A better blueprint for employee relations

by Janice Allen
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Michael McFall is the co-founder and co-CEO of BIGGBY COFFEE as well as author of the Inc. Original books GRIND and GROW.

During the company’s Q4 2022 earnings call, Mark Zuckerberg told investors that 2023 will be the “years of efficiencyat meta. This new mindset, Zuckerberg claimed, would leverage several trends to make the company more profitable, including emerging technologies like AI, realigned priorities and, of course, layoffs.

Lots of layoffs. Facebook fired 10,000 employees a 13% reduction in personnel in March, preceded by more than 11,000 redundancies in November. In April, the company reported earnings of $5.7 billionexceeding analysts’ expectations and getting compliments from financial analysts.

Facebook of course is not the only company looking for this formula to maximize profitability. At the helm of Twitter, infamous Elon Musk laid off 80% of full-time staff. Amazon, Alphabet, Microsoft, IBM, Spotify, McDonalds and dozens of other companies have significantly reduced their workforce this year as brands prioritize profits and stock prices over people.

This evidence of the intractable transactional relationship between employers and employees comes just months after leaders railed against “quitting quietly,” bemoaning employees’ perceived lack of commitment to their companies.

It also happens when many people reevaluate their relationship with work and their leaders. As a fired Google employee explained in a viral LinkedIn post“[layoffs] just brings home that work isn’t your life, and employers – especially big, faceless ones like Google – see you as 100% disposable. Live life, not work.”

As business leaders, we know that this dynamic is not sustainable. Layoffs themselves are not the problem; however, they are a symptom of a larger problem and reflect the transactional relationship between employers and employees that often undermines a company’s core potential.

We need a better blueprint for employee relations.

Transactional relationships are a barrier to growth

Already, 61% of employees say they have a transactional relationship with work, clocking in for a paycheck and clocking out when the day is over. Since the pandemic, 89% of employees say they question the role work plays in their lives, making now a critical time for leaders to connect with their employees.

Badly executed or ill-justified layoffs do not help.

For starters, layoffs — often positioned as cost-cutting measures that somehow also make companies leaner, faster, and stronger — are common don’t really save companies lots of money. Severance schemes, reduced productivity and institutional knowledge erode the value of any cost reduction. At the same time, companies will inevitably have to hire new employees as the standard economic cycle takes growth metrics to the next level.

Of 75% of recessions last less than a year and 30% for less than two quarters, transaction relationships based on short-term metrics can undermine growth and sustainability initiatives. In other words, when 12- to 18-month profit margins are more important than institutional knowledge and employee loyalty, misaligned priorities are likely to undermine long-term growth potential.

Sure, leaders don’t just show transactional relationships by firing employees, even if their company is hugely profitable. Failing to connect, inspire, motivate, equip and empower employees to do their best work can create a sense that leaders are giving up their responsibilities to create businesses that thrive.

The power of relationship-driven outcomes

Conversely, building relationships and trust between employees, colleagues, and bosses creates a positive work environment that fosters engagement, productivity, and loyalty. This relational capital is crucial for high levels of performance and forms the basis for sustainable growth and success.

For example, a Gallup study found that having a “best friendat work “contributes to a thriving employee experience as well as communication, engagement and other outcomes.” While leaders don’t have to be best friends with their employees, this reality underscores the importance of relationships at work. Leaders can cultivate environments where employees feel connected to their teams and leaders.

When employees feel safe and secure, they are more likely to perform at a high level, leading to higher profitability in the long run. On the other hand, when employees feel disposable and undervalued, they are likely to leave the organization, leading to a loss of knowledge and loyalty that people have for the organization.

Leaders must create an environment where their employees feel valued, supported and inspired. This includes building relationships based on trust, fostering a positive company culture and supporting employees in building powerful lives they love.

When leaders invest in their employees’ relational capital, they will attract and retain high-quality people who are engaged and inspired, leading to sustainable growth and success.

Reevaluating leadership for long-term success

The recent trend of mass layoffs and an emphasis on short-term profitability at the expense of employee well-being highlights the urgent need for a better employee relations blueprint. It is becoming increasingly clear that transactional relationships between employers and employees are unsustainable and ultimately detrimental to a company’s long-term success.

While many conglomerates may get away with this behavior, your small or medium-sized business is not powerful enough to act like the big players. Thriving businesses are built on and supported by employees who feel empowered, engaged and committed to the company’s success.

Pursuing those priorities is the first step towards a thriving organization.


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