Layoffs - First Friday Luncheon

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The Impact of Layoffs on Employees, Families, and Communities:

Sunil J. Ramlall, Ph.D. Associate Professor of Management The Impact of Layoffs on Employees, Families, and Communities

The Reality…:

The Reality… Productivity declined 0.4 percent in the nonfarm business sector in fourth-quarter 2008 Unemployment rate rose from 7.2 to 7.6 percent in January, 2009 (-598,000)

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Minnesota's seasonally adjusted unemployment rate rose to 7.6 percent in January , the highest rate since mid-1983

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From December 2007 to November 2008, the number of unemployed persons in the United States has increased by 2.7 million, reflecting an increase of 1.7 percentage points (BLS, 2008).

Theoretical Framework:

Theoretical Framework This study used a coping and stress framework, similar to (Marjorie Armstrong-Stassen, 2005) and examined i ) the impact of layoffs on individuals’ psychological and physical well-being, ii) the impact of layoffs on the employees affective commitment, iii) coping strategies used by employees, and iv) job search strategies people are using to find new jobs.

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Empirical research and narrative reports from working managers suggest that employee attitudes can be negatively influenced by organizational downsizing ( Kammeyer -Mueller & Liao, 2006), but to what extent?

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Research that has been done on the downsizing process has focused on lay-off victims and has provided examples of family disintegration, collapse of social networks, and the decline of victims' physical and mental health among other negative side effects (Wang- Bae , 2003). With layoffs are typically financial constraints including foreclosures on one’s house and other material possessions. Families are making radical changes to cope. Some survive; some don’t.


UNDERSTANDING THE IMPACT OF LAYOFFS Without question, employment fulfills many important functions in the lives of adults and older adolescents (Moore, Grunberg , Greenberg, & Sikora , 2007). Besides an income, work often provides structure for one’s time, social connectedness, feelings of self-worth, and the valued role of “breadwinner” (J.C. Latack , Kinicki , & Prussia, 1995; F. McKee-Ryan, Song, & Wanberg , 2005).

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Thus, losing one’s job often entails confronting the losses associated with these secondary benefits. It is not surprising, therefore, that job loss, particularly involuntary job loss, has been found to be stressful, and, on average, to have a negative impact on mental health (J.C. Latack et al., 1995).


OTHER RESEARCH FINDINGS Stress-related illnesses were 50% higher in the companies that had downsized their workforce compared with those companies that had not undergone downsizing and that reports of employee burnout were more than twice as high at companies that had downsized compared with those that had not downsized.

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With the high number of individuals being laid off from their jobs and the relative unavailability of similar job openings, people are left without adequate income for extended periods of time, resorting to very different and frequently lower paying jobs, resulting in higher level of stress and more health symptoms.

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In addition to the physical implications and health issues, employees will generally abandon their commitment to their former employers given the loss of trust. At stake in the layoffs is the reputation of the employer, inability to attract and retain top quality hires, and maintain established levels of productivity.


COPING WITH LAYOFFS “Coping refers to efforts to master conditions that tax or exceed adaptive resources” ( Monat & Lazarus, 1977, p.3)



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Direct action represents task-focused, problem solving efforts such as devoting more time and energy to one’s job. Instrumental support seeking consists of strategies designed to seek information from others. Avoidance coping reflects avoidance of the situation. Job seeking involves actively taking steps to find a job elsewhere.

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Knowing that the more positive one stays, the more active one will remain in the job search and continue to utilize control-oriented coping strategies.


FINANCIAL IMPACT There is no secret as to the financial challenges the current wave of layoffs is having on individuals and families across the country. These include lifestyle changes people have made, including reduction of savings and the sale of stock and other property by individuals to cope with the loss of their income. Many individuals describe the changes in their earlier lifestyle and a greater impact on their social life as additional consequences of layoffs. Individuals have resorted to selling their real estate, moving into smaller houses/renting, sold stocks, cashed out on retirement savings, took out loans to meet expenses, and filed for bankruptcy.

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The most severe impact of layoff was on the financial situation of individuals and the impact on lifestyle. These are listed below. 1. Sold real estate or house 7.6 2. Moved into smaller home 7.6 3. Sold stock or other property 32.2 4. Significantly reduced savings account 68.5 5. Took out a loan to meet expenses 13.0 6. Filed for bankruptcy 3.1 7. No impact 11.5


THE SURVEY – PERSONAL REFLECTIONS Well-being Using a scale of 1 to 4 where 1 means to the least extent and 4 means to the highest extent, please answer the following questions.   Have you recently: Been able to concentrate on whatever you are doing? ______ Lost much sleep over worry? ______ Felt that you are playing a useful part in things? ______ Felt capable of making decisions about things? ______ Felt constantly under strain? ______ Felt you couldn't overcome your difficulties? ______ Been able to enjoy your normal day-to-day activities? ______ Been able to face up to your problems? ______ Been feeling unhappy and depressed? ______ Been losing confidence in yourself? ______ Been thinking of yourself as a worthless person? ______ Been feeling reasonably happy all things considered? ______    

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Coping Instructions: Below is a list of statements dealing with your general feelings about yourself. If you strongly agree, circle SA . If you agree with the statement, circle A . If you disagree, circle D . If you strongly disagree, circle SD . On the whole, I am satisfied with myself. SA A D SD At times, I think I am no good at all. SA A D SD I feel that I have a number of good qualities. SA A D SD I am able to do things as well as most other people. SA A D SD I feel I do not have much to be proud of. SA A D SD I certainly feel useless at times. SA A D SD I feel that I’m a person of worth, at least on an equal plane with others. SA A D SD I wish I could have more respect for myself. SA A D SD All in all, I am inclined to feel that I am a failure. SA A D SD I take a positive attitude toward myself. SA A D SD Taking everything into consideration, how satisfied are you with life in general at the present time? Not satisfied Fairly satisfied Very satisfied Extremely satisfied How would you describe the general status of your health? Would you say it is Poor Fair Good Excellent    

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Job-search Effort How much effort are you putting into obtaining another job? Please use a scale of 1 – 5 with 1 being a slight effort to 5 being extreme effort. ________   Please circle the specific job strategies you are currently using: Posting resume on-line Applying to jobs in newspaper classifieds Cold calling companies to determine if a company is hiring Attending meetings for job searchers (e.g. Career Connection) Attending professional networking events Applying to jobs learned about through a friend or acquaintance What other strategies are you using?

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Financial Changes What changes have you made in your financial choices since you have been laid off? Please check all that apply. Sold real estate or house _____ Moved into smaller home _____ Sold stock or other property _____ Significantly reduced savings account _____ Took out a loan to meet expenses _____ Filed for bankruptcy _____ No impact _____ Please list all other changes you have made due to financial constraints.

Career Implications of Layoff:

Career Implications of Layoff Most people believed that job loss negatively impacted their future job prospects. However, men felt this impact more strongly than women. The respondents felt the most positive aspect of their job loss was that it helped them to reevaluate what they want to do in life. In that regard, women were more likely to think that the job loss helped them reevaluate what they want to do in life and increased their opportunity to investigate new career paths. Older individuals were much less likely to see any positive effects from a layoff such as a chance to pursue new opportunities, reevaluate what they want to do in life and pursue a new career path.




WHAT ARE OTHERS DOING? Competency-based training programs for state rapid response specialists, such as Pennsylvania’s seven-module sessions; Early warning networks, including Massachusetts’ new forecasting system involving 30 state agencies; Proactive business visitation programs, such as seen in New Hampshire;

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A centralized layoff notification system in Texas where local officials can communicate a local layoff notice statewide ; Working with One-Stop Career Centers to proactively match affected displaced workers with companies that are hiring, as in Massachusetts’ Company Match program; Programs that retrain displaced workers from one industry for work in an expanding sector, such as North Carolina’s “Textiles to Technology” program and California’s Bay Area Biotech Consortium “Career Path Project”


WHAT COULD ORGANIATIONS DO? Laid-off individuals expressed dissatisfaction with the organization in terms of the explanation given to them about the layoff, as well as dissatisfaction about getting adequate advance notice of layoff. Those who were single believed they were treated less fairly by the organization than those who were married.

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Those laid-off for the first time were generally more positive about their experience with the organization. For instance, they were more satisfied with the severance package, and were more satisfied with the organizations’ efforts at helping them find a job. However, they were less satisfied with the notice given to them about the layoff than those laid-off multiple times.


ARE WE TURING STRONGER TO RELIGION? Women turned to religion more than men after the layoff. There was also greater tendency among single people for their religious and spiritual beliefs to become stronger. As length of layoff increased, individuals indicated that their religious and spiritual thoughts and beliefs became stronger.



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