Mass Layoffs Spark Social Media Outrage: A Threat to Corporate Growth

By Ebony and Kanya Olivier

When a Miami-based startup announced the layoff of 750 employees in 2022, they anticipated short-term financial savings. However, the wave of negative Glassdoor and social media posts from former employees and contractors revealed a hidden cost that the company hadn’t accounted for: their reputation.
 
Under the company’s most viewed reel on Instagram, with 7,217 views, a comment by an Instagram user identifying himself as one of the 750 laid-off employees recounted his ousting and the treatment he experienced. After reading his post, loyal consumers flocked to the company’s Glassdoor and Indeed profiles to gain clarity on the situation and see if other employees shared the same sentiments. A ripple effect occurred, with other former employees expressing their grievances anonymously on Indeed, Glassdoor, and Reddit.
 
In trying times, we’ve seen companies reluctantly make the heartbreaking decision to downsize and witnessed ousted employees venting their frustrations on social media platforms like TikTok or through 300-word reviews on Glassdoor. There is a clear disconnect between the company’s decision to downsize and employees’ feelings of unappreciation. How can human resources professionals lessen the impact on the company’s reputation and legal ramifications while adequately supporting employees during one of their most challenging times?

The Social Climate Impacting Layoffs Today

The pandemic highlighted the precarious nature of many jobs and the essential role that workers, especially frontline and healthcare workers, play in society. This increased awareness has made consumers more sensitive to how companies treat their employees. The pandemic period coincided with significant social movements, such as Black Lives Matter and increased attention to gender equality. These movements have driven a greater public focus on ethical behavior, including corporate treatment of employees.

We witnessed a cultural shift into a more socially cautious society, focusing on the importance of health and safety in the workplace. The Human Resources industry followed suit by focusing on diversity and inclusion, working to fix discriminatory hiring and pay practices.

Price Waterhouse Coopers’ Global Consumer Insights 2023 Survey reported that 60% of consumers consider the treatment of employees by a company when making purchasing decisions. Additionally, 55% said they would stop buying from a company if they believed employees were being mistreated. Nearly 31% of Americans surveyed by Allison+Partners reported that news coverage of a company’s layoff directly impacted their perception of the brand. It’s a known fact that perception directly correlates with your willingness to purchase goods or services from a company.

The Downside of the Cautious Climate

The pandemic prompted many individuals to reflect on their own values and the impact of their choices. This introspection has led to more value-driven purchasing decisions, with a greater emphasis on supporting ethical and socially responsible companies. The combination of heightened awareness, rapidly increased information flow, and a greater emphasis on social justice and ethical behavior has led consumers to use their purchasing power to boycott unethical companies.

A year after the announcement of downsizing, the Miami-based startup took another major hit in sales revenue, leading to their decision to pause operation on their underperforming locations. While there is not enough evidence to show a direct impact of loss of sales due to company reputation, here are five ways human resource professionals can play their part in adequately supporting employees’ transitions to mitigate potential damage to the company’s reputation and reduce the risk of potential lawsuits:

Damage Mitigation

1. Conduct Exit Interviews: Provide a platform for laid-off employees to express their concerns and feelings, helping them feel heard and respected. This can also assist in offering appropriate support and resources for their transition. Address grievances and concerns before they are aired publicly on social media or review platforms. This proactive approach can help mitigate potential damage to the company’s reputation.
2. Severance Package Based on Tenure: Providing a severance package based on the tenure of laid-off employees is a fair and considerate approach that can help ease the transition for affected individuals.
3. Outplacement Services: Hire an outplacement service that offers personalized career coaching, resume building, and job search assistance to help your employees transition smoothly to new opportunities.
4. Next Venture Support: In lieu of a traditional severance package, companies can offer alternative forms of support such as small business grants for those who wish to start a business or tuition assistance for those who wish to go back to school.
5. Notify Employees of Downsizing Decision Earlier: Informing employees earlier than the mandated 60 days required by the WARN Act demonstrates a company’s commitment to transparency and consideration for its workforce.

By proactively addressing the needs of affected employees, companies can mitigate potential damage to their reputation, maintain trust and morale among remaining staff, and foster a positive public image.

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