Are layoffs HR’s toxic oil spill and product safety recall rolled into one?

Layoffs. Redundancies. Job cuts. In the current challenging employment market, it is likely that either you or someone you know has been impacted by companies taking the difficult decision to reduce headcount. I say ‘difficult decision’ because I genuinely, but also probably naively believe there isn’t a business out there that has zero regard for the personal distress it causes the affected employees, their families as well as their financial and mental health. If you ever find yourself working for a company without the integrity or empathy for the ramifications of layoffs, consider yourself lucky if you’re one of the ones being let go.

Job losses create a ripple effect and potentially seismic waves of reputational harm for organisations from which they may struggle to recover. Layoffs profoundly damage the fundamental principles on which reputation is founded: trust and goodwill.

Whether you’re one of the redundant or one of the survivors, loss of trust breaks the psychological contract between employer and employee. The almost inevitable outcome is it erodes psychological safety, causes emotional fallout, creates survivor anxiety, reduces engagement, lowers morale and increases attrition. Not to mention an impact on productivity.

What’s more, it can permeate way beyond your ‘people brand’ and have a negative bearing on corporate reputation too. Layoffs can signal instability or ethical lapses, prompting customers to switch to competitors or question service quality, ultimately damaging your brand among customers and clients. Competitors may exploit the situation to poach talent or position themselves as more stable and employee-friendly. Negative media and social coverage can cause a public backlash—especially if layoffs are abrupt, large-scale, or perceived as ‘unnecessary’. Job cuts may also be interpreted as signs of deeper strategic or financial problems, eroding investor confidence or putting into question leadership capability.

This is where goodwill really matters. Riding out the storm is dependent on two key things; how you manage the layoffs and how much positive sentiment and understanding you have built with your audiences – employees, customers, communities, stakeholders and shareholders. Experience indicates that layoffs in those organisations with strong corporate and employer reputations won’t necessarily be forgotten, but they may be forgiven over time.

Being prepared, managing risk as well as scenario and communications planning are practical ways to ensure that you minimise the reputational damage. Here is some best practice guidance on how to manage reputation, re-establish trust and leverage goodwill:

1.      Keep it real

Skip the corporate fluff. People want straight answers—why the layoffs happened, what’s changing, and where the business is headed. Whether it’s shrinking markets, a pivot to innovation, or post-COVID recalibration, be honest and back it up with data. Tie the decision into a bigger story about transformation. Show how this sets the business up for long-term strength—not just short-term savings.

2.      Exit with respect

How you treat people on the way out says everything. Severance, career support, and clear communication aren’t just the right thing to do—they shape your reputation. Ex-employees will talk, post, and review. A personal call from a senior leader might just change the tone from “cast aside” to “valued.” A small gesture with big impact.

3.      Don’t forget the people who are staying

Layoffs hit hard—even for those who stay. Guilt, anxiety, and distrust can creep in fast. If you don’t address it, morale drops and your culture takes a hit. Think about running open Q&As, offer mental health support, focus on growth and strategic plans. Make it clear you’re investing in your people —not just surviving.

4.      Own the external story

If you don’t speak up, others will fill the silence. Clients, partners, and the press need to hear from you —clearly, consistently and as early as possible. Syncing your messaging across all channels is essential whether that’s emails, Slack, press releases or LinkedIn posts. They should all tell the same story with the same, humble, considered and transparent tone of voice.

5.      Reaffirm your employer value proposition

Layoffs don’t cancel your EVP—they test it. You may want to revisit your values and show how they’re being upheld, showcase the positives in your culture or bring to life the proof points of the proposition. This is especially critical in sectors where trust and integrity are non-negotiable. Share stories of resilience, innovation, and ethical leadership. Evidence success and when appropriate celebrate individual and team performance.

6.      Prepare your leaders and managers

Delivering and sharing bad news isn’t easy. Potential confrontation can be scary. Managers need to be clear on why layoffs are happening and be ready to explain it in plain, honest terms. They should prepare emotionally and logistically knowing the process and practice the conversation (coaching may be needed). It’s a vital time for senior teams to show up as steady, empathetic leaders during tough times.

Whether some sort of downsizing, rightsizing or cutbacks are on the horizon or if you want to make sure that you are fully prepared to mitigate the reputational impact of layoffs if they become necessary in the future, we’re well versed in helping organisations put the advice into practice.

The long-term investment in creating trust, building goodwill and establishing an enviable employer reputation is too valuable to risk by not being prepared for times of crisis.