discussion was to start with a 20% cut immediately with an expectation that more were likely to follow. With quite a bit of persuasion, that was changed to a 20% pay cut across the board. People below a certain base pay weren’t impacted and execs took the biggest hits. The argument against this was that instead of upsetting a few employees that we let go we’d upset everyone. However, with the messaging that in tough times we wanted to pull together and not impact everyone while also having a full team to pivot to address the changes, it was met with enthusiasm instead.

Tens of thousands of borrowers reached out to say they couldn’t make payments and would need to default on the loans. Simultaneously, pretty much all lenders stopped investing money for fear if exactly that.

What we did for customers

Though good customer management and quick code changes, we were able to allow customers to take pauses in their payments or reduce payment amounts. Of those that said they needed to default, we were able to save more than 99%. The lenders saw this and came back.

What we did for employees

Everyone was shifted to working from home. Pay was cut quickly. We put together a plan that would allow us to monitor revenue and bring pay back up slowly if/when things got better. Things got better and pay went for 80% to 85%, to 90%, to 95%, to 100% to restoring all perks and benefits. There were regular all-hands to update how things were going and field ask-me-anything questions.

What was the result?

What had been forecast as the worst year for the business in 15 years ended up being the best. It had been predicted as a huge hit in employee moral saw a record boost. We did extensive, consistent employee moral surveys at the end of every year. We saw the first double digit jump (upwards) in moral to the highest level ever achieved. In 2021, Prosper filed for IPO – that’s still pending for a variety of reasons, but that seems like a pretty impressive outcome for something that had been feared to be a very real threat to company existence.

Hum Capital, Inc. – Adjusting for Unexpected Changes in Funding and Market

Hum was set up for growth with a funding rounds in the making when the lead investor got into trouble and pulled out. This coincided with a sustained downturn in the market.

Cost-cutting became unavoidable. Initially, this meant reduction in team size after having grown perhaps too hastily. We then turned to graduated pay reductions to keep critical mass while reducing costs. A lot more was done in terms of transparency on finances and how the business runs. Paths back to full pay were laid out that included financial targets and hypotheses for achieving these. Team morale naturally took a hit, but there was approval within the team that we didn’t let further people go in tough times. With increased focus, a better understanding of the business and more focused execution, the team has been able to deliver value more reliability and effectively. The company achieved profitability and pay has started to move back. The morale is good, the team is much more cohesive across departments and the promise of success for the business has become evident again.

Executive and Other Pay Cuts

6 in 10 executives have taken pay cut to minimize layoffs in past 6 months

Key findings:

• 78% of executives say their company has had layoffs in the past 6 months; 70% say there will be layoffs in next 6 months
• 66% of executives have taken a salary cut in the past 6 months, and 94% say this was to prevent or reduce layoffs
• 1 in 4 executives who had salary cut took a 30% hit or more; 5% had salary cut by at least 90%
• 67% of executives who haven’t yet taken a salary cut say they would be willing to in order to prevent or reduce layoffs
• 60% of executives say non-exec employees’ well being is ‘extremely important’

Looking to Thwart Layoffs, Executives Are Taking Pay Cuts (February 9, 2023)

“New data reveals that most executives (66 percent) have accepted a pay cut in the past six months, with the overwhelming majority of those (94 percent) saying the move was to prevent or reduce layoffs, according to a survey of 1,000 U.S. executives at companies with more than 100 employees from ResumeBuilder.”

Goldman’s Solomon Joins CEOs Taking Pay Cuts After Laying Off Thousands

• David Solomon, the CEO of Goldman Sachs, has taken a 30% pay cut to $25 million after the bank laid off 3,200 employees.
• Solomon joins a growing number of CEOs who have taken pay cuts in recent months, as companies face economic headwinds.
• Other CEOs who have taken pay cuts include Morgan Stanley CEO James Gorman and Alphabet CEO Sundar Pichai.
• The pay cuts come as companies are also cutting costs in other areas, such as travel and entertainment.

Fortune Pay Cut Study

Many workers facing a layoff would accept a 25% pay cut to keep their jobs—but 97% of bosses don’t even ask. Even the researchers are stumped why.

A recent study by the National Bureau of Economic Research found that a surprising 60% of workers facing a layoff would accept a 5% pay cut to keep their jobs. This number jumps to a staggering 97% when the pay cut is increased to 25%. Despite this willingness to accept lower wages, employers rarely offer pay cuts as an alternative to layoffs. The researchers behind the study are puzzled by this disconnect and offer several possible explanations.

One possibility is that employers are hesitant to cede control of personnel decisions to employees. Layoffs give employers the ability to select which workers to let go, while pay cuts would require buy-in from all employees. Additionally, employers may fear that offering pay cuts would damage morale and lead to the loss of top talent.

Another possibility is that employers simply don’t know that many workers would be willing to accept a pay cut. The study’s findings suggest that many laid-off workers are unaware of the financial difficulties their companies are facing and believe that layoffs are an inevitable consequence. This lack of understanding may prevent workers from volunteering for pay cuts.

Whatever the reason, the study’s findings highlight a missed opportunity for employers. By offering pay cuts, companies could potentially avoid layoffs altogether, saving money and preserving the morale and productivity of their workforce. However, more research is needed to understand why employers so rarely consider this option.

What Motivates Us?

Keeping teams motivated and engaged is key in a post-layoff period where raises and promotions are unlikely. In his book “Drive: The Surprising Truth About What Motivates Us,” Daniel H. Pink explores the underlying factors that truly drive human motivation, particularly in the context of work and business. He identifies three core elements:

1. Autonomy: The desire to direct our own lives. Pink argues that people are more motivated when they have control over their work and environment. This autonomy can relate to task (what they do), time (when they do it), team (who they work with), and technique (how they do it).
2. Mastery: The urge to get better at something that matters. Pink emphasizes that the process of mastering a skill or subject is inherently satisfying. People are motivated by the desire to improve, to overcome challenges, and to grow their expertise.
3. Purpose: The need to do what we do in the service of something larger than ourselves. According to Pink, motivation is heavily driven by the desire to be part of a greater cause or to contribute to something that has significance beyond personal gain.

These tenets are presented as a shift away from traditional ‘carrot and stick’ extrinsic motivators (like monetary incentives) towards more intrinsic motivators, which Pink argues are more effective in fostering creative and cognitive task engagement. The book posits that these intrinsic motivators are key to success and satisfaction in the modern, increasingly automated and purpose-driven workplace.

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See Also (Books, Articles, Blog Posts, Pod Casts) on Cost-Cutting

Books:

The Hard Thing About Hard Things by Ben Horowitz

This book offers real-world insights and practical advice from a veteran Silicon Valley VC and entrepreneur on tough decisions like layoffs, navigating downturns, and building a strong company culture.

Radical Candor: How to Get What You Want by Saying What You Mean by Kim Scott

This book emphasizes the importance of clear and direct communication, even when delivering difficult news like layoffs. It provides tools and frameworks for having constructive conversations and building trust within a team during challenging times.

Creativity, Inc.: Overcoming the Unseen Forces That Block True Inspiration by Ed Catmull

This book dives into the culture and practices of Pixar, focusing on fostering creativity and innovation even in the face of constraints. While not directly addressing layoffs, it offers valuable insights on building a resilient and adaptable team amidst change.

Only the Paranoid Survive by Andy Grove

“Only the Paranoid Survive,” by Andrew S. Grove, the former CEO of Intel, is a guide on navigating the challenges and opportunities in the rapidly changing world of business. Grove emphasizes the importance of recognizing and responding to ‘strategic inflection points,’ significant shifts in a business environment that force a company to change its strategy fundamentally. While the book does not focus specifically on layoffs, it addresses the broader theme of adapting to drastic changes in the business landscape, which can include workforce adjustments as part of a strategic response to maintain competitiveness and ensure company survival.

Articles and Blog Posts:

A Better, Fairer Approach to Layoffs by Harvard Business Review:

This article criticizes traditional cost-cutting methods during downturns that prioritize short-term savings over long-term well-being. It proposes a framework emphasizing transparency, fairness, and humanity in layoffs, advocating for open communication, objective selection criteria, generous severance packages, and outplacement services. This approach aims to minimize harm to employees, maintain morale among remaining staff, and protect the company’s reputation, ultimately leading to a smoother transition and faster recovery.

Startup Layoffs: A CEO’s Guide to Doing It Right by Harvard Business Review:

This article provides a step-by-step guide for CEOs on approaching layoffs in a humane and responsible manner, minimizing negative impact on employees and the company’s reputation.

The Art of the Layoff: 5 Things Startups Need to Get Right by TechCrunch:

This article emphasizes the importance of transparency, communication, and severance packages when executing layoffs, offering practical tips for startups.

How startups can survive and thrive in uncertain times by LinkedIn:

In the ever-evolving landscape of business, startups often find themselves facing a unique set of challenges. Uncertain times, marked by economic downturns, global crises, and rapidly changing markets, can be particularly daunting.

Why “Copycat” Layoffs Won’t Help Tech Companies — Or Their Employees by by Melissa De Witte of Stanford Business School

The Stanford Business School article criticizes the prevalent trend of tech layoffs, highlighting their ineffectiveness and the overlooked evidence suggesting more beneficial alternatives to handling economic challenges​.

Don’t Want to Cut Employees? Try Cutting Salaries by Skye Schooley of Business.com

The article by Skye Schooley explores strategies for businesses facing economic hardships, suggesting salary reductions as an alternative to layoffs. It outlines the legal considerations, potential impacts on employee morale, and the importance of a fair and transparent approach in implementing pay cuts​.

Companies prefer layoffs to pay cuts by Peter Coy and Jena McGregor of NBC News

This article, while arguing that layoffs were more prevalent in 2008, highlights that some businesses did try to implement pay cuts during the financial crisis.

Workers say they’d take a pay cut to keep their jobs if recession hits by Kathryn Moody of HRDrive

While focusing on worker sentiment, this article alludes to the use of pay cuts as a cost-saving measure during economic downturns.

The Case for Lower Wages and More Government Spending By Derek Thompson of The Atlantic

This article leads with “General Motors and the United Auto Workers union agreed last week on a new wage structure that works out to a 20 percent wage cut for GM employees,” and explores why when demand is down, the price for work — wages — should be down, too. But wages have a tendency to flat-line, not fall, in recessions.

Layoffs That Don’t Break Your Company Better approaches to workforce transitions by Sandra J. Sucher and Shalene Gupta of Harvard Business Review

This article discusses the negative effects of layoffs on companies and employees. It also offers a better approach to workforce transitions. Companies should avoid layoffs whenever possible. Instead, they should focus on retraining and redeployment. If layoffs are necessary, they should be handled fairly and with a clear plan.

What Companies Still Get Wrong About Layoffs by Sandra J. Sucher and Marilyn Morgan Westner of Harvard Business Review

This article discusses the negative effects of layoffs on companies. Layoffs can hurt a company’s reputation, lead to knowledge loss, and decrease employee morale. In the long run, layoffs can cost companies more money than they save. The article also mentions some recent examples of companies that have laid off employees.

Pay Cuts May Be The Least-Worst Option When Compared To Layoffs And Furloughs by Jack Kelly of Forbes

From 2020, the article opens with “It’s been widely reported that about 40 million Americans have lost their jobs over the last few months due to the Covid-19 pandemic. There’s a growing trend, however, that’s not garnering as much attention. A large number of companies have elected to cut the pay of some—or all—of their workers instead of enacting massive layoffs and furloughs. These corporations run the gamut, spanning many different sizes and all across industry sectors, including HCA Healthcare, Aon, ESPN, Tesla, the Chicago Cubs, Vice Media, BuzzFeed and others.“

Offering Pay Cuts to Stave Off Layoffs is Easier Said Than Done for Employers by Joseph Abrams and Paige McGlauflin of SHRM

The article explores the complexities and challenges of offering pay cuts instead of layoffs in today’s workforce. Explore the insights and considerations from a recent study and employee compensation expert on why this strategy remains rare.

Pay Cuts Vs. Layoffs Dialog with Stacey Vanek Smith on NPR

This is an NPR article discussing layoffs versus pay cuts during a recession. In the past, layoffs were more common, but in the pandemic recession, many companies prefer pay cuts. This is because the pandemic is seen as a shared experience, and there’s hope for a quick economic recovery, allowing pay cuts to be temporary.

Can An Employer Legally Reduce Your Pay? A Guide December 18, 2023 by Matthew K. Fenton

A perspectivee offered by a Florida based law firms that represents employees in disputes with employers.

Can My Boss Reduce My Work Hours With No Notice? By Christie Nicholson, J.D. of Find Law

Generally, employers can reduce your work hours without notice, unless it’s a large company reducing hours by more than half. Exceptions apply to exempt vs non-exempt employees. Consult an employment lawyer for details.

Google’s CEO, Sundar Pichai, Says Laying Off 12,000 Workers Was the Worst Moment in the Company’s 25-Year History by Inc.

Pichai reflects on the difficult decision to lay off 6% of Google’s workforce in 2022 (around 12,000 employees). The article likely stems from a leaked audio recording from a recent Google all-hands meeting where Pichai discussed the layoffs. The context surrounding the article is important, as it highlights the broader challenges faced by tech companies in a changing economic climate and the difficult choices leaders must make.

Layoffs That Don’t Break Your Company (Harvard Business Review)

This article provides insights on how to conduct layoffs in a way that minimizes damage to the company. “research shows that job cuts rarely help senior leaders achieve their goals. Too often, they’re done for short-term gain, but the cost savings are overshadowed by bad publicity, loss of knowledge, weakened engagement, higher voluntary turnover, and lower innovation, which hurt profits in the long run.“

The Elements of a Good Company Apology (Harvard Business Review)

The article emphasizes that effective apologies must recognize the offense adequately, express genuine remorse, and offer appropriate reparations to those affected. This approach not only addresses the immediate fallout but also aids in rebuilding trust​.

Layoff to Liftoff: Surviving Downsizing in the Tech Industry

Kodeco’s guide to surviving tech layoffs offers actionable tips on stress management, job search strategies, and staying productive post-layoff to prepare for your comeback. By Joey deVilla.

Organizational Downsizing: Its Effect on Financial Performance Over Time by Kenneth P. De Meuse and Guangrong Dai

The study found that downsizing did not immediately improve financial outcomes for companies. Instead, companies experienced substantially lower financial performance in several metrics during and after downsizing, with recovery aligning with nondownsized companies only over a longer term​

The Paradox Of Layoffs: Engagement Drops When You Need It Most (Forbes)

The article discusses how layoffs, while sometimes necessary for a company’s survival, can significantly lower employee engagement at a time when motivation and productivity are most needed. The piece highlights that layoffs not only affect those who are let go but also impact the morale and productivity of the remaining workforce, leading to a decrease in overall company performance​.

Mass Layoffs at Twitter, Meta, Amazon: an Old-Guard Mistake (Bloomberg)

The Bloomberg article “Mass Layoffs at Twitter, Meta, Amazon: an Old-Guard Mistake” critiques the resurgence of mass layoffs in big tech companies, labeling it a regressive strategy that ultimately undermines long-term stability for short-term financial gains.

What We Know Now About Bias and Intergroup Conflict, the Problem of the Century

Susan T. Fiske’s research indicates that layoffs can exacerbate existing biases and inter-group conflicts.

The article highlights several key issues regarding bias and inter-group conflict:

1. Pervasiveness of Bias: Fiske emphasizes that bias is not limited to a few extreme individuals but is widespread, often manifesting as subtle, unconscious biases in most people. These biases can lead to discrimination and conflict even when individuals consciously endorse egalitarian values.
2. Subtlety of Bias: Fiske argues that contemporary biases are often subtle and indirect, making them difficult to recognize and address. They may manifest as microaggressions, exclusionary behaviors, or implicit associations that disadvantage certain groups.
3. Consequences of Bias: Fiske highlights that biases have significant consequences, contributing to discrimination, inequality, and intergroup conflict. These consequences can be seen in various domains, including the workplace, education, healthcare, and the criminal justice system.
4. Origins of Bias: Fiske discusses the origins of bias, pointing to factors such as social categorization, stereotypes, and ingroup favoritism. She emphasizes that biases are often learned and reinforced through socialization and cultural norms.
5. Complexity of Inter-group Conflict: Fiske emphasizes that inter-group conflict is a complex phenomenon with multiple causes, including historical grievances, competition for resources, and social identity. Bias plays a significant role in exacerbating these conflicts by fueling distrust and animosity between groups.

Avoiding Layoff Blunders (MIT Sloan)

The article details common mistakes companies make during layoffs, including poor decision-making that can be costly. It advises on approaches to manage downsizing more effectively to mitigate negative impacts and preserve organizational integrity. “Nearly one-third of the executives thought their companies terminated the wrong person at least 20% of the time, and approximately an additional quarter indicated that their companies made the wrong decision 10% of the time.“

The five common mistakes highlighted in the article are:

1. Groupthink: This occurs when the desire for consensus overrides careful analysis and dissenting opinions, leading to poor decision-making.
2. Framing Effects: This refers to how the way options are presented can influence choices, potentially leading to sub-optimal outcomes.
3. Recency Effect and Availability Bias: This happens when recent events or easily accessible information disproportionately influence decisions, overlooking other relevant factors.
4. Time Constraints: Hasty decisions made under time pressure can result in overlooking critical details and making mistakes.
5. Escalation of Commitment: This occurs when decision-makers persist in a failing course of action due to an unwillingness to admit previous errors, leading to further losses.

Keeping Your Headcount When All about You Are Losing Theirs: Downsizing, Voluntary Turnover Rates, and the Moderating Role of HR Practices

The paper examines the relationship between company downsizing and increased voluntary turnover rates among remaining employees. It finds that downsizing is a significant predictor of higher turnover and this effect is mediated by reduced organizational commitment. However, the study also identifies specific HR practices that can mitigate or exacerbate this effect, providing valuable insights for companies facing downsizing situations.

The Impact of Layoffs: Employee Sentiment and Cost Implications- Elevating Culture and Productivity After Workforce Reductions

The layoffs in tech and finance are part of a broader trend of workforce reductions. In 2020, 41.7M people in the U.S. lost their jobs, mainly because of the pandemic. Since then, layoffs have continued and become an unfortunate corporate reality because of cost-cutting, rising inflation, an economic slowdown, war, and a reevaluation of tech-sector over-hiring.

While layoffs aim to reduce costs and optimize resources, both employees and employers feel the effects. This paper dives into the impacts of layoffs on employees left behind, the subsequent cost implications, and ROI-focused insights into managing post-layoff scenarios effectively.

The Social Brain:The Psychology of Successful Groups by Tracey Camilleri, Samantha Rockey, and Robin Dunbar

This excellent book primarily explores the psychological and evolutionary factors that contribute to the formation and success of social groups. While it doesn’t directly address layoffs, one might extrapolate its core principles to understand the potential social ramifications of layoffs within a company.

Key Themes from the Book:

• Importance of Social Connection: The book emphasizes the fundamental human need for social connection and belonging. Layoffs can disrupt these connections, leading to feelings of isolation and disengagement among both laid-off employees and remaining staff.
• Group Dynamics and Cohesion: The authors discuss how group dynamics, shared goals, and a sense of collective identity contribute to group cohesion. Layoffs can fracture this cohesion, creating anxiety, mistrust, and a loss of morale among employees.
• Social Support and Well-being: The book highlights the role of social support in promoting individual well-being and resilience. Layoffs can remove essential sources of social support for affected employees, leaving them vulnerable to stress, depression, and other mental health issues.
• Leadership and Communication: Effective leadership and open communication are crucial for maintaining group cohesion and navigating challenges. During layoffs, transparent and empathetic communication from leadership is essential to mitigate negative social impacts.

Potential Implications for Companies and Employees:

Increased Stress and Anxiety: Layoffs can trigger significant stress and anxiety for both laid-off employees and those who remain. This can lead to decreased productivity, engagement, and overall well-being.

• Damaged Morale and Trust: Layoffs can erode trust in leadership and create a sense of insecurity among remaining employees. This can negatively impact teamwork, collaboration, and organizational culture.
• Social Isolation and Disconnection: Laid-off employees may experience social isolation and a loss of professional identity, hindering their ability to cope with the transition and find new opportunities.
• Negative Impact on Company Reputation: Mishandling layoffs can tarnish a company’s reputation, making it difficult to attract and retain talent in the future.

Recommendations for Mitigating Negative Social Impacts:

Transparent and Empathetic Communication: Leadership should communicate clearly and compassionately about the reasons for layoffs, the process, and the support available to affected employees.

• Prioritize Social Support: Companies should offer resources like counseling, career transition services, and networking opportunities to help laid-off employees cope with the transition.
• Maintain Open Dialogue: Encourage open communication and dialogue among remaining employees to address concerns, rebuild trust, and foster a sense of community.
• Focus on Team Building: Invest in team-building activities and initiatives to strengthen social bonds, boost morale, and promote a positive work environment.

By understanding the social dynamics at play during layoffs and taking proactive steps to mitigate negative impacts, companies can better support their employees and maintain a healthy organizational culture.

Company size after a layoff

The book would likely conclude that the size of a company and its departments after a layoff is crucial to maintaining productivity and morale.

• Optimal Group Size: The book emphasizes that there’s an optimal size for groups to function effectively. This size allows for strong relationships, efficient communication, and a shared sense of purpose. Layoffs that leave groups too small can hinder collaboration and innovation, while groups that are too large may lead to fragmentation and a lack of cohesion.
• Dunbar’s Number: The book discusses the cognitive limit to the number of meaningful relationships humans can maintain, often referred to as “Dunbar’s number.” This concept suggests that there’s a limit to the size of a group where everyone can know and trust each other well enough to collaborate effectively. Layoffs need to consider this limit to ensure the remaining group size is conducive to building strong relationships.
• Impact on Company Culture: The size of a company and its departments after a layoff can significantly impact company culture. If layoffs result in groups that are too large and impersonal, it can lead to disengagement and a loss of the sense of belonging. On the other hand, if groups are too small, it can create an environment of overwork and burnout.

Hiring back is neither free or easy

Letting people go or losing them is a bigger hit to the business than many people realize. Finding and hiring replacements is not easy and it’s only the beginning. Employees need to come up to speed before they are fully contributing…

• RemoteBase: What Is The Cost Of Hiring An Engineer In 2023? Budget-Friendly Pro Tips
• WhatFix: The Cost of Onboarding New Employees in 2024 (+Calculator)
• BuiltIn: The Most Effective Ways To Onboard New Software Engineers
• BambooHR: From Recruitment to Onboarding, What’s the True Cost of Hiring Employees?
• Introdus: Software Developer Onboarding: Best Practices & Checklist

Blog Posts & Podcasts

• Podcast: A company is not a family with Airbnb CEO Brian Chesky – Brian Chesky, the CEO and cofounder of Airbnb, is firmly in the trust business. His focus isn’t only on building a trusted platform for people to rent their homes to strangers — it’s on earning the trust of his employees. Adam and Brian discuss how to lead with care in tough times, why it’s better to overcommunicate.
• Sozialverträglicher Personalabbau – Das Konzept der doppelten Freiwilligkeit – The article discusses a humane approach to workforce reduction called “the concept of double voluntariness” which involves avoiding compulsory redundancies through a voluntary program. This program is part of a social plan that includes offering employees the option to transition into a transfer company, incentivized by a bonus for early departure. The process is structured into phases: voluntary phase, direct approach, social selection, and compulsory redundancy, prioritizing voluntary departures and preserving essential staff. This method aims to achieve over 90% voluntary exits, ensuring a socially responsible and legally secure reduction of staff.
• 10x Engineers (CD) – what I’ve learned about how to find them, motivate them and retain them.
• How to spin up new hires (CD) – effectively without impacting progress – especially important offshore.
• Becoming a manager (CD) – Who to promote to managers and how as an aspect of rebuilding
• Human Transformation (CD) – The need to stay current with advancing technology
• Layoff done Wisely by Patrick Lencioni: We’ve all heard stories about the mistakes leaders make when conducting layoffs, but how can we carry them out well?  This week, Pat, Cody and Beau discuss how to preserve our employees’ dignity and strengthen our organizations by conducting layoffs with courage and clarity. 

Return to Office

There is a growing trend by employers to ask employees to return to office in the post-COVID era. While COVID is still present, there has been a return to “normalcy” in general. When asked, I’m hearing from employers that they are looking to bring people back into the office because they feel they can’t trust that employees are fully engaged in the work at home. In the office, they feel with supervision, this can be managed. These considerations are particularly relevant in a post-layoff context where trust and morale will already be under strain.

There is a hypothesis, often debated in the business and psychology communities, that employers may distrust the engagement and productivity of employees working from home, which could be a driving force behind the push for a return to office work. This hypothesis, however, might not align with the actual outcomes of remote work, as several studies and surveys have indicated.

Employer Distrust of Remote Work

Some employers hold the belief that employees are less productive and engaged when working remotely. This perception could be rooted in traditional views of work environments where physical presence is equated with productivity. Such employers may feel that they cannot adequately monitor or trust their employees’ work ethic and engagement without in-person supervision​.

• McKinsey: Returning to work: Keys to a psychologically safer workplace
• Psychology Today: Returning to the Office? Here’s Why That Might Harm Your Mental Health
• HR-Executive: Where mental health fits in your return-to-office strategizing
• Pathways: Why Managing Mental Health Matters in a Return-to-Work Plan

There is evidence that “quiet quitting” is more prevalent among remote workers. Key contributor to quiet quitting are stress and burn-out – both of which increase before, during and after layoffs. “The least engaged workers are remote workers with 12% reporting putting in less effort now. For hybrid workers, 8% reduced their efforts as have 10% of on-site workers.“

Several factors contribute to quiet quitting, such as job dissatisfaction, burnout, and work-related stress. These can be amplified in a post-layoff world. Also, in a tight job market, quiet quitting may be more prevalent than actual quitting. This all underscores the importance of these factors at a time where there are many other areas needing attention.

• Resume Builder: 1 in 4 of workers are ‘quiet quitting,’ saying no to hustle culture
• Research Gate: Quiet Quitting: Causes, Consequences And Suggestions
• Nature: Modelling the significance of organizational conditions on quiet quitting intention among Gen Z workforce in an emerging economy
• Ericsson: Why do people quiet quit? Let’s look at the theory

Counterproductive Outcomes

Contrary to this belief, several studies have shown that remote work can actually increase productivity and employee satisfaction. Remote work offers flexibility, reduces commuting time, and can lead to a better work-life balance, all of which can enhance employee engagement and productivity. The insistence on returning to the office, despite these benefits, can potentially lead to lower morale, decreased job satisfaction, and even increased turnover, especially among employees who have adapted to and prefer remote work​.

The Need for Trust and Flexibility

The emerging understanding in modern work culture emphasizes the importance of trust and flexibility. Employers who recognize and adapt to the changing dynamics of work, including the benefits of remote work, tend to see better engagement and productivity. Trusting employees to manage their work effectively, regardless of location, is becoming an important aspect of modern management​.

• Psychology Today: Is Forcing Employees Back to the Office Wise?

Cognitive Biases in Decisions

There’s also a discussion around how cognitive biases like the status quo bias and functional fixedness can influence employer decisions. These biases can make some leaders cling to traditional office-based models, even when evidence suggests that flexible work arrangements can be more effective. Overcoming these biases is crucial for adapting to the evolving nature of work and maximizing employee potential​.

In summary, while some employers may believe that employees are less engaged when working remotely, leading to a push for a return to the office, this belief may not align with the evidence showing the benefits of remote work. A flexible approach that trusts employees and leverages the advantages of both remote and in-office work is suggested to maximize engagement and productivity.

• Forbes: The Surprising Reason For The Return To Office
  “The results from a recent poll of over 150 U.S. CEOs by Chief Executive reveals a startling reason for why many companies are enforcing a return to office. The study indicates that many organizations are struggling to foster strong communication, collaboration, and team bonding in these environments.”
• The Power of Proximity to Coworkers – Training for Tomorrow or Productivity Today?
  “We find being near coworkers has tradeoffs: proximity increases long-run human capital development at the expense of short-term output.“