Home Articles Worker Engagement vs. Layoffs? You’d be surprised what works better

Worker Engagement vs. Layoffs? You’d be surprised what works better


The recent rise in unemployment appears to confirm last year’s predictions, notably by Macquarie, about Australia entering a white-collar recession. You probably don’t need these numbers to tell you what is happening out there in the real world. Many companies are cutting staff or have announced upcoming mass redundancies. The economic effect of this is enormous.

But is layoffs the right thing to do? Should you actually carry it out en-masse? Is there an alternative to letting people go when the economic forecast looks so gloomy?

If you are looking to drastically cut numbers in order to improve profits, you might first want to look at the bottomline benefits of motivating and working with the strengths of your existing team – in other words, increasing your employees’ engagement.

Here’s research from a variety of sources that tells you how engaging your employees can actually improve your bottom line.

#1. Engage and benefit.

Towers Watson, a professional services consulting firm, recently studied engagement levels across 50 global organisations. Here’s what it found: Operating income in high-engagement companies improved 19.2% over a 12-month period while in low engagement companies it declined 32.7%.

The study also revealed a 13% improvement in net-income growth in companies with high engagement. In contrast, companies with low staff engagement experienced a 3.8% decline.

#2. Disengagement cost is high.

The consulting firm Gallup estimates the cost of disengagement to be more than $39 billion in lost productivity alone.  If you think people will work harder if they fear they will lose their jobs, think again.

In the U.S., a country that experienced far worse economic conditions than here in Australia, researchers found that people fearful of their jobs still looked to leave their jobs. For three months in 2010, the number of employees voluntarily quitting surpassed the number fired or discharged, according to U.S. Bureau of Labor Statistics.

Fear of losing jobs, it seems, is not enough to keep people productive and motivated.

#3. The innovation payoff.

Other Gallup research found that higher levels of engagement are strongly related to higher levels of innovation. Fifty-nine per cent of engaged employees say their job brings out their most creative ideas. Only 3% of disengaged employees echoed the view.

So what can you do if you still need to consider reducing the number of employees?

During the last downturn many successful organisations retained staff by offering sabbaticals, unpaid time off, reduced working weeks and part-time jobs. At the same time, successful companies fostered a “we’re in this together” culture among their teams. They did so by generating ideas about improving productivity and efficiency, and by asking their staff directly for ideas.

Of course, there’s a lot more to it. So if you’d like more thoughts on how to create a highly engaged workforce, read our blog. You’ll find help here, no matter what stormy weather the economic climate brings.

Liza Garrido founded Enigma HR in 1997 with the philosophy: “Be ethical; be professional.” Her firm specialises in insurance and accounting placements, and workforce management. Write to her here.