Some companies attempt to “manage out” employees quietly during organisational restructuring rather than organise formal consultations. While seemingly expedient, this approach can significantly affect employee morale, company reputation, and legal standing.
The importance of a transparent, consultative process cannot be overstated, particularly in today’s highly scrutinised business landscape.
Reduced employee morale
Managing employees without proper communication or consultation often results in low morale across the workforce. When employees witness colleagues leaving abruptly without clear reasoning, fear and uncertainty spread, impacting overall productivity.
For instance, during WeWork’s 2019 restructuring, reports of sudden layoffs and unclear communication dropped employee morale and contributed to widespread internal dissatisfaction.
Employees felt insecure, which stifled productivity and commitment—two crucial elements for any company undergoing restructuring.
Legal and financial risks
Silently laying off employees can expose organisations to potential legal repercussions. Employment laws in the UK and many other regions mandate fair consultation with employees, especially during large-scale redundancies. Failure to comply can lead to costly lawsuits and reputational damage.
In 2021, Tesco faced criticism and legal challenges for attempting to change working conditions without consulting employees.
This situation impacted Tesco financially due to legal disputes and damaged its brand perception among employees and customers.
Damage to organisational reputation
Organisations that neglect consultation during restructuring suffer reputational harm. News travels quickly, and social media amplifies the experiences of employees who feel unfairly treated.
For example, Uber faced widespread criticism when it managed out employees during restructuring efforts without adequate communication.
This phenomenon tarnished Uber’s brand image, raising concerns about its work culture and commitment to employee welfare.
Customers and potential hires are more inclined to avoid organisations that lack transparency and fair treatment practices, ultimately impacting growth and talent acquisition.
Loss of expertise
Laying off employees without consultation may result in the unintended loss of critical talent. When restructuring occurs openly, organisations can assess each employee’s skills and knowledge and retain high-performing individuals for future roles.
Silent exits, on the other hand, often mean that talented employees leave prematurely, sometimes even taking their expertise to competitors.
Open consultation allows employees to understand their options within the organisation and contribute to the restructuring process more positively.
Best practices for consultations
To manage restructuring effectively, organisations should follow best practices for employee consultations, including:
- Convey the rationale behind restructuring efforts and maintain transparency.
- Ensure alignment with employment laws by following fair redundancy and consultation processes.
- Engage employees in discussions, giving them a voice in their future and reducing feelings of disempowerment.
Organisations can navigate the complexities of change by prioritising structured employee consultations during restructuring. Transparent engagement mitigates legal and reputational risks and promotes a culture of trust, strengthening the organisation for future growth.