Research Summary

The Human Costs of Layoffs: Workforce Reductions and their Alternatives

by Sandra J. Sucher


This research project examines a profoundly difficult and practical question facing managers: How to manage workforce reductions—critical to responding to economic cycles and strategic shifts—while making good on responsibilities to employees, companies, shareholders, and communities around the world?

The primary objective of this research is to develop a framework – and book – to help senior business leaders make better decisions about when to make workforce reduction decisions (and when to avoid reducing the workforce to pursue alternative approaches), how to implement the reductions in more efficient and humane ways, and how to mitigate potential harm to departing workers, to the company and its surviving employees, and to local communities.

The project has already produced output including: 1) five technical notes for students, including notes on the effects of layoffs on key stakeholders, best practices in conducting layoffs, and on the legal requirements of managing layoffs in selected countries, 2) video interviews with laid off employees to demonstrate the impacts these decisions have on the lives of individual people—currently 10 video interviews with laid off employees from the U.S., France, and India.

We are now engaged in research on the costs and benefits and implementation challenges of different types of workforce reduction policies. We have completed a case on Honeywell's use of employee furloughs (unpaid leaves) as an alternative to layoffs during the Great Recession. We are also finalizing a case on Nokia's multi-faceted company program to manage the lay off of nearly 20,000 employees, including the use of employee innovation grants for approved business plans for departing employees. Future research will include an examination of ‘no layoff’ policies, the labor management policies of German companies during periods of economic uncertainty, and the planning and management of long-horizon facility/site closings, an essential feature of workforce reductions in extractive and natural resource industries.