Layoffs are the impact sector’s abandoned child

It’s time for philanthropy and impact investing to step up in reimagining layoffs.


“They gave us no notice’: (Darling Tech Giant) lays off 3,500 employees via a three-minute Zoom call”

“2,000 layoffs by [Fortune 100 Company] will devastate local economy”

These are the headlines we see in the news this year that have now become daily defaults in the aftermath of COVID-19.

The impact on workers is not only destructive to their economic livelihoods, but to their overall health and well-being.

Confused. Lost. Ashamed. Crushed.

These are the words we hear from workers impacted by layoffs, many of whom break into tears as they tell us about one of the most devastating experiences of their lives. On top of a psychological burden, 83% of laid of workers have a higher chance of health conditions, and sadly, are even more likely to commit suicide.

The impact of layoffs also extends well beyond the time of being handed the pink slip. Research from Harvard shows that 20 years later, laid off workers still have 20% lower incomes than their peers, and behavioral scientists have concluded that it takes longer to recover from the pain of unemployment than from losing a loved one.

An even less spoken about reality is the impact a round of layoffs has on workers who remain with the company. Remaining workers end up with 41% lower job satisfaction, 20% lower job performance, and 31% higher voluntary turnover. Layoffs often have a negative ripple effect on morale, productivity, and retention that leads to a massive hit to the bottom line. 

Every one of us knows intuitively that layoffs, as they happen today, are broken and often inhuman. We are also now realizing that with increasing business disruption and automation, layoffs are not going anywhere and may even increase in frequency in intensity. The Brookings Institute predicts that a quarter of the workforce are vulnerable to being laid off due to increased automation efforts, which have only been further accelerated by companies during the pandemic.

So the question is — in a world where business leaders are reimagining every part of their employee lifecycle, why are layoffs still as destructive and inhuman as 30 years ago? 

The Impact Sector’s Opportunity & Responsibility to Protect Livelihoods

Leaders in government, philanthropy, and impact investing can and must act to change this reality. Almost everything in the impact world boils down to either life or livelihood and work is one of the most significant contributors to livelihood for people around the world.

Layoffs in particular provide a unique high-impact leverage point in the system. They are very real human experience crossing borders and communities with very real quantifiable costs to the individual and society at large. It is also one of the unique opportunities where impact dollars can catalyze and complement private sector investments.

Focusing on the very visceral problem of layoffs also helps avoid further downstream overloading of public employment services and health systems while building the foundation for further upstream interventions to help companies and societies proactively reskill and upskill their employees for future jobs and skills.

The insights learned from the work on this challenge can then be replicated across many other work transition use cases (youth, veterans, refugees and immigrants, formerly incarcerated).

Layoffs: An Eroded Social Contract, a Taboo Culture, and a Lack of Empathy

For most of the 20th century, there was an implicit social contract between companies and their workers of a company’s responsibility to maintain its workers’ employment, whereby mass layoffs were “a sign of corporate failure and a violation of acceptable business behavior” as author Louis Uchitelle described in his book The Disposable American. It was not until the 1980’s when GE chairman Jack Welch began popularizing and normalizing the idea of mass layoffs as a sign of corporate competitiveness. 

In the past decade, companies have adopted numerous innovative talent initiatives across every part of their employee lifecycle to begin adapting to the future of work. Recruiting processes have been revamped and optimized to ensure a positive experience for even rejected candidates, as leaders have understood the lasting impact the experience can have on the company’s brand perception. Investments in employee perks and benefits have skyrocketed as companies have understood the tangible implications on employee satisfaction, productivity, and engagement. And corporate learning solutions have been at the forefront of boardroom agendas as executives grapple with the need to equip employees with the skillsets of tomorrow.

But even the most innovative and future-focused companies who have re-imagined every other aspect of the talent function almost never mention layoffs, even though they are a reality in every one of their businesses. 

For too long, layoffs have been too taboo to discuss. Personally, laid off workers often feel lonely, ashamed, and stigmatized, putting an undue burden of responsibility on their own shoulders even when a decision to restructure the business or a shock from an event like COVID-19 had nothing to do with their performance. 

When asked about rethinking layoffs, Zabeen Hirji, former CHRO of Royal Bank of Canada and Deloitte’s Executive Advisor on Future of Work says “Unlike other parts of the talent and skills agenda, most executives have not personally experienced layoffs and perhaps the missing piece in this puzzle is empathy.” 

But despite its taboo history and the lack of empathy that some may have for the experience of a laid off worker, all business leaders must grapple with the fact that layoffs may increase in the coming years and it will be their choice if they continue layoffs in their current destructive form.

It is far past due that we talk about layoffs, about the deep impact they have on people, their families, our businesses, and our communities and begin the work of reimagining them as we have with every other element of the employee lifecycle.

Reimagining Solutions through AI-Powered Outskilling

Perhaps ironically, the solution of how to reimagine layoffs and better equip affected workers for the next step in their career may be powered by the same element that is causing many of the layoffs in the first place: artificial intelligence.

Imagine, for a moment, a world where every single worker whose job is impacted by automation, disruption, or external shocks like COVID-19 was supported to land softly in their next opportunity through a personalized, AI-powered journey that:

 1. ‘Locates’ You: Parses your resume to understand your past learning and work experiences, infers your skills based on your experiences, and profiles your interests, personality, and career preferences

2. Recommends ‘Destinations’: Uses a combination of your 360 profile, skill and experience requirements of occupations, as well as real-time labour market information like demand, automation predictions and salary to recommend career paths for you to consider

3. Creates a Personalized ‘Roadmap’ to Get You There: Uses an AI engine trained on millions of data points to craft a roadmap with personalized learning and job matches which continue to improve as the platform gets to know you better

Our platform, FutureFit AI, is one such solution that acts as an AI-powered GPS for career transitions like outskilling. We have taken millions of resume and job posting data points, built a robust marketplace of learning opportunities and other support services, and created a system of human and virtual support to ensure laid off workers have all the resources they need to succeed.

Our team realizes though that we are only one of the many solutions that should exist as part of this reimagination of layoffs. In one case study, Harvard researchers outlined how Nokia laid off an entire manufacturing plant in 2008 without any proactive planning or support, and it ended up costing them $85,000 per employee. But then in 2011, the Chairman revamped their approach and introduced a “Bridge” program that provided multiple pathways for workers to identify their next opportunity inside or outside the company. The innovative program reduced costs per employee by over 90%, while employee satisfaction jumped to 85%, even among employees that were let go.

We anticipate and encourage even more solutions being introduced as business leaders address this destructive part of the employee lifecycle. AI-powered outskilling provides executives with the opportunity not only to do good by their people but also turn transitioning workers into brand ambassadors by helping them grow their careers, build a brand that attracts future talent through a commitment to take care of people, and reduce brand and legal risk.

As evidenced by the recent collaboration between MasterCard’s Center for Inclusive Growth and Rockefeller Foundation to set up, one of the most promising areas in social change is extending the power of data science to societal challenges. Layoffs, because of how well-defined they are as a problem as well as their very quantifiable success metrics, present a powerful opportunity for bringing together data, technology, and impact.

It’s time for the impact sector to adopt this abandoned child.

About the author

Hamoon Ektihari is the CEO of FutureFit AI,  a finalist in the CareerTech Challenge Prize. FutureFit AI uses AI to help companies and governments rethink workforce transitions and layoffs. Hamoon can be found online on LinkedIn.

About the CareerTech Challenge Prize:

The CareerTech Challenge Prize is a joint project between Nesta Challenges and the Department for Education, aiming to improve access to data-driven careers advice and guidance. You can read more about the other Finalists on the Prize website.