Why Strong Performers Are Not Always Safe When Companies Cut Jobs

Employees in the U.S. are often taught from a young age that good job performance will guarantee job security. However, many decisions made by firms contradict this belief, causing confusion among employees. Although it would seem reasonable for companies to retain employees who contribute positively, the reality is that most firms base their decisions to lay off workers on overall business needs rather than individual performance.

Layoffs have been found to result from strategic decision-making, including cutting costs, restructuring, and changing the focus of the firm's activities. In this regard, it is not uncommon for firms to let go of competent employees since their services are no longer needed due to the shift in business strategy.

Layoffs often reflect business strategy

Businesses function in dynamic market environments, and sometimes, these changes may necessitate business executives to opt for options that place survival, profitability, and stockholders’ satisfaction ahead of employment security. In these times, companies can lay off workers promptly to manage costs or boost efficiency.

As per the ScienceDirect study, businesses generally base their decision-making processes on the short-term financial implications of their choices, reducing the connection between employee productivity and job security.

The effect is that apart from the contributions of workers, their positions become subject to strategic considerations that are unpredictable and subject to change at any time.

The break in trust employees feel

In the case where highly productive staff members are retrenched without any performance-based cause, it usually results in what psychologists refer to as a psychological contract breach.

This concept alludes to the informal agreement existing between the employer and employee, wherein the latter expects that his or her commitment, dedication, and output will be acknowledged and compensated for by job security.

According to research conducted by the International Journal of Human Resource Management, once a psychological contract is breached, the resultant feeling of betrayal and mistrust towards one’s organization is evident among both the affected staff members and others still employed.

Financial priorities can outweigh individual value

Organizations have leaders who are often swayed by the need to hit certain financial goals, which in turn may affect decision-making in such a way that the needs of the workers are ignored for short-term monetary gain.

As stated in the ScienceDirect article, managerial practices that focus on the financial aspect might overlook the contributions of employees who have been productive over the years. The outcome will be layoffs that do not seem to be based on merit.

The emotional impact of sudden job loss

A person can suffer from an emotional setback when laid off from work unexpectedly. Individuals who thought that their good performance would guarantee their jobs might experience this effect more intensely.

According to various research studies conducted by the National Institutes of Health, layoffs from work can be related to anxiety, depression, and poor general well-being. Emotional consequences of being laid off from work could even go further than the financial setback since people might find themselves suffering from low self-confidence and poor self-esteem, which would affect their employment seeking.

Uncertainty spreads across the workplace

Without making the link between layoffs and individual performance explicit, the effect will be felt throughout the organization, among employees who have been retained. Seeing talented co-workers getting laid off might make people feel threatened and fearful, despite still being part of the company.

According to studies referenced by the International Journal of Human Resource Management, such uncertainties could affect the motivation levels of workers as they question the value of putting in additional work.

A shifting understanding of work

The assumption that good performance guarantees job security no longer holds true in today's environment, as many forces outside the organization come into play, as well as organizational strategy, both of which most employees tend to overlook.

To understand this phenomenon, one needs to have an accurate picture of organizational processes and decision-making.

Although good performance still counts towards personal and organizational success, it may be insufficient in ensuring job security.

The realization of this truth could prove to be beneficial to employees since it would enable them to prepare themselves for unforeseen circumstances, while organizations will be able to share their reasons behind certain employment decisions with employees.

Thus, it becomes evident that the correlation between effort and job security is not as simple as it looks at first glance.