Do layoffs erode brand equity? | The Financial Express

Do layoffs erode brand equity?

Mass layoffs are bound to happen if businesses in today’s world, facing several economic challenges while committed to their growth aspirations, want to remain competitive.

Do layoffs erode brand equity?
If a firm wants to build trust among its external consumers, it must be equally concerned about its internal consumers (which are its staff). That is non-negotiable.

Brands like Byju’s and Twitter are in the news for mass layoffs and forced redundancies. While the two have cited business exigencies as a key reason, a question that comes to the fore is whether such drastic decisions by corporations end up eroding their brand equity. What do consumers make of a company that is announcing job cuts and hiring a global celebrity as a brand ambassador in the same breath? And did ed-tech firm Byju’s rope in footballing great Lionel Messi to counter the narrative around the brand following the layoffs, as social media users are accusing it of? These are some of the questions we posed before our panel of experts. Here are some answers:


‘Firms must have concern for internal consumers’
Meenakshi Menon, communications specialist & founder, Spatial Access
There are two types of companies – centrestage companies, and there are periphery companies. Periphery companies, such as engineering firms, may do mass layoffs but won’t raise too many eyebrows because they are not really in the public eye. In the case of centrestage companies such as Byju’s, there is definitely bound to be some impact and there may be a backlash not just from those who work for the brand but also its customers. Mass layoffs are likely to set alarm bells ringing in the customers’ minds and there will be questions. When companies start laying off a large number of people, their brand value and ability to withstand the vagaries of business really start crashing and they become more fragile. The future of the company looks uncertain in the eyes of the public, and therefore their present is compromised.

If a firm wants to build trust among its external consumers, it must be equally concerned about its internal consumers (which are its staff). That is non-negotiable. Look at the series of events unfolding with a global company like Twitter under Elon Musk. If a firm doesn’t look at its stakeholders with respect, it is clear that they have no respect for their external consumers either. It is not uncommon to hear stories from employees of many new-age, unicorn companies about the toxic work culture in these firms. If employers do not respect the people working for them, it will backfire on their brand image and equity.

  
‘Layoffs do impact brand equity; management crucial’
Yeshasvini Ramaswamy, serial entrepreneur & CEO, Great Place to Work India

Mass layoffs are bound to happen if businesses in today’s world, facing several economic challenges while committed to their growth aspirations, want to remain competitive. These layoffs do impact brand equity. However, the broader question must be about the management of such downsizing and its impact on the brand image. If the industry is reporting mass hiring, it will also report mass layoffs because that is the very nature of a business cycle.

However, no CEO looks forward to the day they have to do this. Such downsizing could be happening for reasons such as industry-specific challenges, business transformation, growing digitisation or restructuring of business processes. Respect is of utmost importance, and the story is in the how. 

Some businesses are falling woefully short of professional standards. The least anyone can expect is to be treated with dignity but some layoffs have become transactional. They lack emotional connection and are opaque. When brands come forward and say they’re “reducing 10% of their staff”, they must understand that these are not just numbers but lives, and they should handle the situation accordingly. I believe there is a need for maturity in leadership and we have a lot of ground to cover. After all, only companies that put their employees first are able to build a sustainable business.  

That said, the Indian market is still some way from being mature. If this were to happen at, say a Starbucks abroad, then you would have really seen an impact. Here the impact is largely sector-dependent, and the effect is more on the employee side and may not have a correlation with consumers.

(As told to Geetika Srivastava)

‘Layoffs are unavoidable but how firms do it matters
Niraj Bora, founder, Surmount Business Advisors

Considering the slowdown and recession situation in many countries globally, it’s only obvious that layoffs are going to happen one way or another. Even when companies are looking to expand, redundancies and inefficiencies need to be refined out. Today’s world is not the same as it was 50 years ago, when the speed of execution was not a critical aspect of any business. One cannot afford to have extra baggage with so many things to deliver and such a dynamic market.

Layoffs are a sort of mandatory business requirement in tough times, and in such cycles any company cannot avoid it. However, companies should not fire as they please at their own terms. The way a company undertakes the layoff matters a lot. I have seen companies giving out enough severance and good assistance with finding other jobs etc. This ensures that the company maintains a good name and reputation of itself and shows some empathy in bad times.

Timely communication from the company regarding layoffs helps employees to decide the way ahead well in advance. If that is the case, along with decent severance and some assistance with new opportunities, I think it is okay. Employees understand that companies cannot survive purely on unsustainable business or emotions and they have to keep a Plan B as a career plan apart from the company they are working with in these times.

Mass layoffs are bound to happen if businesses in today’s world, facing several economic challenges while committed to their growth aspirations, want to remain competitive.

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First published on: 07-11-2022 at 08:17 IST