Can layoffs have a "positive" effect for a business due to the remaining employees thinking "If I don't work harder, I may be the next"?

Question

Letting go of an unqualified member is unavoidable sometimes. But my question is not about that. My situation is when the business is not thriving and my employer has to layoff people, anyone who is not “essential” to the team probably will be laid off.

This is a sad situation but my boss believes there will be a “positive” effect since the remaining ones will work harder in fear that if I don’t work harder I may be next. We are a software company, the definition of “work hard” to my boss is simple, deliver fast with less bug. I don’t like that thought at all because I believe people want to work hard only because they believe they can gain something from it and not because of fear.

But maybe that “positive” effect does exist? (Hence my question)

My company is Beijing based and the coronavirus has done a lot of damage to small businesses. I believe people realize that the situation will last for a while and probably feel lucky if they still have a job.

But whether it is coronavirus or not, I am more interested in how the layoff will affect the remaining ones, both positive and negative. I never experience the positive effect myself but maybe others have.

I want the discussion to focus on the psychological impact on the remaining co-workers.

I really appreciate all the answers and comments I got so far. I also expected most of the answers would say no. So I decided to play the devil’s advocate (otherwise there is no need to ask this question in the first place).

So what about Steve Jobs firing the manager of MobileMe on the spot (My purpose to link this story was to let people know it in case they did not. I know the article actually criticized Jobs action.)

What about Satya Nadella's mass layoff in his early years of being CEO of Microsoft.

And just look at what is happening in Twitter. As an engineer myself, of course I hate that and I know this is definitely an unpopular question. But on the other end I feel that is probably the reality as I asked that in 2020 as in 2022. The bottom line is how much choice do we really have?

Answer 1

the remaining ones will work hard in fear that if I don't work harder I may be the next

Much more likely that the remaining ones will think "better jump, before I get pushed".

And, the best of them will find it easiest to find new jobs with other companies.

That's the way that it normally plays out when redundancies start. Add the knowledge that the company is in financial trouble and orderly exit can become a stampede.

So, getting rid of a few "pour encourager les autres" is unlikely to have a happy ending

(and Let them hate me, so long as they fear me didn't turn out too well either ;-)

(and and - I don't know how I forgot this one, but thanks, @JSON for your comment "the beatings will continue until morale improves" :-)

---

This situation is how I got into contracting. My MNC company lost a major contract and laid off only three of over a hundred developers (the correct figure would have been none). One of them found a contract position, told us how much more he was earning and the rush for the door began. Three continents and fifteen countries later, I do not regret joining the rush :-)

Answer 2

That question made me think of what Joel "Joel on Software" Spolsky (who also served in the Israeli army) wrote about "The Command and Control Management Method":

"Soldiers should fear their officers more than all the dangers to which they are exposed…. Good will can never induce the common soldier to stand up to such dangers; he will only do so through fear" (Frederick the Great) [...]

The Command and Control form of management is based on military management [...]

There are, it turns out, three drawbacks with this method in a high tech team. First of all, people don’t really like it very much, least of all smarty-pants software developers, who are, actually, pretty smart and are used to thinking they know more than everyone else [...]

That leads to hostile workplace (even if not explicitly) which leads to:

• higher turnover, good people leaving first
• people spending time looking for jobs instead of working
• people trying to "game the system" and find what management cares about instead of what is good for the company. You can call it "backstabbing" of their fellow coworkers or the work process

Answer 3

But maybe that "positive" effect do exist ?

While it's not a universal "no" to that.. it's pretty close and the overall effect is likely to be negative.

Let's assume the local jobs market for these people's skills is in reasonable health (i.e. the layoffs aren't as a result of a general tanking in the sector) and imagine you have three devs are intended to survive the lay-offs: Timmy, Spike, and Johnny.

Timmy is a decent, competent dev, Timmy's not going to be laid off because he's doing good work for you. Unfortunately for the company Timmy knows this, so if the company attempts to instill fear in Timmy that more lay-offs are around the corner Timmy's best move by far is to jump ship. He knows he's pretty employable and while he's still got his current job he would be smart to look for something more secure. As a result Timmy is going to metaphorically have one foot out the door. Timmy is not going to be working harder/better for you.

Spike is mediocre, he's not bad but he knows he's no rockstar. Spike is smart enough to realize that Timmy is better than he is and therefore he's more likely to be laid off than Timmy. So for Spike it's the smart move to start looking now, rather than wait for the axe to fall - and the sooner the better since he knows that if Timmy ends up on the market he's going to be competing against Timmy for jobs. So Spike is not going to be working harder/better for you.

Johnny, well let's be honest Johnny isn't great. Johnny knows that he's going to be the last pick on the job market so he needs this job. Johnny is going to be terrified of being laid off - so he's going to try harder, the boss looks at a increase in output from Johnny and assumes the fear is driving him. So he keeps the fear going, after all if Johnny feels secure again he might start to slack! For Johnny though he sees the fear hasn't lessened, despite his hard work so he tries harder, and harder. But Johnny, bless 'im isn't blessed with an abundance of talent and an infinite capacity to work so he starts making mistakes. Mistake follows mistake which only serves to leave him in abject terror. Timmy and/or Spike leave and the fear and the pressure increases. Pretty soon Johnny is a quivering wreck who produces reams of garbage day in day out, the business never gets anything good done and delivery times slip, costs escalate and the company ends up in worse straits than it was before.

So for the meager "gains" of a short term boost to the productivity of the weakest member of the team the company has potentially lost two decent employees and is, in short, screwed.

So yeah my advice to your boss (or anyone thinking of fear as a motivator) is that it's a stupid idea that's counter-productive in the long run.

But what about special circumstances? Coronavirus and whatnot?

Well you might get people like Timmy/Johnny deciding that things are too volatile right now to move on - stability can be a great comfort when other things are flying out of control. But these guys aren't idiots - they will remember that when the chips were down they were exploited and treated badly. So they'll still look to jump ship just as soon as the market looks viable. Boosting productivity for a month or two only to tank it for the rest of the year is a bad trade.

Answer 4

It would be difficult to make people work harder if they already are working hard.

There is a paradox in your question: You are getting rid of less essential workers, and keeping the productive ones. This I can understand. But then, if you say your point is to make people that are essential (according to your own term) working harder than they already are, then it means that you are acknowledging they are not working hard in the first place.

Keep in mind that people, especially good workers, become very offended when you make them believe they are not working hard enough when they actually are. This will lead to a decrease of morale and best workers will leave your company.

But if you insist on this strategy, you will need to define "not hard enough" and "harder".

You will need good management skills to explain to your workers on which field they do not work hard enough, and they can do to improve and work "harder".

Don't just throw a vague "work harder" to the remaining workers, it will mean nothing concrete.

Answer 5

I have laid people off for a lack of work. I didn't have a choice. I didn't do it because I thought it would make the ones I kept work harder; and I didn't hold back from doing it because I thought it would make the ones I kept work less hard. I did it because I could see that there wouldn't be money for payroll so I had no choice.

In some firms, once the layoffs start, people begin to look for jobs elsewhere. The ones who are good enough to get other work leave. The ones who stay are those who, for whatever reason, can't get other jobs or aren't brave enough to try. This lowers quality and things generally get worse, not better. Occasionally, people who have been practicing on the job retirement might react to a layoff by working harder so it won't be them next time, but this is likely only in a very large firm where a lot of people are lazing most of the day.

In your case, with a specific short term outside pressure, there's no need for the remaining people to work harder. That won't outrun the virus. Your manager, who probably didn't decide to implement these layoffs, may be looking for a "silver lining" but don't for a moment think that motivating all of you to work harder is the reason some of you no longer have jobs. That isn't how layoff decisions work.

Answer 6

This depends a lot on the kind of work to be done and the general context. If the boss needs simple physical labor and people who are fired are generally worse off than those keeping the job, then motivation through fear can be an effective strategy.

If on the other hand you have brainy intellectual work and people can just look for another job in a different company, motivation through fear is a terrible strategy and is almost guaranteed to backfire.

Answer 7

Yes and no.

There is a huge difference depending on culture. Your username gives it away (and you confirmed it in the update that provides extra information), the context is "China".

The "positive" effect that is to be expected is described in "Sun Tzu and the Concubines".

Now, in Europe, the effect would probably be such that the more qualified individuals secretly and quickly look for a different employer and leave soon whereas only those that do not have that option will remain (and these will join a union, found a work council, and/or develop burnout, either for real or fake, and go on sick leave).

In the USA, I'd say it's a 50/50 chance between "similar to or same as Europe" and "same as in Asia", depending on how desperate they are.

In China (or east Asia in general) I wouldn't be so sure. Humans are worth a lot less, and it is much more realistic to figuratively shout: "On your knees you worthless dog, work harder or you will feel my stick!" at someone, and the person may answer: "Yes. Yessss! I must work harder!".
Sure enough, fear as well as a desperate situation with no way out can be a strong motivator. That's also the idea behind 破釜沉舟, you either win, or die.

Things that are "WTF?!" in some places are pretty normal in other places. Sampo sedae or Satori generation is de-facto "normal" in Korea and Japan. Young people with good education work off their ass all day long, literally to the point of dying, and still fail to earn enough to afford what we would consider a normal life. And all they're told is "work harder". Guess what, those that don't commit suicide actually do work harder.

So... yes, that actually works. But it really depends on the culture.

Answer 8

If the question is, does fear make developers make less mistakes, it seems relevant to think about where mistakes come from.

Some mistakes may happen because people have gaps in their knowledge. This is due to the nature of the job, most of the time developers are doing something they haven't done before. (there is a related quote I can't think of the source for: "otherwise it wouldn't be development, it would be shopping".) A lot of mistakes enter the system because of lack of communication, where developers may misunderstand what customers want, for instance, or two developers assigned to different parts of a system might have different understandings of what each of their parts needs to be responsible for. Or people make mistakes because they are overloaded with work and can't give things the attention they need.

So mistakes are bound to happen. Mistakes need to get addressed by processes that introduce feedback loops, allowing for testing assumptions. Code reviews, unit tests, integration tests, acceptance tests, load tests, and running in prod are all examples of opportunities for feedback. You want short feedback loops, especially for things that change often, so that errors get addressed as soon as possible. Places that go without feedback for long periods or which allow some aspects of the work to escape scrutiny are asking for trouble.

Some parts of development require individual effort from everybody. Maybe in the short run you can force compliance for these and the Sun Tzu story is relevant, every project has a point where you just have to bear down and focus on getting it done. (If this drags on then the project becomes a death march and people flee.) But imposing fear won't do that much to help with quality problems that are caused by systems issues. Even if the result is people are trying harder, the result may mean that the problems get generated faster.

Addressing systems problems takes a willingness to confront issues and make changes, where fearful people may be trying hard to comply and avoid bringing attention to themselves. If you want to fix process issues you need to avoid blame and fear.

So best case it may help in the short term with convincing people they need to make an effort. But that effort gets diluted by systems issues that go unresolved. It sounds like you have a boss who doesn't comprehend how software development works. There may not be much hope here.

Answer 9

In my experience, companies usually don't lay off employees "to save money." They don't do it to "motivate" people. And, they don't do it because they want to. They do it because they are forced to do it, because the company itself is in financial trouble: they can't afford the people anymore. It's a last-ditch effort to try to keep the balloon from crashing into the ground.

Many software companies are "very small start-ups" which are actually hanging on a thread. Unless you've actually run a small business, as I have, you really don't appreciate how difficult and precarious it actually is. No one wants their business to fail, I assure you. And, if you're the owner who has to give this unpleasant news to anybody, you can't escape the notion that you failed them, along with every other stakeholder that ever heard you make a good-faith promise that now you can't fulfill.

My best advice, then, is that when you begin to smell layoffs in the wind, immediately start looking for another job while you've still got this one, and leave your present company at the earliest opportunity. Do the best work you can for your present employer, and don't burn any bridges, but if that employer is "going down," read the handwriting on the wall and promptly react to it. The total situation "is what it is," and there's probably nothing to be done about it. I also think it best that you not discuss your plans with your co-workers.

You can find a new job quickly if you are competent in this business, and I'm sorry to say that you really should expect layoffs. It is wise to have one to two month's income set aside in savings, so that you can pay your bills while you eat Ramen noodles.

Answer 10

Most (maybe all) other answers assume that employees have the viable option of searching another job and that such a move doesn't carry an important cost. I'm sure that those assumptions actually hold in a lot of places and sectors, and they likely hold in software companies in China or the US. However, please note that they don't hold in some other places:

• In some countries unemployment rates are sometimes at two digit percent ranges. Finding a job - any job - might take years. Recession, a shrinking sector or older age may make the situation still worse.
• Due to rigid job related laws, staying in a job may have important benefits compared to starting a new one - even if a similar o better job were available. Current job may have a large severance in case of being laid off - proportional to years worked in the same company - or salary may be higher due to having been fixed according outdated rules that don't apply to new employees.

In such a situation, the main goal of workers may be to keep their job, and a fear based strategy may make sense to some employers. On the other hand, an aggressive strategy may make sense to employees - anything from strikes to suing the employer.

I must say that I have some second hand accounts of fear based strategies applied at different degrees by employers in Spain. At least, the strategy of occasionally laying off the worst performing employees to make everyone aware that they can't take their jobs for granted doesn't seem uncommon. In fact, the low productivity of the public sector and big companies has traditionally been attributed to the opposite strategy: underperforming workers are never fired from there.

Answer 11

This is a very subjective question - it's more one for a discussion forum than a Q+A one like this.

I've worked for a few companies where layoffs were made and I would say there is a large mix of attitudes in the people that remain:

1) People who have been laid off but with notice (i.e. not immeadiately fired) will do as little as possible, being totally demoralised and not seeing the point in working hard.

2) People will hold out for a redundancy package, so they won't care, or might even be happy if they're next.

3) People will think "I might be next!" and just go looking for another job. Unfortunately for this company, it is the more capable of these that are more likely to get them and therefore more likely to leave.

4) People will blame / be angry at the management and do the bare minimum. Especially if the laid off people are replaced with cheaper outsourcees. (In this case they will also resent the outsourcees, be less likely to work well with them, and tend to blame them for anything that goes wrong)

5) People will work harder out of fear that they might be next. However, if they weren't working hard before now, then they are more likely to be amongst the lay-offs and so there won't be many of these people.

6) People will work harder out of loyalty to the company and the desire to save it. However, these people were probably already working hard before and so probably will not be able to improve by much.

In summary, no I don't think there can be much of a positive effect on productivity arising from layoffs.

We are a software company, the definition of “work hard” to my boss is simple, deliver fast with less bug.

I know you didn't want to get side-tracked but I felt this should be addressed, and it's probably the misconception that lead your boss to his initial thought regarding the productivity. You can't deliver faster and have less bugs! If you want less bugs you have to spend more time testing / checking your work, so you're not going to be faster!

Answer 12

Your average and low performance workers will think like that and you will see the effect you mention - at least to some extent.

Your smartest, most successful and highest-performing people will ready their CV, dust off the headhunter contacts and while not necessarily actively search for a new job, will be available for interesting offers.

You can only threaten people if you can impact them negatively. For people with good CV, performance and confidence, changing a job is an inconvenience, not a danger.

Answer 13

If there is no huge unemployment on the market, some of your current workers may opt to meet the fate face to face and start searching for another job on they own initiative. This gives more time, and also possibility to reject one another disliked job proposal. Unemployment insurance often requires to take immediately the first valid job offer, if you are already sitting on they money, and voluntary leave "towards new opportunities" sounds much better during job interview than "have been fired for underperforming". Really, makes a lot of sense.

Unfortunately, your best workers (good age, right education, enough experience, etc), not the worst, will likely be more successful in the job search, as they are more attractive in the job market. Hence you may eventually stay with the work force you initially wanted to get rid off plus some new people you do not know much about.

Hence attempts to apply ever increasing pressure this way should be limited.

Answer 14

A general answer based on two updates: reasons to business "not thriving", software company.

A global market is thirsty of people doing software. You might be some small local company but that don't restrict (or don't restric totally) ability for remote work.
My company have a office in China and thanks to home office and enforced use of VPN my chinesse collegues are amazed how much faster their internet work and how much faster they can get things done.

As you noticed your company is tied to the place they do business in. White-collar workers not so much. Not to mention that after the initial stutter ALL business will try to catch up and will try to fill the gaps.
And the best thing to get project up to speed is to throw more people at it. With attractive offer to get those people in.

I'm not familiar with Chinesse work ethics but I would say it's general person want/need to choose better options for them. They might envision that after some time everything will be back to normal. Will the boss hire people back? How will old employees work if for X time 75 of them tried to do 100 work?
I assume they will be more willingly to reward themself with better job with better pay.

IF they don't do that earlier because they prefer to ditch a company that only solution for troubles is "Fire employees, overwork remaining ones, expect better results".

Answer 15

Generally speaking layoff and hiring freezes are about (un)natural attrition. The company can't keep the employees for whatever reason then they just let them go and the ones that are left they know will naturally leave thus equalizing their workforce.

It may be a sign the company is going under or is going to consolidate to a central product and/or location. I don't recommend jumping ship but I do recommend keeping your resume up to date. Don't "work harder" and make yourself stand out good or bad.