Following the impact of the COVID 19 pandemic, many companies are wondering what the best course of action to restart the growth machine and re-engage their staff under such uncertain times. One of the big questions is how to mitigate the impact of a restructure on performance for the survivors.
First, let us take a look at what the data tells us.
After a layoff, survivors experienced a 20% decline in job performance.
According to a study by Harvard Business School, the impact of restructuring goes way beyond the drop in the workforce. Drop-in moral, anxiety due to the uncertainty and reduction in productivity is very common amongst the “Survivors” and a key factor that leaders should keep in mind.Charlie Trevor of University of Wisconsin–Madison and Anthony Nyberg of the University of South Carolina found that downsizing a workforce by 1% leads to a 31% increase in voluntary turn over the next year. This increase in talent attrition can severely impact financial performance and in the long term overweight the short term cost-benefit.
A 2002 study by Magnus Sverke and Johnny Hellgren of Stockholm University and Katharina Näswall of the University of Canterbury found that after a layoff, survivors experienced a 41% decline in job satisfaction, a 36% decline in organizational commitment, and a 20% decline in job performance.
Another aspect particularly important to consider for tech companies is the impact of creativity and innovation: A study of one Fortune 500 tech firm done by Teresa Amabile at Harvard Business School discovered that after the firm cut its staff by 15%, the number of new inventions it produced fell 24%. For companies that rely on new products to keep their competitive advantage, this could have a dramatic impact.
With this in mind, leaders should above all ensure they have a comprehensive plan to mitigate these risks and invest in looking after their remaining staff. Amongst others, investing in your workspace is a strong driver of staff satisfaction.
Below are some key elements to consider:
- Investing in upgrading your fit-out & technology: Although this may seem like a counter-intuitive decision the long-term impact of modernising your workforce will outweigh the initial investment
- A headcount reduction means that you will not need as much space, therefore, can consider reducing the leased footprint and the overall rent cost to fund the fit-out upgrades
- Fitout is typically depreciated over ten years which means it will have a limited impact on your company’s EBIT and no impact on your EBITDA
- On the contrary, the reduced footprint will mean lower rent, therefore, higher Ebitda at constant revenue
- 72% of staff stay longer if they are happy with their work environment – Typically the first survivors to leave will be your best talent since they have more opportunities of employment so investing in your work environment will mitigate the risk of losing them
- In these uncertain times, the landlord will work much harder to retain their tenants, therefore if your lease is coming to an end over the next 12 to 24 months you will be able to negotiate with your landlord and get assistance with funding your workspace upgrades.
- Finally, in the current economic context, the cost of construction tends to decrease as builders come to struggle for work and therefore reduce their hourly rate. After years of growth, the construction market is finally resetting and it presents a great opportunity to get the best possible value for a new fit-out before it starts picking up again
Get in touch: Brendon Brodie
Head of Business Development
Mb: 021 228 8437