Layoff is last resort...: Bestseller author Adam Grant’s advice to CEOs

As big and small tech companies continue their firing spree, New York Times bestselling author and organizational psychologist Adam Grant pointed out that ‘mass layoffs are counterproductive’

Citing several studies, he tweets that, firms that downsize end up being less profitable than peers that find other ways to lower costs (e.g., exec pay cuts, unpaid leaves).

Along with the tweet, he also posted screenshots of various studies on the topic. One of the studies reads, “While these initiatives are typically undertaken in the quest for improved firm performance and competitiveness, empirical research to date has been equivocal in supporting the efficacy of these initiatives.”

Another study says that layoff announcements have an overall negative effect on stock market prices, and this remains true whatever the country, the period of time or the type of firm considered.

Layoffs bleed talent & breed guilt+anxiety. They should be the last resort, he adds to the tweet.

Many of his followers had insightful comments.

One said, It’s interesting when the people that should think hardest about long-term organizational strategy think so short-term about their “most valuable asset”.

Another follower commented, And half the time, the CFO gets a big bonus for saving the company and laying people off...quite often comparable to multiple people's wages. How does this make sense?

Another suggested, Instead of layoffs, a mechanism of rewarding the most effective & efficient employees should be created. In this case wages are paid based on the level of contributions made by each employee to the organisation. A mass layoff reduces employees' productivity.

Many also focused on the solution.

One posted, Don’t overhire in the first place is likely the real solution. Observed it first hand at multiple companies. Hiring spree feels wrong as it’s happening - often a result of people building fiefdoms - and even more wrong when letting people go.

Everyone wants to hire well. But it’s impossible to get it right all the time. Hell, 50/50 is a good batting average

In the past few months, a raft of U.S. companies from Goldman Sachs Group Inc to Alphabet Inc, to Twitter to Amazon have laid off thousands this year to ride out a demand downturn wrought by high inflation and rising interest rates.