Key lessons for managing the psychological impact of redundancies on survivors

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REDUNDANCY ADVICE FOR EMPLOYERS: MANAGING THE PSYCHOLOGICAL IMPACT

Many business leaders eventually have to make the difficult decision to make structural changes. Reductions in headcount and redundancies have become more common as we face continued economic uncertainty across the globe.

To give your company the best chance, you must consider those leaving and those left behind. My advice on redundancy is to consider the psychological impact of redundancy on your “survivors”. By “survivors” I mean those employees who remain after their colleagues are selected for redundancy.

Consider remaining employees after redundancy

Statistics illustrate that redundancies are increasingly prevalent. This is particularly true in light of economic instability disrupting an array of workplaces in 2024.

Yet downsizing and redundancy remain a sensitive topic to discuss. My work focuses on helping organisations to manage and prepare for the forthcoming psychological impact of downsizing. Most research and intervention focus on those made redundant, i.e. the victims. Meanwhile, much of my work focuses on those who remain, the “survivors”.

Very relevantly, my Master’s degree thesis focused on this very topic nearly two decades ago. My recent literature review highlights that there has been little progress or development in researching the impact of survivors. Therefore, I would like to share my advice on redundancy based on my theoretical knowledge and executive coaching experience. I will focus on how organisations can prepare to minimise the psychological impact on their survivors.

"They're pleased to have survived the cuts": a corporate myth

Quite surprisingly, survivors are often an afterthought because management is so accustomed to thinking about the redundancy selection process. There is very little support for the emotional and workplace needs of the survivors.

There is even a corporate myth behind this notion of ignoring the survivors. It goes: ‘They’re so pleased they’ve survived that we don’t have to worry about them’.

I challenge this myth as the psychological impact of redundancy or downsizing on the survivors is hugely important. Whilst departing employees are entitled to statutory redundancy pay and fair notice periods, survivors are expected to make the organisation function. Ultimately, organisations expect survivors to succeed with fewer personnel.

Therefore, one can argue that the reactions of the survivors determine an organisation’s post-redundancy success.

Think about how your remaining employees will react

Literature suggests that survivors after redundancy can experience a mix of reactions. These reactions may include:

Anger
Depression
Guilt
Distrust
Vulnerability
Powerlessness
Loss of morale and motivation

Additionally, some have coined the term ‘survivor sickness’.

Survivors’ psychological reactions are very complex. Redundancy processes, such as the organisation’s strategic vision, communication, policies and treatment of victims, greatly shape these reactions.

The extent to which survivors appraise the redundancy process will influence their response to it. If redundancies are ‘compulsory’ and the consultation process lacks underlying reasons, involving colleagues can have an adverse effect. Disrupted psychological wellbeing results in lower productivity levels and overall ineffective corporate functioning.

Never underestimate the power of psychological contracts

Downsizing greatly affects the psychological contract with survivors.

What is a psychological contract?

Psychological contracts comprise subjective beliefs regarding an unstated agreement between an employee and their employer. This agreement offers continued employment in return for loyalty and hard work.

The nature of psychological contracts is dynamic, frequently re-negotiated, and individualistic. However, psychological contracts derive from trust and loyalty.

How does redundancy impact a psychological contract of employment?

Overall, studies indicate that people perceive redundancy as a violation of their psychological contract. This perception leads individuals to feel less obligated to their employers. Consequently, redundancies may cause a decrease in organisational loyalty. Many survivors may be inspired to seek suitable alternative employment.

Survivors are likely to redefine their psychological contract. These employees typically shift their loyalty away from the company. Often, they adopt the view of ‘I will get as much out of the company as I can’.

For instance, survivors may take advantage of building portfolios of portable skills and marketable experience. Survivors prioritise these over company-specific skills to enhance their employability across various organisations.

How to consult with employees during a redundancy procedure

My advice for employers is to:

Acknowledge the importance of handling redundancy processes effectively.
Recognise how the treatment of redundancy victims plays a significant role.
Consider how you can influence the perceptions of survivors regarding the overall downsizing exercise.

Organisations must prepare to redesign their side of the psychological contracts. This should reflect new work environments, culture, communication and processes. Failure to do so can result in the new psychological contract becoming an impoverished version of the old one.

Consider the ripple effect of redundancy: altered social networks

We mustn’t simply view downsizing from an individual perspective. Downsizing also influences social networks, causing disruptions within the workplace. Studies show that survivors’ reactions will vary depending on the relationship ties they have with their affected colleagues. We can assess how colleagues might react based on:

Frequency of contact with the redundant employee.
Intensity of working relationships.
Personal closeness with someone you are letting go.

For many, ‘work’ is not simply for ‘money’. Work also provides a sense of belonging, purpose and meaning. Furthermore, people may regard their workplace as a ‘symbolic family’. Colleagues who people interact with regularly become part of their social structure. Managing redundancies causes separation from members of the ‘family’, which can also affect survivors.

Alterations to a social network can disrupt:

Working relationships.
Work patterns.
Communication flows.

These factors can make it harder for survivors to continue with their work after a downsizing exercise.

How to maintain a positive redundancy process

Organisations need to be aware that downsizing is an attack on the social fabric of a firm. This awareness is important because each redundancy victim has ties to others within a firm’s social network.

Treating victims and survivors well throughout the redundancy process is paramount. The treatment of survivors greatly influences their engagement, acceptance, and support for the organisation's actions and conduct.

Remember: downsizing often creates new and increased responsibilities for survivors. Look after your remaining employees by defining processes to:

Avoid overload.
Maintain role clarity.
Support the team, as fewer personnel handle the same workload.

Redundancy advice to manage and minimise the psychological impact

My redundancy advice for employers is to focus on both existing and former employees. Learn how to assist survivors in absorbing the experience more favourably and progress with the organisation's new direction or vision.

1. Communicate why the redundancy process will rejuvenate the organisation. Providing this clarity will help survivors to perceive redundancies as being fair and just. A lack of communication could lead to automatically unfair assumptions.

2. Communicate a clear revised vision. Sharing your vision will enable survivors to trust the leaders’ competence in turning the company around. As a result, a clear vision will instil lost confidence and hopefully inspire many more years of continuous service.

3. Redesign work and responsibilities. This clear restructuring will enhance the intrinsic quality of survivors’ work. In turn, survivors can focus on adjusting to downsizing, rather than unsatisfactory levels of work.

4. Provide relevant training for survivors. This support will equip employees to take on their revised roles, feeling competent and empowered. Additionally, surviving employees will regain trust in their leaders. This trust will enable employees to comprehend their role in the company's future vision.

You can minimise the psychological impact of the redundancy process through effective preparation and focused planning. Furthermore, a sincere desire to take care of those who survive, not just those who leave, is crucial.

NB: If an employee brings a claim against your organisation during a redundancy procedure, we recommend you to seek legal advice.

AUTHOR

Simi Rayat
Leadership Coach
Simi works as a ‘Leadership Coach’ helping Xennial and Millennial leaders on their leadership journey to embrace and solve leadership challenges. Simi is the founder of Wellbeing Face Ltd and she works with clients across the globe in both private and public sector, across a diverse range of industries. Her coaching style and approach is underpinned by her deep expertise and passion in the psychology of people and her pragmatic application of leadership development. Using this integrated and eclectic approach, Simi is able to create significant ‘ah haa’ moments for her clients and bring about compelling shifts in their thinking, behaviours and outcomes which lead to incredible and sustainable results.

With over 15 years of business psychology consulting experience, working in the UK, Australia and Canada, Simi is an insightful specialist in shaping behaviour at the individual, group and organisational level. She specialises in the areas of: personal impact, self-awareness and leadership capability. She is the former founder and owner of Minds for the Future, a thriving Melbourne based psychology practice, which she profitably sold in 2015 and it continues to prosper.

Her clients describe her coaching style as ‘energising’, ‘thought-provoking’ and ‘pragmatic’. She challenges thinking and empowers her clients to take control and apply their best. Many of her long standing clients view her as their trusted advisor and valuable sounding board.

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